They say that breaking up is hard to do
Now I know that it’s true
— Neil Sedaka
What’s the Greek word for ‘chutzpah’? We don’t know either.
But the leader of the communists/socialists, Alexis Tsipras, has it. He must have heard that old saying:
“When you owe your bank $100,000, you can’t sleep at night. When you owe your bank $1 million, your banker can’t sleep at night.”
Since the Greeks owe money all over town, he figured he could thumb his nose at his lenders. He told the Germans that they were trapped. They had no choice. They had to keep the money flowing to Greece. Otherwise, the Greeks would default...and cause Hell to all of Europe.
What’s the word for “oh yeah?” in German? We don’t know that either. But surely the Germans have a word for this occasion. A word that means... “We’ll show you what a moron you are...”
In the event, the Bundesbank did the talking. As to the possibility of the Greeks’ departure:
“The challenges this would create for the euro area and for Germany would be considerable but manageable given prudent crisis management.”
Or, in the words Gerald Ford used in responding to New York City’s request for a loan: ‘Drop Dead.’
Yesterday, the Dow was down as much as 170 points as investors wondered what would happen next. The dollar rose to $1.25 to the euro. By the close of trading, the Dow had managed to pull itself up to only a 6-point loss. Everything else was down, down, down...and it keeps going down. Watch out...investors could panic!
In Europe itself, things seem to be coming to a head. It looks like the Greeks might finally leave...or be pushed out of the euro.
Bloomberg continues:Greece may have only a 46-hour window of opportunity should it need to plot a route out of the euro.
That’s how much time the country’s leaders would probably have to enact any departure from the single currency while global markets are largely closed, from the end of trading in New York on a Friday to Monday’s market opening in Wellington, New Zealand, based on a synthesis of euro-exit scenarios from 21 economists, analysts and academics.
But switching currencies is not an easy thing to do. Bloomberg continues:It would most likely be necessary to close borders to stop Greeks smuggling out euros to stash in banks elsewhere. But with hundreds of miles to cover, much of it in inaccessible mountain, wood and scrubland, security forces would be stretched thin.
Simultaneously, police would likely have to manage a dramatic spike in unrest and perhaps more political and criminal violence. Already, there have been isolated examples of Germans — or those suspected of being German — being assaulted in apparent anger over EU-enforced austerity.
Greece’s leaders could decide to deploy the army onto the streets in an attempt to reassure the population and bring calm. But that could prove deeply divisive...
The commentariat still insists that it would be against Germany’s interest to push the Greeks out of the euro. One says Germany would be “shooting itself in the foot” or perhaps the head. Another says it would cost a fortune, $1 trillion, according to a report in the Telegraph:The British government is making urgent preparations to cope with the fallout of a possible Greek exit from the single currency, after the governor of the Bank of England, Sir Mervyn King, warned that Europe was “tearing itself apart”.
Reports from Athens that massive sums of money were being spirited out of the country intensified concern in London about the impact of a splintering of the eurozone on a UK economy that is stuck in double-dip recession. One estimate put the cost to the eurozone of Greece making a disorderly exit from the currency at $1tn, 5% of output.
Yes, breaking up is hard to do. It would be costly. But money isn’t everything. People do bad things for money, it’s true. But they do worse things IN SPITE OF money.
Where was the money in WWI? In starving the Ukrainians? In Hitler’s ‘final solution’? In the extermination of the Armenians?
You might find a money motive...but few mass murderers are bottom- line oriented. They’re usually world-improvers...
There are some things more important than money. National pride is one of them. Here’s our point. At some point, people stop counting the costs...they go ‘off their heads’...and begin doing things that don’t really benefit anyone in a financial way. So, it may not matter whether it “makes sense” to kick the Greeks out of the European monetary system or not.
Greece was still in it as of yesterday. Today, anything could happen. But at this stage, the Germans may prefer to blow off a toe or two in order to get rid of them.
And more thoughts...
We went to Toronto yesterday to visit an old friend who made a lot of money in the mining business but now works in bio-tech. Why did you get out of mining, we wanted to know?
“It just got too crowded. You know what they say about the ‘crowded trade.” Get out. Well, I guess it was the big run-up in commodities a couple of years ago that caused it. Suddenly, everyone was starting up a mining company. And they were getting a lot of investment money. Everybody thought he’d get rich in resources.
“But it doesn’t work that way. The mining business is extremely cyclical. Prices go up. It draws in the marginal players. And the good deals disappear. Everything is too expensive. There’s too much production. Too many projects. Too many promoters. And then prices collapse.
“We’ve already had a good pullback. I’m starting to see some good deals again. But I’m waiting a little longer. I think we’ll get some better deals before this is over.”
Our guess, here at The Daily Reckoning, is that Facebook’s IPO represented some kind of high water market for the virtual economy. It was like Blackstone’s IPO in June 2007, which marked the top in the financial economy.
Now, the economy will shift back to the real things...oil, and copper, and precious metals. It could take years.
But heck, we’re not in any hurry either.
Regards,
Bill Bonner
for The Daily Reckoning
El Conquistqdor Francisco de Orellana
The Conquistador who put the Amazaon baisn "on the map"....Francisco Orellana
Thursday, May 24, 2012
Uncivilized Investing
The Daily Reckoning Presents
Dan Denning
Uncivilized times call for uncivilized investments.
Charlie Munger, Warren Buffett’s partner in crime at Berkshire Hathaway, told CNBC recently, “I think gold is a great thing to sew into your garments if you’re a Jewish family in Vienna in 1939, but I think civilized people don’t buy gold. They invest in productive businesses.”
In a way, Munger is correct. Gold is uncivilized in the sense that it functions best when civilization functions worst. The more uncivilized a society becomes, the more civilized gold becomes.
So the easiest way to dismiss this statement is to say that maybe it’s 1939 again and maybe this time “we’re all Jewish families in Vienna.” But let’s not let Charlie off the hook so easily. Instead, let’s “unpack it,” in the words of our tutors at St John’s College in Santa Fe, New Mexico. To ‘unpack it’ we need to focus on two key words in Charlie’s statement: “productive” and “civilized.”
Charlie might be right if the world were, indeed, civilized. But maybe the modern world isn’t as civilized as he thinks. Part of what made the world so uncivilized in 1939 was unsound money. The abandonment of the classical gold standard in 1914 made the expansion of the Warfare state possible. The equally unsound system that emerged from World War I — including the Treaty of Versailles — virtually guaranteed that monetary and fiscal instability would lead to political instability. Radical parties like the Nazis flourished.
Gold, on the other hand, is sound money. You are not buying it for a capital gain. You are buying it, by our reckoning, as a way of preserving purchasing power. You extract paper from the fiat money system and turn it into something (bullion) you can later exchange for whatever currency emerges when the financial system becomes more civilized.
Interestingly, for more than a decade Berkshire has underperformed gold — the investment asset Buffett recently called “forever unproductive.”
Since 1997, Berkshire’s shares have declined relative to this forever unproductive asset. The nearby chart depicts the trailing 10-year return of gold since 2007. Thus, the first data point on this chart shows the return an investor would have received from buying gold or Berkshire Hathaway in 1997. Moving across the chart to the right shows subsequent 10-year time frames. Bottom line: Based on a 10-year holding period, there has not been a single moment since late 1997 what an investor would have been better off buying Berkshire Hathaway instead of gold.
No wonder Charlie is so cranky!
This lengthy underperformance by Berkshire may explain Buffett’s and Munger’s very vocal and public hostility toward gold. Or maybe that’s just a function of both men living most of their adult lives in an era where the monetary system was not disintegrating. They are unable to imagine it.
But the chart above isn’t an indictment of the investment acumen of Buffett and Munger. It’s an indictment of the world’s fiat monetary system! A civilized society with civilized people has sound money. An economy with sound money has price stability. This stability allows for long-term planning and investment. This stability rewards investors for identifying which businesses are the most productive and efficient users of shareholder capital.
For these exact reasons, William McKinley campaigned for President in 1896 and again in 1900 as a champion of the gold standard. He won...twice. But just 12 years after his assassination in 1901, the Era of Incivility began: The Federal Reserve came into being. Just 20 years after that, FDR confiscated all privately held gold. And 38 years after that, Nixon cut the dollar’s last remaining ties to gold, thereby establishing today’s very uncivilized “fiat money” system.
In an uncivilized society, where the value of your labor is stolen through inflation (made possible by an unsound money system) long- term planning and investment become much more difficult, if not impossible.
If you accept that we live in civilized monetary times where productive labor is actually rewarded, your brain has been tranquilized by the Big Lie of our times. Munger wants you right where you are. The less you think about how uncivilized the current monetary system is, the less likely you are to question it or disrupt it (which would be inconvenient for Charlie).
But if you live an era that subverts accurate valuation of productive businesses — an era that subverts the productivity of the economy itself by encouraging debt and consumption, owning gold seems prudent, not wacky.
Uncivilized times call for uncivilized investments.
Regards,
Dan Denning
for The Daily Reckoning
Dan Denning
Uncivilized times call for uncivilized investments.
Charlie Munger, Warren Buffett’s partner in crime at Berkshire Hathaway, told CNBC recently, “I think gold is a great thing to sew into your garments if you’re a Jewish family in Vienna in 1939, but I think civilized people don’t buy gold. They invest in productive businesses.”
In a way, Munger is correct. Gold is uncivilized in the sense that it functions best when civilization functions worst. The more uncivilized a society becomes, the more civilized gold becomes.
So the easiest way to dismiss this statement is to say that maybe it’s 1939 again and maybe this time “we’re all Jewish families in Vienna.” But let’s not let Charlie off the hook so easily. Instead, let’s “unpack it,” in the words of our tutors at St John’s College in Santa Fe, New Mexico. To ‘unpack it’ we need to focus on two key words in Charlie’s statement: “productive” and “civilized.”
Charlie might be right if the world were, indeed, civilized. But maybe the modern world isn’t as civilized as he thinks. Part of what made the world so uncivilized in 1939 was unsound money. The abandonment of the classical gold standard in 1914 made the expansion of the Warfare state possible. The equally unsound system that emerged from World War I — including the Treaty of Versailles — virtually guaranteed that monetary and fiscal instability would lead to political instability. Radical parties like the Nazis flourished.
Gold, on the other hand, is sound money. You are not buying it for a capital gain. You are buying it, by our reckoning, as a way of preserving purchasing power. You extract paper from the fiat money system and turn it into something (bullion) you can later exchange for whatever currency emerges when the financial system becomes more civilized.
Interestingly, for more than a decade Berkshire has underperformed gold — the investment asset Buffett recently called “forever unproductive.”
Since 1997, Berkshire’s shares have declined relative to this forever unproductive asset. The nearby chart depicts the trailing 10-year return of gold since 2007. Thus, the first data point on this chart shows the return an investor would have received from buying gold or Berkshire Hathaway in 1997. Moving across the chart to the right shows subsequent 10-year time frames. Bottom line: Based on a 10-year holding period, there has not been a single moment since late 1997 what an investor would have been better off buying Berkshire Hathaway instead of gold.
No wonder Charlie is so cranky!
This lengthy underperformance by Berkshire may explain Buffett’s and Munger’s very vocal and public hostility toward gold. Or maybe that’s just a function of both men living most of their adult lives in an era where the monetary system was not disintegrating. They are unable to imagine it.
But the chart above isn’t an indictment of the investment acumen of Buffett and Munger. It’s an indictment of the world’s fiat monetary system! A civilized society with civilized people has sound money. An economy with sound money has price stability. This stability allows for long-term planning and investment. This stability rewards investors for identifying which businesses are the most productive and efficient users of shareholder capital.
For these exact reasons, William McKinley campaigned for President in 1896 and again in 1900 as a champion of the gold standard. He won...twice. But just 12 years after his assassination in 1901, the Era of Incivility began: The Federal Reserve came into being. Just 20 years after that, FDR confiscated all privately held gold. And 38 years after that, Nixon cut the dollar’s last remaining ties to gold, thereby establishing today’s very uncivilized “fiat money” system.
In an uncivilized society, where the value of your labor is stolen through inflation (made possible by an unsound money system) long- term planning and investment become much more difficult, if not impossible.
If you accept that we live in civilized monetary times where productive labor is actually rewarded, your brain has been tranquilized by the Big Lie of our times. Munger wants you right where you are. The less you think about how uncivilized the current monetary system is, the less likely you are to question it or disrupt it (which would be inconvenient for Charlie).
But if you live an era that subverts accurate valuation of productive businesses — an era that subverts the productivity of the economy itself by encouraging debt and consumption, owning gold seems prudent, not wacky.
Uncivilized times call for uncivilized investments.
Regards,
Dan Denning
for The Daily Reckoning
Trademark of the Uncivilized
Investing in Gold as World Economies Falter
Eric Fry
Reporting from Laguna Beach, California...
Are you a civilized individual or a Neanderthal? Berkshire Hathaway’s Charlie Munger provides a simple litmus test... “Civilized people don’t buy gold,” says Munger.
There you have it. If you possess absolutely no gold, other than maybe a tooth filling, you are civilized. Congratulations!
If, however, you’ve stashed a few Krugerrands under your mattress, we’ve got some bad news for you. You are hopelessly uncivilized — a financial Neanderthal, deserving of pity from your civilized counterparts.
“I think gold is a great thing to sew into your garments if you’re a Jewish family in Vienna in 1939,” Munger remarked recently, “but I think civilized people don’t buy gold. They invest in productive businesses.”
Yes, that’s right, Charlie. Civilized people invest in productive businesses...until an uncivilized government decides to steal it, or merely tax and regulate it into oblivion. Some Jews in Vienna in 1939 operated extremely productive businesses. Unfortunately, they could not stitch any of those into their garments.
In other words, Charlie, civilized investment strategies function in civilized societies. In uncivilized societies, gold is usually a better bet. Or to put it another way, as civilizations lose their civility, share prices fall and gold soars...which is exactly what has been happening here in our beloved US of A.
During the last decade and a half, the investment return of Berkshire Hathaway, perhaps the most civilized of American stocks, has trailed far behind that of gold. Civilized folks like Charlie Munger and Warren Buffett consider that 15-year trend a fluke. Maybe so. Or maybe this trend is a warning that America is becoming a bit less civilized — a bit less friendly to productive businesses.
Notwithstanding this trend, civilized folks know better. They shun gold in order to invest in the shares of overhyped social media companies, highly leveraged banks, bonds of bankrupt governments and complex derivatives that are impossible to value precisely... until they go to zero... at which point their precise value is known.
That, Dear Reader, is civilized!
But there is one additional echelon: the über-civilized investor. Über-civilized investors shun gold to invest in über-complex derivatives. These are the folks like Warren Buffett who do not merely shun gold, but also belittle it very publicly while loading up on highly leveraged finance companies that are loaded up on complex financial derivatives.
Often, these banks are run by über-über-civilized investors — the kinds of guys who do not merely load up on complex derivatives, they load up on complex derivatives linked to the bonds of bankrupt governments. Then they utilize a “risk control” methodology that has a perfect record of failing to control risk.
You just can’t get any more civilized than that.
Eric Fry
Reporting from Laguna Beach, California...
Are you a civilized individual or a Neanderthal? Berkshire Hathaway’s Charlie Munger provides a simple litmus test... “Civilized people don’t buy gold,” says Munger.
There you have it. If you possess absolutely no gold, other than maybe a tooth filling, you are civilized. Congratulations!
If, however, you’ve stashed a few Krugerrands under your mattress, we’ve got some bad news for you. You are hopelessly uncivilized — a financial Neanderthal, deserving of pity from your civilized counterparts.
“I think gold is a great thing to sew into your garments if you’re a Jewish family in Vienna in 1939,” Munger remarked recently, “but I think civilized people don’t buy gold. They invest in productive businesses.”
Yes, that’s right, Charlie. Civilized people invest in productive businesses...until an uncivilized government decides to steal it, or merely tax and regulate it into oblivion. Some Jews in Vienna in 1939 operated extremely productive businesses. Unfortunately, they could not stitch any of those into their garments.
In other words, Charlie, civilized investment strategies function in civilized societies. In uncivilized societies, gold is usually a better bet. Or to put it another way, as civilizations lose their civility, share prices fall and gold soars...which is exactly what has been happening here in our beloved US of A.
