The last 75 years have been very kind to people living in Europe, North America, Australia and New Zealand. There has been no major war, income has been sufficient to allow for a comfortable lifestyle, and public pensions were safe. However, over the past two decades severe cracks have appeared in this almost perfect picture. To deal with the challenges ahead, a Live-Beyond-Borders mindset is crucial.
When we talk about borders, we don’t just mean physical or national borders. An important step in developing a true Live-Beyond-Borders mindset is to overcome mental borders, that prevent you from seeing things as they are, opening up to new ideas and acting accordingly. You have to challenge the official narrative, that is fed to you by politicians and the mass media. You have to shed recency bias, that makes you think, that the trends and patterns you have observed in the recent past, will continue in the future. You have to embrace new ideas, even if they make you feel uncomfortable at first. And above all, you have to defeat your own complacency and laziness, that prevents you from making necessary changes today.
Only if you have overcome your mental borders, will you be able to implement the following measures to protect your wealth and freedom in the uncertain times ahead:
- Diversification of your assets to reduce custody and fiat currency risk
- Internationalization of your assets to reduce jurisdiction risk
- Preparation of a realistic Plan B to leave your home country, if the situation there becomes intolerable
Having a Live-Beyond-Borders mindset does not require you to leave everything behind and move like a nomad from one country to another. If you feel happy and secure in the city, where you were born and grew up, this is great. There is no need to move anywhere, at least not for the time being. Just don’t assume, that your current comfortable life will continue undisturbed forever. Instead be vigilant, open your mind to new global opportunities, and be ready to act and step out of your comfort zone, if this becomes necessary. To actually move abroad is a last resort, in case that the situation in your country becomes truly unacceptable for economic, political, social or environmental reasons.
Consider a Live-Beyond-Borders mindset as your personal insurance policy against substantial risks, that no insurance company will cover. If any of the risks occurs, you are well prepared. If not, you will enjoy peace of mind and might even reap handsome profits from the diversification and internationalization of your assets. Unfortunately, as the Western World is currently facing many challenges, it is very likely, that you will have to file a claim against your personal insurance policy.
An economic time bomb
In a previous blog we with have already pointed out, that the world economy is anything but robust. In fact, our current prosperity is fake, as it is built on a record level of debt.
According to the recent Global Debt Monitor published by the Institute of International Finance (IIF), global debt stands at 253 trillion USD or 322% of global GDP. The World Bank, which is certainly not known for being pessimistic, just stated in a press release: “There have been four waves of debt accumulation in the last 50 years. The latest wave, which started in 2010, has seen the largest, fastest, and most broad-based increase in debt among the four. While current low levels of interest rates mitigate some of the risks associated with high debt, previous waves of broad-based debt accumulation ended with widespread financial crises.”
So far central banks have been able to avoid a global recession or even depression, by implementing desperate monetary experiments. Their suppression of interest rates has, for the first time in human history, enabled some governments and even a few corporations, to issue new bonds with a negative yield (that means you are paying them for the privilege, to lend your money to them). Central banks have also created trillions of USD, EUR, Japanese Yen and Chinese Renminbi in new money ex nihilo. The effects can already be felt, as actual – though not necessarily “official”- inflation is rising (additional information can be found here). More monetary experiments are in the offing, such as insertion of newly created money into environmental funds to “save the planet”, full government debt monetization, and helicopter money (= free money for everyone).
Instead of generating sustainable growth, central banks have created bubbles in the price of stocks, bonds and real estate. In addition, they have caused huge distortions in the real economy. Whereas industry concentration is up, productivity is down. Many companies have used low interest rates to accumulate excessive debt, that will be difficult or impossible to repay in the next downturn. Fair competition is heavily affected by the growing number of insolvent “zombie” companies, that are artificially kept alive.
