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Our on-line
newsletter bulletin now going on our sixth year!
Offering our clients and readers news items and headlines
often not covered by the mainstream media, articles of interest
regarding banking, economics, real estate, taxes, living or investing
abroad, plus much more. Finally, our very popular readers write
in section, with answers to some of the questions many of our readers
have - that no one else wants to answer truthfully, except us!
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Visit The Main Newsletter Section & Read Past Issues On-Line:
Dominican Republic Real Estate, Residency Filing, Banking and Interest Rates.
Panama Residency and Retirement. Naturalization and Dual Citizenship - Expatriate Issues.
Economics commentary, inflation, housing, stock markets and investing -
Plus a Whole Lot More !
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Our December 1, 2006 Newsletter Edition
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DOMINICAN REPUBLIC IN THE NEWS:
.
HIS PLACE IN THE SUN
By Zena Olijnyk - November 5, 2006 issue of Canadian Business magazine
.
You could think of Columbus as the first Caribbean tourist. More
than half a millennium later, the Dominican Republic -- is fast
becoming the destination of choice for a growing number of
sun-worshipping vacationers and those, like aging boomers, seeking a
second home in a tropical paradise. Last year, more than 3.6 million
tourists visited the Dominican Republic, up from 7.2% in 2004, well
ahead of Cuba (2.3 million) and Mexico's Cozumel and Cancún (2.4
million). The Dominican Republic has overtaken every other Caribbean
tourist destination, both in number of hotel rooms -- close to 60,000
rooms -- and the value of their economic impact -- more than US$3.1
billion in 2004. Compare that to second-place Puerto Rico -- which had
less than 13,000 hotel rooms in 2004 and tourist receipts of just over
US$3 billion.
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http://www.canadianbusiness.com/after_hours/lifestyle_activities/
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BEST SELLING AUTHOR ROBERT SHEMIN IDENTIFIES FIVE STRONG INVESTMENT OPPORTUNITIES IN TODAY'S REAL ESTATE MARKET
.
MIAMI, Oct. 27 - Responding to the latest figures released yesterday
from the Commerce Department showing selling prices of new houses
suffered the biggest decrease since 1970, Robert Shemin - Wall Street
Journal best-selling author, nationally renowned speaker and major real
estate investor - identified five strong strategies to reassure nervous
investors. The way you make money is not following the herd,
advises Shemin. Lower prices mean greater investment
opportunities because there are more motivated sellers and more deals
coming on the horizon. Now is definitely the time to buy - but to buy
smart. Buy International - Don't be afraid to invest in other
countries. Do your homework. Talk to other investors. Go to a seminar.
Then make your choice. My two favorite picks right now are The
Dominican Republic and Nicaragua.
.
http://www.SheminRealEstate.com
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T&T LEADS CARIBBEAN IN FOREIGN INVESTMENT
By Dennis Morrison - Wednesday, October 25, 2006
.
While the Latin American and Caribbean region as a whole experienced an
increase in foreign direct investment inflows in 2005, the Caribbean
actually saw a decline. According to the World Investment Report 2006,
inflows to the Caribbean actually slipped from US$41.5 billion in 2004
to US$38.2 billion in 2005, largely accounted for by declines in
Bermuda and the British Virgin Islands. Central America also had a
small decrease, but South America had substantial growth from US$37.4
billion to US$44.7 billion, or a near 20 per cent increase. The
big players in the Latin American/Caribbean region continue to be
Mexico, Brazil, Colombia, and Chile, excluding the offshore financial
centres of Bermuda, British Virgin Islands and The Cayman Islands.
Argentina has also been regaining ground lost in its economic upheaval
a few years ago, and Venezuela has rebounded with the upsurge in the
oil industry. Likewise, Peru, which had been plagued by political
instability, has seen a doubling of inflows of foreign direct
investment in the past two years. Among Caribbean countries,
Trinidad and Tobago was at the top of the list with inflows of US$1.1
billion in 2005, up from US$800 million in 2003. The DOMINICAN REPUBLIC
was next, with inflows of US$900 million in 2005, or roughly 50 per
cent above the figure of US$613 million in 2003. Inflows to Jamaica
were flat in 2005 at US$601 million, but down from the US$721 million
recorded in 2003. The Dominican Republic, which had slipped in
the early years of this decade, has been recovering and indications are
that the worst of its financial crisis has passed. Its foreign direct
investment is biased towards tourism, but even so is less concentrated
in any single sector than is the case with Trinidad and Tobago. In
fact, inflows of foreign direct investments in the Dominican Republic
accounted for just 19.4 per cent of gross fixed capital formation in
2005.