During the last decade and a half, the investment return of Berkshire Hathaway, perhaps the most civilized of American stocks, has trailed far behind that of gold. Civilized folks like Charlie Munger and Warren Buffett consider that 15-year trend a fluke. Maybe so. Or maybe this trend is a warning that America is becoming a bit less civilized — a bit less friendly to productive businesses.
Notwithstanding this trend, civilized folks know better. They shun gold in order to invest in the shares of overhyped social media companies, highly leveraged banks, bonds of bankrupt governments and complex derivatives that are impossible to value precisely... until they go to zero... at which point their precise value is known.
That, Dear Reader, is civilized!
But there is one additional echelon: the über-civilized investor. Über-civilized investors shun gold to invest in über-complex derivatives. These are the folks like Warren Buffett who do not merely shun gold, but also belittle it very publicly while loading up on highly leveraged finance companies that are loaded up on complex financial derivatives.
Often, these banks are run by über-über-civilized investors — the kinds of guys who do not merely load up on complex derivatives, they load up on complex derivatives linked to the bonds of bankrupt governments. Then they utilize a “risk control” methodology that has a perfect record of failing to control risk.
You just can’t get any more civilized than that.
Wednesday, May 23, 2012
Like Ecuador in the 1500s...
By Suzan Haskins
Everything is old in Loja. Of course, that’s not literally true…but stroll through the historic colonial heart of this city in southern Ecuador and you’ll feel like you’ve stepped back in time.
If you wish away the cars and buses and try not to see the youngsters with their stylish hair-dos and piercings (this is a university town, after all), you can sense what this city must have been like, oh…nearly 500 years ago. (Loja was founded in 1548.)
Imagine peering at passersby from the inside of a horse-drawn carriage that whisks you down a narrow cobblestone lane...and through a massive arched doorway and into the courtyard...where the horses are watered and left to graze while you take care of business inside the casa, with its wide wooden balconies supported by huge stone columns. The adobe walls are nearly three-feet thick, keeping the rooms nice and cool, helped along by giant shuttered windows flung open to catch a welcome breeze.
Loja inspires such fantasy, with block after block of buildings such as I’ve just described, and plaza after shady plaza, each anchored by an imposing Catholic church, like San Sebastian:
The cathedral at Plaza Central is one of the largest in Ecuador. Days can be spent exploring these and the many historic district museums—yes, full of lots of "old" stuff.
One not-to-be-missed is the Museo Arte Religioso Madres Conceptionistas. Housed in a convent built in the 16th and 17th centuries—and still in use today—it’s full of gold-gilded, fear-inducing religious art and self-flagellation tools. (Imagination runs wild…)
On a happier note, the Museo de Musica hosts old photos, antiquated instruments, artifacts and tributes to the city’s musical legends. (Loja is known as the Music and Cultural Capital of Ecuador.) You may be lucky, as I was, to eavesdrop on a tutoring session or two. I chanced upon both a marimba lesson and a vocal class.
And be sure to poke into the mustard-colored San Sebastian church built in 1650 in honor of the Blessed Virgin Immaculate of Lourdes. It overlooks Plaza de la Independencia where passionate politicos and zealous citizens rallied to plot their revolt against Spanish colonialists in the early 1800s.
After all this time travel, a treat is in order. From Plaza de la Independencia, stroll down Calle Lourdes. Along this old-worldly cobblestone street lined with ancient adobe buildings painted in rainbow shades of blue, orange, turquoise, gold and pink, you’ll find plenty of shops and cafes—the perfect place to stop for tamales lojano, the luscious corn-meal tamales Loja is famous for. Stuffed with pork, chicken, cheese and more, at just 75 cents each, two of these are more than enough for a full meal, and you can wash it all down with a rich, satisfying cup of freshly brewed coffee. Some of Ecuador’s very best export-quality coffee is grown nearby. It’s easy to remember the name—Café Loja.
Monday, May 21, 2012
World's Best Climate
By Suzan Haskins
"Where are they?" I wonder. "Am I the only one here?"
How strange to be roaming the narrow streets, poking about in the antique-filled museums, resting on a bench in the shady, centuries-old plaza…whiling away three hours on the double-decker tour bus…and being the only gringo.
It’s not like this isn’t a place that deserves notice. It’s exactly what most of us are looking for.
On the edge of the hugely beautiful and diverse Podacarpus National Park, the city is large enough to support a vivid cultural life—with several universities, shopping centers and hospitals. And people live here very affordably and happily. (It’s actually called the "Valley of Smiles.")
By the way, this place boasts the world’s best climate...averaging daytime temperatures in the mid-70s every day of the year.
So where am I? In Loja, a manageable city of about 180,000 people in southern Ecuador.
At 6,750 feet above sea level, Loja is at a lower elevation than many of the country’s other major cities perched along the spine of the Andes mountain range. (Popular Cuenca is at 8,200 feet, for example.) Loja is in the Cuxibamba Valley, perfect for growing everything from citrus to coffee, plantains to potatoes.
Loja itself is a treasure trove of Spanish colonial history and influence. In Centro, you’ll find plaza after plaza, each with its own unique statues, frescoes, and attractions. And all are rimmed by massively impressive colonial structures with arched doorways, shuttered windows, and wide, plant-filled balconies supported by thick stone columns.
Music wafts from these ancient windows and doorways, down the cobblestone streets and into the plaza where smiling old men sit on park benches, whiling away the hours in the sunshine. In the afternoon, throngs of young people amble home from school, stopping to chat and flirt, grab an ice cream or dulce de coco, a sweet coconut treat…
Some of Ecuador’s most famous musicians hail from Loja so it’s no surprise that the city is also known as the "Music and Cultural Capital of Ecuador." A saying here is that "Anyone who does not play the guitar can sing a song; the one who does not sing a song can write a verse; the one who does not write a verse reads a book."
So why haven’t North Americans found their way to this little Andean Shangri-la? Most bypass Loja for the larger Cuenca three hours north, with its well-established expat community, or for little Vilcabamba, about 45 minutes farther south. There, they buy small farms, grow their own food, have a couple of horses, maybe some chickens and goats…
There are, of course, a few English-speaking foreigners living in Loja. One I met teaches English at a Loja university. He pays $70 a month to rent a room in a house close to the university. And he says his monthly expenses are about $500. While he lives a more spartan life than most of us might choose, it would be possible to live well in Loja on $1,000 a month. (Two- and three-bedroom apartments can be rented for $300 a month.)
And if you’re looking to buy, I found a 70-acre property on the edge of the city… with beautiful views, spectacular waterfalls and crystalline rivers...selling for just $150,000. Gringo prices aren’t found here, either...
"Where are they?" I wonder. "Am I the only one here?"
How strange to be roaming the narrow streets, poking about in the antique-filled museums, resting on a bench in the shady, centuries-old plaza…whiling away three hours on the double-decker tour bus…and being the only gringo.
It’s not like this isn’t a place that deserves notice. It’s exactly what most of us are looking for.
On the edge of the hugely beautiful and diverse Podacarpus National Park, the city is large enough to support a vivid cultural life—with several universities, shopping centers and hospitals. And people live here very affordably and happily. (It’s actually called the "Valley of Smiles.")
By the way, this place boasts the world’s best climate...averaging daytime temperatures in the mid-70s every day of the year.
So where am I? In Loja, a manageable city of about 180,000 people in southern Ecuador.
At 6,750 feet above sea level, Loja is at a lower elevation than many of the country’s other major cities perched along the spine of the Andes mountain range. (Popular Cuenca is at 8,200 feet, for example.) Loja is in the Cuxibamba Valley, perfect for growing everything from citrus to coffee, plantains to potatoes.
Loja itself is a treasure trove of Spanish colonial history and influence. In Centro, you’ll find plaza after plaza, each with its own unique statues, frescoes, and attractions. And all are rimmed by massively impressive colonial structures with arched doorways, shuttered windows, and wide, plant-filled balconies supported by thick stone columns.
Music wafts from these ancient windows and doorways, down the cobblestone streets and into the plaza where smiling old men sit on park benches, whiling away the hours in the sunshine. In the afternoon, throngs of young people amble home from school, stopping to chat and flirt, grab an ice cream or dulce de coco, a sweet coconut treat…
Some of Ecuador’s most famous musicians hail from Loja so it’s no surprise that the city is also known as the "Music and Cultural Capital of Ecuador." A saying here is that "Anyone who does not play the guitar can sing a song; the one who does not sing a song can write a verse; the one who does not write a verse reads a book."
So why haven’t North Americans found their way to this little Andean Shangri-la? Most bypass Loja for the larger Cuenca three hours north, with its well-established expat community, or for little Vilcabamba, about 45 minutes farther south. There, they buy small farms, grow their own food, have a couple of horses, maybe some chickens and goats…
There are, of course, a few English-speaking foreigners living in Loja. One I met teaches English at a Loja university. He pays $70 a month to rent a room in a house close to the university. And he says his monthly expenses are about $500. While he lives a more spartan life than most of us might choose, it would be possible to live well in Loja on $1,000 a month. (Two- and three-bedroom apartments can be rented for $300 a month.)
And if you’re looking to buy, I found a 70-acre property on the edge of the city… with beautiful views, spectacular waterfalls and crystalline rivers...selling for just $150,000. Gringo prices aren’t found here, either...
Friday, May 18, 2012
If not Ecuador...perhaps Brazil????
Brazil and the Spirit of Liberty
My most surprising findings in Brazil, aside from the amazing fruits that I didn’t know existed because the US government doesn’t think I need them, were the young American kids who have moved here to find economic opportunity. This I had not expected, but now fully understand.
Brazil is a marvelous and massive country where private wealth thrives without embarrassment, where well-protected and healthy familial dynasties form the infrastructure of social and economic life, where technology is popular and beloved by everyone, where the police leave you alone and where Americans can feel right at home.
The world is changing fast. Freedom in America is slipping away so quickly that we are already seeing a wave of young people leaving in search of new opportunities, just as people from around the world once came to America to live the dream. Brazil is one of many countries benefiting from the generational emigration from the US.
Discovering this rattled me more than I might have expected. But the young people themselves are not unhappy, and I can see why. They are valued. They are earning good money doing interesting things. They have access to one of the most beautiful and exotic and friendly places on Earth. They eat well, live well and have rich social lives.
More than anything else, they have the sense of freedom.
Now, you might wonder how it is that people have to leave the “home of the free” to find freedom. Over the last 10 years, something horrible has happened to the United States. The police state has cracked down hard, not so much on “terrorists” or real criminals, but on regular citizens. The news items spill out of my feed on an hourly basis, things that just shock and alarm those who are paying attention.
Maybe it is not so surprising. The US military is larger than most of the world’s militaries combined. We have the largest prison population on the planet, and most are locked up for nonviolent crimes. The political culture focuses more on the need for security than for freedom. Add it all up and you have the perfect recipe for the emergence of a police state.
But most Americans are not entirely conscious of the change. It has been fast, but slow enough not to cause alarm. It hits you only once you leave. This happened to me two years ago when I went to Spain. I could move about and do what I wanted without bumping into authority at every turn. I felt it again in Austria last year. It is not something you can quite put your finger on, just a sense that you are not under constant surveillance in suspicion. You can breathe easily.
It was the same in Sao Paulo, Brazil, a happy and prosperous land of exotic fruits, thriving markets, consumer products that actually work and are not depreciated by regulatory mandates, and polite and warm people.
I received a very generous invitation to be a main speaker at the third conference on Austrian economics sponsored by Mises Brasil, a young organization with a very bright future. It was founded only four years ago. Yet today, it has a gigantic presence in Brazilian intellectual life. The hunger for the intellectual basis of freedom is palpable.
Three hundred or more people were here to listen to lectures and engage in debates on ideas. The audience was a sea of young people, most everyone under 30. They were students, professionals, traders and workers of all sorts, all passionate about freedom and the economic answers provided by the Austrian tradition of Ludwig von Mises, F.A. Hayek and Murray Rothbard.
What most excited them was the classic idea of laissez faire — that is, the idea that society can thrive on its own in the absence of central management and that the government operates as a drain on society. The culture of the group was certainly more intellectual and educational than political. They were invigorated by ideas and given hope by the idea of freedom. Apparently, nothing like this organization existed in Brazil until recently. Now the group’s website is one of the most heavily trafficked in the country.
My hosts were enormously generous with their time, and they knew exactly what I really wanted to do on the first day: see the delights of the open-air markets. I was told they are in the center of town. If you had seen a map of Sao Paulo, you would know just how odd it is even to imagine such a thing. The city seems to be everywhere in sight, everywhere you turn, going on forever. It is like 100 New Yorks.
Driving here is not for the faint of heart. The street layout makes no rational sense at all. I could have been driven the short distance between the hotel and the conference center a hundred times and still not have had the slightest clue about the layout. I was told that it would take at least two years of living here to gain a sense that you really know the place.
Go to a high spot in the center of town and look around on all sides. Everywhere you see a beautiful thing, a world built by millions of human hands. No central plan could have made this. No single mind could have conceived of it. To anyone who is intellectually curious, the obvious questions are how does this place work? How is order achieved? The answer is one that few people in the United States seem to care about today. The miracle is obtained through the coordinating forces of the market itself, of millions of free people interacting in small ways toward their mutual self-betterment. This is the answer that inspires a lifetime of intellectual curiosity.
On the first lunch on my first day, my hosts took me to a place like I had never seen, and they are as unconscious of its significance as Americans would be startled by its very existence. Again, it seemed to be in the center of town. To obtain entry requires extensive security checks. But once you are in, a new world emerges: restaurants, soccer fields, gigantic swimming pools of many varieties and delights as far as the eye can see.
This is a city within a city. But it is entirely private, what Americans would call a “country club,” but of a particularly elaborate type. It is not hidden away in some alcove on the outskirts of town. It is right there in the city for everyone to see — something nonmembers can also take pride in. It is marvelous in every way, a living monument to the possibility of orderly, privately owned anarchist communities.
One thing kept gnawing at me during my entire visit. I kept coming across people who were members of large and extended families with roots very far back in Brazilian history. They were impressive entrepreneurs, but the wealth was more robust than you would find in a place like Silicon Valley. It reminded more of Gilded Age families in the United States, people who carried themselves with grace and confidence born of excellent breeding and material security.
As I thought about it more, the ingredients were unusual by American standards: large and extended families, protected wealth, well-bred youths, a predominantly young population. What was the reason for this? I developed a quick, back-of-the-napkin theory. It had something to do with the inheritance tax. So I asked my hosts, “What are estate taxes like in this country?” The answer came fast: There are none. Some areas charge 3%, maybe 6%, but it is rather easy to escape even those minimal charges.
This contrasts with the United States, where estate taxes can be as high as 35%. We’ve been looting our best families for 100 years. We’ve gouged and smashed the richest generations of American capitalists upon death ever since the Progressive Era. We’ve been living one generation at a time. Time horizons have fallen. Large-scale, privately held capital accumulation has been discouraged, even made illegal. Families have shrunk in size. The population has become ever more aged.
This tax policy has eaten the heart out of the desire of a free people to create dynasties. So our wealthy have to hide. They are encouraged to give their money away to causes, rather than to children. We live one generation to the next. Children are perceived of as an economic burden, rather than a path to immortalizing a legacy.
In Brazil, the time horizon extends beyond the single lifetime. And this is what has given rise to the dramatic cultural, social and economic differences between our countries. These dynasties serve as robust intermediating institutions between the individual and the state. We have ever fewer such things in the United States. Maybe this is what accounts for the incoherent sense that this is a freer country than the US.
There are other factors, too. The military consumes only a tiny percentage of wealth, and Brazilians dread wars because they know that they will be roped into supporting whatever wacky war the US starts. What’s more, the police are well-known to be as likely to commit as prevent or punish crime, so they are not trusted. Security is extremely important in Brazil, but everyone knows that it is a private function and not anything anyone would entrust to the state.
The beautiful thing about Mises Brazil as an organization is that it is working to further encourage these instincts and to spread an intellectual culture that openly embraces liberty as a model of life itself. They publish books and monographs, hold conferences and spread the liberal tradition far and wide among an idea-hungry generation. This is all about the future, and Mises Brazil is right to have confidence in it.
