Saturday, August 28, 2010

New York Times: Fed Ready to Dig Deeper to Aid Growth, Chief Says

New York Times: Fed Ready to Dig Deeper to Aid Growth, Chief Says

Onebornfree commentary:

Dangerous Assumptions

Most people who save money for retirement and investing hold many false assumptions, most of which have their origins in misunderstandings about economics, markets, human action, and governments.

Their assumptions cause them to make serious errors in their long term savings plans and strategies, often unknowingly [often until its too late], thereby exposing money they cannot afford to lose to extreme loss.

Naturally, as with anything else, dangerous assumptions will lead to dangerous consequences.

For example, people who read this headline, Fed Ready to Dig Deeper to Aid Growth, Chief Says, from the New York times sat 08/28/10, and actually believe that the central bank actually can "improve" the economy, suffer, to my mind, under many many dangerous, false assumptions.

Here are just two :

Dangerous assumption [1]: that government people [and related institutions such as the Federal Reserve] can do things more effectively than other people.

Dangerous assumption [2]: that governments [and related institutions such as the Federal Reserve] will produce beneficial results.

I am not going to try to explain to you as to why both these assumptions are completely false [those types of discussions are reserved for clients], I will just make the assertion that these, and many other very similar common assumptions about governments and central banks are simply not true out here in the real world.

Suffice to say that both present and former clients of mine usually understand why this is so [because the issues have been fully explored with most of them].

Making Things Worse?

For the purposes of this blog, however, I would simply state that any further proposed interference by the Federal Reserve system [see NYT article below for its stated options], will either have an even more negative effect on the economy than its prior actions have already had to date, or, simply no effect at all.

In short, the Fed cannot, and will not, "fix" "the economy", only the markets can do this, if it/they are left alone [an extremely unlikely event].

Similarly, other government or quasi-governmental agencies cannot "fix" health care, the environment , or "fairly regulate" markets, institutions etc etc., although, of course, they always claim that they can.

[Tip: never believe any government claims, about anything].

Are You In Serious Trouble- But Don't Know It Yet?

If you believe articles like this and in the magical powers of the Federal Reserve and Mr Bernanke [ or whomever ], I would suggest that you and your life savings are in serious danger .

If you would like to know exactly why those two listed common assumptions and many more like them are false, and how to protect your savings and rid yourself of these and other false assumptions that can and will dramatically reduce the value of your savings/investments in the future, let me know.

Can You Afford It?

As I see it the question is, as I'm expensive and exploring fundamental core assumptions of a client can take a considerable amount of time and mental energy for both parties [its a bit like going to a psychoanalyst!], so, can you afford to talk to me?

I would suggest that since your life savings might well be at risk, a better question might be: can you afford not to?

Regards, onebornfree.
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Fed Ready to Dig Deeper to Aid Growth, Chief Says
By SEWELL CHAN

JACKSON HOLE, Wyo. — The Federal Reserve chairman, Ben S. Bernanke, signaled once again on Friday that the central bank was prepared to act if the economy continued to weaken, as yet another economic report confirmed that the recovery had slowed to a crawl.

Mr. Bernanke made clear that while the Fed could take various steps, including large purchases of government debt, “central bankers alone cannot solve the world’s economic problems.” Speaking at the Fed’s annual symposium here, he hinted broadly that political leaders had to take steps to tackle the deficit and the trade imbalance.

Hours before Mr. Bernanke spoke, the Commerce Department lowered its estimate of economic growth in the second quarter to an annual rate of 1.6 percent, after originally reporting last month that growth from April through June was 2.4 percent. Economists had been predicting a steeper decline, and stock prices rose after the markets opened.

While Mr. Bernanke announced no new steps that the Fed would take immediately, he said the central bank was determined to prevent the economy from slipping into a cycle of falling wages and prices, a situation he said he did not think was likely. Instead he predicted that growth would continue modestly in the second half of the year and pick up in 2011.

Mr. Bernanke said the Fed, having kept short-term interest rates at nearly zero since 2008, had essentially four options:

It can purchase more government debt and long-term securities. It can try to coax down long-term interest rates by announcing its intention to keep short-term rates extremely low for even longer than the markets currently expect. It can lower the interest rate it pays on the funds banks hold at the Fed. And it can raise its medium-term target for inflation, which would discourage banks from sitting on their cash.

