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Guest Post: When Countries Go Broke
Submitted by Simon Black of Sovereign Man blog,
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.
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.
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The end of a monopoly game = the logical conclusion to capitalism.
This how it always ends (graphic)
http://upload.wikimedia.org/wikipedia/commons/9/94/Buchenwald-J-Rouard-1...
Peru's government is not particularly enlightened in this, but I will try to find out soon and report back.
DCRB, you asked me about picking a country to expat to. Send me an email to Kirk... at hush mail, so I can send you info (w/o Big Sis getting into the ring if I post it here).
As someone interested in and researching expatriating to one extent or another in the nearer future I was going to impose on you for your opinion(s) also but that address doesn't exist.
Kirk, Haole,
Low security email: my moniker up there /at\ gmail punto com
My hushmail:
rodajesyoro
i would be interested as well
will use the low sec acc
http://www.wired.com/threatlevel/2007/11/encrypted-e-mai/
They were not killed. They just worked themselves to death. And there were only a few thousand cases. - J. Goebbels
From slavery to freedom, freedom to apathy, and apathy back to slavery - or something like that. It's all a cycle.
Not neccessarily. If you make serfdom a tradeable 'good' (allow capitalization of human workforce) the game could go on forever - as long as there is population growth. Interest rates would have to be equal to population growth, however.
No its not..
The end of the monopoly game is what passes for capitalism now.
Fair competition, and letting poorly managed companies run themselves into the ground is whats supposed to happen
NOW we'll see border fences!
Exactly! Like East Berlin, North Korea and Sing Sing!
It's for your safety!
+1000
Keep the productive captive so the rich can succeed.
Anything based on perpetual growth would ultimately fail. Capitalism was the best system for hitting the end the quickest: very efficient!
We forgot to question the fucking premise! (can there be perpetual growth on a finite planet?)
Or until they don't let us leave anymore...
...and now we see the reason for the sudden push into robots. New robotic factories are the latest meme - people ask who will man them? Who will have money to buy goods if they have no jobs?
Sorry, you're not only superfluous, you're a relic ready for the rubbish bin.
Marx warned about this. (though I don't believe that he understood the exponential function either)
But... demographics, we're rapidly aging. The "trick" for many decades has been to seduce the countries filled with younger populations in to doing the actual work. TPTB looked around and saw this: pretty much ran out of usable younger pools of labor.
We are - supposed to be - an intelligent species.
Instead of low cost labour, robots ARE the future. This is the only way to curb population growth and at the same time increase wealth.
The problem: our current system doesn't allow production without putting in labour as it equals no wages = poverty.
So, a basic income is the future: every person gets a certain amount of money (as a negative tax), in return unemployment benefits are scrapped.
This is the opposite of socialism - more and more benefits - and the way to go.
Switzerland is putting it to the vote...
Australia offers citizenship after an investment of 10-20 thousand in the Indonesian used boat market.
Only as long as you're "happy" with maybe citizenship in Papua-New Guinea!
Under the New Management that's where the "boat people" are heading for - and they have been categorically assured that they will NOT be settled in Australia.
OT...sort of...typhoon Wipha coming in on a track to sideswipe eastern Japan, characterization 'large' and 'strong'
http://www.jma.go.jp/en/typh/1326.html
Massive antinuclear demo in Tokyo
http://jen.jiji.com/jc/eng?g=eco&k=2013101300175
UN panel says Fukushima worker contamination underestimated
http://jen.jiji.com/jc/eng?g=eco&k=2013101300005
Careful, there is more to this than the "obvious". Japan not using nuclear power means they have to keep using OIL (from OPEC).
Hence they are forced to keep using and propping up our PETRO-DOLLARS!
... which they shall be able to purchase, forever, with their ever-appreciating Yen.
Now folks should start to see how brilliant folks like Kissinger were. Got everyone to sign a pact with the devil. Taking a swing at the US means punching oneself.
Buy our GE reactors or support our dollar. Who's your daddy?
Reactors are expensive, untrustworthy and completely unnecessary. Fukushima has at least one core running underground in a simple self-melted hole. The other two cores are somewhere in between the reactor and the ground. The Yakuza has supplied thousands of eager temps to work on site. See any flopping over dead from radiation? Of course not - you simply don't need a reactor to contain lethal radiation. Its just an internet myth.
Neutrons? You're MADE of them. Stop being such pussies about having some of their pals join them in your body.
Pray tell how the theater playing out in this country is an arithmetic problem? Will be as long as the folks doing the adding and subtracting are the marxists with visions of serfdom dancing in their heads. Who wrote this crap?