As I waited in the customs line to enter the US again, we were all shown a film designed to introduce America to new visitors. The film featured kids in ballet class, people riding horses, barn raisings, people water surfing, dances from coast to coast, smiling people of all ages, all against the backdrop of an exciting Coplandesque musical score. It ended with the Statue of Liberty. It was wholly inspiring, but there was something missing: The government was nowhere to be seen.
How I wish this film were the whole truth about our country. It once was. But the American dream is not about geography; the American dream is an idea that moves like a spirit around the world, landing wherever people are willing to embrace it and confess it as creed. That spirit has landed in Brazil, and it was a great honor to be witness to it.
Regards,
Jeffrey Tucker,
for The Daily Reckoning
My most surprising findings in Brazil, aside from the amazing fruits that I didn’t know existed because the US government doesn’t think I need them, were the young American kids who have moved here to find economic opportunity. This I had not expected, but now fully understand.
Brazil is a marvelous and massive country where private wealth thrives without embarrassment, where well-protected and healthy familial dynasties form the infrastructure of social and economic life, where technology is popular and beloved by everyone, where the police leave you alone and where Americans can feel right at home.
The world is changing fast. Freedom in America is slipping away so quickly that we are already seeing a wave of young people leaving in search of new opportunities, just as people from around the world once came to America to live the dream. Brazil is one of many countries benefiting from the generational emigration from the US.
Discovering this rattled me more than I might have expected. But the young people themselves are not unhappy, and I can see why. They are valued. They are earning good money doing interesting things. They have access to one of the most beautiful and exotic and friendly places on Earth. They eat well, live well and have rich social lives.
More than anything else, they have the sense of freedom.
Now, you might wonder how it is that people have to leave the “home of the free” to find freedom. Over the last 10 years, something horrible has happened to the United States. The police state has cracked down hard, not so much on “terrorists” or real criminals, but on regular citizens. The news items spill out of my feed on an hourly basis, things that just shock and alarm those who are paying attention.
Maybe it is not so surprising. The US military is larger than most of the world’s militaries combined. We have the largest prison population on the planet, and most are locked up for nonviolent crimes. The political culture focuses more on the need for security than for freedom. Add it all up and you have the perfect recipe for the emergence of a police state.
But most Americans are not entirely conscious of the change. It has been fast, but slow enough not to cause alarm. It hits you only once you leave. This happened to me two years ago when I went to Spain. I could move about and do what I wanted without bumping into authority at every turn. I felt it again in Austria last year. It is not something you can quite put your finger on, just a sense that you are not under constant surveillance in suspicion. You can breathe easily.
It was the same in Sao Paulo, Brazil, a happy and prosperous land of exotic fruits, thriving markets, consumer products that actually work and are not depreciated by regulatory mandates, and polite and warm people.
I received a very generous invitation to be a main speaker at the third conference on Austrian economics sponsored by Mises Brasil, a young organization with a very bright future. It was founded only four years ago. Yet today, it has a gigantic presence in Brazilian intellectual life. The hunger for the intellectual basis of freedom is palpable.
Three hundred or more people were here to listen to lectures and engage in debates on ideas. The audience was a sea of young people, most everyone under 30. They were students, professionals, traders and workers of all sorts, all passionate about freedom and the economic answers provided by the Austrian tradition of Ludwig von Mises, F.A. Hayek and Murray Rothbard.
What most excited them was the classic idea of laissez faire — that is, the idea that society can thrive on its own in the absence of central management and that the government operates as a drain on society. The culture of the group was certainly more intellectual and educational than political. They were invigorated by ideas and given hope by the idea of freedom. Apparently, nothing like this organization existed in Brazil until recently. Now the group’s website is one of the most heavily trafficked in the country.
My hosts were enormously generous with their time, and they knew exactly what I really wanted to do on the first day: see the delights of the open-air markets. I was told they are in the center of town. If you had seen a map of Sao Paulo, you would know just how odd it is even to imagine such a thing. The city seems to be everywhere in sight, everywhere you turn, going on forever. It is like 100 New Yorks.
Driving here is not for the faint of heart. The street layout makes no rational sense at all. I could have been driven the short distance between the hotel and the conference center a hundred times and still not have had the slightest clue about the layout. I was told that it would take at least two years of living here to gain a sense that you really know the place.
Go to a high spot in the center of town and look around on all sides. Everywhere you see a beautiful thing, a world built by millions of human hands. No central plan could have made this. No single mind could have conceived of it. To anyone who is intellectually curious, the obvious questions are how does this place work? How is order achieved? The answer is one that few people in the United States seem to care about today. The miracle is obtained through the coordinating forces of the market itself, of millions of free people interacting in small ways toward their mutual self-betterment. This is the answer that inspires a lifetime of intellectual curiosity.
On the first lunch on my first day, my hosts took me to a place like I had never seen, and they are as unconscious of its significance as Americans would be startled by its very existence. Again, it seemed to be in the center of town. To obtain entry requires extensive security checks. But once you are in, a new world emerges: restaurants, soccer fields, gigantic swimming pools of many varieties and delights as far as the eye can see.
This is a city within a city. But it is entirely private, what Americans would call a “country club,” but of a particularly elaborate type. It is not hidden away in some alcove on the outskirts of town. It is right there in the city for everyone to see — something nonmembers can also take pride in. It is marvelous in every way, a living monument to the possibility of orderly, privately owned anarchist communities.
One thing kept gnawing at me during my entire visit. I kept coming across people who were members of large and extended families with roots very far back in Brazilian history. They were impressive entrepreneurs, but the wealth was more robust than you would find in a place like Silicon Valley. It reminded more of Gilded Age families in the United States, people who carried themselves with grace and confidence born of excellent breeding and material security.
As I thought about it more, the ingredients were unusual by American standards: large and extended families, protected wealth, well-bred youths, a predominantly young population. What was the reason for this? I developed a quick, back-of-the-napkin theory. It had something to do with the inheritance tax. So I asked my hosts, “What are estate taxes like in this country?” The answer came fast: There are none. Some areas charge 3%, maybe 6%, but it is rather easy to escape even those minimal charges.
This contrasts with the United States, where estate taxes can be as high as 35%. We’ve been looting our best families for 100 years. We’ve gouged and smashed the richest generations of American capitalists upon death ever since the Progressive Era. We’ve been living one generation at a time. Time horizons have fallen. Large-scale, privately held capital accumulation has been discouraged, even made illegal. Families have shrunk in size. The population has become ever more aged.
This tax policy has eaten the heart out of the desire of a free people to create dynasties. So our wealthy have to hide. They are encouraged to give their money away to causes, rather than to children. We live one generation to the next. Children are perceived of as an economic burden, rather than a path to immortalizing a legacy.
In Brazil, the time horizon extends beyond the single lifetime. And this is what has given rise to the dramatic cultural, social and economic differences between our countries. These dynasties serve as robust intermediating institutions between the individual and the state. We have ever fewer such things in the United States. Maybe this is what accounts for the incoherent sense that this is a freer country than the US.
There are other factors, too. The military consumes only a tiny percentage of wealth, and Brazilians dread wars because they know that they will be roped into supporting whatever wacky war the US starts. What’s more, the police are well-known to be as likely to commit as prevent or punish crime, so they are not trusted. Security is extremely important in Brazil, but everyone knows that it is a private function and not anything anyone would entrust to the state.
The beautiful thing about Mises Brazil as an organization is that it is working to further encourage these instincts and to spread an intellectual culture that openly embraces liberty as a model of life itself. They publish books and monographs, hold conferences and spread the liberal tradition far and wide among an idea-hungry generation. This is all about the future, and Mises Brazil is right to have confidence in it.
As I waited in the customs line to enter the US again, we were all shown a film designed to introduce America to new visitors. The film featured kids in ballet class, people riding horses, barn raisings, people water surfing, dances from coast to coast, smiling people of all ages, all against the backdrop of an exciting Coplandesque musical score. It ended with the Statue of Liberty. It was wholly inspiring, but there was something missing: The government was nowhere to be seen.
How I wish this film were the whole truth about our country. It once was. But the American dream is not about geography; the American dream is an idea that moves like a spirit around the world, landing wherever people are willing to embrace it and confess it as creed. That spirit has landed in Brazil, and it was a great honor to be witness to it.
Regards,
Jeffrey Tucker,
for The Daily Reckoning
Wednesday, May 16, 2012
As the Boomers Head for the Barn
By Patrick J. Buchanan
When the April figures on unemployment were released May 4, they were more than disappointing. They were deeply disturbing.
While the unemployment rate had fallen from 8.2 percent to 8.1 percent, 342,000 workers had stopped looking for work. They had just dropped out of the labor market.
Only 63.6 percent of the U.S. working age population is now in the labor force, the lowest level since December 1981.
During the Reagan, Bush I and Clinton years, participation in the labor force rose steadily to a record 67 percent. The plunge since has been almost uninterrupted.
Here is a major cause of the economic malaise of the 21st century, a condition over which a president has little control. A shrinking share of our population is carrying an ever-expanding army of dependents.
If this were a result of American women going home to have kids, that would be, as it was after World War II, a manifestation of national vigor and health.
But that is not the case here.
The number of Americans of working age not in the labor force grew in April from 87,897,000 to 88,419,000 — by an astonishing 522,000. This is an immense army for the rest of society to carry.
Why are Americans dropping out?
Some have given up looking for jobs in towns they grew up in, because the jobs are gone and not coming back, and they don’t want to leave. Some are rejecting the low-wage unskilled work being offered, because the alternative — unemployment checks and federal and state welfare — is not all that torturous.
With some, the work incentive was never implanted. With others, the option of moving back in with the parents is not all that terrible.
America, it seems, is becoming less like the country we grew up in, in its attitudes about work and idleness, and more like Europe.
Whatever its causes, this social and economic torpor that seems beyond the capacity of presidents to correct or cure is a dark cloud over the hopes of Barack Obama for a second term.
And yet another ominous cloud, no longer on the far horizon, is now directly above: the impending departure from the labor force of 70 million baby boomers in the next two decades.
According to the Statistical Abstract of the United States, from Jan. 1, 1930, to Dec. 31, 1935, there were 13 million births in the U.S. From January 1940 through December 1945, there were 16 million.
This was the Silent Generation, born in Depression and war. It never produced a president, and never will, unless Ron Paul catches fire pretty quickly. The Greatest Generation gave us six presidents, starting with JFK and ending with Bush I. Our three most recent presidents — Bill Clinton, Bush II, Barack Obama — are all baby boomers
And here we come to the heart of our next economic crisis.
If one adds up all the children born between Jan. 1, 1946 and Jan. 1, 1965, the era of the great American baby boom, the total comes to 77 million babies born in the United States.
Why is this so significant now?
Because this year, 2012, the first wave of baby boomers, all those born in 1946, like Clinton and George W. Bush, will reach 66, and eligibility for full Social Security and Medicare benefits. The boomers, en masse, will start moving off payrolls onto pension rolls.
Let us assume the 77 million boomers are down to 72 million. This means that over the next 20 years, boomers will be retiring and reaching eligibility for Social Security and Medicare at a rate of 3.6 million a year, or 300,000 a month, or 10,000 every day.
Three hundred thousand a month leaving the labor force may help to explain its shrinkage. And as the boomers are the best-paid, best-educated generation we produced, the loss of their collective skills, abilities and tax contributions will be as heavy a blow to the nation as the funding of their Medicare and Social Security will be a burden to the taxpayers they leave behind in the labor force.
Since Roe v. Wade, abortions have carried off 53 million of the generations that were to replace the boomers. While those 53 million lost have been partially replaced by 40 million immigrants, legal and illegal, our recent immigrants have not exhibited the same income- or tax-producing capacity as boomers.
In 1965, LBJ announced his plan to convert our ordinary society into a Great Society. Since then, trillions have been spent.
The fruits of that immense investment? The illegitimacy rate, dropout rate, crime rate and incarceration rate have set new records, as the test scores of high school students have plummeted to new lows.
Our labor force is shrinking, the number of dependent U.S. adults is growing, our social programs are failing, and our best educated and most productive generation is retiring.
To borrow from Merle Haggard, “Are the good times really over for good?”
When the April figures on unemployment were released May 4, they were more than disappointing. They were deeply disturbing.
While the unemployment rate had fallen from 8.2 percent to 8.1 percent, 342,000 workers had stopped looking for work. They had just dropped out of the labor market.
Only 63.6 percent of the U.S. working age population is now in the labor force, the lowest level since December 1981.
During the Reagan, Bush I and Clinton years, participation in the labor force rose steadily to a record 67 percent. The plunge since has been almost uninterrupted.
Here is a major cause of the economic malaise of the 21st century, a condition over which a president has little control. A shrinking share of our population is carrying an ever-expanding army of dependents.
If this were a result of American women going home to have kids, that would be, as it was after World War II, a manifestation of national vigor and health.
But that is not the case here.
The number of Americans of working age not in the labor force grew in April from 87,897,000 to 88,419,000 — by an astonishing 522,000. This is an immense army for the rest of society to carry.
Why are Americans dropping out?
Some have given up looking for jobs in towns they grew up in, because the jobs are gone and not coming back, and they don’t want to leave. Some are rejecting the low-wage unskilled work being offered, because the alternative — unemployment checks and federal and state welfare — is not all that torturous.
With some, the work incentive was never implanted. With others, the option of moving back in with the parents is not all that terrible.
America, it seems, is becoming less like the country we grew up in, in its attitudes about work and idleness, and more like Europe.
Whatever its causes, this social and economic torpor that seems beyond the capacity of presidents to correct or cure is a dark cloud over the hopes of Barack Obama for a second term.
And yet another ominous cloud, no longer on the far horizon, is now directly above: the impending departure from the labor force of 70 million baby boomers in the next two decades.
According to the Statistical Abstract of the United States, from Jan. 1, 1930, to Dec. 31, 1935, there were 13 million births in the U.S. From January 1940 through December 1945, there were 16 million.
This was the Silent Generation, born in Depression and war. It never produced a president, and never will, unless Ron Paul catches fire pretty quickly. The Greatest Generation gave us six presidents, starting with JFK and ending with Bush I. Our three most recent presidents — Bill Clinton, Bush II, Barack Obama — are all baby boomers
And here we come to the heart of our next economic crisis.
If one adds up all the children born between Jan. 1, 1946 and Jan. 1, 1965, the era of the great American baby boom, the total comes to 77 million babies born in the United States.
Why is this so significant now?
Because this year, 2012, the first wave of baby boomers, all those born in 1946, like Clinton and George W. Bush, will reach 66, and eligibility for full Social Security and Medicare benefits. The boomers, en masse, will start moving off payrolls onto pension rolls.
Let us assume the 77 million boomers are down to 72 million. This means that over the next 20 years, boomers will be retiring and reaching eligibility for Social Security and Medicare at a rate of 3.6 million a year, or 300,000 a month, or 10,000 every day.
Three hundred thousand a month leaving the labor force may help to explain its shrinkage. And as the boomers are the best-paid, best-educated generation we produced, the loss of their collective skills, abilities and tax contributions will be as heavy a blow to the nation as the funding of their Medicare and Social Security will be a burden to the taxpayers they leave behind in the labor force.
Since Roe v. Wade, abortions have carried off 53 million of the generations that were to replace the boomers. While those 53 million lost have been partially replaced by 40 million immigrants, legal and illegal, our recent immigrants have not exhibited the same income- or tax-producing capacity as boomers.
In 1965, LBJ announced his plan to convert our ordinary society into a Great Society. Since then, trillions have been spent.
The fruits of that immense investment? The illegitimacy rate, dropout rate, crime rate and incarceration rate have set new records, as the test scores of high school students have plummeted to new lows.
Our labor force is shrinking, the number of dependent U.S. adults is growing, our social programs are failing, and our best educated and most productive generation is retiring.
To borrow from Merle Haggard, “Are the good times really over for good?”
Good Advice for New Ecuador Expats
By Suzan Haskins
International Living
Rent before you buy. That’s good advice for anyone looking to try a new country on for size. Despite its incredibly low real estate costs, Ecuador is no exception.
