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Cheap Gasoline: Why Venezuela Is Doomed To Collapse – Forbes

Cheap Gasoline: Why Venezuela Is Doomed To Collapse – Forbes.

Christopher HelmanChristopher HelmanForbes Staff

Riots in the streets. Killings of protesters. Shortages of consumer staples liketoilet paper and flour. Power outages. Confiscations of private property. Capital flight. Inflation running at more than 50%. The highest murder rate in the world.

The situation in Venezuela has grown so terrible that we could very well be witnessing the waning days of the Chavez-Maduro regime.

But don’t hold your breath. Despots propped up by revenues from natural resources have had a surprisingly robust track record over the past 100 years. Saddam Hussein survived through ruthlessness and handouts to Baath party loyalists. Khadafi perfected the same model in Libya. The Saudis and other Gulf sultanates and emirates have survived by paying off tribe members. Zimbabwe’s Robert Mugabe is still around thanks to his trade in blood diamonds.

In each case, the big boss keeps his head by paying off everyone who matters.

Hugo Chavez appeared to have the same kind of staying power. But with a difference. Rather than just focusing on lining the nests his generals and ministers and doers, Chavez, and Nicolas Maduro after him, found a different way to squander Venezuela’s great oil wealth. They could have created a mechanism by which the people of Venezuela could leverage oil wealth to finance investment and capital formation (like, say, Norway). Instead they’ve simply given it all away.

Indeed, it might not happen this month or this year, but Venezuela is ultimately doomed to collapse because of cheap gasoline.

Befitting Venezuela’s position as holder of the world’s biggest oil reserves, Chavez set the price of gasoline at the official equivalent of 5 U.S. cents per gallon. Using the more realistic black market exchange rate, a gallon of gas in Venezuela costs less than one penny. You can fill up an SUV for less than the price of a candy bar.

It’s one thing for a dictator to curry favor among his subjects by handing out cash. You can trade cash for goods today. You can save it up and buy something bigger tomorrow. And vitally, you can invest cash and create capital. Cash has unsurpassed option value.

But in Venezuela, cheap gasoline doesn’t. Sure, some enterprising Venezuelans would fill up their tanks, drive to Colombia, siphon it out and sell it for a profit. But most just take it for granted, like breathable air. You can’t trade it, can’t sell it, can’t store it up.

Over time, when a government continually gives its people a non-tradable subsidy, they will come to consider it a right, not a privilege. When that happens it will no longer occur to them to be thankful toward their generous president for the handout. When that take-it-for-granted moment occurs, the handout no longer retains any political capital for the ruler who presides over it. On the contrary, once the populous sees the subsidy as a right, it necessarily become a political liability for the leader — tying his hands and preventing the implementation of a more reasonable policy.

Grant people a right and they will thank you, for a little while. Try to take away that right and they will revolt. The last time Venezuela tried to hike gas prices, in 1989, there were riots in the streets.

Cheap gasoline is why the government of President Nicolas Maduro is doomed to collapse. He can’t raise gas prices meaningfully without setting off an even greater populist uprising than the one already wracking the capital. But without change, the Venezuelan economy and its state-run oil company Petroleos Venezuela (PDVSA) cannot last long.

Let’s work through the numbers to see how bad it is:

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Pres. Maduro with PDVSA workers. (Credit: AP)

Venezuela produces about 2.5 million barrels of oil per day, about the same as Iraq.

About 800,000 barrels per day of gasoline and diesel is consumed domestically for which PDVSA doesn’t make a dime. That’s about 290 million barrels per year in subsidy oil.

What’s that cost PDVSA? Oil minister Rafael Ramirez has said that the breakeven cost to supply refined gasoline to the masses is $1.62 per gallon, or about $70 per barrel. But because Venezuela’s refineries can’t even make enough fuel to meet demand, PDVSA also has to import about 80,000 bpd of refined products (for which they must pay the far higher market price in excess of $2.50 per gallon). All told, the subsidized fuel costs PDVSA about $50 billion a year — that’s at least $25 billion a year in fuel subsidies plus another $20 billion or so in foregone revenue that PDVSA desperately needs to reinvest into its oil fields. Even a well managed company would have trouble climbing out of such a big hole.

