Sovereign Man Notes from the Field Date: December 30, 2011 Reporting From: Santiago, Chile

Sovereign Man

Notes from the Field

Date: December 30, 2011
Reporting From: Santiago, Chile

[Editor's Note: Governments protect themselves through regulations. It's no secret that liability is limited as a government employee. As they gain access to more information and have dire need for more revenue, this trend continues to increase.

This selection, from August, shows some easy holes which can be punched into the official story of one of this year's biggest news events. As a former intelligence officer, I recognize what goes on behind the scenes versus what may have happened on the ground. With this, I send off the year and wish a happy and prosperous 2012 to each of our readers.]

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VIEW A PREVIEW OF THIS MONTH’S SOVEREIGN MAN: CONFIDENTIAL

The world is changing daily. ‘Solutions’ to government debt problems now delay the inevitable for minutes rather than weeks and months.

Simon spends this month getting a grasp on how some of the most experienced experts predict the outcome. He doesn’t forget to interview someone who has lived through crisis.

Each provides their action plan to survive and thrive.

Simon wanted to give you a preview so you can read the details for yourself.  Click here to see it now.

***********************************************************************

———Original Dispatch on August 22, 2011 from Zell am See, Austria ———

One of my favorite books is the Personal Memoirs of Ulysses S. Grant- West Point graduate, Union commander, former President, and failed businessman. It’s a bit long-winded, but brutally honest, and much of the first volume deals with Grant’s personal experiences as a young military officer during the Mexican War.The Mexican War was a turning point in American history; fought between 1846-1848 after the US annexation of Texas, it represented many unfortunate firsts for the United States:

1) It was America’s first war of conquest. US politicians had been aching for years to complete the westward expansion, and the Treaty of Guadalupe Hidalgo that ended the war ceded all Mexican territory west of the Rio Grande to the US, essentially the entire southwest through California.

2) It was the first time that the US press was involved in a war. Reporters were usually on the battlefield, even ‘embedded’ in troop encampments.  The government used the press to influence popular support for the war, as indicated by this excerpt from the Hartford WeeklyTimes dated February 5, 1848:

“The course of duty on the part of our country is very plain. Mexico should be completely occupied as to prevent any thing like a government on their part, and so as to secure the entire revenues of the country.”

3) The war was also the first time (of many, many more to come) that the US government outright lied as a pretext to declare war. The official story spun by President James Polk at the time was that Mexican forces invaded the United States, unprovoked, and ‘shed American blood on American soil.’

This account has been rejected by historians, as well as by Grant in his memoirs:

“We were sent to provoke a fight, but it was essential that Mexico should commence it. It was very doubtful whether Congress would declare war; but if Mexico should attack our troops, the Executive could… prosecute the contest with vigor. Once initiated there were but few public men who would have the courage to oppose it.”

Grant later writes, “Experience proves that the man who obstructs a war in which his nation is engaged, no matter whether right or wrong, occupies no enviable place in life or history.”

Not much has changed. The next 165 years of warfare in the United States are filled with lies, deceit, false flag operations, imperialistic conquest, and state-sponsored media propaganda. Those who dared question the official stories were vilified and dismissed as unpatriotic conspiracy theorists.

The most recent example was the capture and death of Osama bin Ladin in May 2011 by the famed SEAL Team Six.

There are so many questions, so many holes in the official story- the conspicuous location in a small town surrounded by Pakistani military, the handling of the body in accordance with a Muslim tradition that doesn’t exist, the refusal to provide any real evidence to verify the claim, etc.

US mainstream media largely gave Obama a pass on these questions and focused instead on the nationwide euphoria over the news.

Now the United States Congress is trying to lock down, once and for all, any further hint of question about the event with a new bill, HR 2819 . The bill prohibits any “officer or employee of the Federal Government from providing information about the mission to kill Osama bin Laden to any person outside the Federal Government…”

This essentially silences anyone who might be able to shed some light on the event.

The gag order would remain in effect until the CIA and Defense Department conduct their own ‘investigations’ and brief Congress; in other words, several years at least.

It’s ironic that the government often relies on an insipidly weak logic when it erodes the privacy of its citizens. If you don’t like how USA PATRIOT Act provisions allow then to tap your telephone or check out your rental history, they say, “Hey, if you have nothing to hide, you have nothing to fear!”

Obviously the same reasoning doesn’t apply to them… and it’s another example of the tragic farce that is modern government.

Until tomorrow,

Simon Black
Senior Editor, SovereignMan.com 

This article appears courtesy of SovereignMan.com: Notes From The
Field, a free newsletter dedicated to individual freedom,
internationalization, asset protection and global finance. For a
complimentary subscription, visit http://www.SovereignMan.com

Sovereign Man Notes from the Field Date: December 29, 2011 Reporting From: Santiago, Chile

Sovereign Man

Notes from the Field

Date: December 29, 2011
Reporting From: Santiago, Chile

[Editor's Note: There is a growing line awaiting the exits at the US borders. Whether it is retirees seeking cheaper cost of living or workers finding better economic opportunities elsewhere, money and brain power is draining away from the US economy.

This selection, from July, details my first hand experience of the border issues still existing in the Balkans. I also show you the release of the proposed application to obtain a passport. Penalties are, of course, severe for not giving every minute detail of information you may have forgotten.

It's no surprise that those seeking expatriation have increased significantly. A topic we will surely cover in more detail over the next year.]

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VIEW A PREVIEW OF THIS MONTH’S SOVEREIGN MAN: CONFIDENTIAL

The world is changing daily. ‘Solutions’ to government debt problems now delay the inevitable for minutes rather than weeks and months.