(After all, not everybody wants to buy a two-bedroom beach condo or an apartment in an historic World Heritage city for less than $50,000.)
Fortunately, rental costs in Ecuador are very affordable, too.
In Cotacachi—the sweet Andean artisan village where I live—an expat who decided to move to the coast sent out this e-mail: "I have an apartment for rent that, for the money, is a great deal. It is a completely bare, one- bedroom place (no fridge, stove or anything else), but for $100 a month it is a great space."
Of course, an unfurnished apartment means you’ll need to buy furniture. But still, an apartment with a monthly price tag that’s the cost of a fancy meal back home? Not a bad deal.
Admittedly, furnished rentals are harder to come by here in Cotacachi, thanks to the growing number of expats coming to check out the lifestyle options of our quiet little village. Still, we know of furnished rentals available for about $200 a month. And it’s possible to sublet a home or apartment short-term from a fellow expat who’s going back to the States or Canada for a visit.
In larger cities, like cosmopolitan Quito or popular Cuenca, you may pay more. But not a lot: $500 - $600 a month gets you a furnished three-bedroom apartment in central Quito.
In Cuenca, a two- or three-bedroom apartment or house (maybe near the river) rents for around $400 a month.
In rural Vilcabamba in southern Ecuador…at a lower elevation and therefore warmer than Quito, Cuenca or Cotacachi…an expat couple has renovated a 6,000-square-foot house and is offering fully furnished and equipped apartments for rent. You can rent a room with a shared kitchen for $180 a month or a three-bedroom apartment for $550 a month.
So what are you waiting for? Daily living costs here are so affordable…even more so when you have a kitchen to cook in. At the local farmers’ markets you can buy enough fresh produce for $5 to last you a week or more. Bakeries sell fresh bread hot from the oven for 50 cents or less. Delicious 22-ounce bottles of Pilsener beer sell for 75 cents. You can get your haircut for $3, hire someone to clean your apartment for $5 or $10, take the bus anywhere in the country for about $1 an hour…
Whether it’s for a month or a year or forever…now is the time to check out Ecuador.
International Living
Rent before you buy. That’s good advice for anyone looking to try a new country on for size. Despite its incredibly low real estate costs, Ecuador is no exception.
(After all, not everybody wants to buy a two-bedroom beach condo or an apartment in an historic World Heritage city for less than $50,000.)
Fortunately, rental costs in Ecuador are very affordable, too.
Of course, an unfurnished apartment means you’ll need to buy furniture. But still, an apartment with a monthly price tag that’s the cost of a fancy meal back home? Not a bad deal.
Admittedly, furnished rentals are harder to come by here in Cotacachi, thanks to the growing number of expats coming to check out the lifestyle options of our quiet little village. Still, we know of furnished rentals available for about $200 a month. And it’s possible to sublet a home or apartment short-term from a fellow expat who’s going back to the States or Canada for a visit.
In larger cities, like cosmopolitan Quito or popular Cuenca, you may pay more. But not a lot: $500 - $600 a month gets you a furnished three-bedroom apartment in central Quito.
In Cuenca, a two- or three-bedroom apartment or house (maybe near the river) rents for around $400 a month.
In rural Vilcabamba in southern Ecuador…at a lower elevation and therefore warmer than Quito, Cuenca or Cotacachi…an expat couple has renovated a 6,000-square-foot house and is offering fully furnished and equipped apartments for rent. You can rent a room with a shared kitchen for $180 a month or a three-bedroom apartment for $550 a month.
So what are you waiting for? Daily living costs here are so affordable…even more so when you have a kitchen to cook in. At the local farmers’ markets you can buy enough fresh produce for $5 to last you a week or more. Bakeries sell fresh bread hot from the oven for 50 cents or less. Delicious 22-ounce bottles of Pilsener beer sell for 75 cents. You can get your haircut for $3, hire someone to clean your apartment for $5 or $10, take the bus anywhere in the country for about $1 an hour…
Whether it’s for a month or a year or forever…now is the time to check out Ecuador.
Saturday, May 12, 2012
This Now Poses Huge Dangers to the Continent
Mac Slavo
May 10th, 2012
One of the lone voices of reason in the European Union Parliament, the UK’s Nigel Farage, outlines the dangerous consequences facing the whole of the European continent as unemployment and tempers rage, debts pile up, and lack of access to basic necessities in some afflicted regions takes its toll.
In his impassioned plea to EU leaders Farage warns of the rise of extreme political environments on the right and left of the spectrum, and urges Parliament members to take the necessary step of breaking up the union by releasing debt-ridden nations instead of further impoverishing them. A failure to act, cautions Farage, leaves Europe facing the prospect of mass civil unrest and nationalistic revolution.
Like Communism, this has all gone badly wrong, and the EU titanic has now hit the iceberg.
It is a European Union of economic failure, of mass unemployment, of low growth; but worst of all it’s an EU with the economic prison of the Euro.
This now poses huge dangers to the continent.
We face the prospect of mass civil unrest, possibly even revolution in some countries that have been driven to total and utter desperation.
…
We’re seeing it country after country…
In Greece what we saw last Sunday was rather reminiscent of the German election of 1932. We saw the status quo center collapse, and the extremes of right and left rise. You know, this project could even cause the rebirth of national socialism in Europe.
We are headed the wrong way. We must break up the Euro Zone. We must set those Mediterranean countries free.
…
We can not do it if we are asked to rally behind that flag [motions to EU flag]. I owe no allegiance to that flag, and nor do most of the people in Europe either.
May 10th, 2012
One of the lone voices of reason in the European Union Parliament, the UK’s Nigel Farage, outlines the dangerous consequences facing the whole of the European continent as unemployment and tempers rage, debts pile up, and lack of access to basic necessities in some afflicted regions takes its toll.
In his impassioned plea to EU leaders Farage warns of the rise of extreme political environments on the right and left of the spectrum, and urges Parliament members to take the necessary step of breaking up the union by releasing debt-ridden nations instead of further impoverishing them. A failure to act, cautions Farage, leaves Europe facing the prospect of mass civil unrest and nationalistic revolution.
Like Communism, this has all gone badly wrong, and the EU titanic has now hit the iceberg.
It is a European Union of economic failure, of mass unemployment, of low growth; but worst of all it’s an EU with the economic prison of the Euro.
This now poses huge dangers to the continent.
We face the prospect of mass civil unrest, possibly even revolution in some countries that have been driven to total and utter desperation.
…
We’re seeing it country after country…
In Greece what we saw last Sunday was rather reminiscent of the German election of 1932. We saw the status quo center collapse, and the extremes of right and left rise. You know, this project could even cause the rebirth of national socialism in Europe.
We are headed the wrong way. We must break up the Euro Zone. We must set those Mediterranean countries free.
…
We can not do it if we are asked to rally behind that flag [motions to EU flag]. I owe no allegiance to that flag, and nor do most of the people in Europe either.
Ecuador seeks answer to riddle of Inca emperor's tomb
Does the final resting place of Inca Emperor Atahualpa lie here?
The mystery surrounding the tomb of the last Inca emperor - and its reputed treasure - might be closer to being solved.
If Ecuadorean historian Tamara Estupinan is right, Emperor Atahualpa's mummified body was kept in the lush, hilly lowlands, a six-hour drive south-west of Ecuador's capital city, Quito.While it is still too early to confirm Ms Estupinan's theory, this discovery could shed light on a tumultuous historical period that marked the beginning of the Spanish colonial era in the Americas.
At its height, in the early 1500s, the Inca empire covered most of the Andes, from southern Colombia to central Chile as well as some parts of Argentina.
Inca emperors were mummified because it was believed that their powers remained within their bodies, which were guarded by guards and family members.
Atahualpa governed out of Quito during a civil war against his brother, who was based in Cusco, the seat of the Inca empire
Some 40 years after the death of Atahualpa the Inca empire had fallen
Shortly after defeating his brother, Atahualpa was captured by Spanish troops under Francisco Pizarro.It is believed that Atahualpa offered to fill a large room with gold and silver in exchange for his life. The offer did not work - he was executed in 1533.
End of an era
The Inca empire began to fall apart after his death, leaving only pockets of resistance against the Spanish conquerors.Archaeologists and historians have questioned whether his body remained in Cajamarca, the city in northern Peru where he died. No tomb was ever found.
But Ms Estupinan, a researcher at the French Institute for Andean Studies (IFEA), says historical texts contain clues that indicate that the Inca emperor's final resting place was in what is now Ecuadorean territory.
The historian's work focused on Ruminahui, one of Atahualpa's most loyal generals who led a revolt against the Spanish conquerors after the emperor's death. During her research, which lasted more than a decade, Ms Estupinan came across evidence that suggested that the Sigchos area in Ecuador's Andes became a base for Ruminahui and his men.
She started looking for locations whose names were connected to sacred rituals.
In 2004 she came across a small farm named Malqui - a word that means "mummy" in Quechua, the language spoken by the Incas.
A trapezoidal enclosure leading to rectangular rooms that were built with cut polished stone led Ms Estupinan to think that she had reached an Inca monument. The presence of trapezoidal underground water canals served as confirmation.
"I started running around," she says. "It was extremely exciting."
Ms Estupinan believes Malqui and Machay were part of an Inca settlement set up to hide Atahualpa's mummy and his possessions, which were traditionally buried with the emperor, from the Spanish conquistadors.
Machay is aligned with other sacred Inca sites, such as the Quilotoa lagoon, and is surrounded by the Machay River. Running water was important in sacred Inca places.
The site is 1km (3,280ft) above sea level, in the sub-tropical lowlands on the western slopes of the Andes.
Given the humidity, it is unlikely that remains of the mummy could be found intact almost 500 years later.
Excavation works are expected to start in June, partly financed by Ecuador's government, which plans to invest $97,500 (£60,000) in marking and protecting the site.
"For now the government cannot yet say whether this is Atahualpa's grave," said Joaquin Moscoso, of the Heritage Ministry.
"If the historian's hypothesis is confirmed, we would be facing one of the largest and most unusual discoveries of the past decades."
Treasure trove 'unlikely'
Unlike in Peru, where much attention goes to Inca sites, such as world renowned Machu Picchu, Ecuador's archaeological ruins attract a limited number of tourists, and government spending is limited
So far a police officer has been deployed to protect Machay from possible looters attracted by the legend of Atahualpa's treasure.
According to Ms Estupinan, it is unlikely that riches would be found.
"For the Incas, the real treasure was the mummy itself," she says.
Ms Estupinan also stresses that more attention should be placed on the site's conservation.
Pictures of Machay from the 1960s show clear deterioration of several walls.
The site was used to raise fighting cocks and to farm fish.
This year's heavy rains have taken their toll, with the destruction of a large portion of a wall, says Ms Estupinan.
Francisco Moncayo, who owns the Machay site, says he is waiting for money from the municipality to help him keep the place in order.
He says the cost of maintaining the site runs to $3,000 (£1,800) a year.
Jorge Yarad, one of two owners at Malqui, says he feels honoured to be in an Inca site, but he is worried about looters
"It is a great responsibility," he says.
Mr Yarad hopes the government will be able to buy the land to build an archaeological site that would become world renowned.
"We have been sleeping with history," says Mr Yarad. "And only now are we waking up."
Beach Life in Ecuador
By Chuck Stanley
"We're right on the beach and we love that," says expat Cynthia Kelley.
"We can hear the ocean at night and we love to watch the sunset over the water in the evenings." It’s easy to get the feeling that you’re a million miles away from the rest of the world in Canoa, on Ecuador’s northern coast.
In the past few years, though, newly-paved roads and a bridge across the bay between neighboring San Vicente and Bahía de Caraquez have opened up this idyllic beach town.
"When we first arrived there was a dirt road to get here and now there’s a four-lane paved highway," Cynthia says. "We used to have to come across the bay on a little boat and now we drive across a big bridge."
Cynthia and her husband Ron are part of the growing community of expats enjoying the low costs and laid-back lifestyle of one of the finest stretches of Pacific beach you’ll find anywhere.
"Canoa is not like in the U.S., where all the houses look the same. Everybody creates their own dream here. They have an idea about what they want in a house and what they want their lifestyle to be and they create that," says Cynthia.
For Cynthia and Ron, the dream started after a trip to the Galápagos Islands. "We hadn’t planned on visiting the mainland but we liked the people so much that we decided to change our itinerary," she remembers.
Buying property for a vacation home wasn’t part of their plan, either. But after falling in love with the town’s laid-back atmosphere and being blown away by the low cost of living, they started to consider the possibilities.
When they came across a beachfront property offered at a bargain price, they decided the opportunity was too good to pass up. Once the planning was complete and work began on their home overlooking the Pacific, they were overcome with excitement. They moved in before the construction was even finished.
Now, in addition to the one-bedroom house Cynthia and Ron live in, the property features a two-bedroom guest house, an outdoor kitchen and dining area, a garage/office, and a bamboo yoga hut with a grass roof.
"We could never have afforded to build a home right on the beach in the United States," says Cynthia. "Now we’ve about four acres and this year we have papayas growing in the front yard." They also have banana trees, coconut trees, a variety of tropical flowers, and two happy dogs with ample room to roam and play.
"We buy the rest of our produce fresh from the market, where a sack of veggies costs just $5. The flavor is superior to anything you can find in the U.S. I think it comes from being picked ripe instead of picked green and then shipped," she says.
"And if you know where to go, the selection of fresh meats can be just as rich as the fruits and vegetables that come to town fresh from the countryside. We get our meat from Manta, from a guy who raises his own cattle, and I get my chickens from a woman who raises her own chickens. I can’t get chicken that nice back in the U.S."
It isn’t just groceries that are low cost in Canoa...
"We're right on the beach and we love that," says expat Cynthia Kelley.
"We can hear the ocean at night and we love to watch the sunset over the water in the evenings." It’s easy to get the feeling that you’re a million miles away from the rest of the world in Canoa, on Ecuador’s northern coast.
In the past few years, though, newly-paved roads and a bridge across the bay between neighboring San Vicente and Bahía de Caraquez have opened up this idyllic beach town.
"When we first arrived there was a dirt road to get here and now there’s a four-lane paved highway," Cynthia says. "We used to have to come across the bay on a little boat and now we drive across a big bridge."
Cynthia and her husband Ron are part of the growing community of expats enjoying the low costs and laid-back lifestyle of one of the finest stretches of Pacific beach you’ll find anywhere.
"Canoa is not like in the U.S., where all the houses look the same. Everybody creates their own dream here. They have an idea about what they want in a house and what they want their lifestyle to be and they create that," says Cynthia.
For Cynthia and Ron, the dream started after a trip to the Galápagos Islands. "We hadn’t planned on visiting the mainland but we liked the people so much that we decided to change our itinerary," she remembers.
Buying property for a vacation home wasn’t part of their plan, either. But after falling in love with the town’s laid-back atmosphere and being blown away by the low cost of living, they started to consider the possibilities.
When they came across a beachfront property offered at a bargain price, they decided the opportunity was too good to pass up. Once the planning was complete and work began on their home overlooking the Pacific, they were overcome with excitement. They moved in before the construction was even finished.
Now, in addition to the one-bedroom house Cynthia and Ron live in, the property features a two-bedroom guest house, an outdoor kitchen and dining area, a garage/office, and a bamboo yoga hut with a grass roof.
"We could never have afforded to build a home right on the beach in the United States," says Cynthia. "Now we’ve about four acres and this year we have papayas growing in the front yard." They also have banana trees, coconut trees, a variety of tropical flowers, and two happy dogs with ample room to roam and play.
"We buy the rest of our produce fresh from the market, where a sack of veggies costs just $5. The flavor is superior to anything you can find in the U.S. I think it comes from being picked ripe instead of picked green and then shipped," she says.
"And if you know where to go, the selection of fresh meats can be just as rich as the fruits and vegetables that come to town fresh from the countryside. We get our meat from Manta, from a guy who raises his own cattle, and I get my chickens from a woman who raises her own chickens. I can’t get chicken that nice back in the U.S."
It isn’t just groceries that are low cost in Canoa...