Mr. Bernanke suggested that the first of those options was the most likely, and all but ruled out the last two............."

http://www.nytimes.com/2010/08/28/business/economy/28fed.html?th&emc=th

Saturday, August 14, 2010

Expatriate Your Wallet

Onebornfree comment: I've been a big fan of Mr Coxon's thoughts/writings/suggestions for around 20 years or more, in fact, ever since his pamphlet explaining the use of warrants.

His classic wealth protection manual, "Keep What You Earn"
although published a while ago, should be closely studied by those concerned with protecting their wealth and long term savings.

Mr Coxon employs easily to understand essential principles of wealth protection that need to be consistently and judicially employed to protect one's acquired savings from confiscation by private parties, courts, and/or governments around the world.

Onebornfree's [free:-) ] advice, take anything Mr Coxon says very seriously indeed!

Regards, onebornfree

Expatriate Your Wallet

by Terry Coxon



If everything you own is held in your own name in your own country, then you are not merely exposed, you are vulnerable absolutely, to whatever decisions the government might make about how you should behave and who gets the wealth you’ve earned. Tomorrow's new government measure, which might land out of the blue, could be a law that affects everyone, or it could be a rule devised to deal with people like you. Or, it could be an administrative action aimed at you alone. In any case, with all your assets at home, you'd find out how the lobster feels when his trap is being hauled out of the water. Nothing he can do about it.

The only way to protect yourself against the risk of being boiled in a government pot is to keep some of your assets in another country. Depending on how you go about it, the specific benefits you might achieve are:

* Protection from currency exchange controls
* Protection from the confiscation of precious metals
* A lower profile as a lawsuit target
* Income tax planning advantages
* Estate planning advantages
* Easier access to investments in other countries
* A measure of financial privacy
* Practical readiness to move additional assets quickly
* Psychological readiness to think and act internationally when you need to

There are many ways to go about getting those benefits. None is right for everyone, and they all come with some element of cost or inconvenience. Here’s the main menu.

Small bank account. A small account at a foreign bank gives you a ready and private landing spot if you ever decide you want to move a large amount of money in a hurry. If you're a U.S. person, the account is non-reportable, so long as the balance (together with any other foreign financial accounts you own) never reaches $10,000.

Large bank account. A large account at a foreign bank also provides a landing spot for anything you want to send later. If foreign exchange controls are ever imposed, the new rules may require you to repatriate the money – or they may not. Depending on the specifics of the new rules, your account may be grandfathered. In that case, the overseas funds would enable you to travel outside your own country while others are forced to stay at home.

A foreign bank account also slows things down if you’re ever under attack. It’s safe from an instant seizure by functionaries of your own government or by the unassisted order of a court in your own country.

The disadvantage of a large bank account vs. a small bank account is the loss of privacy. If you’re a U.S. person, you are required to report your foreign financial accounts if their aggregate value reaches $10,000.

Physical gold. Gold stored in a safe deposit box in a foreign bank is not a foreign financial account, nor is physical gold in segregated storage with a non-bank safe-keeping facility. So a U.S. person can store an unlimited amount of metal that way without triggering any reporting requirements. Avoiding a need for annual reporting is a plus, but don’t rely too heavily on the privacy you get with a safe deposit box, since the steps the gold takes to get there may create records of their own.

Foreign variable deferred annuity. As with an annuity issued by a U.S. insurance company, a variable annuity issued by a foreign company is tax-deferred for a U.S. investor until he withdraws the earnings. The annuity can be invested in major currencies or in portfolios of international stocks and bonds. If the annuity is big enough (a minimum of $1 million or more, depending on the insurance company), it can be invested in real estate, a private business, or just about anything else.

It’s only conjecture, but if foreign exchange controls are imposed, they are unlikely to disturb any foreign annuity that’s already in place, which is a big plus for an annuity vs. a foreign bank account.

A foreign variable deferred annuity isn’t private for a U.S. investor. When you buy one, you generally must file an excise tax return and pay a 1% tax, and you must report the annuity as a foreign financial account.

Swiss immediate lifetime annuity. A Swiss annuity that begins paying you an annual income when you buy it isn’t a foreign financial account, which may save you a reporting burden. And under a tax treaty with the U.S., Swiss annuities are exempt from the 1% excise tax. There’s nothing private about it, however, since part of each annual payment you receive will be taxable income.

You can make it difficult for a creditor (such as someone who won a lawsuit against you) to get his hands on a Swiss immediate lifetime annuity by electing not to have the option to cash it in. A forced assignment to a creditor generally would not be valid under Swiss law.