Simon spends this month getting a grasp on how some of the most experienced experts predict the outcome. He doesn’t forget to interview someone who has lived through crisis.

Each provides their action plan to survive and thrive.

Simon wanted to give you a preview so you can read the details for yourself.  Click here to see it now. 

***********************************************************************

———Original Dispatch on July 11, 2011 from Pristina, Kosovo ———

Can you imagine being trapped inside your home country, unable to leave? It may be closer to a reality than you realize. I’ll tell you a quick story to explain.

This weekend I rented a car in Bulgaria with the aim of driving through Serbia, Kosovo, Macedonia, and eventually into Greece. Now, I’m no virgin to land border crossings in the developing world and understand the corruption and incompetence that typifies customs checkpoints. But this weekend’s experience was much more.

With documents in hand, I drove to my first border crossing in Strezimirovci, Bulgaria. After clearing customs on the Bulgarian side, the Serbian officers decided that they would not allow me to enter with the normal papers, and instead required that I obtain another customs form to proceed.

Unfortunately, they had no such customs form at their station, so they turned me around and sent me to another border check point in Kalotina, over an hour away.

The road from Strezimirovci to Kalotina skirts the Serbian border for a large part of the drive- quite literally, on one side of the road is Serbia, and on the other is Bulgaria. It’s all part of the same landscape with no discernable difference… these are just invisible lines guarded by gun-toting monkeys.

When I arrived to Kalotina, I found the ‘office’ where I was supposed to obtain the new document- just a simple, roadside concession stand. The ‘agent’ was the shop’s proprietor, a chain-smoking Serbian woman with rather mannish features.

Once I paid the appropriate fee, she spent the next 10 minutes hacking at her keyboard to produce an official looking Cyrillic document with lots of stamps and seals.

While I was waiting for her to finish, four different customers came into the shop to stock up on snacks and drinks. All they wanted was a cold one for the road, but they eventually got tired of waiting and left.

These four customers represented potential transactions that could have contributed something to the economy. Instead, though, they were preempted by an unnecessary bureaucracy that adds absolutely no value whatsoever.

As expected, the Serbian customs agent barely glanced at the form when I crossed the border this time. Finally on Serbian soil, I pointed my car towards Pristina.

Now, Serbia still pretends like Kosovo is part of its sovereign territory, and Serbian police are under strict instructions to make the immigration checkpoint on the Kosovo border as painful as possible.

The vehicle line at the checkpoint was backed up so much that it took several hours to pass. All along the way, there was not a single bathroom, vending machine, fuel station, or even street light. It’s obvious that they want to incovenience travelers to the point that people will think twice before visiting Kosovo again.

When it was finally my turn, I drove up to the policeman and handed him all of my papers. He slowly went through every single detail, looking for any technicality he could find to prevent me from crossing.

The rest the station was staffed with 10 other agents.  All brandished automatic weapons slung over their backs, yet each stood around doing absolutely nothing. One person was “working,” and the other ten were smoking, eating, drinking, and shooting the breeze.

Frankly, I pity all of these border agents whose only function is to deny, obstruct, or otherwise frustrate the forward progress of other human beings.  These people will go their entire careers contributing nothing of value to the world, and destroying what others are trying to create. It’s truly a pitiful existence.

This weekend’s affair was a clear example of what happens when a government imposes mind-numbing bureacracy to prevent freedom of movement. And if you think it can’t happen where you live, think again.

In the US, the government now requires all citizens to have a passport in order to pass the border, even when driving into Mexico or Canada. Obtaining a passport, however, is neither free nor guaranteed.  You must apply, pay an ever-increasing fee, and wait for weeks to be approved and receive it.

Recently, the State Department quietly proposed a new ‘biographical questionnaire’ in lieu of the traditional passport application. The new form requires you to provide things like:

- names, birth places, and birth dates of your extended family members
- your mother’s place of employment at the time of your birth
- whether or not your mother received pre-natal or post natal care
- the address of your mother’s physician and dates of appointments
- the address of every place you have ever lived in your entire life
- the name and address of every school you have ever attended

Most people would find it impossible to provide such information, yet the form requires that the responses ‘are true and correct’ under penalty of imprisonment.

Naturally, the privacy statement on the application also acknowledges that the responses can be shared with other departments in the government, including Homeland Security.

If this proposal passes, then US citizens will have a nearly insurmountable hurdle to obtain a passport and be able to leave the country at will. Even if it doesn’t pass, it’s a clear demonstration of what the people who run the country are thinking.

Have you reached your breaking point yet, comrades? Let me know what you think.

Until tomorrow,

Simon Black
Senior Editor, SovereignMan.com 

This article appears courtesy of SovereignMan.com: Notes From The
Field, a free newsletter dedicated to individual freedom,
internationalization, asset protection and global finance. For a
complimentary subscription, visit http://www.SovereignMan.com

Sovereign Man Notes from the Field Date: December 28, 2011 Reporting From: Santiago, Chile

Sovereign Man

Notes from the Field

Date: December 28, 2011
Reporting From: Santiago, Chile

[Editor's Note: I can count almost a dozen 'emergency conferences' among the central bankers to prevent collapse. As I've joked with friends before, their solutions now only assuage markets for seconds rather than weeks.

This selection, from June, explores the options these central bankers continue to debate. The link between economic and social collapse is a theme that we'll continue to address as central bankers and governments make impoverish the masses. These posts are the core of our expanding community and I know that many readers probably missed some important letters from earlier days.]

———Original Dispatch on June 14, 2011 from New York City   ———

For the last few days, we’ve been having an important discussion about the magnitude of the economic challenges in the west; if you didn’t read yesterday’s letter , I really encourage you to do so before proceeding because it’s important to understand why the west has truly passed the point of no return.