Deducting that 800,000 bpd of domestic consumption from the 2.5 million bpd total leaves a subtotal of 1.7 million bpd that Venezuela can sell into the world market.

But we have more deductions. In order to finance fuel subsidies and other social spending, PDVSA has borrowed massively. According to PDVSA’s statements, its debt has increased from $15.5 billion in 2008 to $43 billion now. Venezuela’s biggest creditor is China, which has reportedly loaned the country $50 billion since 2007. China is not interested in getting Venezuelan bolivars; it insists on being paid back in oil — about 300,000 bpd worth of oil.

Paying China its oil knocks PDVSA’s saleable supply down to 1.4 million bpd.

We’re not done yet. Chavez was not just generous to his own people. In an effort to make friends with his neighbors, he forged a pact called Petrocaribe, through which PDVSA delivers deeply subsidized oil to the likes of Cuba, Jamaica, Haiti and Nicaragua. Though shipments at peak were more than 200,000 bpd, including 100,000 bpd to Cuba, there’sevidence that PDVSA has cut the volumes. No wonder, when the Dominican Republic has reportedly been paying back PDVSA in black beans. Cuba sends doctors and athletic trainers. (Jamaicaputs its PetroCaribe debt to Venezuela at $2.5 billion.)

As if that weren’t enough, PDVSA, through its U.S. refining arm Citgo has even donated more than $400 million worth of heating oil to poor people in the United States. That’s about 4 million barrels over nine years.

So all that largesse knocks off another 200,000 bpd or so, bringing PDVSA’s marketable supply down to 1.3 million bpd.

Over the course of a year, selling that 1.3 million bpd of oil brings in about $50 billion in hard currency (assuming about $100 per barrel). This contrasts with PDVSA’s reported revenues of $125 billion, most of which is not in dollars, but bolivars, of uncertain worth.

That $50 billion might seem like a tidy sum, but keep in mind that this represents more than 95% of Venezuela’s foreign earnings. And that’s not enough for a country of 40 million to live on.

Because no one in their right mind would want to exchange goods for bolivars, it’s out of this pile of greenbacks that Venezuela has to pay for all its imports as well as about $5 billion a year in dollar-denominated interest payments. Venezuela’s foreign currency reserves have plunged from $30 billion at the end of 2012 to about $20 billion today.

Newspapers have closed because they can’t import paper. Toyota has stoppedmaking cars because it can’t get dollars to import parts. Shortages of sugar, milk and butter are common. The CEO of Empresas Polar, a big food manufacturer, has rejected Maduro’s criticisms that his company is to blame for shortages, insisting that because the government holds all the country’s dollars he can’t get the hard currency he needs to import raw materials.

Venezuela’s official exchange rate stands at about 6 bolivar to the dollar. But on the black market one greenback will fetch 87 bolivars or more.

If you’re an entrepreneur or a business owner in Venezuela, you’re not likely to keep throwing good money after bad there, especially if you’re a retailer like Daka. Last November Maduro ordered soldiers to occupy Daka’s five stores and forced managers to sell electronics at lower prices. In some cases looters just helped themselves.

Reuters reported that Maduro was outraged at a store selling a washing machine for 54,000 bolivars — $8,600 at the official rate. That might seem high until you hear from a business owner: “Because they don’t allow me to buy dollars at the official rate of 6.3, I have to buy goods with black market dollars at about 60 bolivars, so how can I be expected to sell things at a loss? Can my children eat with that?” said the businessman, who asked Reuters not to identify him.

When the president of the country speaks to the merchant class saying, “The ones who have looted Venezuela are you, bourgeois parasites,” that’s a sign to any entrepreneur that it’s time to round up whatever dollars you can and get out.

Venezuela is more likely past the point where it can grow out of its problems. Oil production is believed to have fallen as much as 400,000 bpd in the past year due to natural decline rates from mature fields. PDVSA says it is on track to invest more than $20 billion in its operations this year — but are those official dollars or black market dollars? Western oil companies are wary about putting their capital into the fields, considering that Chavez has famously nationalized assets of ExxonMobil, ConocoPhillips , Harvest National Resources, Exterran and others. PDVSA says it owes oil company partners and contractors $15 billion.

