Marc Faber, publisher of the Gloom, Boom & Doom Report, told Tom Keene and Sara Eisen on “Bloomberg Television” today “there is no safe haven. The best you can hope for is that you have a diversified portfolio of different assets and that they don’t all collapse at the same time.” 

It’s become almost cliche these days to point out how many governments are broke beyond belief. 

In Japan, where the country’s debt level already exceeds 200% of GDP, the government has to finance 46% of its budget by issuing more debt. 

In the United States, the governments add a trillion dollars each year to the already unsustainable debt, and fails to collect enough tax revenue to cover mandatory entitlement spending and interest payments on the debt. 

The theater playing out in the US right now is irrelevant. America’s debt challenge is not a political problem. It’s an arithmetic problem. Same in Japan and most of Europe. 

However, most of these ‘rich’ western nations aren’t doing anything about it. It’s business as usual, and their debts are only getting bigger. 

Poorer countries don’t have this luxury of kicking the can down the road and delaying the inevitable. They must face their financial reckoning now. 

In some cases, like Cyprus, they resort to plundering people’s savings. Or Argentina, where the government nationalizes everything that isn’t nailed down. 

Others are falling back on more creative measures. 

Puerto Rico, for example, is in the midst of its own epic debt crisis. It’s gotten so bad that the commonwealth has effectively been shut out of the bond market. 

So last year, the government of Puerto Rico codified a number of special incentives aimed at attracting wealthy foreigners, particularly from the United States. 

Puerto Rico’s tax agreement with the US government allows US citizens who are resident in Puerto Rico to pay only Puerto Rican tax, not US tax. 

According to the law, US citizens who become residents of Puerto Rico are exempt from any taxation on their Puerto Rican-sourced ordinary income, dividends, or interest, plus long-term capital gains. And they’ll pay no US tax either. 

Malta is another example. That country’s debt level is almost as bad as in Cyprus. Yet the government of Malta has recently announced a new citizenship by investment program which could potentially raise billions of euros for the tiny country. 

And just over the weekend, Antigua officially joined the ranks of Dominica and St. Kitts as the latest Caribbean nation to offer citizenship by investment. 

Antigua is drowning in debt at nearly 100% of GDP. And after spending nearly two years exploring this idea of raising cash by selling citizenship, the Prime Minister formally launched the program over the weekend. 

Briefly, foreigners can obtain Antiguan citizenship by investing $400,000 in Antiguan real estate, or $1.5 million in a local business, or merely donating $250,000 to the government. 

Other government fees total roughly $60,000 for a single applicant, plus an additional amount for each dependent; it’s possible to apply with your spouse, children under the age of 25, and parents over the age of 65. 

Then there’s places like Turks & Caicos– which is in a ‘less desperate’ debt situation, but is still taking proactive steps to raise revenue. 

The T&C government has recently reintroduced a ‘permanent residency through investment’ program whereby a foreigner can make investments between $300,000 (for real estate) up to $1.5 million (for a business) and obtain permanent residency in the island nation. 

(Note to premium members– we will be discussing all of these options soon in upcoming SMC alerts…) 

Candidly, all of this is an encouraging sign, and it gives us a glimpse of how the system will be in the near future. 

Rather than governments being the enemy of commerce and liberty who treat citizens like milk cows, governments will become interested stakeholders who are forced to compete with one another to attract talented, productive people.

Until tomorrow, 
 
Simon Black 
Senior Editor, SovereignMan.com

The Chinese Premier Li Keqiang has sent a clear message to U.S. Secretary of State John Kerry on Thursday. Li told him that for “China the issue of the American debt ceiling [is of] great attention”. His statements were published on the government website.

These remarks, as short as they are, demonstrate that the financial monetary system of the world is being cast in a spotlight that illustrates that American Powers are by no means as free to act irresponsibly and independently as before. The Chinese have US assets amounting to about $2 trillion.

The Chinese Vice Finance Minister Zhu Guangyao has asked the Americans to “ensure the safety of Chinese investments.” In the event that the U.S. debt limit may not increase, the Americans would first have to service their debt obligations to the holders of government bonds, Zhu said.

Clearly, the real risk of technical bankruptcy of the USA is probably at ZERO. This “credit event” is becoming more routine. The probability of this happening each time the debt ceiling needs to be raised is the real issue. We are in a debt vortex where we might as well be run by a bunch of monkeys. Nobody in their right mind would run a country as they are today in all of Western society. This is absolutely brain-dead. Why do we borrow paying interest when we have ZERO intention of ever paying anything back in principal?

This is illustrating that the US, as all Western governments, has lost its independent sovereignty when it has to rely upon foreign adversaries for its survival. How could the US invade Syria when Russia and China opposed and they gold $2.5 trillion in US assets?

This is why the pension seizure is coming. The SAFE act will not be guaranteed by government and they will count on insurance companies being unable to produce guaranteed returns. But once annuities are bought, you will hand them your assets and there will be no account to withdraw from – it is gone. The Feds will then step in, and the debt will be stuffed into this and it will no longer be your money. Say good bye to your future assets. This will then solve the problem of foreign debt holders and independence shall be restored.