Simply put, the United States and much of Europe are borrowing an extraordinary amount of money now just to pay interest on the money they’ve already borrowed. They cannot even self-fund their mandatory entitlement programs without going into the hole, and their options are limited:

Option 1: Continue borrowing, keep the party going.

As long as the government CAN do this, they WILL do this.  Regardless of their intentions, though, more debt only worsens the situation, creating higher borrowing costs in the long run, and even more debt. As this happens, the pool of buyers begins to dry up, especially from overseas.

Option 2: Inflation 

The more buyers stop purchasing Treasury securities, the more the Federal Reserve will mop up the excess liquidity. In doing so, the Fed essentially conjures up money and loans it to the government.

No matter what the government monkey statistics say, this is inflationary, plain and simple. The more money they print, the greater the level of inflation in the long-term. Meanwhile, as foreigners simultaneously reduce their US dollar holdings, this inflation will become more acutely felt in the US.

Option 3: Austerity

There’s going to come a time when the US government is forced to face its economic reality and make some incredibly deep cuts that would be felt across society, from Wall Street and the military industrial complex to project housing on the other side of the tracks.

Option 4: Default

Eventually, the debt burden is simply going to be too much, and the most obvious solution will be to default. Politicians will make China out to be the enemy and they will probably invent a war just to have an excuse to default on Chinese owned debt. Americans will wave the flag and celebrate defaulting on their enemies.

Option 5: Economic Cannibalism

In the best traditions of Atlas Shrugged, the government will continue its persecution of the productive class- professionals, investors, entrepreneurs, and skilled workers. Existing taxes will rise, new taxes will be created, trade barriers will be enacted, and a maze of cost prohibitive regulations will be passed.

The first option (keeping the party going) is what has been happening for years. Politicians make small concessions to show they’re “serious” about fiscal discipline, cutting laughably small programs while dumping hundreds of billions of dollars into wars and entitlement programs.

The worse the debt situation becomes, though, the higher the borrowing costs become, and the worse the debt situation becomes. It’s not an enviable position. Existing lenders will continue backing away from the US Treasury market, giving option 1 a half-life measured in months at best.

In the longer term, only options 2-5 remain: inflation, austerity, default, and cannibalism. Each of these remaining options will shake the financial system to its core. More importantly, each of these has the power to create widespread social upheaval.

When inflation eats away at a family’s already meager standard of living, when austerity eliminates the benefits to which recipients have grown accustomed, when default vanquishes a retiree’s savings, when high taxes make workers feel like they’re just government serfs- this is when the real turmoil will begin:

* Rising crime: devoid of a job or means to support their families, people will turn to crime out of desperation

* Class warfare: with dividing lines drawn between have’s vs. have-not’s, it will become unpopular and even dangerous to be successful

* Corruption: low-level public service officials will look to supplement their income through bribery and kickbacks

* Black economy: An underground, cash-only (probably gold or foreign currency) economy will emerge with people getting paid in envelopes

* Censorship: Of course they’ll blame it on national security, but the idea will be to prevent public disparaging of government policy

* War: The government will need another major event to distract people from the real problems

* Protests/Riots: This is when things turn bloody

* Police state conditions: The government will close ranks and send the cops out to show all the little people who’s really in charge

There are a number of other manifestations, and many are already showing signs of emergence. The US and European police states are alive and well. Crime is on the rise.

In Europe, cops are doing battle in the streets with their citizens. Think it can’t happen in the US? Remember tanks in the streets during the LA riots? Remember New Orleans? Remember any number of G8/G20 protests?

Here’s the bottom line: all you have to do is glance at the headlines to see what happens when you strip people of their livelihood, of their ability to put food on the table for their families.

The US has been able to kick the can down the road with the most blunt social implications simply because the country benefits so much from a US-oriented financial system. This is coming to an end very, very quickly.

As a rule of thumb, the greater the economic distortion, the harder the collapse. The US economy has been in a fantasy world for so long, and when its dominant primacy is yanked away, the collapse will be at freefall speed.

Listen… I’m not talking about the end of the world here, I’m talking about difficult times ahead, and the things that go beyond economics. It’s time to face facts and look at how society will change (and has already changed).

Tomorrow, I’d like to write more about what we can do now. Meanwhile, please tell mewhat you think about this - how do you see society changing from this reset of the financial system?

Until tomorrow,

Simon Black
Senior Editor, SovereignMan.com 

This article appears courtesy of SovereignMan.com: Notes From The
Field, a free newsletter dedicated to individual freedom,
internationalization, asset protection and global finance. For a
complimentary subscription, visit http://www.SovereignMan.com

Sovereign Man Notes from the Field Date: December 27, 2011 Reporting From: Santiago, Chile

Sovereign Man

Notes from the Field

Date: December 27, 2011
Reporting From: Santiago, Chile

[Editor's Note: As we're quickly approaching the end of December, I thought it would be appropriate to republish a few letters from earlier this year. 2011 brought a year of increased printing of fiat currencies around the world.

This selection, from March, combines logic from the U.S. DoJ and the actions of our current Federal Reserve Chairman, Ben Bernanke. The destruction of currencies is a theme that we'll continue to address as governments cling to power. These next several posts are the core of our expanding community and I know that many readers probably missed some important letters from earlier days. ]

———Original Dispatch on March 21, 2011 from Denver, CO———

The United States Department of Justice delivered a very clear and unfortunate message on Friday:

“Attempts to undermine the legitimate currency of this country are simply a unique form of domestic terrorism.  While these forms of anti-government activities do not involve violence, they are every bit as insidious and represent a clear and present danger to the economic stability of this country.”