Some partners, like Chevron CVX -1.68%, Repsol, Eni, Rosneft and Total, have pledged to invest in increasing production and even to extend more loans to PDVSA. But like China they want to get paid back in oil. Not much is likely to come of these ventures: 10,000 barrels here and 10,000 barrels there is not going solve the problem. What’s needed is a real plan. The analysts at oil consultancy WoodMackenzie tell me that Venezuela’s best bets for growing production lie in the ultra heavy oil deposits of the Orinoco Basin. There, to increase output by 1.5 million bpd will require investment of $100 billion to drill enough wells and build enough “upgraders” to take the heavy oil and transform it into something readily exportable. So far PDVSA hasn’t gotten any interest in this plan.

The oil is there, but the oil companies are in no hurry to get at it. They have plenty of opportunities to drill in the United States, and are looking forward to the first exploration contracts to be awarded in Mexico. They know someday Venezuela will again become a safe place to invest.

That day may be approaching. Venezuela’s credit default swaps are at five-year highs. According to Reuters, prices for some of its debt issues have fallen to 63 cents on the dollar. Some short term issues are yielding 20%. These are the kind of sovereign yields that presage defaults.

The sad thing for Venezuela is that (barring an explosive rise in oil prices) it’s hard to imagine the situation not getting worse before it gets better. In time the government will simply run out of the dollar reserves it needs to pay its debts and import goods. Trading partners will refuse to ship. Oil companies will refuse to invest. Those tankers of cheap PetroCaribe oil will stop arriving in Havana. Chavez’s daughters will be kicked out of their presidential party palace. And the people of Venezuela will some day be forced to pay more than a dollar to fill up their SUVs.

Government Lays Groundwork To Confiscate Your 401k and IRA: “This Is Happening”

Government Lays Groundwork To Confiscate Your 401k and IRA: “This Is Happening”.

Mac Slavo
February 13th, 2014
SHTFplan.com

uncle-sam-retirement

This morning Reuters obtained a leaked proposal disclosing that European Union officials are looking for new and innovative ways to fund their immense debt levels. As noted by Zero Hedge, they’re no longer turning exclusively to central bankers to simply print more money as needed. Because last year’s bank bail-in forcing the confiscation of funds from average depositors in Cyprus worked so well, EU regulators and bankers have determined that they’ll use a similar method to fund their future endeavors.

In a nutshell, and in Reuters’ own words, “the savings of the European Union’s 500 million citizens could be used to fund long-term investments to boost the economy and help plug the gap left by banks since the financial crisis, an EU document says.”

The solution? “The Commission will ask the bloc’s insurance watchdog in the second half of this year for advice on a possible draft law “to mobilize more personal pension savings for long-term financing”, the document said.”

Mobilize, once again, is a more palatable word than, say, confiscate.

This is what happens when governments run out of money.

But if you think this is limited to just Europe, then consider the words of President Barack Obama in his recent State of the Union address.

For all intents and purposes, a similar groundwork is being laid right here in America.

They’ve already taken over the health care industry… why not nationalize our retirement savings while they’re at it?

(Reprinted with permission from Sovereign Man. You can read the full analysis here.)

This is basically the offer that the President of the United States floated last night.

And like an unctuously overgeled used car salesman, he actually pitched Americans on loaning their retirement savings to the US government with a straight face, guaranteeing “a decent return with no risk of losing what you put in. . .”

This is his new “MyRA” program. And the aim is simple– dupe unwitting Americans to plow their retirement savings into the US government’s shrinking coffers.

We’ve been talking about this for years. I have personally written since 2009 that the US government would one day push US citizens into the ‘safety and security’ of US Treasuries.

Back in 2009, almost everyone else thought I was nuts for even suggesting something so sacrilegious about the US government and financial system.

But the day has arrived. And POTUS stated almost VERBATIM what I have been writing for years.

The government is flat broke.Even by their own assessment, the US government’s “net worth” is NEGATIVE 16 trillion. That’s as of the end of 2012 (the 2013 numbers aren’t out yet). But the trend is actually worsening.

In 2009, the government’s net worth was negative $11.45 trillion. By 2010, it had dropped to minus $13.47 trillion. By 2011, minus $14.78 trillion. And by 2012, minus $16.1 trillion.