Friday, May 11, 2012
Protecting Your Assets from an Out-of-Control Government, Part II
“Stay at home is still the norm for Americans,” I observed in yesterday’s Daily Reckoning. “but it’s a norm that is slowly fading. Every billion-dollar tick of the government debt clock, every expansion of the government’s regulatory apparatus, every overreaching judicial decision made in the name of a compelling public need,...every intellectually tortured discovery of a new meaning in the Constitution’s 4,400 old words leaves a few thousand more people wondering how prudent it is to consign all their eggs to a single national basket.
“Most Americans still have yet to stick a single financial toe across the border,” I explained, “but more and more are considering it...Because internationalizing your financial life means dealing with the unfamiliar, the project can seem more complex than it really is, so it’s best to start with the simplest measures, even if by themselves they don’t give you all the safety you’re looking for. Even from a simple beginning, what you learn with each step will make the next step easier to plan. Start with the first rung on the ladder of internationalization. Then climb, at your own speed, to reach the right level of protection.”
Yesterday I described the first three rungs of this ladder. Today, I present the rest...
Rung 4: A Swiss Annuity
A conventional annuity contract is a device for accumulating investment returns and eventually converting the value into a lifetime income. The investment return on an annuity from a US insurance company is tax deferred until it is paid out to you. If you buy an annuity from a foreign company, tax deferral is available only if the annuity’s value is tied to the performance of a pool of investments (a variable annuity).
Swiss annuities have long held a special place in personal financial planning. Such an annuity is denominated in Swiss francs, i.e., it’s francs, not dollars, that are owed to you. The Swiss insurance industry has a perfect record; policyholders have never been hurt by a default. And a Swiss annuity comes with an element of protection from would-be lawsuit creditors.
The Swiss franc is, like every other modern-day currency, just a piece of paper. It’s not redeemable for anything, not even a piece of chocolate. But the Swiss National Bank has a remarkable record of restraint in issuing new francs, which means that the franc’s prospects for holding its value have long been rated better than for any other currency.
I believe that is still the case, despite the Swiss National Bank’s current policy of suppressing any further increase in the price of the franc. In September, in order to save export industries from being crushed by the franc’s rapid appreciation against other currencies, the Swiss National Bank announced that it would purchase euros without limit to enforce a minimum exchange rate of 1.2 francs per euro — which implies printing enough francs to pay for those euros. By itself, it is an inflationary move, but it’s not a suicide pact with the European Central Bank (the issuing authority for euros). If the ECB turns to a policy of rapid inflation, I would expect the Swiss National Bank at some point to decouple the franc from the euro and let the franc’s price rise. So owning some Swiss francs, whether directly or through an annuity, is still a good step toward internationalizing your financial life.
Under Swiss law, an annuity is protected from the owner’s creditors if the beneficiaries consist of family members or if the owner has made a beneficiary designation that is irrevocable. For an owner in the US, that protection is not an impenetrable barrier to the winner of a lawsuit, but it is a barrier, and it makes the annuity a less- than-ideal prize for an attacker.
Earnings that are accumulating in a Swiss annuity are not eligible for tax deferral for a US taxpayer. The advantages are currency protection, the reliability of Swiss insurance companies and a measure of asset protection.
Rung 5: Foreign Real Estate
Owning real estate in another country gives you a suite of protections that distinguishes it from other steps toward internationalization.
First, the property’s value will depend on economic conditions in the country you’ve chosen, not on what happens in the US. If the economy of the foreign country grows and prospers, there is likely to be a spillover effect on the market value of your house, apartment, farm or patch of land — regardless of what is going on in the US.
Second, a foreign real estate investment would be hard to digest for any future capital controls imposed by the US. New rules could compel you to repatriate the cash you have in a foreign bank; rules forcing you to liquidate your foreign real estate and bring the money home would be another matter. Selling real estate isn’t quick or easy. How does the government compel an unwilling citizen to do what an eager seller often finds difficult to accomplish?
Third, as a potential prize for a lawsuit attacker, foreign real estate is a stinker. Even if he wins a judgment against you, foreclosing on your foreign property would be difficult to impossible, since it would require the cooperation of the courts in the foreign country, about whose rules and procedures the attacker’s attorney probably knows nothing. But he does know that even if he persuades a court in the US to order you to sell the property, the inherent illiquidity of real estate would give you plenty of opportunities for foot-dragging.
Where to buy? The whole world is open to you... which can be a problem. So many possibilities and no obvious place to start. One approach is to think about where you’ve been that you’d like to visit again or about some place you’ve long wanted to see. Plan to spend a few weeks there. Minimize your hotel hours, to maximize your exposure to the rest of the locale. Try to meet Americans, perhaps expatriates, who know their way around the place and who can point you toward a real estate broker who won’t try to treat you as an out-of-town sucker.
Buying foreign real estate isn’t for everyone. It requires a big investment in time and effort, but it could repay you with an asset that is low on the list of things anyone might try to take from you.
Rung 6: A Foreign LLC for Investments
A limited liability company organized under the laws of a foreign country is easy to set up and not too expensive. To bring the company into existence, you (or a service you hire) would file a simple form with a government office in the country you’ve chosen and pay a small fee. Then you as the LLC’s Manager and you as the LLC’s owner would enter into an agreement (the “operating agreement”) that would be the company’s governing instrument.
As the LLC’s Manager, you would open a non-US bank account or brokerage account in the name of the LLC and transfer your personal cash and investments to that account. Again as Manager, you would make all the investment decisions.
For a US person, a foreign LLC can be a powerful door-opener. It is welcome at many banks and brokerage firms where you personally would be turned away. This enables you to keep a wider range of assets outside the US, which puts more wealth beyond the reach of any arbitrary bureaucratic action. It also gives you investment choices that aren’t available at home.
Access to foreign investments and overseas financial services is reason enough to consider using a foreign limited liability company. But it can do much more for you, although at the cost of some complexity.
Notice the fundamental difference between a foreign LLC and what is going on at the first four rungs of the ladder of internationalization. With the LLC, you no longer personally own the assets you are trying to protect; the company owns them. This makes the LLC a powerful device for reducing your family’s expose to gift and estate taxes. And with the right provisions in the operating agreement, it can provide strong protection against loss to any malicious lawsuit.
If you are the sole owner of a foreign LLC intended for holding investments, you can and almost certainly should file an election for the LLC to be treated as a disregarded entity (indistinguishable from you for income tax purposes). If your spouse or anyone else is going to share in ownership of the LLC, the company can and should elect to be treated as a partnership for income tax purposes.
Rung 7: A Foreign LLC for Business
A business that operates outside the US does even more than a portfolio of foreign investments to give you the benefits of internationalization.
By its nature, a foreign business lives in a different environment than a business in the US. Economic troubles at home might not touch it. If it’s a business that depends on your personal efforts, it’s even less attractive as a lawsuit prize than foreign real estate. Being foreign, it would be outside the range of capital controls in the US. And many of the financial institutions that might turn away an investment-owning LLC because it is owned by an American will welcome an LLC that makes or sells goods or services.
If you already have a business in the US that has foreign customers or foreign suppliers, you may be able to relocate the business’s non-US activities to a foreign LLC. Internet-based businesses are especially amenable to internationalization.
Locating your business in a low-tax or no-tax jurisdiction, if it is practical to do so, can reduce your overall tax burden. In many cases, a foreign LLC that operates a business should elect to be treated as a foreign corporation for US income tax purposes. That can allow the business to reinvest its earnings while it pays little in current taxes and you personally pay nothing.
Rung 8: An International Trust That You Establish
Establishing a trust outside the US is the strongest internationalization step you can take for yourself and your family. Doing so costs more than any other measure, but the costs needn’t be prohibitive if your goal is to move $500,000 or more into the safest structure possible. What you achieve is a very high level of protection from aggressive lawsuits, from potential capital controls and from the possibility of a gold seizure. The trust also puts your wealth in a far better environment for income tax planning and for estate planning.
To serve the purposes of protection and tax savings, an international trust is irrevocable (you can’t simply call the institution you’ve chosen as trustee and say you’ve changed your mind) and discretionary (meaning that the trustee has a responsibility to decide when to send a check to you or to any of the other beneficiaries you’ve included). Putting assets under the control of a trust company under such an arrangement is a big step. You’re not going to do it unless you’ve done the homework needed to understand how and why you can count on the trustee to handle the assets in the way you intend.
Getting the protection and tax savings of an international trust doesn’t require you to give up management control of the assets. The trust can be limited to owning just one thing — an LLC that you manage. The LLC owns all the investments, under your supervision as LLC Manager.
If you establish an international trust, it will be tied to you for income tax purposes. But at the end of your lifetime, it will completely disconnect from the US tax system. At that point, for the benefit of your survivors, it becomes...
Rung 9: An International Trust Someone Else Established
Being a beneficiary of an international trust established by someone other than a living US person is as good as it gets. It’s not linked to you by any transfers you’ve made to it, and you don’t have a determinable percentage interest in it (since it’s a discretionary trust). So until you actually receive a distribution, there is nothing for you to report, nothing for you to pay tax on and nothing a potential lawsuit creditor can hope to take from you. And, having no living connection to the US, the trust is as far beyond the orbit of any conceivable US gold seizure or currency controls as the former planet Pluto.
One Toe over the Line
It’s a long way from walking into the local coin shop and buying a few one-tenth-ounce gold Eagles to setting up a trust in a foreign country. But the distance isn’t nearly as great as you might imagine, and it will get shorter both in fact and in apprehension with each step you take.
As you move up the ladder, you’ll learn about the reporting requirements for US taxpayers. Rung 1 (gold coins in your pocket) entails no reporting, nor does Rung 8 until you actually receive a distribution. Rung 5 (foreign real estate) also is free of reporting requirements, at least for now. But under rules in effect now or soon to come, everything else covered in this article entails filing a form with the US government. The most reliable way to make sure that you stay within the rules, so that internationalization adds to your safety and not to your problems, is to let your accountant know what you are doing. Keep him informed, so that he can see to it that all the reporting requirements are satisfied.
Regards,
Terry Coxon,
for The Daily Reckoning
“Most Americans still have yet to stick a single financial toe across the border,” I explained, “but more and more are considering it...Because internationalizing your financial life means dealing with the unfamiliar, the project can seem more complex than it really is, so it’s best to start with the simplest measures, even if by themselves they don’t give you all the safety you’re looking for. Even from a simple beginning, what you learn with each step will make the next step easier to plan. Start with the first rung on the ladder of internationalization. Then climb, at your own speed, to reach the right level of protection.”
Yesterday I described the first three rungs of this ladder. Today, I present the rest...
Rung 4: A Swiss Annuity
A conventional annuity contract is a device for accumulating investment returns and eventually converting the value into a lifetime income. The investment return on an annuity from a US insurance company is tax deferred until it is paid out to you. If you buy an annuity from a foreign company, tax deferral is available only if the annuity’s value is tied to the performance of a pool of investments (a variable annuity).
Swiss annuities have long held a special place in personal financial planning. Such an annuity is denominated in Swiss francs, i.e., it’s francs, not dollars, that are owed to you. The Swiss insurance industry has a perfect record; policyholders have never been hurt by a default. And a Swiss annuity comes with an element of protection from would-be lawsuit creditors.
The Swiss franc is, like every other modern-day currency, just a piece of paper. It’s not redeemable for anything, not even a piece of chocolate. But the Swiss National Bank has a remarkable record of restraint in issuing new francs, which means that the franc’s prospects for holding its value have long been rated better than for any other currency.
I believe that is still the case, despite the Swiss National Bank’s current policy of suppressing any further increase in the price of the franc. In September, in order to save export industries from being crushed by the franc’s rapid appreciation against other currencies, the Swiss National Bank announced that it would purchase euros without limit to enforce a minimum exchange rate of 1.2 francs per euro — which implies printing enough francs to pay for those euros. By itself, it is an inflationary move, but it’s not a suicide pact with the European Central Bank (the issuing authority for euros). If the ECB turns to a policy of rapid inflation, I would expect the Swiss National Bank at some point to decouple the franc from the euro and let the franc’s price rise. So owning some Swiss francs, whether directly or through an annuity, is still a good step toward internationalizing your financial life.
Under Swiss law, an annuity is protected from the owner’s creditors if the beneficiaries consist of family members or if the owner has made a beneficiary designation that is irrevocable. For an owner in the US, that protection is not an impenetrable barrier to the winner of a lawsuit, but it is a barrier, and it makes the annuity a less- than-ideal prize for an attacker.
Earnings that are accumulating in a Swiss annuity are not eligible for tax deferral for a US taxpayer. The advantages are currency protection, the reliability of Swiss insurance companies and a measure of asset protection.
Rung 5: Foreign Real Estate
Owning real estate in another country gives you a suite of protections that distinguishes it from other steps toward internationalization.
First, the property’s value will depend on economic conditions in the country you’ve chosen, not on what happens in the US. If the economy of the foreign country grows and prospers, there is likely to be a spillover effect on the market value of your house, apartment, farm or patch of land — regardless of what is going on in the US.
Second, a foreign real estate investment would be hard to digest for any future capital controls imposed by the US. New rules could compel you to repatriate the cash you have in a foreign bank; rules forcing you to liquidate your foreign real estate and bring the money home would be another matter. Selling real estate isn’t quick or easy. How does the government compel an unwilling citizen to do what an eager seller often finds difficult to accomplish?
Third, as a potential prize for a lawsuit attacker, foreign real estate is a stinker. Even if he wins a judgment against you, foreclosing on your foreign property would be difficult to impossible, since it would require the cooperation of the courts in the foreign country, about whose rules and procedures the attacker’s attorney probably knows nothing. But he does know that even if he persuades a court in the US to order you to sell the property, the inherent illiquidity of real estate would give you plenty of opportunities for foot-dragging.
Where to buy? The whole world is open to you... which can be a problem. So many possibilities and no obvious place to start. One approach is to think about where you’ve been that you’d like to visit again or about some place you’ve long wanted to see. Plan to spend a few weeks there. Minimize your hotel hours, to maximize your exposure to the rest of the locale. Try to meet Americans, perhaps expatriates, who know their way around the place and who can point you toward a real estate broker who won’t try to treat you as an out-of-town sucker.
Buying foreign real estate isn’t for everyone. It requires a big investment in time and effort, but it could repay you with an asset that is low on the list of things anyone might try to take from you.
Rung 6: A Foreign LLC for Investments
A limited liability company organized under the laws of a foreign country is easy to set up and not too expensive. To bring the company into existence, you (or a service you hire) would file a simple form with a government office in the country you’ve chosen and pay a small fee. Then you as the LLC’s Manager and you as the LLC’s owner would enter into an agreement (the “operating agreement”) that would be the company’s governing instrument.
As the LLC’s Manager, you would open a non-US bank account or brokerage account in the name of the LLC and transfer your personal cash and investments to that account. Again as Manager, you would make all the investment decisions.
For a US person, a foreign LLC can be a powerful door-opener. It is welcome at many banks and brokerage firms where you personally would be turned away. This enables you to keep a wider range of assets outside the US, which puts more wealth beyond the reach of any arbitrary bureaucratic action. It also gives you investment choices that aren’t available at home.
Access to foreign investments and overseas financial services is reason enough to consider using a foreign limited liability company. But it can do much more for you, although at the cost of some complexity.
Notice the fundamental difference between a foreign LLC and what is going on at the first four rungs of the ladder of internationalization. With the LLC, you no longer personally own the assets you are trying to protect; the company owns them. This makes the LLC a powerful device for reducing your family’s expose to gift and estate taxes. And with the right provisions in the operating agreement, it can provide strong protection against loss to any malicious lawsuit.
If you are the sole owner of a foreign LLC intended for holding investments, you can and almost certainly should file an election for the LLC to be treated as a disregarded entity (indistinguishable from you for income tax purposes). If your spouse or anyone else is going to share in ownership of the LLC, the company can and should elect to be treated as a partnership for income tax purposes.
Rung 7: A Foreign LLC for Business
A business that operates outside the US does even more than a portfolio of foreign investments to give you the benefits of internationalization.
By its nature, a foreign business lives in a different environment than a business in the US. Economic troubles at home might not touch it. If it’s a business that depends on your personal efforts, it’s even less attractive as a lawsuit prize than foreign real estate. Being foreign, it would be outside the range of capital controls in the US. And many of the financial institutions that might turn away an investment-owning LLC because it is owned by an American will welcome an LLC that makes or sells goods or services.