These remarks were released by the US Attorney’s office in the western district of North Carolina following the conviction of one Bernard von NotHaus, the creator of the ill-fated Liberty Dollar.

As you likely recall from a few years ago, Liberty Dollars were privately minted gold and silver rounds. Paper certificates, akin to warehouse receipts were also issued, effectively giving the bearer a right to claim a certain amount of gold or silver at the group’s warehouse in Coeur d’Alene, Idaho.

This is traditionally how the system of money used to function- precious metals would be stored in private, secure storage facilities, and paper certificates were issued as a medium of exchange that entitled the bearer to redeem metal from the vault.  Liberty Dollars represented a return to that system.

Clearly, the Justice Department feels otherwise… instead viewing these silver rounds as an attempt by terrorists to undermine the US dollar.

Interesting choice of words.  Undermine? “verb [transitive]. to erode the base or foundation of something. to damage or weaken, especially gradually. “

Funny, this sounds a lot more like quantitative easing than anything else.  Ben Bernanke, in creating trillions of new dollars and debasing the value thereof, is guilty of the same insidious acts, and similarly, he represents a clear and present danger to the economic stability of the United States.

Somehow, though, I doubt that Homeland Security chief Janet Napolitano or Attorney General Eric Holder will end up labeling Mr. Bernanke as a domestic terrorist.

Von NotHaus faces up to 15 years in prison on one count and 5 years on two others. Punitively, this is more serious than engaging in female genital mutilation (5-years, section 116 of Title 18, US Code), certain types of assault (as little as six months, section 113), or, ironically, bank robbery (10-years, section 2113b).

The US government obviously has its priorities straight.

As for the total amount of Von NotHaus’ gold and silver booty? A whopping $7 million, roughly .000083% of Bernanke’s $8.4 trillion money supply.  Von NotHaus was so insignificant he wasn’t even in the ballpark of a rounding error.  By definition, this couldn’t possibly constitute a danger to the economy.

Realistically, the government’s 6-year effort to bring him down had one single purpose: to send a message. Uncle Sam is telling us very clearly, “You WILL use our rapidly depreciating dollars… and anything we don’t like in our sole discretion, we will label as domestic terrorism.”

If safeguarding the purchasing power of savings is considered domestic terrorism, what else is considered terrorism? I think this also begs the question of whether gold and silver confiscation is on the table… I’d love to hear your thoughts.

Until tomorrow,

Simon Black
Senior Editor, SovereignMan.com 

This article appears courtesy of SovereignMan.com: Notes From The
Field, a free newsletter dedicated to individual freedom,
internationalization, asset protection and global finance. For a
complimentary subscription, visit http://www.SovereignMan.com

Sovereign Man Notes from the Field Date: December 26, 2011 Reporting From: Santiago, Chile

Sovereign Man

Notes from the Field

Date: December 26, 2011
Reporting From: Santiago, Chile

[Editor's Note: As we're quickly approaching the end of December, I thought it would be appropriate to republish a few letters from earlier this year. 2011 was a year of turmoil, even Time Magazine selected 'The protester' as the Person of the Year.

This selection, from early 2010, drives actionable steps based on the aggressive responses from law enforcement and government around the world. These next several posts are the core of our expanding community and I know that many readers probably missed some important letters from earlier days. It's also great to see that the exact real estate development I mentioned almost two years ago is finally coming to fruition.]

———Original Dispatch on January 8, 2010 from Estepona, Spain———

If I have been too subtle in the past, let me be absolutely clear this afternoon: the time to do something, the time to take action to safeguard your future and your families livelihood, is NOW.

I’m more impassioned than usual this morning… and with reason.  Reluctantly, I tuned in to Team Obama’s press briefing last night about the ongoing saga of the Nigerian underwear bomber.  Obama’s is clearly trying to cultivate a fear of al-qaeda while simultaneously building blind trust in his government.

After the President’s remarks, his Homeland Security Secretary and Deputy National Security Advisor took the stage to unveil a series of proposals to ‘improve security.’

I’ll spare you the details as you have probably already heard them, but the bottom line is simply more government– a bureaucrat’s ultimate and only solution. This means more TSA, more air marshals, more undercover agents, more gun-toting soldiers, more pat-downs, more scanners, more searches, more scrutiny, more suspicion, etc.

How do you spell police state?

I’m ordinarily laid back about this sort of thing. I can afford to be since I’m a safe distance from all of that stupidity… but in this case I looked down to find that my knuckles were turning white, clenched around my glass of 2005 priorato.

I set my wine down and remarked to my friends who were watching with me, “What is it going to take for people to wake up and get the hell out of town? Do they need legions of storm troopers marching down the street before they realize it’s time to go??”

I was positively exacerbated.  The US is turning into a police state, and I’m not even saying this specifically to Americans living there. Many countries around the world are following close order behind Uncle Sam.

Once again, the time to act is now.  So what should you do?

First, make sure you have access to funds outside of your home country. This is one of the most important flags that you can plant.  You should open a foreign bank account (like I discussed in the Panama Black Paper), and/or consider storing precious metals in a private storage facility overseas.

Later this quarter, I plan on releasing a new Black Paper that contains actionable information to open an account at safe foreign banks that still take US customers.  You haven’t heard of most of them, and would probably never hear about them because it’s actually illegal for foreign bank to advertise in the United States in most cases.

Stay tuned for that.

Second, you should really be thinking hard about foreign property. Why? Because it can be a great investment; it’s an easy, non-reportable way to move money overseas; and it can be your escape hatch when you’re finally ready to hit the eject button.