Here’s the thing: according to the IRS, there is well over $5 trillion in US individual retirement accounts. For a government as bankrupt as Uncle Sam is, $5 trillion is irresistible.

They need that money. They need YOUR money. And this MyRA program is the critical first step to corralling your hard earned retirement funds.

At our event here in Chile last year, Jim Rogers nailed this right on the head when he and Ron Paul told our audience that the government would try to take your retirement funds:

I don’t know how much more clear I can be: this is happening. This is exactly what bankrupt governments do. And it’s time to give serious, serious consideration to shipping your retirement funds overseas before they take yours.

As former Congressman Ron Paul notes, the government will stop at nothing.

“They’ll use force and they’ll use intimidation and they’ll use guns, because you can’t challenge the State and you can’t challenge the State’s so-called right to control the money,” warns Paul. “It’s already indicated that they will confiscate funds and they will [confiscate] pension funds.”

This didn’t just happen over night. The move to make this reality has been going on for quite some time. The first time it was mentioned publicly in any official capacity was at a 2010 Congressional hearing:

Democrats in the Senate on Thursday held a recess hearing covering a taxpayer bailout of union pensions and a plan to seize private 401(k) plans to more “fairly” distribute taxpayer-funded pensions to everyone.

Sen. Tom Harkin (D-Iowa), Chairman of the Health, Education, Labor and Pensions (HELP) Committee heard from hand-picked witnesses advocating the infamous “Guaranteed Retirement Account” (GRA) authored by Theresa Guilarducci.

In a nutshell, under the GRA system government would seize private 401(k) accounts, setting up an additional 5% mandatory payroll tax to dole out a “fair” pension to everyone using that confiscated money coupled with the mandated contributions.  This would, of course, be a sister government ponzi scheme working in tandem with Social Security, the primary purpose being to give big government politicians additional taxpayer funds to raid to pay for their out-of-control spending.

You’d think that such an idea would be immediately dismissed by the American public, but it has only gained steam since, as evidenced by a 2012 hearing held at the U.S. Labor Department:

The hearing, held in the Labor Department’s main auditorium, was monitored by NSC staff and featured a line up of left-wing activists including one representative of the AFL-CIO who advocated for more government regulation over private retirement accounts and even the establishment of government-sponsored annuities that would take the place of 401k plans.

“This hearing was set up to explore why Americans are not saving as much for their retirement as they could,” explains National Seniors Council National Director Robert Crone, “However, it is clear that this is the first step towards a government takeover. It feels just like the beginning of the debate over health care and we all know how that ended up.

Such “reforms” would effectively end private retirement accounts in America, Crone warns.

A few years ago the government of the United States of America nationalized nearly 1/6th of our economy when they took over the health care system with forced mandates. In the process they essentially took control of $1.6 trillion in yearly industry revenues.

But that’s nothing compared to private savings. The total amount of retirement assets in America, including 401k, IRA and savings accounts is around $21 trillion. With our national debt coincidentally approaching the same, the government sees big money and potentially a way out of our country’s fiscal disaster.

This will start voluntarily with the MyRA and other state-sponsored programs. But when not enough Americans are making it their patriotic duty to turn over their funds to their government, they’ll mandate compliance with the stroke of a pen just as they did with thePatient Affordable Care Act.

And just like Obamacare it will be enforced by the barrel of a gun. Failure to comply will mean confiscation without recourse and prison time.

All they need now is a trigger.

And that trigger will likely come in the form of another stock market collapse. Wipe out Americans’ in a stock market crash and scare the heck out of them with more economic bad news, and millions of our countrymen will be all too willing to hand it over to Uncle Sam. Panic is a powerful motivator and what better way to get people on board than by threatening them with squalor and destitution in their old age if they don’t go along with it?

Government officials have been actively working to make this a reality for years. The Europeans are doing the same.

You can put your head in the sand or cover your ears and pretend this is not happening, but that won’t change the outcome.

They will take everything they can get their hands on.

Europe Considers Wholesale Savings Confiscation, Enforced Redistribution | Zero Hedge

Europe Considers Wholesale Savings Confiscation, Enforced Redistribution | Zero Hedge.