Do you understand the exponential function, well, do ya, punk? (sorry, felt compelled to inject some Dirty Harry)
How much growth do you want? How long do you expect that?
The exponential function is impervious to human actions. It is what it is, and it's trajectory can only be stopped one way...
Countries only go broke when they don't have a Bernank of their own.
I seem to recall Weimar Germany had a Bernanke of their own.
Excellent parry.
http://www.scmp.com/news/china/article/1331801/shutdown-debacle-shows-us...
In a lengthy polemic against American hegemony since the second world war, it added: "Such alarming days when the destinies of others are in the hands of a hypocritical nation have to be terminated.
"A new world order should be put in place, according to which all nations, big or small, poor or rich, can have their key interests respected and protected on an equal footing."
Their use of the term NWO makes me nervous. Sounds just like GHW BUSH, Clinton, Bush Jr.
It could be that the Chinese mean New World-Order, whereas our former Presidents mean New-World Order. A subtle but very important difference.
Well, Km4, it certainly SHOULD, but until the better angels of human nature take over, whose divisions are going to enforce that wonderful new world order?
Now hiring: Senior leaders for the U.S. government
http://thenextweb.com/shareables/2013/10/14/now-hiring-senior-leaders-u-...
before you apply, you must meet a few requirements.
You’re going to need to have “effective” management and persuasion skills, be media-savvy, open to travel 50 percent of the time, and must be able to balance a checkbook. No past political experience is required.
Must be able to explain the exponential function.
Maybe TAX COMPETITION will make a comeback! And promises of financial privacy!
Predicted many years ago in "The Soverign Individual," by James Davidson.
Wealth producing individuals will be fought over by countries offering incentives. They are not captive assets like a mine or farm-something to be taxed and confiscated at will. They, and their wealth producing efforts will go to the country bidding the most.
Let the competition begin!
Bidding the most and/or oppressing the least ;)
Davidson also ruminated that countries may end up operating like hotels, offering various levels of service depending on how much capital you bring to the table. Some countries would be like 5-star hotels, while others might have to stretch to provide newcomers with indoor plumbing.
"Newcomers" isn't really the right term. We need a better, shorter word here. Don't suggest "refugees".
<== Tax meat
<== Internees? Wait... that would only apply to current U.S. citizens.
Ah those awesome "wealth producing individuals", like Lloyd Blankfein or John Gotti?
"Wealth producing" without PHYSICAL resources?
Do people not understand how things are produced? In the future it's ALL be about resources: did you get the memo about all the US activities around the globe, all the hot spots having ONE thing in common (energy)?
I suspect that it'll be done as it's been done in the past. Big wars wherein the "winner" gets to siphon off from the "losers" all the creators of the various means of distruction (such as the US did when they slurped up all the Nazi scientists). But, again, one must have PHYSICAL resources (virtual is in line with all the trickery that we've been operating under for the last several decades). Yeah, not sexy like raffling oneself off as a god.
Predicted? Nearly every country on earth has had programs of this sort for a while now. You can get american, british or australian citizenship for about the same amount. Uruguay used to not have income taxes and last time I checked, Panama still had a territorial income tax. There used to be much better deals available.
Odious debt,,,FUCK 'EM!
Not everyone has heard of Odious Debt.
In international law, odious debt, also known as illegitimate debt, is a legal theory that holds that the national debt incurred by a regime for purposes that do not serve the best interests of the nation, should not be enforceable. Such debts are, thus, considered by this doctrine to be personal debts of the regime that incurred them and not debts of the state. In some respects, the concept is analogous to the invalidity of contracts signed under coercion.
-Wikipedia
Another interesting and associated idea is Unconscionable Contract
Unconscionability (known as unconscientious dealings in Australia) is a doctrine in contract law that describes terms that are so extremely unjust, or overwhelmingly one-sided in favor of the party who has the superior bargaining power, that they are contrary to good conscience. Typically, an unconscionable contract is held to be unenforceable because no reasonable or informed person would otherwise agree to it. The perpetrator of the conduct is not allowed to benefit, because the consideration offered is lacking, or is so obviously inadequate, that to enforce the contract would be unfair to the party seeking to escape the contract.
-Wikipedia
FRNs are an Unconscionable Contract as are most 'currencies' on the planet
"Such debts are, thus, considered by this doctrine to be personal debts of the regime that incurred them and not debts of the state."
And then there's the added complexity to this tale of the Fed... Brilliant concept, the Fed can take the lightening strike for "the people" and for the crooks, er, a, politicians.
Odiuos debt,,,SPREAD THE WORD and FUCK 'EM!