Remember, I’m not talking about a 50 million euro villa in Monaco; you can pick up cheap land in Latin America for less than $50 per acre, and I’m pretty sure that everyone reading this letter has at least 50 bucks to spare.

Also, as I’ve discussed in the past, you can buy foreign property using your tax-deferred retirement savings, and I plan on revisiting this topic in short order because it is an absolute no-brainer.

Additionally, if there’s interest, I may also explore the idea of building a small, cost-effective, subscribers-only development.  It would likely be on the outskirts of Panama City and include self-sustaining fresh water and agricultural resources.

Third, if you have the means, you should really consider obtaining second (or third, fourth, etc.) citizenship. Second citizenship can be the ultimate emergency exit if things get really bad, and it effectively serves as the most comprehensive insurance policy you could even have.

I have a lot of contacts in this field, and my colleagues and I are currently experimenting with a few options that I plan on bringing to you soon.  I won’t bring you a passport program unless one of us has gone through the process ourselves, so give me some time while we play guinea pig.

Fourth, give serious consideration to your finances; unless you are already independently wealthy or have sustainable income streams, think about what you would do to earn money if you lost your job today.

Think about what skills you have– what problems can you solve that other people are willing to pay you for? What opportunities to you see around you that can be quickly and profitably exploited?

I guarantee you that there is opportunity everywhere around you. For example, a friend of mine is an intelligent, 22-year old girl who lives in Minsk, Belarus– the last bastion of the Iron Curtain.  While Belarus is not the totalitarian state it once was under the Soviet Empire, it’s pretty close.

And yet, despite living under a tyrannical yolk, my friend has become quite a successful entrepreneur, launching a successful brick-and-mortar company and several web sites just within the last few months.

I raise this simply to point out that if an inexperienced but intelligent and energetic young girl can find opportunity in a place like Belarus, then I would wager that there is a plethora of opportunity out there in places like Panama, Abu Dhabi, Chile, China, Angola, Thailand, Bulgaria, and even the US/Europe.

In fact, I know this to be true because I see so much of this opportunity when I travel.

So those are the top four things I would recommend you do in making your own personal preparations. I clearly have a lot of work to do between the real estate, the citizenship programs, and the banking Black Paper… but after seeing the writing on the wall so plainly last night, I will be refocusing my efforts to get these done quickly.
Feel free to share this information with your friends and family if you think they understand the reality of the situation.

Until tomorrow,

Simon Black
Senior Editor, SovereignMan.com 

This article appears courtesy of SovereignMan.com: Notes From The
Field, a free newsletter dedicated to individual freedom,
internationalization, asset protection and global finance. For a
complimentary subscription, visit http://www.SovereignMan.com

Sovereign Man Notes from the Field Date: December 23, 2011 Reporting From: Santiago, Chile

Sovereign Man

Notes from the Field

Date: December 23, 2011

Reporting From: Santiago, Chile

First off, happy holidays. I hope this email finds you in good health and cheer.

Down here in Chile, I intend to spend the weekend (and most of next week) doing absolutely nothing but reading, relaxing, and riding horseback with friends around our new 1,000+ acre farm. I’m excited that many readers will soon be joining me.

Personally I’m not much for the holidays. The last two months of the year (starting with Halloween) feel a lot more like forced consumerism– people buying useless trinkets with money they don’t have for the sake of others they hardly know, or for close friends who simply don’t care.

I prefer to opt-out of the whole nonsense and simply tell the people I care about that they’re important to me. On that note, I’m truly grateful for our daily conversations and the many wonderful relationships that this letter has brought.

2012 will undoubtedly be a difficult and challenging year for the global economy. But I can promise you that the world is not coming to an end. The game is simply being reset with a new set of rules.  And whether young or old, rich or poor, the decisive, creative mind will thrive.

It’s overwhelming to see how many people are waking up to reality, educating themselves, and taking action. And I’m truly humbled to play a part in this movement. Thank you for being a reader, and I look forward to our continued conversations. 

With that, a few questions from this week:

Tom Childs writes, “Simon, regarding Chile, what are your thoughts about the very considerable risk of burgeoning volcanic activity in the country? Is your retreat in any way threatened by an expanded volcanic crisis?”

Quite frankly, volcanic activity in Chile is actually Argentina’s problem. 

The prevailing Pacific winds blow to the east, picking up ash and dumping it on neighboring towns in Argentina. During the last minor eruption, ash was swept as far east as Uruguay.

I wouldn’t want to be at the foot of a volcano, in Chile or anywhere else. Our farm, however, is more than a safe distance away. We have great views of some volcanoes and snow-capped Andean peaks… but I have zero concern of seeing any lava in my living room.

Next, in response to my comments about weaknesses in the banking system, Patrick writes, “Simon, while the US government may be bankrupt, they will just print more money to cover any FDIC insured assets if a major bank went under. More than likely they wouldn’t even let it go under.”

At this point, the FDIC’s insurance fund is woefully undercapitalized. Meanwhile, banks are sitting on nearly incalculable losses (real and nominal) for having accumulated so much worthless paper.

Some people may take comfort that the US government will bail out depositors by printing more money… that the deposit risk in the US banking system is negligible because Bernanke will simply conjure more money out of thin air. I’m not one of these people.

To me, a bank is safe because it is profitable (not because of clever accounting tricks) AND well-capitalized. False promises and guarantees of monopoly money provide me no sense of confidence.

What’s more, for individuals with a higher net worth, the insolvent FDIC can only guarantee up to $100,000 anyhow. So fundamentally, the central issue falls back on a bank’s creditworthiness. I’m not willing to take that chance with US banks.