.
http://www.jamaicaobserver.com/columns/
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OTHER ITEMS IN THE NEWS:
.
AUSTRALIA SPENDING $19 MILLION TO PROMOTE IMAGE OF U.S.
By Raymond Bonner, New York Times - November 16, 2006
.
SYDNEY: The prime minister of Australia, John Howard, is so troubled by
Australians' dislike of the United States that his conservative
government has contributed $19 million to the establishment of a U.S.
Studies Center, under the umbrella of the American Australian
Association. A prominent Australian, who has played a role in
setting up the center but did not wish to be identified, asked, What
other government in the world is helping the United States to sell
itself? It is hardly news that the image of the United States in
the world is tarnished, but Australia would seem to be one of the last
places it would need burnishing. On the surface, Australia often seems
like another California - beautiful beaches, laid-back lifestyle, even
two cities that are parallels to San Francisco (Melbourne) and Los
Angeles (Sydney).
.
http://www.iht.com/articles/2006/11/16/news/sydney.php
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THE REAL THREAT
By Terry Tillman - November 6, 2006
.
A long time Republican friend recently asked me: Just how bad is
the American reputation in those countries? How long will it take the
US to recover from the Bush years? How could a father and son be so
different? She asked for permission to send my email below to
friends, and suggested I post it on the Huffington Post. My work
takes me out of the country at least half the year. Recently I've been
to England, France, Spain, Monaco, Morocco, Russia, Kazakhstan,
Lithuania, Canada, Mexico, China and Malaysia. The American
reputation out there? We are despised now! The damage done by the
consciousness and decisions of this administration could take a
generation (or more) to repair. I'm outside of the USA each year as
much as I'm in it. I've lost a couple contracts in Europe in the last
year solely because I'm an American. Two international companies, well
know and respected brands, told me directly, We really value your work
and hope to continue at some point, BUT it doesn't look good for us to
be working with an American consultant right now...I wonder how many
other American companies are losing business and aren't being told
directly why? There is much developing in reaction to Bush that
doesn't make the U.S. News. This I believe is a real longer-term threat
to the USA, more than terrorism. Our government is, and has, in their
arrogant superiority, alienated potential partners and existing friends.
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http://www.huffingtonpost.com/terry-tillman/the-real-threat_b_33443.html
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EDITORS NOTES:
You mean to say that Aussies dislike the US Government? That is
not something they often highlight on American news programs, in fact,
I do not think they have ever mentioned it. I wonder what other
things about other countries we are not told or informed about as
well? What strikes me most in terms of the comments above by Mr.
Terry Tillman is that he has lost business (and income) because he is
an American. Can you imagine? Truthfully I can, and I
concur with many of the comments and perceptions he offers.
People often ask me, why do your clients want to gain another
citizenship and another passport? Why? Being an American or
more correctly stated, a US citizen, can be very detrimental to your
health (financially speaking and otherwise as well). If you do
not believe me, just go and ask any US citizen that has attempted to
open a bank account in Europe over the past 24 months.
.
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GOOGLE TO HIRE 500 AS IT MAKES DUBLIN ITS EUROPE HUB
By Eamon Quinn - The New York Times - November 15, 2006
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DUBLIN: Google, the leading Internet search company, said Wednesday
that it would hire 500 more employees in Dublin as it makes its Irish
facility the largest outside the United States. The central
Dublin offices, which first opened with five employees in 2003, could
have more than 1,400 people by the end of next year if Google can
attract technical personnel and graduates in language studies from
around the world, said John Herlihy, director of online sales and
operations in Europe. Herlihy said that Ireland's low 12.5
percent corporate tax rate had helped Google decide to base its
European operations there. In U.S. financial reports, Google said
it expected its tax rate to fall to 30 percent this year from 31.6
percent in 2005 primarily because we expect that our Irish subsidiary
will recognize proportionately more of our earnings in 2006. The
Irish corporate tax rate is lower than what is levied in the United
States.
.
http://www.iht.com/articles/2006/11/15/business/google.php
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EDITORS NOTES:
I bring your attention to the last four lines of the article. If
GOOGLE can relocate to another country for LOWER taxes, what is
stopping you from doing the same? The answer is nothing, because
it is not all that difficult, nor expensive, either. If GOOGLE
can do it, so can you.
.