At first we thought Reuters had been punk’d in its article titled “EU executive sees personal savings used to plug long-term financing gap” which disclosed the latest leaked proposal by the European Commission, but after several hours without a retraction, we realized that the story is sadly true. Sadly, because everything that we warned about in “There May Be Only Painful Ways Out Of The Crisis” back in September of 2011, and everything that the depositors and citizens of Cyprus had to live through, seems on the verge of going continental. In a nutshell, and in Reuters’ own words, “the savings of the European Union’s 500 million citizens could be used to fund long-term investments to boost the economy and help plug the gap left by banks since the financial crisis, an EU document says.” What is left unsaid is that the “usage” will be on a purely involuntary basis, at the discretion of the “union”, and can thus best be described as confiscation.

The source of this stunner is a document seen be Reuters, which describes how the EU is looking for ways to “wean” the 28-country bloc from its heavy reliance on bank financing and find other means of funding small companies, infrastructure projects and other investment. So as Europe finally admits that the ECB has failed to unclog its broken monetary pipelines for the past five years – something we highlight every month (most recently in No Waking From Draghi’s Monetary Nightmare: Eurozone Credit Creation Tumbles To New All Time Low), the commissions report finally admits that “the economic and financial crisis has impaired the ability of the financial sector to channel funds to the real economy, in particular long-term investment.”

The solution? “The Commission will ask the bloc’s insurance watchdog in the second half of this year for advice on a possible draft law “to mobilize more personal pension savings for long-term financing”, the document said.”

Mobilize, once again, is a more palatable word than, say, confiscate.

And yet this is precisely what Europe is contemplating:

Banks have complained they are hindered from lending to the economy by post-crisis rules forcing them to hold much larger safety cushions of capital and liquidity.

The document said the “appropriateness” of the EU capital and liquidity rules for long-term financing will be reviewed over the next two years, a process likely to be scrutinized in the United States and elsewhere to head off any risk of EU banks gaining an unfair advantage.

But wait: there’s more!

Inspired by the recently introduced “no risk, guaranteed return” collectivized savings instrument in the US better known as MyRA, Europe will also complete a study by the end of this year on thefeasibility of introducing an EU savings account, open to individuals whose funds could be pooled and invested in small companies.

Because when corporations refuse to invest money in Capex, who will invest? Why you, dear Europeans. Whether you like it or not.

But wait, there is still more!

Additionally, Europe is seeking to restore the primary reason why Europe’s banks are as insolvent as they are: securitizations, which the persuasive salesmen and sexy saleswomen of Goldman et al sold to idiot European bankers, who in turn invested the money or widows and orphans only to see all of it disappear.

It is also seeking to revive the securitization market, which pools loans like mortgages into bonds that banks can sell to raise funding for themselves or companies. The market was tarnished by the financial crisis when bonds linked to U.S. home loans began defaulting in 2007, sparking the broader global markets meltdown over the ensuing two years.

The document says the Commission will “take into account possible future increases in the liquidity of a number of securitization products” when it comes to finalizing a new rule on what assets banks can place in their new liquidity buffers. This signals a possible loosening of the definition of eligible assets from the bloc’s banking watchdog.

Because there is nothing quite like securitizing feta cheese-backed securities and selling it to a whole new batch of widows and orphans.

And topping it all off is a proposal to address a global change in accounting principles that will make sure that an accurate representation of any bank’s balance sheet becomes a distant memory:

More controversially, the Commission will consider whether the use of fair value or pricing assets at the going rate in a new globally agreed accounting rule “is appropriate, in particular regarding long-term investing business models”.

To summarize: forced savings “mobilization”, the introduction of a collective and involuntary CapEx funding “savings” account, the return and expansion of securitization, and finally, tying it all together, is a change to accounting rules that will make the entire inevitable catastrophe smells like roses until it all comes crashing down.

So, aside from all this, Europe is “fixed.”

The only remaining question is: why leak this now? Perhaps it’s simply because the reallocation of “cash on the savings account sidelines” in the aftermath of the Cyprus deposit confiscation, into risk assets was not foreceful enough? What better way to give it a much needed boost than to leak that everyone’s cash savings are suddenly fair game in Europe’s next great wealth redistribution strategy.