Last, Stefan asks, “Simon, you mentioned that you’re investing in precious metals… suggesting that you hold a consensus view that inflation is what we’re in store for. What if the crisis actually produces the opposite effect– deflation– and the value of precious metals falls?”

Deflation certainly is a possibility. I’m not squarely in one camp or the other… I look at the totality of circumstances, and in my travels around the world (I hit over 40 countries this year ), I objectively look for signs of both.

At the moment, I see far more signs of -inflation- , but that’s because I’ve spent my time this year in many developing nations where the US exports inflation.

Here’s the thing– if the debt bubble bursts and many of these insolvent countries do default (which is quite likely), it could cause a massive deflationary chain reaction in which the price of gold drops dramatically.

Whether any potential deflationary effects are short-lived (like 2008) or long-term (Japan), I still want to own gold. Along with a debt-bubble bursting will come a severe loss of confidence in the fiat system… and gold is a great hedge in this scenario. 

More on that soon. I hope you have a great and restful holiday period. Best wishes from all of us to you and your family.

Simon Black
Senior Editor, SovereignMan.com 

This article appears courtesy of SovereignMan.com: Notes From The
Field, a free newsletter dedicated to individual freedom,
internationalization, asset protection and global finance. For a
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Sovereign Man Notes from the Field Date: December 22, 2011 Reporting From: Toronto, Canada

Sovereign Man

Notes from the Field

Date: December 22, 2011
Reporting From: Toronto, Canada[Editor's note: Simon's close friend Craig Ballantyne, now editor of the Early to Rise publication, is filling in today while Simon storms the new farm in Chile.]If you’re like Simon and I and you spend any time at all reading the daily news headlines, it undoubtedly feels like the world is inches away from going off a cliff.

There’s a lot of truth to this news… and it can literally put so much fear, anxiety, and apprehension into people that is paralyzes them from doing taking any steps to protecting themselves, let alone advancing their situation in life. You can’t let that happen.

Listen, even if the world is becoming unglued, there’s nothing you personally can do about global economic problems. Just like there’s nothing the last lemming at the end of the line can do about all the other lemmings in front of it.

However, that last lemming still has a choice. It can take action… because action is the only thing that can overcome anxiety and apprehension.

I recently had this ‘a-ha’ moment when penning my weekly internal newsletter to my team of amazing employees. I wrote to them:

“We’re always taking action. Moving ahead. Finishing a project, celebrating the success, and hitting up a newer, bigger project. That’s why we’re going to continue to prosper no matter how crazy the rest of the world gets around us. Because we keep on taking massive action.”

It’s important for them to hear it and to be reassured that if we keep on pushing, we’ll get what we earn. And in this case, the advice I gave was even more important for me to hear, and it this quote which I also shared with them is helpful too.

“Success seems to be connected with action. Successful people keep moving. They make mistakes, but they don’t quit.” — Conrad Hilton

Don’t let apprehension or anxiety stop you from taking action. Some things might not work out in life, but if you keep taking action, past failures often end up contributing to future successes.

I struggled three times to launch one specific type of online business. The first time it just fizzled out.

The second time it failed miserably… and then voila, the 3rd time turned into a business that will bring in 7-figures in 12 months.  I wouldn’t have been able to do this if I hadn’t failed the first two times.

Overnight success is something that I’ll never promise anyone. However, action taken every day is a habit that I’ll guarantee will bring you success in time.

Action causes momentum… momentum breeds more action… and action combined with momentum ultimately lead to success.

“Nothing is particularly hard if you divide it into small jobs.” – Henry Ford

It doesn’t matter if your goal is building wealth, internationalizing your assets, or simply creating a second income online with an Internet business, all components of life reward action.

[As editor of the daily e-letter Early to Rise, Craig is an eternal optimist and believes that everyone can still realize their own unique 'American Dream', wherever you are in the world.  Craig's advice about using the Internet to build income is without peer, and you can find out more about how he does it here.]

Until tomorrow,

Simon Black
Senior Editor, SovereignMan.com 

This article appears courtesy of SovereignMan.com: Notes From The
Field, a free newsletter dedicated to individual freedom,
internationalization, asset protection and global finance. For a
complimentary subscription, visit http://www.SovereignMan.com

Sovereign Man Notes from the Field Date: December 21, 2011 Reporting From: Santiago, Chile

Sovereign Man

Notes from the Field

Date: December 21, 2011
Reporting From: Santiago, Chile

Let’s speak plainly.  If you are in the United States or Western Europe, chances are incredibly high that your bank is simply not safe. In other words, your money is at risk. Big time. Let’s review some of the chief concerns:

1) A black box of assets

Banking is a complicated industry… and especially when larger banks are concerned, nobody really knows what’s under the hood. Can we say with any accuracy what’s on Bank of America, Deutsche Bank, or Citi’s balance sheets?

No way. There’s $8.5 trillion worth of mortgage-backed securities floating around the system. Not to mention, tens of trillions of dollars worth of derivatives contracts tied to mortgage-backed securities on top of that.

These assets are all highly susceptible to downturns in housing, a rise in interest rates, and a host of other systemic risks. Yet we have no earthly idea who owns what, or who the counterparties are. It’s all a black box of assets.

In a world where the most basic foundations of the financial system can no longer be accepted as truth, we cannot assume away that bank balance sheets are healthy without more careful investigation and transparent information.

2) The assets that we do know about aren’t winning any beauty prizes

When governments auction-off tens of billions of dollars worth of bonds, it’s often the banks that buy. Large banks wielding hundreds of billions, trillions of dollars have few options where they park capital. They require enormous liquidity, and it’s ironic that the most liquid bond markets are the most dangerously indebted nations.