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PUNDIT SAYS TO SPEND LESS OR TAX MORE
By Mike Hodgson, November 18, 2006
.
Gov. Arnold Schwarzenegger and the Legislature must decide whether to
cut spending or increase taxes if they hope to address impending budget
crises, infrastructure deficiencies and the lack of health-care
coverage for all Californians. That was the assessment of
California's future delivered Friday by Dan Walters, a syndicated
Sacramento Bee columnist who has spent 40 years covering state
government. Many believe Walters has the best track record of any
state Capitol observer when it comes to predicting the future of
California. As a result, the state issued $40 million in
infrastructure bonds to address crumbling roadways and weakening
levees. But realistically, that's a drop in the bucket, he
said. We do not need $40 million; we need hundreds of millions of
dollars. Walters noted California's population is expected to
increase by 5 million to 6 million every decade, which means 500,000
more vehicles on state roads every year. We need $100 million on
our highways alone, he said. Where is a sustainable
program? The infrastructure bonds are general obligation bonds,
he said, which means the money will come from the general fund, which
is already running a multibillion-dollar deficit. And there is no plan
to make up the difference.
.
http://www.santamariatimes.com/articles/2006/11/18/news/centralcoast/news04.txt
.
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SCHOOLS FACE DEFICIT IN 2008
By LaToya Thompson - November 18, 2006
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URBANA -- Urbana City Schools' faces a looming $700,000 deficit in June
2008. The board members agreed that an income tax levy for
operating costs would have to be put on the ballot next year in order
to avoid budget cuts. Urbana Treasurer Londa Schwierking said
schools throughout Ohio have experienced a flat line revenue stream
while expenditures continue to increase year after year. The
district has spent its money conservatively and we've already done some
fiscal tightening, she said. We don't have a lot of wiggle room,
Schwierking said. The board members will decide in future
meetings when to place the income tax issue on the ballot and at what
percentage.
.
http://www.springfieldnewssun.com/hp/content/oh/story/news/local/2006/11/17/
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PREDICTED DEFICIT TO REQUIRE TOUGH CUTS
By Jon Ward - The Washington Times - November 16, 2006
.
ANNAPOLIS -- Maryland budget analysts yesterday forecast a $1.3 billion
deficit next year, prompting legislators to warn of spending cuts at
least in the next year. Warren Deschenaux, the state's chief
budget analyst, told state legislators that projections show the state
with a $489 million deficit in fiscal 2007, which started July 1, and a
$1.3 billion deficit in fiscal 2008.
.
http://www.washtimes.com/metro/20061115-104021-3955r.htm
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EDITORS NOTES:
This scenario is the norm rather than the exception for US State and
Municipal governments nationwide. There are broke, and you can be
almost guaranteed to find your state income taxes and or real estate
taxes increased, AND government services or social programs curtailed
in the near future. From California to Ohio to Rhode Island and
almost everywhere in between, the story is the same. Do a GOOGLE
news search with the term DEFICIT and see what news stories come
up. You might be very shocked to realize the profundity of this
problem and also what the politicians have in store for you behind
closed door meetings (and believe me, it is not good if you are a
tax-payer or home owner).
.
.
US ECONOMY HAS A FIGHT ON ITS HAND BUT THE NEXT DECADE BELONGS TO ASIA - November 6, 2006
.
Some Comments By Dr. Marc Faber:
.
This global economic expansion has some unusual features. After the
bursting of the dot-com bubble in March 2000, the US Federal Reserve
became rightly or wrongly concerned about the possibility of a
deflationary recession, and implemented ultra-expansionary monetary
policies, which have remained in place. While the Fed has
increased the cost of money since June 2004 by raising the Fed funds
rate - well understood in baby steps - the availability of money or
liquidity has not yet diminished. When the Fed began to increase
interest rates in the second quarter of 2004, credit expanded in the US
at an annual rate of 7%. However, in the first quarter of this year,
credit expanded at an annual rate of 12% - hardly an indication of
tight monetary policies! In fact, expansionary monetary policies
have been accompanied by an unprecedented credit expansion compared
with GDP growth. Over five years from 2000, total credit market debt
increased by $12.7 trillion (EUR11.4 trillion) while nominal GDP grew
by just $2.1 trillion.
.