If you already have a business in the US that has foreign customers or foreign suppliers, you may be able to relocate the business’s non-US activities to a foreign LLC. Internet-based businesses are especially amenable to internationalization.
Locating your business in a low-tax or no-tax jurisdiction, if it is practical to do so, can reduce your overall tax burden. In many cases, a foreign LLC that operates a business should elect to be treated as a foreign corporation for US income tax purposes. That can allow the business to reinvest its earnings while it pays little in current taxes and you personally pay nothing.
Rung 8: An International Trust That You Establish
Establishing a trust outside the US is the strongest internationalization step you can take for yourself and your family. Doing so costs more than any other measure, but the costs needn’t be prohibitive if your goal is to move $500,000 or more into the safest structure possible. What you achieve is a very high level of protection from aggressive lawsuits, from potential capital controls and from the possibility of a gold seizure. The trust also puts your wealth in a far better environment for income tax planning and for estate planning.
To serve the purposes of protection and tax savings, an international trust is irrevocable (you can’t simply call the institution you’ve chosen as trustee and say you’ve changed your mind) and discretionary (meaning that the trustee has a responsibility to decide when to send a check to you or to any of the other beneficiaries you’ve included). Putting assets under the control of a trust company under such an arrangement is a big step. You’re not going to do it unless you’ve done the homework needed to understand how and why you can count on the trustee to handle the assets in the way you intend.
Getting the protection and tax savings of an international trust doesn’t require you to give up management control of the assets. The trust can be limited to owning just one thing — an LLC that you manage. The LLC owns all the investments, under your supervision as LLC Manager.
If you establish an international trust, it will be tied to you for income tax purposes. But at the end of your lifetime, it will completely disconnect from the US tax system. At that point, for the benefit of your survivors, it becomes...
Rung 9: An International Trust Someone Else Established
Being a beneficiary of an international trust established by someone other than a living US person is as good as it gets. It’s not linked to you by any transfers you’ve made to it, and you don’t have a determinable percentage interest in it (since it’s a discretionary trust). So until you actually receive a distribution, there is nothing for you to report, nothing for you to pay tax on and nothing a potential lawsuit creditor can hope to take from you. And, having no living connection to the US, the trust is as far beyond the orbit of any conceivable US gold seizure or currency controls as the former planet Pluto.
One Toe over the Line
It’s a long way from walking into the local coin shop and buying a few one-tenth-ounce gold Eagles to setting up a trust in a foreign country. But the distance isn’t nearly as great as you might imagine, and it will get shorter both in fact and in apprehension with each step you take.
As you move up the ladder, you’ll learn about the reporting requirements for US taxpayers. Rung 1 (gold coins in your pocket) entails no reporting, nor does Rung 8 until you actually receive a distribution. Rung 5 (foreign real estate) also is free of reporting requirements, at least for now. But under rules in effect now or soon to come, everything else covered in this article entails filing a form with the US government. The most reliable way to make sure that you stay within the rules, so that internationalization adds to your safety and not to your problems, is to let your accountant know what you are doing. Keep him informed, so that he can see to it that all the reporting requirements are satisfied.
Regards,
Terry Coxon,
for The Daily Reckoning
Protecting Your Assets from an Out-of-Control Government, Part I
By keeping all your assets in the country where you live, you commit, ahead of time, to ratify whatever policy your home government might adopt, no matter how objectionable, unreasonable or pernicious that policy happens to be. If the next new mandate is “Register today to get a nail pounded into your head,” you’re already signed up.
Americans, by and large, run all their affairs within the confines of the US. The US economy is so large and so varied that it’s easy to assume that everything you want to do with your wealth can be done without crossing any borders. And people in the US, like people anywhere, live with the habits and attitudes developed over generations. They’re only human. In the case of Americans, those habits grew out of long experience with a government that was small and that generally practiced the rare virtue of following its own laws. In a happy exception to mankind’s experience with rulers, there was little to fear from it.
Stay at home is still the norm for Americans, but it’s a norm that is slowly fading. Every billion-dollar tick of the government debt clock, every expansion of the government’s regulatory apparatus, every overreaching judicial decision made in the name of a compelling public need, every inversion of protection for citizens into license for the state and every intellectually tortured discovery of a new meaning in the Constitution’s 4,400 old words leaves a few thousand more people wondering how prudent it is to consign all their eggs to a single national basket. Encounters with high-handed IRS agents and eager TSA gropers do nothing to ease that concern. And for those who listen thoughtfully, the messages from our designated leaders and their would-be replacements only hurry the dawning sense of unease.
Specific worries include exposure to predatory lawsuits; fear of where income tax rates might climb; the prospect of losing a family business in a regulatory battle or simply through estate tax; the fragility of financial institutions that have operated for forty years with the assurance that the Federal Reserve would rescue them from any folly; the possibility that a government desperate to protect the dollar from collapse might impose foreign exchange controls or capital controls; the memory and precedent of the forced gold sales of 1933; and the thought that a government floundering in deficits might start pilfering from IRAs and other pension plans.
But beyond those particular worries, and perhaps more important than any of them, is the sense that from here on, anything goes. The politicians will do whatever they find expedient, because there is no longer anything to stop them — not an electorate that is jealous of its freedoms and certainly not the Constitution, which is now just a playhouse for judicial imagineering. No one can know what’s coming next from the government and the financial system it has fostered, but for many of us there is an awful suspicion that we are not going to like it.
Most Americans still have yet to stick a single financial toe across the border, but more and more are considering it. Many, perhaps millions of toes are now twitching at the thought. Their owners want to end their absolute dependence on what happens in the US. They want to prepare for whatever is coming down the road, even though they don’t know what it will be. They want to be as ready as possible, even though their worries can only guess at what’s ahead.
Because internationalizing your financial life means dealing with the unfamiliar, the project can seem more complex than it really is, so it’s best to start with the simplest measures, even if by themselves they don’t give you all the safety you’re looking for. Even from a simple beginning, what you learn with each step will make the next step easier to plan. Start with the first rung on the ladder of internationalization. Then climb, at your own speed, to reach the right level of protection.
Rung 1: Coins in Your Pocket
Gold coins that you’ve stored personally give you something whose value doesn’t depend on the health of the US economy, doesn’t depend on any financial institution in the US and doesn’t depend on any US government policy. Gold coins are portable and hold their value no matter where in the world you might take them. They’re internationalization in a wafer. Safety cookies.
It’s best to buy the coins for cash, for maximum privacy. And there is a good reason to favor one-tenth-ounce gold Eagles. Gold coins mean readiness for troubled times; if you ever need to dispose of the gold in an informal market, it will be easier to do so with small-denomination coins that are widely recognizable and whose value matches the scale on which large numbers of people normally trade.
The premium on one-tenth-ounce coins (the price compared with the value of the gold content) is higher than on the larger coins — usually about 15% for the small coins vs. 5% for one-ounce Eagles. But the premium isn’t a dead cost, like a commission or bid-ask spread. The premium is a second investment; it’s what you pay for the packaging, and you can expect to recover it when you sell or trade. And in the circumstances when you would have the strongest reasons for thanking yourself for having bought some gold, the premium you paid will look like a bargain.
Rung 2: A Foreign Bank Account
On its own initiative, the IRS can freeze any bank account in the US without warning. The action might arise from mistaken identity, from an erroneous filing by some other taxpayer, from your failure to respond to an IRS notice in time or even from a postal error. And that’s what can happen without malice. Other government agencies have similar powers to act on their own, without giving you an opportunity to object in court. And any one of them might act against you for any of their specialized reasons — perhaps because someone resents your inattention to the needs of the migratory birds that visit your property or perhaps because someone thinks it would be fun to point to you as a terrorist, drug smuggler, arms dealer or child-porn merchant.
In principle, there are legal avenues for undoing a freeze or a seizure. But you’d need a lawyer, and being suddenly penniless could get in the way of hiring one.
A foreign bank account protects you from being trapped in such a nightmare. The US government can get to your foreign bank account eventually, because it can get to you. But a lightning seizure is very unlikely, because it would require a foreign government to override its own legal processes, which it generally wouldn’t be willing to do except in a grave emergency. So if your liquid assets at home were frozen, you would have cash outside the US to fund the legal cost of untangling the problem.
A foreign bank account is also a way to step back from the uncertainties of the US dollar, since the account could be denominated in another currency.
The US government has seen to it that Americans are no longer welcome customers at foreign banks. So forget about opening a Swiss bank account in your own name. However, if you apply in person (not by mail), you still can open a bank account in Canada. Be prepared to show your passport and to give the bank an original utility bill that confirms your place of residence.
Rung 3: Gold Abroad
The forced gold sales of 1933 were the work of an executive order signed by President Roosevelt. The purported legal basis for the order was the Trading With The Enemy Act, a legislative artifact of World War I. I have yet to find an explanation of how the authority for an order requiring Americans to sell their gold to the government at the government’s official price of $20 per ounce could be found in the Trading With The Enemy Act, but the fact that the enemy in question had gone out of business 15 years earlier didn’t seem to interfere with the legal logic.
The forced sale was a prelude to an increase in the official gold price to $35. The government’s reason for wanting that price rise was to gain leeway for a substantial, though limited, inflation of the dollar while keeping the dollar on the international gold standard. The forced sale was a way for the government, which operated in a political environment that still disfavored deficit spending, to capture the profit from the price rise. That profit would be a kitty for more spending without more borrowing.
Today there is no gold standard for the government to stay on. And deficit spending isn’t something politicians especially want to avoid; they’ve promoted it as a civic duty, to stimulate the economy. So the depression-era motives for a gold grab don’t seem to apply. Yet you can’t listen to a conversation between two gold investors without hearing the seizure topic coming up.
Are they just scaring each other? I don’t believe so. There are two potential motives for the government to again treat gold differently from everything else.
If the dollar’s slide in foreign exchange markets threatens to turn into a panic, the government might want to use gold sales to foreigners to mop up foreign-held dollars — in which case it might see a need to mop up the gold owned by its own citizens. That’s bad enough, but a second motive is a good bit nastier. At a visceral level, people who have centered their lives on government just don’t like gold. It’s an affront to the government’s authority to command and control and an insult to government’s supposed aptitude for solving economic problems. So disrespectful. From their point of view, every ounce purchased by an American is another tomato hurled at the political class. And the purchasers still constitute a tiny minority of the voting population. What could be more satisfying and convenient for the politicians than to kick sand in the face of gold investors for being such lousy citizens?
A new attack on gold ownership probably wouldn’t be a point-for- point reenactment of 1933. There are many weapons for mugging gold investors. It could be a prohibition on gold ownership coupled with a prohibition on sales of gold to foreigners. The only one left to buy would be the government, and being the only bidder, it would be a very low bidder. It could be a commandeering of privately owned gold, with token compensation like the $15 per day paid for jury duty. It could be a super tax, say 90%, on gold profits, which would get the job done slowly... or quickly if it were accompanied by a mark-to-market rule. Or it could be something none of us has thought of yet.
Not only can’t we know the shape of a future gold grab, we can’t know whether or how the rules would touch foreign-held gold. Owners of gold stored outside the US would be a minority of a minority. Their gold wouldn’t be the low-hanging fruit — it would be higher up in the tree and more trouble to get to. That’s why, in a casino sense, gold overseas is a different bet and a better bet than gold at home.
Maybe it will turn out that storing gold overseas won’t matter at all, in which case a little effort will have been wasted. And maybe it will turn out to matter a great deal.
To be continued tomorrow...
Regards,
Terry Coxon
for The Daily Reckoning
Americans, by and large, run all their affairs within the confines of the US. The US economy is so large and so varied that it’s easy to assume that everything you want to do with your wealth can be done without crossing any borders. And people in the US, like people anywhere, live with the habits and attitudes developed over generations. They’re only human. In the case of Americans, those habits grew out of long experience with a government that was small and that generally practiced the rare virtue of following its own laws. In a happy exception to mankind’s experience with rulers, there was little to fear from it.
Stay at home is still the norm for Americans, but it’s a norm that is slowly fading. Every billion-dollar tick of the government debt clock, every expansion of the government’s regulatory apparatus, every overreaching judicial decision made in the name of a compelling public need, every inversion of protection for citizens into license for the state and every intellectually tortured discovery of a new meaning in the Constitution’s 4,400 old words leaves a few thousand more people wondering how prudent it is to consign all their eggs to a single national basket. Encounters with high-handed IRS agents and eager TSA gropers do nothing to ease that concern. And for those who listen thoughtfully, the messages from our designated leaders and their would-be replacements only hurry the dawning sense of unease.
Specific worries include exposure to predatory lawsuits; fear of where income tax rates might climb; the prospect of losing a family business in a regulatory battle or simply through estate tax; the fragility of financial institutions that have operated for forty years with the assurance that the Federal Reserve would rescue them from any folly; the possibility that a government desperate to protect the dollar from collapse might impose foreign exchange controls or capital controls; the memory and precedent of the forced gold sales of 1933; and the thought that a government floundering in deficits might start pilfering from IRAs and other pension plans.
But beyond those particular worries, and perhaps more important than any of them, is the sense that from here on, anything goes. The politicians will do whatever they find expedient, because there is no longer anything to stop them — not an electorate that is jealous of its freedoms and certainly not the Constitution, which is now just a playhouse for judicial imagineering. No one can know what’s coming next from the government and the financial system it has fostered, but for many of us there is an awful suspicion that we are not going to like it.
Most Americans still have yet to stick a single financial toe across the border, but more and more are considering it. Many, perhaps millions of toes are now twitching at the thought. Their owners want to end their absolute dependence on what happens in the US. They want to prepare for whatever is coming down the road, even though they don’t know what it will be. They want to be as ready as possible, even though their worries can only guess at what’s ahead.
Because internationalizing your financial life means dealing with the unfamiliar, the project can seem more complex than it really is, so it’s best to start with the simplest measures, even if by themselves they don’t give you all the safety you’re looking for. Even from a simple beginning, what you learn with each step will make the next step easier to plan. Start with the first rung on the ladder of internationalization. Then climb, at your own speed, to reach the right level of protection.
Rung 1: Coins in Your Pocket
Gold coins that you’ve stored personally give you something whose value doesn’t depend on the health of the US economy, doesn’t depend on any financial institution in the US and doesn’t depend on any US government policy. Gold coins are portable and hold their value no matter where in the world you might take them. They’re internationalization in a wafer. Safety cookies.
It’s best to buy the coins for cash, for maximum privacy. And there is a good reason to favor one-tenth-ounce gold Eagles. Gold coins mean readiness for troubled times; if you ever need to dispose of the gold in an informal market, it will be easier to do so with small-denomination coins that are widely recognizable and whose value matches the scale on which large numbers of people normally trade.
The premium on one-tenth-ounce coins (the price compared with the value of the gold content) is higher than on the larger coins — usually about 15% for the small coins vs. 5% for one-ounce Eagles. But the premium isn’t a dead cost, like a commission or bid-ask spread. The premium is a second investment; it’s what you pay for the packaging, and you can expect to recover it when you sell or trade. And in the circumstances when you would have the strongest reasons for thanking yourself for having bought some gold, the premium you paid will look like a bargain.
Rung 2: A Foreign Bank Account
On its own initiative, the IRS can freeze any bank account in the US without warning. The action might arise from mistaken identity, from an erroneous filing by some other taxpayer, from your failure to respond to an IRS notice in time or even from a postal error. And that’s what can happen without malice. Other government agencies have similar powers to act on their own, without giving you an opportunity to object in court. And any one of them might act against you for any of their specialized reasons — perhaps because someone resents your inattention to the needs of the migratory birds that visit your property or perhaps because someone thinks it would be fun to point to you as a terrorist, drug smuggler, arms dealer or child-porn merchant.
In principle, there are legal avenues for undoing a freeze or a seizure. But you’d need a lawyer, and being suddenly penniless could get in the way of hiring one.
A foreign bank account protects you from being trapped in such a nightmare. The US government can get to your foreign bank account eventually, because it can get to you. But a lightning seizure is very unlikely, because it would require a foreign government to override its own legal processes, which it generally wouldn’t be willing to do except in a grave emergency. So if your liquid assets at home were frozen, you would have cash outside the US to fund the legal cost of untangling the problem.
