What Will You Do When the Crisis Comes?

A Warning From Spain
By Bob Bauman JD, Offshore and Asset Protection Editor

Look to Spain

You can forget Professor Henry Higgins’ famous lyric from the 1964 hit musical, My Fair Lady: “The rain in Spain stays mainly on the plain.”

There is a far more serious gusher in the Kingdom of Spain … an economic disintegration that could make financially failing Greece look like a minor problem by comparison – and don’t forget Italy, Ireland and Portugal.

The New York Times reports that capital fleeing Spain from May through July equaled a startling 50% of the country’s gross domestic product during the same period. While much of this outward flow was foreigners unloading stocks and bonds, a large portion was caused by Spaniards transferring their cash and savings to what they see as far safer foreign banks. The August numbers probably will be even worse.

As doubts grew about Spain’s financial system in July, Spaniards withdrew a record 75 billion euros (US$94 billion) from their banks – that equals 7% of the country’s total economic output.

Many worry that Spain’s economic tailspin could force the country’s withdrawal from the euro, and a return to its former currency, the peseta. The Times says: “That dire outcome is still considered a long shot, even if Spain might eventually require a Greek-style bailout. But there is no doubt that many of those in a position to do so are taking their money, and in some cases themselves, out of Spain.”

Experts say the deposit outflow from Spain is the most serious in the entire euro zone, and is indicative of a broader capital flight problem. The withdrawals quickened a trend that began in 2011 and came despite a European commitment to pump up to 100 billion euros into the Spanish banking system.

The capital flight began with the failure of Bankia, which shocked Spanish savers who were told by government officials that the bank was sound. Instead of calming fears, the state takeover of the bank recalled comparisons to Argentina in 2001, when peso bank accounts denominated in dollars were frozen in order to stem the flight of deposits.

In the face of all this bad news and the loss of faith in their government, reasonable Spanish people are doing what is natural: they are trying to save themselves and their families.

This exodus is starting to include members of its educated and entrepreneurial elite who are fed up with the lack of jobs in a country where the unemployment rate is 25%.

The Times describes the plight of a senior executive for a multinational payroll-processing company in Barcelona, who, after working six years, is cutting his professional and financial ties with his homeland. He moved his family to Cambridge, England, where he will take over a small software company, and he transferred his savings from Spanish banks to British banks.

As more money and more skilled individuals leave the nation, what does that portend for Spain? For those who didn’t take steps to protect their financial futures, things are looking even grimmer…
Could This Be in Store for America?

Now let’s see – surely Americans have not forgotten the massive Obama-Bush 2009 bailout using $700 billion of taxpayer dollars, or the separate bailout of Fannie Mae and Freddie Mac? Click here for an accurate but alarming list of all the U.S. banks that supposedly were rescued from failure – the likes of Bank of America, Citigroup, JPMorgan Chase, Wells Fargo, Goldman Sachs and Morgan Stanley, to name a very few.

How stable do you think these U.S. banks are today? Is there a Spanish Bankia among them? As the old saying goes, don’t bank on any of them.

Of course, it’s not as if another bank bailout is the only economic problem looming. As I write this, the U.S. national debt has just passed the $16 trillion mark. Neither major political party is offering real solutions. No matter who wins this November, it seems clear that our politicians will continue to dig a deeper hole for our nation, rather than agree upon any real solutions.

Like those reasonable Spanish people, you should want to protect yourself from the next bank collapse, or for when our debt finally catches up with us. But if you wait for disaster to strike, it may already be too late.

So, I repeat:

When the crisis comes in America, will you have the freedom to escape that the Spanish executive who took his family to England had?

Will you have a safe nest egg in a sound offshore bank in a stable country such as Switzerland?

Will you have an official residence established in a safer country such as Uruguay?

Making sure you have an escape plan will help secure your financial future no matter what lay in store here at home, so what are you waiting for? Act now!

Until next time,

Bob Bauman