Easy money and rapid credit growth in the US then led to asset
inflation - particularly evident in the housing market - and allowed
households to refinance and extract money from their homes by using
them like a cash machine. This allowed the households to spend on
consumption in excess of their personal earnings, leading to a negative
savings rate, and because of this over-consumption, to a rise in the US
trade and current account deficit. There are several problems
with the present US expansion, which has been driven by credit creation
but not by strong employment gains with rising personal incomes, nor by
capital spending. Permanent asset inflation in excess of income gains
is not possible, as sooner or later affordability becomes a problem. In
fact, given that US median personal incomes in real terms - that is,
inflation adjusted - have declined by more than 4% since 1998,
affordability has become a problem in the housing market, which will be
exacerbated if interest rates rise further due to the widespread use of
adjustable-rate mortgages and mortgages with negative amortizations.
.
Low capital spending in the US by the corporate sector also means that
in the long run, corporate profits will come under pressure, as it is
capital spending that ultimately drives profits. Moreover, whereas some
observers argue that the current account deficit is not a problem, it
should be clear that with the shift of capital spending and industrial
production overseas, the US loses some of its competitiveness to
foreign economies - notably China and India where, unlike in the US and
Europe, real per capita incomes and GDP are growing at a fast
pace. The US over-consumption and resulting current account
deficit have weakened the US dollar, especially against commodities,
and increased inflationary pressures, which will, if the US economy
does not slow considerably, continue to accelerate. I would argue
that even if the US economy slowed and the Fed began to cut interest
rates, inflation could continue to accelerate and lead to an
inflationary recession or to stagflation. Depending on how much money
the Fed will print in future, the stock market may not decline or even
rise in nominal terms. But since 2003, US financial assets have grossly
under-performed foreign financial assets, and since 2000, the US stock
market has been in a bear market against gold. So, my modest point is
that recession or not, US financial assets are not particularly
attractive and that enormous global imbalances have been a direct
consequence of what I call irresponsible US monetary policies. In
fact, US 30-year government bonds rank top on my list of the world's
most unattractive assets for the next 10 years - just ahead of the
Zimbabwe dollar!
.
http://www.financialnews-us.com/
.
EDITORS NOTES:
The comment is that the next decade belongs to Asia. All I can
say is, when you start outsourcing your research and development to
China and India, because you cannot find enough university graduates in
your own country, and or the cost is so much cheaper in the countries I
just mentioned - watch out. It is bad enough when the
manufacturing jobs go, but when the white color jobs PLUS research and
development as well, it is not a good sign. On another note, I
have noticed recently that they are now selling salt cod in the frozen
food section of Price Cosco, made in China. It is bad enough that
all the television sets, stereos, cell phones, clothing, shoes, and
whatever is made there. When the Chinese start making food too, I
think it is proof that US hegemony in manufacturing or production is
done for (just my opinion).
.
.
THE FREE TRADERS HARD CHOICE
By Stirling Newberry - November 14, 2006
.
The PPI tells us something but it isn't what you think. The headline
numbers show a sharp plunge in prices - crude, intermediate and
finished - driven by even sharper falls in energy prices. We are
in a cyclical drop in inflation, but we are still in a secular
inflationary environment. Europe recognizes this, with both the Bank of
England and the European Central Bank preparing increases in interest
rates, and even the Bank of Japan readying to open fire to stop
inflation. The Fed, however, is not. And there in lies a tale.
.
First let's do the numbers: Finished goods over the last year
have dropped -1.6% on the wholesale level. That you, the consumer,
aren't seeing a drop - you can bet that when the October CPI comes out
it will show an increase year on year - means we are in an inflationary
environment, that's what inflation is - someone having pricing power to
sell the same thing at a higher cost. It gets worse if you look at
finished consumer goods - which dropped by -2.3% over the last year at
the wholesale level. Again, you can bet that CPI isn't going to show a
2.3% drop in prices. Where has this money gone to? Profits of
course. But as important for the future is to look at the chain
from crude to intermediate to finished. Crude materials fell by 45%,
but that is energy driven. Taking energy and food out, one finds that
materials prices are 20% higher than last year. Intermediate goods show
the same pattern - 16% drop, but 6% rise less food and energy. Finally
consumer goods rose .6%, but .9% less food and energy. What this
should tell us is that the inflationary pressure is still in place, and
that at each stage of processing, manufacturers are choosing to push
the costs on to someone else. Since profits have not dropped, and
executive salaries have gone up, this means that wages have born the
brunt of the adjustment.
.