When $13 billion worth of 30-year bonds were sold last week at record low yields as low as 2.815%, your bank may very well have been one of the buyers.

In the all-too-likely event that price inflation surpasses 2.815% thanks to all the easing, twisting, and printing going on, your bank will essentially be sitting on even more worthless paper. And this doesn’t take into account the possibility of an all-out default.

3) Core banking business has all but shuttered

Do you remember the good old days when banks used to be responsible stewards of capital, paying depositors a fair rate (which exceeded inflation) and making sensible loans to creditworthy businesses and individuals?

I don’t either. But I’m told that’s how banking used to be. These days, banks hardly loan to anything that doesn’t come with a government guarantee.

This is not a well-functioning system. “Safe” banks are profitable… and in order to be profitable in the long-term, banks must engage in sound deposit and lending practices. This is no longer part of the banking landscape.

4) Lies, regulatory loopholes, and accounting tricks

Banks are adept at hiding the true nature of their financial condition. They conjure fake profits out of thin air and stuff their liabilities into off-balance sheet entities. And it’s all legal.

A recent paper by the Adam Smith Institute shows how banks book ghost profits from assets that are clearly toxic. The paper, appropriate entitled “The Law of Opposites,”discusses the material flaws in IFRS accounting and mark-to-market profit recognition on uncertain future cash flows:

“Much of the activity in the banking sector is aimed at nothing more than exploiting these accounting rules to register inflated fake profits and hence convert shareholders’ equity and, in extremis, debt-holders’ and taxpayers’ funds into executive bonuses.”

Government legislators and regulators are willing accomplices in the fraud. For example, risk-weighted capital adequacy ratios are the industry standard in assessing a bank’s safety. Even the Federal Reserve acknowledges that insufficient capital ratios portend bank failure.

Current regulations, however, allow banks to materially misstate the real risks on their books. Government bonds are assigned a risk weighting of zero… hardly a fair assessment in today’s environment.

As such, a bank filled with worthless government paper can legally tell its depositors, “we are completely safe.”

5) The backstops need backstopping

Today, “government-guaranteed” anything is a joke. Federal deposit insurance is just another false promise like social security. Deposit insurance funds are even more poorly capitalized than the banks, and the ultimate backstop (the government) is completely insolvent.  The buck stops nowhere, and depositors assume 100% of the risk.

6) No one is isolated

Even if your bank has acted responsibly, the issues are global. Given the derivatives exposure that cascades across the entire system, no bank is credibly isolated from the misfortunes of the others.

Here’s the bottom line: money is serious business, and the decisions we make should not be taken lightly. We don’t buy a stock without conducting a lot of research about the company and its growth prospects. Yet we make banking decisions without the most cursory consideration of the institution’s creditworthiness.

I want to urge you to think about options overseas, especially if you’re in the US or Western Europe. These banks are in precarious shape, and there are better options abroad where banks are much better capitalized.

You may want to consider Sharia-compliant banks in places like Abu Dhabi or Singapore (which has never had a bank failure) since Islamic code requires financial institutions to maintain significantly higher liquidity ratios.

You could also consider physical precious metals as they carry no counterparty risk. There are security risks with gold and silver, however such risks pale in comparison to the systemic risks in today’s banking environment.

Until tomorrow,

Simon Black
Senior Editor, SovereignMan.com 

This article appears courtesy of SovereignMan.com: Notes From The
Field, a free newsletter dedicated to individual freedom,
internationalization, asset protection and global finance. For a
complimentary subscription, visit http://www.SovereignMan.com

Sovereign Man Notes from the Field Date: December 20, 2011 Reporting From: Santiago, Chile

Sovereign Man

Notes from the Field

Date: December 20, 2011
Reporting From: Santiago, Chile

Here’s a quick crash course in how the intelligence business works these days.  Despite the Hollywood mystique of suave, womanizing, pun-dropping men of mystery flitting around the world, it’s much more mundane.In reality, government operatives from a host of three-letter agencies are working to develop large networks of informants. These are mostly folks who deal with other people and are in the know– the bartender in Beirut, the luxury car dealer in Bogota, the money changer in Riyadh, the hotel manager in Shanghai, etc.These assets are constantly being pumped for information– who did you see, what were they buying, where did they go next, who were they with, what were they discussing, etc. And in exchange, informants typically get paid.

In the United States, there are a number of laws on the books which are theoretically supposed to prevent the three letter agencies from spying on US citizens. Naturally, the government dispenses with such inconvenient formalities in its sole discretion, and Congress frequently passes legislative exceptions (USA PATRIOT Act, NDAA, etc.)

There’s a little known division of the Treasury Department called the Financial Crimes Enforcement Network (FinCEN) whose mission is to “to enhance U.S. national security, deter and detect criminal activity, and safeguard financial systems from abuse by promoting transparency in the U.S. and international financial systems.”

Here’s a government agency rule of thumb: The more noble-sounding the mission statement, the more villainous the agency.

FinCEN is basically the CIA of the financial system. But unlike the CIA which is technically not allowed to spy on US citizens and typically has to pay informants, FinCEN has complete legal authority over US persons. And they’ve managed to turn the entire financial system into the world’s largest network of informants.

Simply put, your banker is an unpaid, often unwilling spy of the US government.

Case in point– last week, FinCEN announced that a California banker had been slapped with a $25,000 penalty for notifying a customer who had become the subject of a federal “Suspicious Activity Report” or SAR.

SARs are required to be filed by bankers, brokers, money changers, check cashers, and even casinos. You may have been the subject of dozens of SARs and never know, because it’s against the law for your banker to notify you.