But worst of all, central banks policies have grossly worsened inequality. The Rich have hugely profited from easy access to cheap credit and the continued growth in asset prices. In contrast, most middle-class families struggle with stagnant or falling real salaries, excessive mortgage payments caused by the overpriced housing market, and the rising cost of living. Due to the low interest rate environment, those who have bank savings or life insurance policies, hardly earn any return.
According to Oxfam, the world’s 2,153 billionaires own more wealth than 4.6 billion people together. And the wealth gap is widening. Bloomberg reports, that in 2019 alone, the wealth of the 500 richest people surged by 1.2 trillion USD or 25%.
A recent report on income and wealth inequality in the USA by the Pew Research Center sums it up nicely: “The richest families are the only group to have gained wealth since the Great Recession”. Even Kristalina Georgieva, Managing Director of the International Monetary Fund (IMF), had to admit in a recent speech speech, that over the past two decades “inequality has been on the rise” and that “across much of the OECD … income and wealth inequality have reached or are near record highs.”
If this wasn’t already enough, another major threat looms on the horizon. Social security systems in most Western countries are ailing or already broke. The quality of health care is deteriorating and public pension systems will not be able to honor their promises for future payouts. Employer pension plans will hardly be able to compensate for this, as most of them are severely underfunded. For more information read our blog Delusion: Social security and pensions are safe.
A global economy drowning in debt, coupled with growing inequality and imploding public security systems, is a time bomb waiting to explode.
A plethora of other risks
Citizens of Western nations also face a variety of other risks, such as suppression of personal freedom, mass immigration, geopolitical tensions, environmental degradation and pandemics.
Personal freedom is progressively under threat. The right to privacy has been severely curtailed by increased mass surveillance, that is carried out by governments and Big Tech. Free speech is becoming a right of the past. Many politicians and large segments of Western society have started to label everything, that does not conform to their own political views or narrow-minded thinking, as “fake news” and “hate speech”. Search engines and social media giants have been given the power to delete any content, that they deem inappropriate, and can therefore suppress undesired views and control the information that is fed to the populace. A controversial, but fair exchange of views has become increasingly rare, and disconcerting facts can’t be reported anymore as they might potentially “offend” someone.
Economic freedom is equally under threat. There is a strong movement to ban cash to better control the payments of individuals and to set the stage for negative interest rates on normal savings accounts. Civil asset forfeiture in the USA, that allows the confiscation of private assets without due legal process, shows that personal property is not safe from theft perpetrated by government agents. We are only at the beginning and it will get progressively worse. More in our blog Delusion: The government protects our freedom.
Mass immigration is another issue. Whereas the population in Western societies is stagnant or shrinking, there is explosive population growth in many parts of Africa and the Middle East. The number of desperate young men and women, who were born in poverty, received only basic education and have limited or no chance of getting a stable job, is rapidly expanding. Who can blame them for looking at other regions, that seem to offer better prospects for life? Once the influx of illegal immigrants really starts, the overextended welfare systems especially in Europe will crash. In addition, existing social tensions will worsen, as the culture and religion of many immigrants is very different from ours and some hardly have an inclination to integrate into Western society. If you know history, you can easily guess what is ahead of us.
Geopolitical tensions are also on the rise. Over the past 75 years, the USA has been the world superpower, due to its economic, technological and military power. But in the last two decades China has emerged as a strong contender. We are now witnessing a struggle for world domination between two countries, that are both beset with many problems.
The USA is still the biggest economy on earth, but its future outlook is not so promising. Public and corporate debt are out of control, and the role of the USD as the global reserve currency is under attack. What used to be a flourishing democracy with a strong emphasis on civil liberties, has degenerated into a country ruled by the military-industrial complex, Big-Tech and surveillance agencies, that all seem to exist outside of the law. U.S. soldiers are deployed all over the world and the government intervenes politically or with force, whenever it considers its interests to be threatened.