However, that blow off is not a general drop in inflation, as we can
see from the frantic pace of crude materials. The Federal Reserve would
like to believe that where energy has gone, the rest of inflation will
follow. This contradicts their earlier theory that energy rising
doesn't drive inflation. Europe sees things differently - it sees
the rises in materials prices as being a sign of continued inflationary
pressure, and the large growth of global monetary supply as being
indicative of continued inflationary pressures going forward. The US
has wanted Europe to inflate the way the US has, and save less. This is
not in Europe's long or short-term interest, and it points to a renewal
of monetary policies at cross-purposes. The view from the
financial press is that this shows a monetary policy from the fed,
which was just strict enough to hold off inflation, without sending the
economy into recession. In one sense, this is right, in another, it is
off base. It is probably right if you assume that the middle
class of the developed world is wiling to continue to be the designated
losers of the economic world, that they are willing to watch the gains
of the last two generations destroyed, that they are willing to give up
on medical care, their pensions, and their personal retirement savings,
that they are willing to watch their children graduate from college a
house in debt, and not able to find upwardly mobile positions in the
work force. In short, it assumes that all of the benefits from the
economy are going to continue to flow to about 1% of the population.
Forgive me for pointing this out, but while one can run a macro economy
with people paying half a billion dollars for paintings, it is very,
very unlikely that the conditions which create it will continue to be
allowed. That's why mercantilism, or neo-mercantilism, invariably
collapses, because at a certain point the target economy falls apart,
or its population closes the doors.
.
http://www.tpmcafe.com/blog/coffeehouse/2006/nov/14/
.
EDITORS NOTES:
So, what can we learn from all this? In a nutshell, the US
Federal Reserve has indeed been running the printing presses, and the
rest of the world knows it - and are not on board. According to
Dr. Faber, the Fed was expanding the money supply to the tune of 7
percent previously and THIS YEAR they are running the presses or
inflating the money supply by 12 percent in 2006. The Europeans
want no part of it, and the Asians will probably continue dumping
dollars. The bottom line is this: Even if taxes are
increased and government spending cut (reduced pensions, cutbacks in
social services, whatever) the US Dollar is headed for the
basement. However, as Mr. Newberry correctly states, most average
citizens are asleep at the wheel. They have NOT been the
beneficiaries of free trade, globalization, and certainly not higher
wages. In addition, they have no idea what is in store for them
down the road. Remember that politicians lie, but statistics do
not. We cannot control what politicians do even though we would
like to think otherwise. However, we can control what we do
individually, where we invest, and how we arrange our personal
financial affairs to make sure we are not left standing when the music
stops playing in this game of economic musical
chairs.
.
.
PITTSBURGH BREWING DISPUTES PENSION CLAIMS
By Joe Napsha - TRIBUNE-REVIEW - Tuesday, November 14, 2006
.
Bankrupt Pittsburgh Brewing Co. says it wants a judge to reduce a
federal agency's $11.8 million claim against the brewery for un-funded
pension liabilities because the claim is grossly overstated.
Because the Pension Benefit Guaranty Corp.'s claim represents a stream
of future payments to retirees, the value of the claim must be reduced
to reflect the present value of those payments, the brewery said.
Instead of offering its own estimate of unfunded pension liabilities,
the brewery wants the claim reduced to an amount determined in a
hearing before Judge M. Bruce McCullough. Pittsburgh Brewing,
which filed for bankruptcy in December, won a court order in April
giving it the right to terminate the pension plan that covered 532
workers and retirees. The pension insurer said that Pittsburgh
Brewing's pension plan was just 50 percent funded, with about $12
million in assets to cover $24 million in promised benefits.
.
http://www.pittsburghlive.com/x/pittsburghtrib/s_479606.html
.
.
PENSIONS AGENCY REPORTS DEFICIT OF $18.1 BILLION
Associated Press - November 15, 2006
.
WASHINGTON - The federal agency that insures private pension plans for
millions of Americans logged a deficit of $18.1 billion this year, a
big improvement from last year as a new law helped to put the agency on
better financial footing. The narrower deficit for the 2006
fiscal year reported by the Pension Benefit Guaranty Corp. Wednesday
was down from a shortfall of $22.8 billion recorded in 2005 and a
record $23.3 billion posted in 2004. The PBGC's financial
condition appears to have stabilized for the time being, said Vince
Snowbarger, interim director of the agency, which insures pensions for
44 million workers and retirees. The agency disclosed in its
annual financial report that as of Sept. 30 it had assets of $60
billion to cover liabilities of $78.1 billion. The PBGC was
created in 1974 as a government insurance program for traditional,
defined benefit pension plans. Those plans give retirees a fixed
monthly amount based on salary and years of employment. Companies that
sponsor these traditional pension plans pay insurance premiums to the
agency. If a company can't support its pension obligations, the agency
takes over the plan and pays promised benefits up to certain
limits. The maximum annual benefit for plans taken over in 2006
is $47,659 for workers who wait until 65 to retire. Workers who retire
before 65 get smaller benefits. Addressing the PBGC's overall red
ink this year, Greg McBride, senior financial analyst at Bankrate.com,
said: From the individual worker's standpoint, you are still looking at
a big deficit. The message here is even if you have a pension, you
still need to save on your own because the health of that pension when
you go to retire could be tenuous. President Bush in August
signed a bill to shore up funding for traditional pensions. Supporters
hope the changes will help prevent a multibillion-dollar taxpayer
bailout of the PBGC.