IRA confiscation: it’s happening

IRA confiscation: it’s happening.

Uncle Sam

January 29, 2014
Santiago, Chile

I have an old acquaintance named Sam who has a hell of a deal for you.

Sam is actually a pretty famous guy with a big reputation. Unfortunately he has been a bit down and out on his luck lately… but he’s trying to make a comeback. And Sam is prepared to float you a really great investment opportunity.

Here’s the deal he’s offering: you give Sam your hard-earned retirement savings. Sam will invest your funds, and pay you a rate of return.

Granted, the rate of return he’s promising doesn’t quite keep up with inflation. So you will be losing some money. But don’t dwell on that too much.

And, rather than invest your funds in productive assets, Sam is going to blow it all on new cars and flat screen TVs. So when it comes time to make interest payments, Sam won’t have any money left.

But don’t worry, he still has that good ole’ credibility. So even though his financial situation gets worse by the year, Sam will just go back out there and borrow more money from other people to pay you back.

Of course, he will be able to keep doing this forever without any consequences whatsoever.

I know what you’re thinking– “where do I sign??” I know, right? It’s the deal of the lifetime.

This is basically the offer that the President of the United States floated last night.

And like an unctuously overgeled used car salesman, he actually pitched Americans on loaning their retirement savings to the US government with a straight face, guaranteeing “a decent return with no risk of losing what you put in. . .”

This is his new “MyRA” program. And the aim is simple– dupe unwitting Americans to plow their retirement savings into the US government’s shrinking coffers.

We’ve been talking about this for years. I have personally written since 2009 that the US government would one day push US citizens into the ‘safety and security’ of US Treasuries.

Back in 2009, almost everyone else thought I was nuts for even suggesting something so sacrilegious about the US government and financial system.

But the day has arrived. And POTUS stated almost VERBATIM what I have been writing for years.

The government is flat broke. Even by their own assessment, the US government’s “net worth” is NEGATIVE 16 trillion. That’s as of the end of 2012 (the 2013 numbers aren’t out yet). But the trend is actually worsening.

In 2009, the government’s net worth was negative $11.45 trillion. By 2010, it had dropped to minus $13.47 trillion. By 2011, minus $14.78 trillion. And by 2012, minus $16.1 trillion.

Here’s the thing: according to the IRS, there is well over $5 trillion in US individual retirement accounts. For a government as bankrupt as Uncle Sam is, $5 trillion is irresistible.

They need that money. They need YOUR money. And this MyRA program is the critical first step to corralling your hard earned retirement funds.

At our event here in Chile last year, Jim Rogers nailed this right on the head when he and Ron Paul told our audience that the government would try to take your retirement funds:


I don’t know how much more clear I can be: this is happening. This is exactly what bankrupt governments do. And it’s time to give serious, serious consideration to shipping your retirement funds overseas before they take yours.

(Note to members of our PREMIUM service: look for an upcoming actionable alert on this topic).

Here it comes– more leading economists call for capital controls

Here it comes– more leading economists call for capital controls.

As the saying goes, ‘desperate times call for desperate measures.’

The phrase is bandied about so frequently, it’s generally accepted truth. But I have to tell you that I fundamentally disagree with the premise.

Desperate times, in fact, call for a complete reset in the way people think. Desperate times call for the most intelligent, effective, least destructive measures. But these sayings aren’t as catchy.

This old adage has become a crutch– a way for policymakers to rationalize the idiotic measures they’ve put in place:

  • Inflation-adjusted interest rates that are… negative.
  • Trillion dollar deficits.
  • Endless wars and saber-rattling
  • Unprecedented expansion of central bank balance sheets.
  • DIRECT CONFISCATION of people’s bank accounts.

But hey… desperate times call for desperate measures. I guess we’re all just supposed to be OK with that.

One of those desperate measures that’s been coming up a lot lately is the re-re-re-introduction of capital controls.

It started in late 2012, when both the European Central Bank and the International Monetary Fund seperately endorsed the use of capital controls.

For the IMF, it was a staunch reversal of its previous position, and Paul Krugman lauded the agency’s “surprising intellectual flexibility” a few days later.

The IMF then followed up in 2013 with another little ditty proposing a global wealth tax. The good idea factory is clearly working ’round the clock over there.