China has gone through a long phase of exceptional development. But most of its recent growth has been financed by newly created money, that was invested in infrastructure and building projects with questionable long-term benefits. Today China has a Debt-to-GDP ratio in line with the heavily indebted countries of the West. To keep the system going and to control its economy and population, the government is resorting to ever more repressive measures. Irrespective of its domestic issues, China has become a main international player. Nowadays, it is driving the development in Eurasia with its Belt and Road Initiative, controls most natural resources and infrastructure projects in Africa, and shows military muscle in the South China Sea.
We are approaching the final showdown between a corrupted Western superpower in decline and an over-indebted, but highly confident Eastern giant, that is eager to regain its former glory. Whereas the previous power struggle between Great Britain and the USA was solved peacefully, this is not so sure for the ongoing fight between the USA and China.
Our environment is deteriorating fast. Devastating forest fires, severe draught, floods, avalanches and excessive air pollution, pose increasing risks to our current lifestyle. To be sure, the situation in China, India and some other parts of Asia is much worse. But even in the West, environmental degradation threatens not only our physical well-being, but also the economic livelihood of not just a few of us.
Recently there has been a lot of news about the coronavirus. It is now confirmed, that the incubation period can last up to 14 days, and that the virus is contagious, even within the incubation period. Latest reports also show, that the infection risk is higher than that of SARS. Considering that a lot of people have already died of the virus, this is not a situation to be taken lightly. Authorities in China have quarantined Wuhan and several other cities with a combined population of over 33 million people. However, their actions have come far too late as – according to the Major of Wuhan – 5 million people left the city before the restrictions were put place. Other countries and the WHO were equally slow in restricting or prohibiting international travel from China, as they did not want to endanger tourist income and business activities. Let’s hope that the virus can somehow been contained and that a worldwide pandemic can be avoided. But based on previous (in)actions of our authorities, we can’t count on it.
The list of deeply concerning issues can easily be extended. Except for those, who blindly believe the official fairytale narrative, it is obvious, that we live in much more dangerous times than 20, 30, 40 or 50 years ago. In our blog Are you adequately prepared for the future?, we have provided an overview of the risks, that your home country might face within the next decade. Not all countries will be affected in the same way. Some countries might manage to avoid the worst, while others will be at the center of the crisis. But don’t make the mistake of hoping, that your home country will be spared completely.
We don’t want to scare you and certainly don’t think, that the end of the world is near. On the contrary we are convinced, that every crisis also offers a lot of opportunities. However, in order to profit, you need to prepare now. That doesn’t mean, that you have to hide in a bunker, move into the Canadian wilderness, or buy a Swiss mountain pasture. There are other reasonable measures, that won’t disrupt your current live completely. They only require some time and effort on your side.
Elements of a Live-Beyond-Borders mindset
Our world is changing rapidly. Therefore, it is crucial to continuously analyze major trends with a critical mind, and regularly follow the news to be up-to-date about the latest developments. Reading or watching mass and social media is certainly not sufficient, as they mostly contain paid-for, biased or censored information. Instead, you should also follow well-researched alternative news sites covering topics, that you will not find anywhere else.
Just being aware of increased global risks is not enough, you must also act proactively. Many people are unable to do so. As long as their lives are fine, they feel no urge to change anything. Why read long blogs about boring financial matters or spend time looking at alternative investment opportunities? Isn’t it much more fun to party with friends, go on vacation, or enjoy an extended dinner at a nice restaurant? For the time being for sure. But in the long run, their current inertness will cost them not just a lot of money, but potentially even their freedom or life.
As we have highlighted in Key portfolio risks that your financial advisor is unlikely to talk about and Build a crisis-proof portfolio, that it makes sense to diversify your assets between custodians, as every service provider is vulnerable to bankruptcy, confiscation or fraud. In particular, don’t keep all your money with a single bank, all your securities with a single broker and all your precious metal in a single vault. It is equally important to diversify away from fiat assets, as the main fiat currencies such as the USD, EUR, AUS, CAD, JPG are bound to fail in the long-term. Having investments in assets, whose value is independent of fiat money, such as physical gold/silver and cryptos, is essential to preserve your wealth.