.
http://www.msnbc.msn.com/id/15730546/
.
EDITORS NOTES:
The government must define insolvency or bankruptcy differently than
the rest of us. The PBGC, a US government pension insurance
scheme, has 60 Billion is Assets and 78 Billion in Liabilities.
Were it a private company of any kind, never mind an insurance program,
by all accounts, we would say the entity is bankrupt. In any
event, we have not even gotten started yet in terms of what we might
have coming down the road in 2007 and 2008 in terms of the US
economy. Ford Motor, one of the largest US car manufacturers
recently has had its bonds downgraded to junk status. The US
airlines industry is in trouble. Just about everything is now
made in China and who knows what other companies are on the brink of
declaring bankruptcy? Personally I really do love the last line
from the news article above: Supporters hope the changes will help
prevent a multibillion-dollar taxpayer bailout of the PBGC. Yeah,
there was much wishful thinking back towards the end of 1986 when the
FSLIC went bankrupt too and taxpayers had to bail out all the Savings
and Loan institutions for a sum just a bit more than 8 Billion Dollars
(what the heck, its only money after all, and as far as the politicians
are concerned - not their money). However, don't get me wrong, I
am a positive minded kind of guy - I am also hoping the tooth fairy
leaves me a winning lottery ticket for the next multi-million dollar
power ball jackpot. I guess I will have to wait and
see.
.
.
READERS WRITE IN:
.
Re: Your comments on the FDIC. Back in 1968 a bank in San
Francisco went belly up, so the FDIC stepped in and I interviewed with
them for a position as executive secretary. What the on-site FDIC
manager told me was appalling. Even if the FDIC weren't in debt,
he told me that the FDIC insurance only covers the costs of the FDIC
officials to step in and divvy up what is left. And to
think--Americans fear banking offshore because it is riskier than U.S.
banks--give me a break!
.
EDITORS REPLY:
How true, and if Americans really understood how a number of other
government operated insurance programs, such as Social Security, really
worked, they would be outraged (or in the least should be). Many
things are not what they seem or are not what people are often coaxed
into believing. For example, how much money really is in the FDIC
fund and how solvent would it be really if a major banking crisis were
to befall? The answer may both surprise you and upset you, and
the fact that some US banks are actually allowed to escape paying in
somewhat appalling as well. In addition, the amount of funds paid
into such a fund miniscule in comparison to the premiums paid by banks
in other countries to their own respective government run banking
insurance programs - such as in Panama and the Dominican
Republic. If you want some recent history, you only need to go
back a few years and examine the so-called Savings and Loan crisis in
the US. Ironically, the percentage of Savings and Loans
institutions that failed completely (were insolvent altogether) totaled
441 - or about 14 percent of all such institutions, and those
institutions that were dangerously low on capital totaled 533.
Together, this means that roughly 30 percent of the financial
institutions failed or were in danger, and the whole insurance program
imploded, forcing a taxpayer-funded bailout. Which is to
say, the FSLIC (Federal Savings and Loan Insurance Corporation, the
sister government run banking insurance fund to FDIC) was declared
bankrupt on December 31, 1986. How could a government operated
insurance program have been allowed to become bankrupt? Good
question. Now think about all the other new deal socialist
inspired programs, which were well intended and were noble ideas all,
but are NOW bankrupt as well.
.
.
ANOTHER READER WRITES:
.
I read one of your articles and I am not sure if you are right or wrong
but it sure makes you think. I live in Florida and was thinking
of retiring in Panama. What would you do if you were me?
.