More from Martin Armstrong:

Commodity Hedge Funds are Collapsing

CAPITAL APPRECIATION v EARNINGS

Economists, analysts and advisors have been trying to figure out exactly what “quantitative easing” does. The Fed is adding more than $1 trillion to the monetary base every 12 months. It’s got to have some effect, right?

In theory, it goes into banks’ excess reserves… which, in theory, the banks could lend out at a ratio of 10-to-1… for a total potential increase to the money supply of $20 trillion.

But it’s not that simple…. 

These are excess reserves at the Fed we’re talking about. Some experts insist these reserves are untouchable in the financial caste system… and that they add nothing to the money supply. They say QE is an asset swap (interest-paying excess reserves for interest-paying Treasury paper), not an additive process.

But it’s not that simple either….

The Fed creates money. It buys Treasury bonds from the banks. The banks are free to buy more Treasury bonds. This transfers cash from the Fed to the federal government. And it saves the federal government having to get it from other sources (at higher rates of interest).

All money, like water, eventually finds its way to the sea – occasionally washing away a few houses along the way. And when you add $1 trillion a year into a $16 trillion economy, it’s bound to raise the sea level.

Gold Is “Zombie Proof”

How? When? 

We don’t know… but we’d avoid property too close to the shoreline!

That’s why we own gold… 

Because gold is waterproof. 

No kidding. When the broad ocean of cash, credit and connivance breaks into open fury – with howling winds and towering waves – gold will stand tall and sure, like an indestructible lighthouse.

No financial wind blows it over. No drenching rain warps it. That’s why smart investors… and smart central banks… are watching the weather and accumulating gold.

Gold is “Fed-proof” too… and zombie proof!

The Fed’s announcement in September not to “taper” its bond buying came as a shock to the mainstream press. But no one should have been surprised. This is an economy that has come to depend on Fed stimulus.

Every time the Fed has hinted that it (might… possibly… at some time in the future… unless it changes its mind… and the creek doesn’t rise) reduce its interference, the markets get the heebie-jeebies.

Since the purpose of the Fed’s action is to avoid the heebie-jeebies, they are now trapped by their own clumsy meddling. They broke it. Now, they own it.

Perhaps this is a good time to answer our critics. 

As you know, we recently announced our availability to run the Fed. If selected, we promised to be derelict in our duties. In fact, we promised to abdicate immediately – shirking our responsibility completely. 

But at least one dear reader believed our plans for the Fed were completely unrealistic and downright irresponsible. We’ll let him explain:

Bill, you would have to be a Luddite to believe what you say. Your way will be totally catastrophic, everything, everything has moved on, we cannot go back, should it be that you head the Fed.

I am not saying for a moment I like where we are, or that the banks are not making things worse, they plainly are. But in order to keep people working, you need to rely on the velocity of money, period.

Our reader goes on to tell us that we too are prisoners of the Fed’s actions… and of the paper money system. There’s no way out now… not without hell to pay.

Hell to Pay

And guess what? He’s right. 

There is hell to pay. But we guarantee you, dear reader, hell will collect… whether we like it or not. And the bill won’t get any smaller the longer we dodge the bill collector.

Look, what’s the real point of our current paper money, Fed-managed system? It is so that the insiders can manipulate, obfuscate and confiscate.

They manipulate the value of our money… lie about what is really going on… and steal wealth from savers and workers to pay for their pet projects and give money to their zombie friends. 

That’s the way it has always been and shall ever be, amen.

For example, Charles de Gaulle’s economist Jacques Rueff explained why inflation seemed to boost employment. It was because inflation robbed the workers of their wages… lowering labor costs… and making it easier for employers to hire them.

And Marc Faber recently explained how QE robs more than 90% of the population to pay off the elite. Where does all the Fed’s QE liquidity go? It goes into stock prices! Who makes money when stock prices rise? Wall Street and its elite clients! Everybody else loses.

And what about the zombies?

We’ll explain that part of it ourselves. The Federal government borrows the Fed’s ersatz dollars at record low interest rates. What happens to the money? Does it go to the taxpayers? Does it go to real, productive businesses? Does it go to real, productive workers?

Nope.

It goes to zombies of all sorts – to the 7 out of 10 families who get more from the government than they pay in taxes… and to all those contractors we passed along the Dulles Corridor on our way to the airport.

QE is the ultimate “Zombie Enrichment Program.” 

The sooner it ends… and the sooner the Fed is abolished… the better off we all will be.

Get Bill’s Letter FREE HERE

About Bill Bonner

Bill Bonner founded Agora Inc. in 1978. It has grown into one of the largest independent newsletter publishing companies in the world. In 1999, along with Addison Wiggin, Bill foundedThe Daily Reckoning. Today, this daily e-letter reaches over 500,000 readers around the globe.

Bill has also co-written two New York Times bestselling books, Financial Reckoning Day and Empire of Debt. He has written or co-written other widely read books as well, and has penned a daily column at The Daily Reckoning for over 12 years. Recently, Bill decided to “retire” from his role at The Daily Reckoning and begin writing his Diary of a Rogue Economist.

Bill Bonner’s Diary of a Rogue Economist is your gateway to Bill’s decades of accrued knowledge about history, politics, society, finance and economics. Sometimes funny, sometimes frightening – but always entertaining and packed with useful insight, Diary of a Rogue Economist can help you make sense of the complex world we live in today.