Being heavily exposed to a single jurisdiction can have devastating consequences, except if you live in a country, that outperforms all other economies, provides reasonable taxes, safeguards personal and property rights, and maintains political stability. However, you will sustain losses, if your country’s economy underperforms, your fiat currency is repeatedly devalued, or excessive taxation increasingly impairs your income and wealth. In the worst case you can face expropriation of your assets and personal detainment, even if you did nothing wrong from a moral perspective.
To safeguard against jurisdiction risk requires you to diversify internationally, by holding assets around the world. In uncertain times it is beneficial, to have one or several foreign bank or brokerage accounts and to store precious metal in a vault far away from home. Just ensure, that you chose a jurisdiction with a strong track record of being a safe haven location. In addition, chose service providers, that offer the same or a higher level of quality and reliability as your service providers at home.
Internationalization of assets is certainly not without pitfalls. All the arguments put forward against your home country can also be used against the country, where you chose to store some of your wealth. In addition, if capital controls are implemented, you might not be able to transfer your assets back home. And in the worst case, laws could be enacted, that make holding assets by you in the foreign country illegal.
Nevertheless, if done carefully and under consideration of existing laws and regulations, internationalization of assets offers a great insurance against future problems at home. Take for instance a foreign bank account. If your home currency gains value, the exchange rate loss of the money held at the foreign account, can be interpreted as an insurance premium. Consider all the money that you spend for fire, theft or disability insurance. If you never make a claim, this money is lost, but provides you at least with peace of mind. The same applies to potential exchange rate losses of a foreign bank account. However, if your home currency depreciates a lot, your foreign investment will pay off handsomely. And if you ever need to leave your home country, having money stashed abroad can be a life changer.
To keep part of your assets abroad is not enough. The economic, political, social, or environmental situation in your home country can change, making it intolerable or even impossible to stay there. Therefore, even if you love your current home and don’t want to move anywhere else, it is good to prepare one or several options, to move to another country. Having such a Plan B is an insurance, that can turn out to be essential in preserving your wealth, freedom and perhaps even your life. In Global living does not come easy we have outlined the varies challenges that you will face, when you attempt to move abroad. Knowing where to go and having prepared measures to deal with immigration and financial issues, can help you save precious time that might turn out to be crucial.
Most of the Super Rich already have a plan B in place. If they don’t, they own at least enough money to pay their way out of trouble. For instance, Carlos Ghosn, the former Nissan-Renault Chairman, allegedly spent millions of dollars on his recent spectacular escape by private jet from Japan to Lebanon, to avoid a trial for financial crimes. You probably don’t have that kind of money. And the fact, that you have always been a law-abiding citizen and did nothing wrong, won’t help you much either, in finding a new home quickly. Therefore, prepare now to avoid mischief in the future.
In summary, people with a Live-Beyond-Borders mindset do the following. They
- observe and analyze the latest developments closely by using quality media and alternative news sites
- shed their complacency and allocate adequate time and efforts to prepare for trouble ahead
- diversify assets to reduce custody and fiat currency risk
- internationalize assets to reduce jurisdiction risk
- prepare a realistic Plan B to leave their home country, if the situation there becomes intolerable
I fyou adopt a Live-Beyond-Borders mindset you are not guaranteed success. But you are far more likely to prosper in the future than people, who just sit there and hope for the best. And in the very unlikely event, that your current life can continue undisturbed for the next decades, you have an insurance policy that gives you peace of mind and potentially some extra profit.
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Disclaimer: The above is for informational purposes only. It is not an offer or advice to buy or sell any products or services. LBB and its owner do not provide investment, tax, legal, or accounting advice. Neither the company nor the author is responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any content, goods or services mentioned in this article.
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