A foreign bank account is also a way to step back from the uncertainties of the US dollar, since the account could be denominated in another currency.
The US government has seen to it that Americans are no longer welcome customers at foreign banks. So forget about opening a Swiss bank account in your own name. However, if you apply in person (not by mail), you still can open a bank account in Canada. Be prepared to show your passport and to give the bank an original utility bill that confirms your place of residence.
Rung 3: Gold Abroad
The forced gold sales of 1933 were the work of an executive order signed by President Roosevelt. The purported legal basis for the order was the Trading With The Enemy Act, a legislative artifact of World War I. I have yet to find an explanation of how the authority for an order requiring Americans to sell their gold to the government at the government’s official price of $20 per ounce could be found in the Trading With The Enemy Act, but the fact that the enemy in question had gone out of business 15 years earlier didn’t seem to interfere with the legal logic.
The forced sale was a prelude to an increase in the official gold price to $35. The government’s reason for wanting that price rise was to gain leeway for a substantial, though limited, inflation of the dollar while keeping the dollar on the international gold standard. The forced sale was a way for the government, which operated in a political environment that still disfavored deficit spending, to capture the profit from the price rise. That profit would be a kitty for more spending without more borrowing.
Today there is no gold standard for the government to stay on. And deficit spending isn’t something politicians especially want to avoid; they’ve promoted it as a civic duty, to stimulate the economy. So the depression-era motives for a gold grab don’t seem to apply. Yet you can’t listen to a conversation between two gold investors without hearing the seizure topic coming up.
Are they just scaring each other? I don’t believe so. There are two potential motives for the government to again treat gold differently from everything else.
If the dollar’s slide in foreign exchange markets threatens to turn into a panic, the government might want to use gold sales to foreigners to mop up foreign-held dollars — in which case it might see a need to mop up the gold owned by its own citizens. That’s bad enough, but a second motive is a good bit nastier. At a visceral level, people who have centered their lives on government just don’t like gold. It’s an affront to the government’s authority to command and control and an insult to government’s supposed aptitude for solving economic problems. So disrespectful. From their point of view, every ounce purchased by an American is another tomato hurled at the political class. And the purchasers still constitute a tiny minority of the voting population. What could be more satisfying and convenient for the politicians than to kick sand in the face of gold investors for being such lousy citizens?
A new attack on gold ownership probably wouldn’t be a point-for- point reenactment of 1933. There are many weapons for mugging gold investors. It could be a prohibition on gold ownership coupled with a prohibition on sales of gold to foreigners. The only one left to buy would be the government, and being the only bidder, it would be a very low bidder. It could be a commandeering of privately owned gold, with token compensation like the $15 per day paid for jury duty. It could be a super tax, say 90%, on gold profits, which would get the job done slowly... or quickly if it were accompanied by a mark-to-market rule. Or it could be something none of us has thought of yet.
Not only can’t we know the shape of a future gold grab, we can’t know whether or how the rules would touch foreign-held gold. Owners of gold stored outside the US would be a minority of a minority. Their gold wouldn’t be the low-hanging fruit — it would be higher up in the tree and more trouble to get to. That’s why, in a casino sense, gold overseas is a different bet and a better bet than gold at home.
Maybe it will turn out that storing gold overseas won’t matter at all, in which case a little effort will have been wasted. And maybe it will turn out to matter a great deal.
To be continued tomorrow...
Regards,
Terry Coxon
for The Daily Reckoning
Thursday, May 10, 2012
You Can’t Hide Money Unless You Know This “Secret”
By Erika Nolan, Executive Publisher
Johnny Carson once joked, “The difference between a divorce and a legal separation is that the legal separation gives a husband time to hide his money.”
In the lounge at the Hamilton Princess hotel in Bermuda, about seven years ago, I was offered a choice. I was setting up an investment account.
The advisor leaned in and whispered, “Now, you don’t have to put your husband’s name on this account. It’s up to you. But if things go bad between you, and his name is on this account….well, it will be too late.”
I did the fair thing – I added Patrick’s name to the account. After all, the money was “our” money… earned by both of us. Now, after nearly 14 years of marriage, things are still rosy (knock on wood) and the majority of our wealth has been built together.
Putting money out of reach – from a spouse, children, business partners, or even employees – is a rather unsettling, but very popular topic. Just last week, the WSJ ran a full page story telling of how hiding money from your spouse has gotten harder… but the truth is there is a simple way to protect your wealth.
Discretion – Less is Really More
Money is easier to disguise when it never surfaces. This may not seem like a secret, but it is. Using a bit of discretion and living beneath your means may seem counter to the “American Way” but it’s smart.
Bragging and flashing cash is a big risk these days. The less you flaunt your wealth – and your personal details – the less likely people are to reach into your pockets. Often, you are your own worst enemy. A few of the wealthiest people I know look like average, every-day people.
My one good friend is worth tens of millions of dollars, easily. And for the duration of our decade-long friendship, I’ve rarely seen him dressed in much more than a pair of khakis, a button-down shirt and a muted cashmere sweater tossed around his shoulders.
Another friend of similar means chose to pay cash for his cars – buying mid-level Japanese models because he finds them reliable. He lives in a very nice, but modest house for his wealth. Outside of those closest to him, no one has a clue about his net worth.
A long-time Sovereign Society member, I’ll call him Paul to maintain his privacy, has been attending our offshore events for years. I met him in early 1999 and frankly, he was dressed like a building maintenance man. I still remember his bright yellow t-shirt and his tan Dickies. Years later, he still wears nearly the same outfit to our events, but I now know he owns multiple apartment buildings in New York City.
The other mistake many people make, other than flashing the cash, is volunteering private information. Telling people about your wealth is one of the fastest ways to get on the radar.
I fly roughly 75,000+ miles a year and I’m always amazed at the stories complete strangers tell me during the course of the flight. Small talk is fine…but revealing your net worth, bragging about your latest real estate development, divulging your portfolio assets, and the like makes no sense.
Say Good-Bye to Technology
Besides keeping your lips sealed, use discretion with today’s technologies. As the WSJ rightfully points out, smart phones, text messages, Facebook and computer transactions all leave a trail that can easily be picked up by a spouse. And, these trails are very hard – if not impossible – to wipe out. But, the WSJ falls a bit short with their advice.
I am a huge advocate of not using electronic communication for anything truly confidential. This is especially true when it comes to offshore accounts, trusts, etc.
If you want to ensure real privacy over your financial information, you have to go back to basics.
Elect to have any detailed financial statements from banks or brokerage firms held for you. Then instruct the companies to forward the documents to a lawyer. Normally, asset-protection or family attorneys offer this service, and this is especially true if you are a client. Opt to go to the lawyer’s office to open and review the mail, make any necessary phone calls or sign any necessary papers. Leave any documents you need to retain in the custody of the lawyer to ensure maximum privacy where it is shielded by the rules of lawyer-client privilege. Shred anything that isn’t worth saving.
My advice is to use discretion when it comes to your wealth, and that applies to everyone…except governments and tax authorities. There you must be fully transparent and fully compliant. Tax returns are not part of public record so they can’t be accessed without a lawyer and a judge.
Unfortunately, many people make their most private financial details “public” all by themselves. Keep your secrets to yourself. It will save you thousands.
In Wealth & Prosperity,
Erika Nolan
Johnny Carson once joked, “The difference between a divorce and a legal separation is that the legal separation gives a husband time to hide his money.”
In the lounge at the Hamilton Princess hotel in Bermuda, about seven years ago, I was offered a choice. I was setting up an investment account.
The advisor leaned in and whispered, “Now, you don’t have to put your husband’s name on this account. It’s up to you. But if things go bad between you, and his name is on this account….well, it will be too late.”
I did the fair thing – I added Patrick’s name to the account. After all, the money was “our” money… earned by both of us. Now, after nearly 14 years of marriage, things are still rosy (knock on wood) and the majority of our wealth has been built together.
Putting money out of reach – from a spouse, children, business partners, or even employees – is a rather unsettling, but very popular topic. Just last week, the WSJ ran a full page story telling of how hiding money from your spouse has gotten harder… but the truth is there is a simple way to protect your wealth.
Discretion – Less is Really More
Money is easier to disguise when it never surfaces. This may not seem like a secret, but it is. Using a bit of discretion and living beneath your means may seem counter to the “American Way” but it’s smart.
Bragging and flashing cash is a big risk these days. The less you flaunt your wealth – and your personal details – the less likely people are to reach into your pockets. Often, you are your own worst enemy. A few of the wealthiest people I know look like average, every-day people.
My one good friend is worth tens of millions of dollars, easily. And for the duration of our decade-long friendship, I’ve rarely seen him dressed in much more than a pair of khakis, a button-down shirt and a muted cashmere sweater tossed around his shoulders.
Another friend of similar means chose to pay cash for his cars – buying mid-level Japanese models because he finds them reliable. He lives in a very nice, but modest house for his wealth. Outside of those closest to him, no one has a clue about his net worth.
A long-time Sovereign Society member, I’ll call him Paul to maintain his privacy, has been attending our offshore events for years. I met him in early 1999 and frankly, he was dressed like a building maintenance man. I still remember his bright yellow t-shirt and his tan Dickies. Years later, he still wears nearly the same outfit to our events, but I now know he owns multiple apartment buildings in New York City.
The other mistake many people make, other than flashing the cash, is volunteering private information. Telling people about your wealth is one of the fastest ways to get on the radar.
I fly roughly 75,000+ miles a year and I’m always amazed at the stories complete strangers tell me during the course of the flight. Small talk is fine…but revealing your net worth, bragging about your latest real estate development, divulging your portfolio assets, and the like makes no sense.
Say Good-Bye to Technology
Besides keeping your lips sealed, use discretion with today’s technologies. As the WSJ rightfully points out, smart phones, text messages, Facebook and computer transactions all leave a trail that can easily be picked up by a spouse. And, these trails are very hard – if not impossible – to wipe out. But, the WSJ falls a bit short with their advice.
I am a huge advocate of not using electronic communication for anything truly confidential. This is especially true when it comes to offshore accounts, trusts, etc.
If you want to ensure real privacy over your financial information, you have to go back to basics.
Elect to have any detailed financial statements from banks or brokerage firms held for you. Then instruct the companies to forward the documents to a lawyer. Normally, asset-protection or family attorneys offer this service, and this is especially true if you are a client. Opt to go to the lawyer’s office to open and review the mail, make any necessary phone calls or sign any necessary papers. Leave any documents you need to retain in the custody of the lawyer to ensure maximum privacy where it is shielded by the rules of lawyer-client privilege. Shred anything that isn’t worth saving.
My advice is to use discretion when it comes to your wealth, and that applies to everyone…except governments and tax authorities. There you must be fully transparent and fully compliant. Tax returns are not part of public record so they can’t be accessed without a lawyer and a judge.
Unfortunately, many people make their most private financial details “public” all by themselves. Keep your secrets to yourself. It will save you thousands.
In Wealth & Prosperity,
Erika Nolan
Tuesday, May 8, 2012
Ron Paul: “The Next Crisis Will Be Even More Destructive”
Our central bankers are intellectually bankrupt
by Ron Paul
The financial crisis has fully exposed the intellectual bankruptcy of the world’s central bankers.
Why? Central bankers neglect the fact that interest rates are prices. Manipulating those prices through credit expansion or contraction has real and deleterious effects on the economy. Yet while socialism and centralised economic planning have largely been rejected by free-market economists, the myth persists that central banks are a necessary component of market economies.
These economists understand that having wages or commodity prices established by government fiat would cause shortages, misallocations of capital and hardship. Yet they accept at face value the notion that central banks must determine not only the supply of one particular commodity – money – but also the cost of that commodity via the setting of interest rates.
Printing unlimited amounts of money does not lead to unlimited prosperity. This is readily apparent from observing the Fed’s monetary policy over the past two decades. It has pumped trillions of dollars into the economy, providing money to banks with the hope that this new money will spur lending and, in turn, consumption. These interventions are intended to raise stock prices, lower borrowing costs for companies and individuals, and maintain high housing prices.
But like their predecessors in the 1930s, today’s Fed governors behave as if the height of the credit bubble is the status quo to which we need to return. This confuses money with wealth, and reflects the idea that prosperity stems from high asset prices and large amounts of money and credit.
The push for easy money is not new. Central banking was supposed to have ended the types of periodic financial crises the US experienced throughout the 19th century. Yet US financial panics have only got worse since the centralisation of monetary policy via the creation of the Fed in 1913. The Depression in the 1930s; the haemorrhaging of gold reserves during the 1960s; the stagflation of the 1970s; the dotcom bubble of the early 2000s; and the current recession all have their root in the Fed’s loose monetary policy.
Each of these crises began with an inflationary monetary policy that led to bubbles, and the solution to the busts that inevitably followed has always been to reflate the bubble.
This only sows the seeds for the next crisis. Lowering interest rates in an attempt to forestall a recession in the aftermath of the dotcom bubble required massive credit creation that led to the housing bubble, the collapse of which we still have not recovered from today. Failing to learn the lesson of the bursting of both the dotcom bubble and the housing bubble, the Fed has pumped trillions of dollars into the economy and has promised to leave interest rates at zero through to at least 2014. This will only ensure that the next crisis will be even more destructive than the current one.
Not content with its failed attempts to prop up the US economy, the Fed has set its sights on bailing out Europe, too. Through currency swaps, it has committed to offering potentially hundreds of billions of US dollars to the European Central Bank and we cannot rule out the possibility of direct intervention.
The Fed’s response to the crisis suggests that it believes the current crisis is a problem of liquidity. In fact it is a problem of poorly allocated investments caused by improper pricing of money and credit, pricing which is distorted by the Fed’s inflationary actions.
The Fed has made banks and corporations dependent on cheap money. Instead of looking for opportunities to invest in real products that will serve the needs of consumers, Wall Street awaits the minutes of each Federal Open Market Committee meeting with bated breath, hoping that QE3 and QE4 are just around the corner. It is no wonder that long-term investment and business planning are stagnant.
We live in a world that seems to have abandoned the concept of savings and investment as the source of real wealth and economic growth. Financial markets clamour for more cheap money creation on the part of central banks. Hopes of further quantitative easing from the Fed, the Bank of England, or the Bank of Japan – or further longer-term refinancing operations from the ECB – buoy markets, while decisions not to intervene can cause stocks to plummet. Policy makers focus on spurring consumption, while ignoring production. The so-called capitalists have forgotten that capital cannot be created by government fiat.
Control of the world’s economy has been placed in the hands of a banking cartel, which holds great danger for all of us. True prosperity requires sound money, increased productivity, and increased savings and investment. The world is awash in US dollars, and a currency crisis involving the world’s reserve currency would be an unprecedented catastrophe. No amount of monetary expansion can solve our current financial problems, but it can make those problems much worse.
The writer is a US congressman and a candidate for the Republican party’s presidential nomination
by Ron Paul
The financial crisis has fully exposed the intellectual bankruptcy of the world’s central bankers.
Why? Central bankers neglect the fact that interest rates are prices. Manipulating those prices through credit expansion or contraction has real and deleterious effects on the economy. Yet while socialism and centralised economic planning have largely been rejected by free-market economists, the myth persists that central banks are a necessary component of market economies.
These economists understand that having wages or commodity prices established by government fiat would cause shortages, misallocations of capital and hardship. Yet they accept at face value the notion that central banks must determine not only the supply of one particular commodity – money – but also the cost of that commodity via the setting of interest rates.
Printing unlimited amounts of money does not lead to unlimited prosperity. This is readily apparent from observing the Fed’s monetary policy over the past two decades. It has pumped trillions of dollars into the economy, providing money to banks with the hope that this new money will spur lending and, in turn, consumption. These interventions are intended to raise stock prices, lower borrowing costs for companies and individuals, and maintain high housing prices.
But like their predecessors in the 1930s, today’s Fed governors behave as if the height of the credit bubble is the status quo to which we need to return. This confuses money with wealth, and reflects the idea that prosperity stems from high asset prices and large amounts of money and credit.