EDITORS REPLY:
Well, in the least, if I can motivate people to become more proactive
in understanding economic issues and even political issues (because
both are often interconnected), then that is probably half the
battle. In other words, you certainly have the right to disagree
with many of my comments and opinions, but in the least make whatever
decisions about what is best for your future with your eyes wide open
and with the correct information. Do not be foolish enough to
think that some of the economic problems that are out there will
disappear by magic, nor be so naïve to think government gives a
darn (just ask the home owners, or previous home owners better said, in
Louisiana and Mississippi in terms of Hurricane Katrina). Which
is to say, I think it safe to say that you must take care of yourself
and do what is best for you, because no one else will do so (and you
can forget about the government). With that said, this does not
mean doing anything illegal or anarchistic. The truth of the
matter is, in terms of deciding to relocate or expatriate, the biggest
problem most people have is emotional, meaning that they somehow feel
their own patriotism is in question. But what is patriotic about
allowing the country to go down the drain in terms of political and
economic leadership? Which is to say, I do think patriotism is a
two way street (it is fine to say you need to be patriotic and pay or
do whatever government says you should, but on the same token, one
hopes and assumes politicians are looking out for your long-term
welfare as well - that is the two way compromise that is supposed to be
in effect). However, in my opinion, government is nothing more
than a service provider, just like the electric or cable television
company. In terms of government, we pay our taxes and trust that
our elected politicians will do the right thing, manage the country
properly and manage the economy in one respect or another properly as
well (such as making sure our hard earned money does not loose its
value from over printing). The question then becomes - if
government does not hold up its end of the bargain or even reneges,
then what recourse do you have? They will certainly come and
throw your rear end in the pokey if you do not pay your taxes, which is
supposedly your end of the bargain - but what about theirs? All I
am suggesting with all this is that you do have a choice, and it is
your life and your own long-term financial well being at stake.
Stated another way, change service providers if need be - it does not
get any more complicated than that and it is really not that difficult
to do either.
.
In any event, you ask what I would do, but I can only tell you what I
have already done. Meaning, I made the decision some time ago to
relocate and expatriate because I did not like what I noticed going on
and did not see any real concerted effort to steer things in the right
direction, and I still do not today either to be truthful. Now
the circumstances are even worse in terms of deficits, fiscal problems,
lack of tax revenues, personal bankruptcy filings, cuts in government
pensions for retired employees, etcetera. If you honestly think
or believe that the long-term prognosis is positive, then stay
put. However, there are a number of converging trends that I
think indicate otherwise. In any event, in terms of your question
- where do you go? That depends upon you individually because
your goals and preferences certainly may be different than my
own. But, with that said, we have clients that have decided to
relocate to Panama, The Dominican Republic, Honduras, Argentina,
Brazil, Thailand, China, and even some of the eastern European
countries. In terms of Panama specifically, my advice is to go
and check it out. Consider taking a trip and decide if you think
it is a place you might like to live, and if Panama offers you the kind
of lifestyle that you want. I have confidence in Panama and we
maintain an office in Panama for the purposes of providing services to
clients as well. For me personally, the Dominican Republic scored
a bit higher on my own list of items or preferences, but that does not
mean it is the best place for everyone, but for me personally it
certainly was.
.
Regardless,
do not allow other people to make up your mind about what
is best for you. There are many people out there who will try and
tell you that relocation or expatriation is unpatriotic. They
will try and convince you that in some way you are shirking your civic
or so-called social responsibility if you consider leaving.
However, my question is - what other choice do you have? I honestly
feel terrible for the next younger generation coming up in terms of
their long-term employment and economic prospects, and all that
government debt they will be stuck with. And with that said, many
middle aged and retirement-aged people, are finding they just cannot
afford to stay anymore either. How can you afford to live on a
pension when your local municipality is charging you US$10,000 per year
in real estate taxes for a two-bedroom condo? They mismanaged the
government finances and you have to suffer? I do not see it - and
there is a wide space (as opposed to a fine line) between patriotism
and stupidity. In the Dominican Republic, if you purchase a home
costing 5 Million Pesos or less (about US$150,000) you are EXEMPT from
annual real estate taxes on the property - and believe me, there is a
huge selection of large quality homes or luxury apartments to choose
from BELOW that price range. You can find real estate bargains in
Panama as well, although I will say, I still think your real estate
dollar will go farther in the Dominican Republic (in terms of square
footage, etc.). In any event, I encourage you to investigate
Panama and a few other places as well. It is a big world out
there and a large number of places that can and will offer you a lower
cost of living and amenable lifestyle (not to mention possibly a less
taxing one as
well).
.
.
ANOTHER READER WRITES:
.