As for what is considered “suspicious”, there is no clear guidance on this. It could be anything– depositing or withdrawing too much cash, ATM withdrawals in foreign countries, unusual fund transfers into your account. Basically, anything that’s a departure from a completely sterile existence.

What’s more, financial institutions frequently have a minimum quota of SARs to fill out, and those who do not comply face severe penalties. Financial institution employees can even face CRIMINAL charges for failing to file a SAR.

Now, your banker may be a good guy, but do you think s/he’s willing to do jail time? No chance.

This is how normal, everyday people end up on government watch lists or have their assets frozen ‘pending investigation’. And with the recent passing of the National Defense Authorization Act and its catch-all terrorism clauses, we can only expect this to get worse.

It’s truly despicable when you think about it– the federal government creates a currency monopoly at the point of a gun (try buying your groceries with Swiss francs). Then they make it nearly impossible to function in this world without using the banking system, and then turn the entire banking system into a network of spies.

If you want to reduce these risks and dull the impact of the coming wave of SAR-driven civil asset forfeiture, it would be a really smart move to open a foreign bank account.

Nearly every country in the world has anti-money laundering rules now. Some (such as Mongolia, where I recently opened an account yielding nearly 14%), are easier than others. But the bottom line is that you’d be moving your money out of the jurisdiction where you live, and into a place where those agencies have zero (or limited) authority.

And if you want even more financial privacy, I’d strongly recommend holding precious metals in an anonymous overseas vault like Das Safe in Vienna.

Until tomorrow,

Simon Black
Senior Editor, SovereignMan.com 

This article appears courtesy of SovereignMan.com: Notes From The
Field, a free newsletter dedicated to individual freedom,
internationalization, asset protection and global finance. For a
complimentary subscription, visit http://www.SovereignMan.com

Sovereign Man Notes from the Field Date: December 19, 2011 Reporting From: Santiago, Chile

Sovereign Man

Notes from the Field

Date: December 19, 2011
Reporting From: Santiago, Chile

Ten years ago, Goldman Sachs’ Jim O’Neill coined the term “BRICs” to lump together a group of large, rapidly-growing economies that we all know well: Brazil, Russia, India, and China.

True to his thesis at the time, growth and development in these countries has left the rest of the world for dead over the past decade.

But all good things must come to an end … and it’s now clear that the BRICs are in for a much more difficult period.

China is slowing fast. Property prices have stalled and begun pulling back, souring a huge component of economic growth. The same goes for the country’s infrastructure spending.

Even China’s stalwart manufacturing sector is showing signs of contraction based on the most recent November numbers.

In Brazil, the economy (which is highly dependent on exporting natural resources to Asia) has ground to a halt. Further, the debt-fueled domestic consumption binge among Brazilian households is slowing as debt service burdens have reached nearly 30% of the average Brazilian paycheck (vs. 16% in the US).

India, meanwhile, is struggling with runaway inflation, a collapsing rupee, political gridlock, and a series of high profile corporate collapses– led by Kingfisher Airlines, the plaything of flamboyant tycoon Vijay Mallya, who has been forced to personally guarantee the company’s debts.

The rupee is the worst performing currency in Asia this year and has just fallen to a record low versus the US dollar.  The Indian economy is really on the skids.  Industrial output was 5.1% lower in October versus a year ago.  Output of capital equipment, which is considered a good leading indicator of future economic activity, fell a much more drastic 25.5%.

And now, to top things off, political unrest in Russia following the recent election there has seen troops battling protestors on the streets of Moscow.

It’s clear that the BRICS cannot be the engine room of global economic growth.

Meanwhile, Europe is a complete basket case, and the euro is looking increasingly as though it will be consigned to the dustbin of history. Across the pond, the US is trying to put a brave face on its jobless recovery whilst kicking a $15 trillion debt bomb down the road.

Anyone who steps back and looks at the big picture has -got- to recognize the absurdity of this situation.

Now… here’s the good news: you and I have a huge advantage. Citi, Deutsche Bank, Unicredit, etc. are sitting on incalculable losses, unrealistic obligations, and worthless paper that will destroy their organizations. They’ve been accumulating these for years and have no way of avoiding the endgame. We do.

We, on the other hand, are little guys. If you and I want to cut our exposure to these silly pieces of paper that governments pass off as currency, we can do that easily. We can easily do that by buying gold or productive land overseas.

Bank of America, on the other hand, has to hold Tim Geithner’s dirty laundry.

These banks that are crushed under the weight of managing hundreds of billions of dollars have very few choices– government A’s worthless bonds, or government B’s worthless bonds. We have an entire universe of options.

No matter if you have one hundred dollars, one hundred thousand, or one hundred million, your choices are far, far greater than these pitiable schmucks who are desperately clinging to the fraud that is our global financial Ponzi system.

The stores of value and investment opportunities for our savings are still out there; you just have to look in nontraditional places.

As for me, I’m investing my time, money, and energy in-

a) precious metals (a traditional store of value to some, a barbarous relic to others)

b) business opportunities in exciting frontier economies like Mongolia (and perhaps soon to be North Korea!)

c) shorting the obvious financial system absurdities (like loaning the US government money for 30-years at 2.9%)

d) deeply undervalued and distressed assets (such as stocks that are trading for less than their net cash per share)

e) farmland in Chile… where no matter what happens in the world, we will have high quality organic food to eat and the possibility of obscene profits in the event of steep inflation.

Your own list and preferences may be different, but the opportunities are there just the same.

Until tomorrow,

Simon Black
Senior Editor, SovereignMan.com 

This article appears courtesy of SovereignMan.com: Notes From The
Field, a free newsletter dedicated to individual freedom,
internationalization, asset protection and global finance. For a
complimentary subscription, visit http://www.SovereignMan.com