Offshore mutual funds. The array of mutual funds available internationally is even broader and more varied than what’s available in the U.S. And, like a foreign bank account, your share account with an offshore fund is safe from a lightning seizure by your own government. But for a U.S. investor, an investment in a foreign mutual fund comes with certain tax disadvantages. They are tolerable if you handle the investment properly or truly ugly if you don’t. And your shareholder account would be a foreign financial account and so would be reportable.

Offshore LLC. You can use a limited liability company formed outside your home country as an international holding company. It, not you personally, would buy and hold the overseas investments you want.

An offshore LLC can be designed to be very unfriendly to your potential future lawsuit creditors, even more so than an LLC formed in the U.S. An additional plus is that while many banks, mutual funds, insurance companies, and other financial institutions shun business from individual Americans, many of the shunners will welcome business from a non-U.S. LLC even if it is American-owned.

An offshore LLC owned by a single U.S. person (or by husband and wife) can elect to be treated as a disregarded entity for U.S. income tax purposes, which makes it absolutely income-tax neutral. Or it can elect to be treated as a partnership, which makes it almost income-tax neutral. The LLC also can be used for estate-planning in the same way as a U.S. LLC.

By the ratio of benefits to cost and complexity, an offshore LLC rates especially high. But it does not eliminate your reporting burden. If the LLC owns a large foreign bank account, you will be required to report it. And there will be annual reports for you to file about the LLC itself.

Foreign real estate. A direct investment in foreign real estate is free of any special U.S. tax or reporting rules. It’s just like buying a farm in Kansas. It would also present added difficulties for a lawsuit creditor looking for ways to collect. And it is unlikely that any regime of foreign exchange controls would touch existing foreign real estate investments.

Foreign real estate can also pay you a psychological dividend. Knowing you have a place to go to, should you ever want or need to go, provides a sense of security. That apartment in Buenos Aires or the acreage in New Zealand means you’ll never be a lobster.

Foreign real estate partnership. By investing in a private foreign partnership or LLC that owns foreign real estate, you can achieve all the advantages of a direct investment. In addition, you increase your protection against foreign exchange controls and lawsuit creditors because there is no ready resale market for your partnership interest.

International IRA. An IRA or a solo 401(k) is permitted to own anything other than life insurance and so-called “collectibles.” Anything.

Some IRAs and solo 401(k) plans own a domestic limited liability company and use it as a vehicle to buy and hold other investments. Such an LLC can own an offshore LLC that does the real investing. As with your direct ownership of an offshore LLC, this does nothing to reduce your reporting duties; in fact, it adds to them.

The advantage of such an arrangement is that it allows you to internationalize your retirement plan. Anything international you might do with your personal investments, you can do with your IRA’s investments. And it’s the ideal structure if you want to invest in offshore mutual funds. The IRA short-circuits the special tax rules that apply to investments in offshore funds, and the offshore LLC’s shareholder account application is likely to get a warmer reception from the fund than would your own American hand knocking on the door.

Private international investment contract. Depending on your circumstances, it may be possible to structure an investment contract between you and an international financial institution that is tax-deferred, non-reportable, and protected from future exchange controls or prohibitions on owning gold. This is custom work, so, of course, it’s only practical for large chunks of capital.

International asset protection trust. A properly structured international asset protection trust provides the maximum level of protection from anything that happens in your own country. It does so by leaving you with a measure of influence, but not control, over the trustee. The trustee is outside of your home country and thus is not subject to its laws. And you don't possess the authority to compel the trustee to invest or distribute the trust fund in any particular way. Thus there is no direct means for your own government to impose any regime of exchange controls or investment restrictions on the trust fund.

An international asset protection trust is far and away the most powerful of all financial planning devices. Handled properly, it is virtually impenetrable to future creditors and is especially helpful in estate planning. It is also the most complex device and hence the one most likely to be handled ineptly. And of all the tools mentioned in this article, it comes with the heaviest reporting burden if it is funded by a U.S. person.

Of course, this is the briefest of overviews of a complex topic. For specific guidance on each of the menu items listed, and pros and cons related to your own circumstances, you’ll need to seek qualified counsel.

With an ever-growing number of regulations and financial restrictions that gradually choke your ability to build and maintain wealth, protecting your assets by getting them out of the country should be a critical part of every investor’s strategy. We recommend you get started before it’s too late. Read more about the 5 best ways to internationalize your assets.

August 12, 2010

Terry Coxon is contributing author of Casey Research’s ‘Going Global’ Special Report.
Article reprinted from here
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