John: I enjoy reading your very insightful newsletter every month. My
question to you is how is the WiFi sector in the Dominican Republic? I
am interested in installing wireless networks at beach resorts as part
of a business. I would very much appreciate your thoughts on this.
.
EDITORS REPLY:
Well, the truth of the matter is, the Dominican Republic is not as
backwards as you might think. There already are a number of small
businesses that set up WiFi Internet networks in the country and
high-speed WiFi is available in Santo Domingo from Verizon for about
the equivalent of US$60 per month (they claim up to 1000k download
speed, but I cannot confirm it for you). In addition, the
Dominican Government set up a special program for university students
in recent years so they can get free or reduced service as well.
So, Wifi is alive and well in the Dominican Republic as are DSL
connections and cable-modems. Now, the question is, do the beach
resorts in the tourist areas offer such services to guests? I
would have to imagine that the larger resort or hotel chains do (which
is certainly the case in Santo Domingo), but it is something worth
investigating in terms of the smaller ones.
.
.
ANOTHER READER WRITES:
.
Sir: I thoroughly enjoy your newsletter. I am not concerned
about the oil depletion but the peak oil crisis. It has been projected
that the supply/demand difference will be so great that an oil crash
will occur in 2008-9. (see www.energypulse.net article - Peak
Oil-Investor Strategies for Energy Transition, Andrew McKillop; see
also at energypulse: More Facts and Fictions About the World Oil
Scene). We should be moving rapidly to the solar-hydrogen economy
RIGHT now to avoid this economic disaster. What is your outlook?
.
EDITORS REPLY:
There are two arguments floating around out there. One argument
is that physical supplies of oil are going down simply because we have
been depleting such a non-renewable energy source over the past 100
years, and sooner or later it is going to run out, or ergo we have
passed the mid-level peak already (and the argument is maybe sooner,
especially with new increased demand from China). The other
argument is that this is all nothing more than a conspiracy theory by
the large oil companies to drive up the price of oil for profits, and
one leg of the argument is the large untapped (and cheap to extract)
oil reserves in Iraq. Which is it? A very good question,
and the truth just might be - maybe both. Regardless, one must
realize whether the price of oil goes up (for whatever reason) or gets
cut off altogether - either way it will be a major problem. Which
is to say, some people have asked me why I mix political commentary
with economics? The answer is that they are both
interrelated. For example, the economics of high priced oil (and
that might affect your own wallet) is easy enough to understand.
But what if Iraq turns into a full-blown civil way (more so than it is
already), or ends up being ruled by a radical group of religious
zealots? What if Iran decides to stop selling oil to the US or
Europe at any price, as a political weapon? So, it is not
just the case of economics or the cost of oil regardless of the reason,
but also the case of maybe not having access to the stuff at any price
for other political reasons as well.
.
I do agree that anyone with any common sense (and by that I of course
include governments collectively as well) should take the steps now to
move away from foreign oil dependence. The sun is free and
plentiful in many places. The wind is free and also
plentiful. Granted, I do not think that such alternative energy
can replace all carbon-based fuels completely, but maybe some high
enough percentage to insulate one from such problems (or lessen the
effect). Brazil has already done the hard work and now they are
100 percent self-sufficient, and free of dependency on foreign
oil. I have made the comment as well about home based solar panel
and wind systems being available in the Dominican Republic, tied in of
course to battery inverter systems. Imagine if you will, a case
whereby you invest say US$10,000 to US$15,000 for such a home system
and you have 100 percent free and reliable (24 hours a day) electricity
for you house. If you sell your overpriced real estate in the US
or Europe, assuming that you can of course, and buy a very decent
property in the DR for say US$150,000 plus add on a solar-wind system
for about US$15,000 (in actuality it costs about ten thousand, but let
us mark it up for argument sake) then what do you have? You have a
fully paid for home (no mortgage) and one less utility bill each month,
plus the guarantee of electricity 24-7 (and the rest of the money left
over you put into the bank). If oil does go up to US$200 per
barrel or simply is not available regardless of the price, at least you
have some way to obtain energy for your own personal use that is not
affected. This is not rocket science in my opinion. In any
event, you ask if we should me moving towards solar and hydrogen now to
starve off disaster? Of course we should. Will it happen in
the US? Probably not, the oil industry is too embedded into the
political process (and the politicians too embedded into the oil
companies) for any current and serious effort. Like many other
things, it is about the money, although the joke is, lack of any
serious attention now may certainly become even more expensive later on.
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