That's my intent
Wolf Richter has a good one on odious debt today:
http://www.testosteronepit.com/home/2013/10/13/multi-trillion-dollar-que...
The Puerto Rico’s tax agreement with the US government is the interesting one. I wonder if that will set a precedent for 1%'ers to escape the US tax rules
Hopefully the 1% will all run away to the same or a small number of places - easier to round 'em up that way.
Then this really is an "encouraging sign", just as the article claims
Yeah, rich white men who have plundered the lands of the foreigners seeking refuge in the very same plundered lands. There IS NO escape.
Leave Oprah and her friends alone. Round up politicians, and lobbyists and introduce them to the outside honest world that they leach off of.
The U.S. has a cooler system than Antigua. Come with nothing, get food stamps, driver's licenses, assist, free college education, and free hospitalization.
Hey, don't forget about the free cell phone. You know, so they can keep in touch with their doctors.
The folks in Argentina (and Wiemar Germany) who held foreign currencies or gold, silver, etc made out ok.
The ones who held cash or stocks...well, they suffered.
Read Adam Ferguson's, "When Money Dies." Very educational.
When Argentina (ugh, WHICH time?) and Germany "collapsed" the rest of the world was fuctioning (though post WWII it was a bit rough).
Sometimes the future just ain't what it used to be...
Belize has been promoting this expatriation through commercials.
Caribbean here I come. No, maybe Malta. Shit, I gotta make a list.
"Yes, Mr LC, we offer special discounts for PMs. Welcome to your new abode. Here are your multiple passports."
Malta might be a nice sunny place to visit, but as a SHTF bolthole it really sucks.
In WW2 the island was under seige and people were starving. High population density on a couple of rocky islands isn't a good place to be when the global food supply contracts. Little food, no oil, no minerals, overfished seas.
Also there is the problem of the unwashed neighbours to the south who would gladly kill the infidels and follow in the footsteps of invading Ottoman armies or Barbery pirates.
Hey! You trying the kill the guy's "dream?"
As I've been saying, there's no place to run to. Anyone thinking that they're going to make the exit has already missed the exit: not prepared to end up where they are.
Unrelated, but...
KKR writes new check to help First Data refinance debthttp://www.reuters.com/article/2013/10/14/us-firstdata-kkr-idUSBRE99D0TG...
(Reuters) - Private equity firm KKR & Co LP (KKR.N) and its co-investors, which took First Data Corp private for $29 billion in 2007, are making a new $300 million investment in the world's largest payment processing company to help it refinance its debt.
---
The world's largest payment processing company is failing! Who here would believe that there's anyway that TPTB would let First Data collapse?
Logan's Run so we can feed First Data?
How long do we go before we realize just how unsustainable EVERYTHING is?
So let me get this straight. I can "invest" $1m in real estate in some carribe island get citizenship then lose it all when they nationalize my condo for the greater good?
Damn that sounds enticing but why in the hell would I trust a broke government that's selling citizenship to ultimately protect my property rights? They aren't even protecting their citizenship.
Another 'american' article. Fantasy.
In an 'american' world, mostly two types of ending when it comes to debt:
-those who must pay back their debt
-those who dont.
When part of the 'american' club, you do not care about debt because you dont have to repay it.
Selling citizenship to cover for the debt? That is the PC 'american' version of it.
It is repo in disguise and a way to attract consumption to their shores.
Or, governments could simply put spending reforms in place.
There are always at least TWO LEVELS behind every article like this one above:
FIRST, the biggest gangsters, the international banksters, have been able to apply the methods of organized crime to take over almost all the governments in the world, in order to legalize their FRAUD, in the form of privatized "money" made out of nothing, as debts, which necessarily drives itself insane, because of its fundamental structure!
SECOND, most of the controlled opposition to that want to continue to believe in the same old magical ideas, in the form of false fundamental dichotomies, which motivate the notions that through some series of political miracles, we could finally make impossible ideals be realized, as the "solutions" to our real problems.
THIRD, the conclusions to facing the real facts are not nice, because the realities are that government IS organnized crime, controlled by the best organized gang of criminals, because money is actually measurement backed by murder. Since the debt controls depend on the death controls, there are NO real solutions to the debt slavery becoming debt insanity, than some different system of death controls, erupting through the madness of a civilization which has become almost totally controlled by huge legalized lies, for so long.
COUNTRIES ARE GOING BROKE BECAUSE THEY HAVE BEEN CONTROLLED BY THE BEST ORGANIZED GANGS OF CRIMINALS. THERE IS NOTHING OUTSIDE OF THAT REAL FRAME OF REFERENCE WHICH CAN PROVIDE REAL RESOLUTIONS TO THEIR PROBLEMS.