The push for easy money is not new. Central banking was supposed to have ended the types of periodic financial crises the US experienced throughout the 19th century. Yet US financial panics have only got worse since the centralisation of monetary policy via the creation of the Fed in 1913. The Depression in the 1930s; the haemorrhaging of gold reserves during the 1960s; the stagflation of the 1970s; the dotcom bubble of the early 2000s; and the current recession all have their root in the Fed’s loose monetary policy.
Each of these crises began with an inflationary monetary policy that led to bubbles, and the solution to the busts that inevitably followed has always been to reflate the bubble.
This only sows the seeds for the next crisis. Lowering interest rates in an attempt to forestall a recession in the aftermath of the dotcom bubble required massive credit creation that led to the housing bubble, the collapse of which we still have not recovered from today. Failing to learn the lesson of the bursting of both the dotcom bubble and the housing bubble, the Fed has pumped trillions of dollars into the economy and has promised to leave interest rates at zero through to at least 2014. This will only ensure that the next crisis will be even more destructive than the current one.
Not content with its failed attempts to prop up the US economy, the Fed has set its sights on bailing out Europe, too. Through currency swaps, it has committed to offering potentially hundreds of billions of US dollars to the European Central Bank and we cannot rule out the possibility of direct intervention.
The Fed’s response to the crisis suggests that it believes the current crisis is a problem of liquidity. In fact it is a problem of poorly allocated investments caused by improper pricing of money and credit, pricing which is distorted by the Fed’s inflationary actions.
The Fed has made banks and corporations dependent on cheap money. Instead of looking for opportunities to invest in real products that will serve the needs of consumers, Wall Street awaits the minutes of each Federal Open Market Committee meeting with bated breath, hoping that QE3 and QE4 are just around the corner. It is no wonder that long-term investment and business planning are stagnant.
We live in a world that seems to have abandoned the concept of savings and investment as the source of real wealth and economic growth. Financial markets clamour for more cheap money creation on the part of central banks. Hopes of further quantitative easing from the Fed, the Bank of England, or the Bank of Japan – or further longer-term refinancing operations from the ECB – buoy markets, while decisions not to intervene can cause stocks to plummet. Policy makers focus on spurring consumption, while ignoring production. The so-called capitalists have forgotten that capital cannot be created by government fiat.
Control of the world’s economy has been placed in the hands of a banking cartel, which holds great danger for all of us. True prosperity requires sound money, increased productivity, and increased savings and investment. The world is awash in US dollars, and a currency crisis involving the world’s reserve currency would be an unprecedented catastrophe. No amount of monetary expansion can solve our current financial problems, but it can make those problems much worse.
The writer is a US congressman and a candidate for the Republican party’s presidential nomination
The Empire Strikes back....
*** We’re always trying to connect the dots. Unfortunately, the dots won’t stand still!
Last week, we were thinking about how democracy...or any government...operates on the basis of shared emotions, or feelings, rather than real ideas. We explored the public’s contemporary narrative on the financial crisis. What we saw is that a common view of what is going on — in order to be commonly shared — has to be stripped so bare of nuance and paradox that it ceases to be an idea at all. It is just a feeling.
And sometimes, it becomes a grotesque, simpleminded fantasy that it is actually the opposite of the original thought or desire behind it. It becomes a zombie thought...actually harmful to the group that holds it.
If you follow the popular media, for example, you would think that the US is engaged in a war against “terrorists”...bad people, who for a reason never explained, aim to do harm to Americans. These terrorists are so evil they must be stopped...at all costs.
“It’s a war,” says US Attorney General, Eric Holder. So, he explains, we can set aside the Constitution and the Bill of Rights — the very things we’re supposed to be defending — to fight it.
Thus is the US military industry set to the task of protecting against “terrorists”...with the solid support of the American people. An announcement at the Ft. Lauderdale airport on Friday told us that “military personnel can board at their leisure.” They got the treatment normally given to paying business class passengers! On one plane, a stewardess invited military personnel to take the vacant seats in the business class section. And it was reported last week that of all America’s public and private institutions only the military retains the confidence of the general population.
But if you bother to study the situation at all you quickly realize that it is not terrorists who pose a threat to the US, it is the US military itself. The Pentagon has gone rogue...now it is a danger to the nation.
Terrorists are insignificant. Trivial. You could fit all of them in a mid-sized movie theatre. And half of them — like Osama bin Laden himself — are so infirm, insane or incompetent that they are completely incapable of doing any real damage to the world’s only super-power.
The US military — along with its suppliers, security agencies and all the rest of the lethal establishment meant to protect America — is big. And very expensive. Like a parasite, it drains energy and resources from its host — the productive US economy. The total cost, fully loaded, is about 8% of GDP.
America is, of course, no normal nation. It is an empire. The cost of running an empire is high. But empire is supposed to be a paying enterprise. An empire takes tribute from its vassal states in exchange for providing protection. That’s how all empires worked.
The US empire, on the other hand, loses money. It conquers foreign nations...but it fails to make money at it. Instead of sucking resources from its vassal states, it takes resources from the American public. It is no longer protecting the nation; it is endangering it.
More to come...
Regards,
Bill Bonner
for The Daily Reckoning
Last week, we were thinking about how democracy...or any government...operates on the basis of shared emotions, or feelings, rather than real ideas. We explored the public’s contemporary narrative on the financial crisis. What we saw is that a common view of what is going on — in order to be commonly shared — has to be stripped so bare of nuance and paradox that it ceases to be an idea at all. It is just a feeling.
And sometimes, it becomes a grotesque, simpleminded fantasy that it is actually the opposite of the original thought or desire behind it. It becomes a zombie thought...actually harmful to the group that holds it.
If you follow the popular media, for example, you would think that the US is engaged in a war against “terrorists”...bad people, who for a reason never explained, aim to do harm to Americans. These terrorists are so evil they must be stopped...at all costs.
“It’s a war,” says US Attorney General, Eric Holder. So, he explains, we can set aside the Constitution and the Bill of Rights — the very things we’re supposed to be defending — to fight it.
Thus is the US military industry set to the task of protecting against “terrorists”...with the solid support of the American people. An announcement at the Ft. Lauderdale airport on Friday told us that “military personnel can board at their leisure.” They got the treatment normally given to paying business class passengers! On one plane, a stewardess invited military personnel to take the vacant seats in the business class section. And it was reported last week that of all America’s public and private institutions only the military retains the confidence of the general population.
But if you bother to study the situation at all you quickly realize that it is not terrorists who pose a threat to the US, it is the US military itself. The Pentagon has gone rogue...now it is a danger to the nation.
Terrorists are insignificant. Trivial. You could fit all of them in a mid-sized movie theatre. And half of them — like Osama bin Laden himself — are so infirm, insane or incompetent that they are completely incapable of doing any real damage to the world’s only super-power.
The US military — along with its suppliers, security agencies and all the rest of the lethal establishment meant to protect America — is big. And very expensive. Like a parasite, it drains energy and resources from its host — the productive US economy. The total cost, fully loaded, is about 8% of GDP.
America is, of course, no normal nation. It is an empire. The cost of running an empire is high. But empire is supposed to be a paying enterprise. An empire takes tribute from its vassal states in exchange for providing protection. That’s how all empires worked.
The US empire, on the other hand, loses money. It conquers foreign nations...but it fails to make money at it. Instead of sucking resources from its vassal states, it takes resources from the American public. It is no longer protecting the nation; it is endangering it.
More to come...
Regards,
Bill Bonner
for The Daily Reckoning
Monday, May 7, 2012
Planning an Amazon vacation
By Ellen Creager
Detroit Free Press Travel
It's easier than you think, and you should be able to do it for about $3,000, including a flight from the U.S. and staying at a good ecolodge. You need to be moderately physically fit and be able to climb stairs and walk well on uneven surfaces and muddy trails. Here are the main choices for exotic fun:
Ecuador
Ecuador's Amazon in the El Oriente region is a delight of rain forest and animal diversity. It is also simpler than other Amazon trips.
Fly into: Quito is less than a five-hour flight from Houston; take an additional 30-minute flight on Ecuador's AeroGal (modern Airbus jets) to Coca, the jumping-off point for most Ecuador Amazon adventures.
Main tourist areas: Ecolodges along the Napo River, east of Coca. The Napo is a main tributary of the mighty Amazon River.
Could combine with visits to: Quito and the Galapagos Islands.
Popularity: Ecuador had 227,000 tourist arrivals from the U.S. last year, according to Euromonitor International.
For more: Ecuador Ministry of Tourism, http://ecuador.travel/; .
Peru
Where the Amazon River proper begins; lots of choices for Amazon cruises or ecolodges.
Fly into: Lima, then Iquitos or Cusco to start your trip.
Main tourist areas: Ecolodges or cruises near Iquitos or Tambopata Reserve (southern Peru).
Could combine with visits to: Machu Picchu, Lima.
Popularity: Peru had 423,000 tourist arrivals from the U.S. last year, according to Euromonitor International.
For more: Peru Tourism Bureau, www.visitperu.com;
Brazil
Brazil covers 60% of the Amazon region, so it offers many cruises and lodges, and it has a big tourism industry.
Fly into: Manaus, a city of 1.7 million. There are nonstops from Miami. Unfortunately, a lot of flights from the U.S. stop first in Rio or Sao Paulo -- 1,600 miles south -- then backtrack north. You also need a $140 visa to get into Brazil.
Can combine with visits to: Rio de Janeiro, Sao Paulo, Belém
Popularity: Brazil had 746,000 tourist arrivals from the U.S. last year, according to Euromonitor International.
For more: Brazilian Tourism Board, www.braziltour.com.
Detroit Free Press Travel
It's easier than you think, and you should be able to do it for about $3,000, including a flight from the U.S. and staying at a good ecolodge. You need to be moderately physically fit and be able to climb stairs and walk well on uneven surfaces and muddy trails. Here are the main choices for exotic fun:
Ecuador
Ecuador's Amazon in the El Oriente region is a delight of rain forest and animal diversity. It is also simpler than other Amazon trips.
Fly into: Quito is less than a five-hour flight from Houston; take an additional 30-minute flight on Ecuador's AeroGal (modern Airbus jets) to Coca, the jumping-off point for most Ecuador Amazon adventures.
Main tourist areas: Ecolodges along the Napo River, east of Coca. The Napo is a main tributary of the mighty Amazon River.
Could combine with visits to: Quito and the Galapagos Islands.
Popularity: Ecuador had 227,000 tourist arrivals from the U.S. last year, according to Euromonitor International.
For more: Ecuador Ministry of Tourism, http://ecuador.travel/; .
Peru
Where the Amazon River proper begins; lots of choices for Amazon cruises or ecolodges.
Fly into: Lima, then Iquitos or Cusco to start your trip.
Main tourist areas: Ecolodges or cruises near Iquitos or Tambopata Reserve (southern Peru).
Could combine with visits to: Machu Picchu, Lima.
Popularity: Peru had 423,000 tourist arrivals from the U.S. last year, according to Euromonitor International.
For more: Peru Tourism Bureau, www.visitperu.com;
Brazil
Brazil covers 60% of the Amazon region, so it offers many cruises and lodges, and it has a big tourism industry.
Fly into: Manaus, a city of 1.7 million. There are nonstops from Miami. Unfortunately, a lot of flights from the U.S. stop first in Rio or Sao Paulo -- 1,600 miles south -- then backtrack north. You also need a $140 visa to get into Brazil.
Can combine with visits to: Rio de Janeiro, Sao Paulo, Belém
Popularity: Brazil had 746,000 tourist arrivals from the U.S. last year, according to Euromonitor International.
For more: Brazilian Tourism Board, www.braziltour.com.
"Gringos" overcharged for water/electric bills in Ecuador - The Ecuador Insider
"Are you serious, that really happens?" I said...
...in response to a friend who told me... "Once you buy property in Ecuador, don't change the name on your water or electric service bills because once they see a foreign name on there they'll hike the prices up on you."
"Just leave your place in the old owner's Ecuadorian names."
After first hearing this from several foreigners, than verifying it myself I can honestly say in the small towns of Ecuador this happens, but not in the larger cities.
In fact, there is no tangible benefit to switching the services into your name, it's easy, only takes a few minutes and can be done in just a few minutes with a quick stop at where you pay your water and electric bills. All you need to bring is a copy of the properly registered title (Escritura) in your name and be ready for about a $20 fee.
Overcharging of foreigners happens all over the globe, not just in Ecuador... I remember on my first trip abroad, I landed in Spain only to promptly get ripped off by an airport taxi driver paying about double the normal fare.
Now, it is true, anything "energy" related is CHEAP in Ecuador, often less than a third the price of neighboring Latin countries like Brazil or Colombia. My water bill for my small house on the coast was $4 a month, now more like $7-8 since changing the name. My Electric bill is around $15 a month (I haven't changed it to my name). A Natural Gas tank refill costs $2.50, and did I mention a gallon of gasoline costs $1.50?
Why so cheap? Well, the government subsidies help.
Dom Buonamici
Traveler, Entrepreneur, Manager
...in response to a friend who told me... "Once you buy property in Ecuador, don't change the name on your water or electric service bills because once they see a foreign name on there they'll hike the prices up on you."
"Just leave your place in the old owner's Ecuadorian names."
After first hearing this from several foreigners, than verifying it myself I can honestly say in the small towns of Ecuador this happens, but not in the larger cities.
In fact, there is no tangible benefit to switching the services into your name, it's easy, only takes a few minutes and can be done in just a few minutes with a quick stop at where you pay your water and electric bills. All you need to bring is a copy of the properly registered title (Escritura) in your name and be ready for about a $20 fee.
Overcharging of foreigners happens all over the globe, not just in Ecuador... I remember on my first trip abroad, I landed in Spain only to promptly get ripped off by an airport taxi driver paying about double the normal fare.
Now, it is true, anything "energy" related is CHEAP in Ecuador, often less than a third the price of neighboring Latin countries like Brazil or Colombia. My water bill for my small house on the coast was $4 a month, now more like $7-8 since changing the name. My Electric bill is around $15 a month (I haven't changed it to my name). A Natural Gas tank refill costs $2.50, and did I mention a gallon of gasoline costs $1.50?
Why so cheap? Well, the government subsidies help.
Dom Buonamici
Traveler, Entrepreneur, Manager
Spanish explorers gave Amazon River its name
The wide Napo River, where Ecuador's ecolodges stand, has a famous place in history.
It is where the journey of the first Europeans to traverse the Amazon began.
In 1541, Spanish soldiers searching for gold and spices in the New World left the Pacific coastal town of Guayaquil (now in Ecuador), and headed east. At Coca, desperate and nearly out of supplies, the expedition's leaders sent Capt. Francisco de Orellana and 50 soldiers down the Napo River on rafts as an advance party.
Swept down the whispering, swirling Napo, unable to turn back, they encountered no gold and no cinnamon. But they did pass towering forests and thriving settlements of native people.
The Napo merged into another tributary, then another, until they reached the widest river of all that led them across the continent.
Nine months later, they reached the Atlantic Ocean in Brazil, 3,000 miles from where they began.
Today, Orellana is hailed as the man who named and discovered the Amazon. He named it after a Greek legend of a tribe of fierce female fighters.
Although Brazil is most famous for Amazon lore today, this mysterious part of remote eastern Ecuador is the source of the Amazon's most famous journey.
It is where the journey of the first Europeans to traverse the Amazon began.
In 1541, Spanish soldiers searching for gold and spices in the New World left the Pacific coastal town of Guayaquil (now in Ecuador), and headed east. At Coca, desperate and nearly out of supplies, the expedition's leaders sent Capt. Francisco de Orellana and 50 soldiers down the Napo River on rafts as an advance party.
Swept down the whispering, swirling Napo, unable to turn back, they encountered no gold and no cinnamon. But they did pass towering forests and thriving settlements of native people.
The Napo merged into another tributary, then another, until they reached the widest river of all that led them across the continent.
Nine months later, they reached the Atlantic Ocean in Brazil, 3,000 miles from where they began.
Today, Orellana is hailed as the man who named and discovered the Amazon. He named it after a Greek legend of a tribe of fierce female fighters.
Although Brazil is most famous for Amazon lore today, this mysterious part of remote eastern Ecuador is the source of the Amazon's most famous journey.
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