Lately, two more leading economists– Harvard professors Carmen Reinhart and Ken Rogoff– have joined the debate.

In a speech to the American Economic Association earlier this month, the pair suggested that rich economies may need to resort to the tactics generally reserved for emerging markets.

This is code for financial repression and capital controls.

The idea behind capital controls is simple: create barriers to restrict the free flow of capital. And if you’re on the receiving end, capital controls can be enormously destructive.

But for politicians, capital controls are hugely beneficial; once they trap funds within their borders, the money can be easily taxed, confiscated, or inflated.

Historically, capital controls have been used in ‘desperate times’. Too much debt. Too much deficit spending. Wars. Huge trade deficit. Intentional currency devaluation. Etc.

Does any of this sound familiar? It’s no surprise that policymakers have once again turned to this ‘desperate measure’. They’re already here.

Iceland has capital controls, over five years after its spectacular meltdown. We can also see capital controls in Cyprus, India, Argentina, etc.

I’ve been writing for years that capital controls are a foregone conclusion. This is no longer theory or conjecture. It’s happening. And every bit of objective evidence suggests that the march towards capital controls will quicken.

This is a HUGE reason to consider holding a portion of your savings overseas in a strong, stable foreign bank where your home government won’t as easily be able to trap your savings.

Other options including storing physical gold (even anonymously) at an overseas depository. Or if you’re inclined and tech savvy, you can also own digital currency.

But perhaps the best way to move some capital abroad is to own foreign real estate, especially productive land.

Foreign real estate is not reportable. It’s a great store of value. It generates both financial profits and personal resilience. It’s a LOT harder to forcibly repatriate. And it ensures that you always have a place to go in case you need to get out of Dodge.

Even if nothing ‘bad’ ever happens, you won’t be worse off for owning productive land in a thriving economy.

Like I said– desperate times don’t call for desperate measures. More than ever, it’s time for a complete reset in the way we look at the most effective solutions. These options are certainly among them.

by Simon Black

Simon Black is an international investor, entrepreneur, permanent traveler, free man, and founder of Sovereign Man. His free daily e-letter and crash course is about using the experiences from his life and travels to help you achieve more freedom.

They’re Coming For Your Savings

They’re Coming For Your Savings. (FULL ARTICLE)

Another of history’s many lessons is that governments under pressure become thieves. And today’s governments are under a lot of pressure.

Before we look at the coming wave of asset confiscations, let’s stroll through some notable episodes of the past, just to make the point that government theft of private wealth is actually pretty common.

• Ancient Rome had a rule called “proscription” that allowed the government to execute and then confiscate the assets of anyone found guilty of “crimes against the state.” After the death of Julius Caesar in 44 BC, three men, Mark Anthony, Lepidus, and Caesar’s adopted son Octavian, formed a group they called the Second Triumvirate and divided the Empire between them. But two rivals, Brutus and Cassius, formed an army with which they planned to take the Empire for themselves. The Triumvirate needed money to fund an army of its own, and decided the best way to raise it was by kicking the proscription process into overdrive. They drew up a list of several hundred wealthy Romans, accused them of crimes, executed them and took their property.

• In the mid-1530s, English king Henry VIII was short of funds, so he seized the country’s monasteries and claimed their property and income for the Crown. As historian G. J. Meyer tells it in The Tudors: The Complete Story of England’s Most Notorious Dynasty:

“By April fat trunks were being hauled into London filled with gold and silver plate, jewelry, and other treasures accumulated by the monasteries over the centuries. With them came money from the sale of church bells, lead stripped from the roofs of monastic buildings, and livestock, furnishings, and equipment. Some of the confiscated land was sold – enough to bring in £30,000 – and what was not sold generated tens of thousands of pounds in annual rents. The longer the confiscations continued, the smaller the possibility of their ever being reversed or even stopped from going further. The money was spent almost as quickly as it flooded in – so quickly that any attempt to restore the monasteries to what they had been before the suppression would have meant financial ruin for the Crown. Nor would those involved in the work of the suppression … ever be willing to part with what they were skimming off for themselves.”…

 

Gold Confiscation | Monetary Metals

Gold Confiscation | Monetary Metals.

 

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