Guest Post: How to Save Your Money And Your Life

Tyler Durden's picture

Submitted by Doug Casey of Casey Research

How to Save Your Money And Your Life

I think there are really only two good reasons for having a significant amount of money: To maintain a high standard of living and to ensure your personal freedom. There are other, lesser reasons, of course, including: to prove you can do it, to compensate for failings in other things, to impress others, to leave a legacy, to help perpetuate your genes, or maybe because you just can't think of something better to do with your time.

But I'll put aside those lesser motives, which I tend to view as psychological foibles. Basically, money gives you the freedom to do what you'd like – and when, how and with whom you prefer to do it. Money allows you to have things and do things and can even assist you to be something you want to be. Unfortunately, money is a chimera in today's world and will wind up savaging billions in the years to come.

As you know, I believe we're into at least the fourth year of what I call The Greater Depression. A lot of people believe we're in a recovery now; I think, from a long-term point of view, that is total nonsense. We're just in the eye of the hurricane and will soon be moving into the other side of the storm. But it will be far more severe than what we saw in 2008 and 2009 and will last quite a while – perhaps for many years, depending on how stupidly the government acts.

Real Reasons for Optimism

There are reasons for optimism, of course, and at least two of them make sense.

The first is that every individual wants to improve his economic status. Many (but by no means all) of them will intuit that the surest way to do so is to produce more than they consume and save the difference. That creates capital, which can be invested in or loaned to productive enterprise. But what if outside forces make that impossible, or at least much harder than it should be?

The second reason for optimism is the development of technology – which is the ability to manipulate the material world to suit our desires. Scientists and engineers develop technology, and that also adds to the supply of capital. The more complex technology becomes, the more outside capital is required. But what if sufficient capital isn't generated by individuals and businesses to fund further technological advances?

There are no guarantees in life. Throughout the first several hundred thousand years of human existence, very little capital was accumulated – perhaps a few skins or arrowheads passed on to the next generation. And there was very little improvement in technology – it was many millennia between the taming of fire and, say, the invention of the bow. Things very gradually accelerated and improved, in a start-stop-start kind of way – the classical world, followed by the Dark Ages, followed by the medieval world. Finally, as we entered the industrial world 200 years ago, it looked like we were on an accelerating path to the stars. All of a sudden, life was no longer necessarily so solitary, poor, nasty, brutish or short. I'm reasonably confident things will continue improving, possibly at an accelerating rate. But only if individuals create more capital than they consume and if enough of that capital is directed towards productive technology.

Real Reasons for Pessimism

Those are the two mainsprings of human progress: capital accumulation and technology. Unfortunately, however, that reality has become obscured by a morass of false and destructive theories, abetted by a world that's become so complex that it's too difficult for most people to sort out cause and effect. Furthermore, most people in the OECD world have become so accustomed to good times, since the end of WW2, that they think prosperity is automatic and a permanent feature of the cosmic firmament. So although I'm very optimistic, progress – certainly over the near term – isn't guaranteed.

These are the main reasons why the standard of living has been artificially high in the advanced world, but don't confuse them with the two reasons for long-term prosperity.

The first is debt. There's nothing wrong with debt in itself; lending is one way for the owner of capital to deploy it. But if a society is going to advance, debt should be largely for productive purposes, so that it's self-liquidating; and most of it would necessarily be short term.

But most of the scores of trillions of debt in the world today are for consumption, not production. And the debt is not only not self-liquidating, it's compounding. And most of it is long term, with no relation to any specific asset. A lender can reasonably predict the value of a short-term loan, but debt payable in 30 years is impossible to value realistically. All government debt, mortgage debt and consumer debt and almost all student loan debt does nothing but allow borrowers to live off the capital others have accumulated. It turns the debtors into indentured servants for the indefinite future. The entire world has basically overlooked this, along with most other tenets of sound economics.

The second is inflation. Like debt, inflation induces people to live above their means, but its consequences are even worse, because they're indirect and delayed. If the central bank deposited $10,000 in everyone's bank account next Monday, everyone would think he were wealthier and start consuming more. This would start a business cycle. The business cycle is always the result of currency inflation, no matter how subtle or mild. And it always results in a depression. The longer an inflation goes on, the more ingrained the distortions and misallocations of capital become, and the worse the resulting depression. We've had a number of inflationary cycles since the end of the last depression in 1948. I believe we're now at the end of what might be called a super-cycle, resulting in a super-depression.

The third is the export of dollars. This is unique to the US and is the reason the depression in the US will in some ways be worse than most other places. Since the early '70s, the dollar has been used the way gold once was – it's the world's currency. The problem is that the US has exported about $7 trillion in exchange for good things from around the world. It was a great trade for a while. The foreigners get paper created at essentially zero cost, while Americans live high on the hog with the goodies those dollars buy.

But at some point quite soon, dollars won't be readily accepted, and smart foreigners will start dumping their dollars, passing the Old Maid card. Ultimately, most of the dollars will come back to the US, to be traded for the title to land and businesses. Americans will find that they traded their birthright for a storage unit full of TVs and assorted tchotchkes. But many foreigners will also be stuck with dollars and suffer a huge loss. It's actually a game with no winner.

What's Next

These last three factors have enabled essentially the whole world to live above its means for decades. The process has been actively facilitated by governments everywhere. People like living above their means, and governments prefer to see the masses sated.

The debt and inflation have also financed the growth of the welfare state, making a large percentage of the masses dependent, even while they've also resulted in an immense expansion in the size and power of the state over the last 60-odd years. The masses have come to think government is a magical entity that can do almost anything, including kiss the economy and make it better when the going gets tough. The type of people who are drawn to the government are eager to make the state a panacea. So they'll redouble their efforts in the fiscal and monetary areas I've described above, albeit with increasingly disastrous results.

They'll also become quite aggressive with regulations (on what you can do and say, and where your money can go) and taxes (much higher existing taxes and lots of new ones, like a national VAT and a wealth tax). And since nobody wants to take the blame for problems, they'll blame things on foreigners. Fortunately (the US will think) they have a huge military and will employ it promiscuously. So the already bankrupt nations of NATO will dig the hole deeper with some serious – but distracting – new wars.

It's most unfortunate, but the US and its allies will turn into authoritarian police states. Even more than they are today. Much more, actually. They'll all be perfectly fascist – private ownership of both consumer goods and the means of production topped by state control of both. Fascism operates free of underlying principles or philosophy; it's totally the whim of the people in control, and they'll prove ever more ruthless.

So where does that leave us, as far as accumulating more wealth than the average guy is concerned? I'd say it puts us in a rather troubling position. The general standard of living is going to collapse, as will your personal freedom. And if you're an upper-middle-class person (I suspect that includes most who are now reading this), you will be considered among the rich who are somehow (this is actually a complex subject worthy of discussion) responsible for the bad times and therefore liable to be eaten. The bottom line is that if you value your money and your freedom, you'll take action.

There's much, much more to be said on all this. I've said a lot on the topic over the past few years, at some length. But I thought it best to be brief here, for the purpose of emphasis. Essentially, act now, because the world's combined economic, financial, political, social and military situation is as good as it will be for many years... and a lot better than it has any right to be.

What to Do?

No new advice here, at least as far as veteran readers are concerned. But my suspicion is that very few of you have acted, even if you understand why you should act. Peer pressure (I'm confident that you have few, if any, friends, relatives or associates who think along these lines) and inertia are powerful forces.

That said, you should do the following.

  1. Maintain significant bank and brokerage accounts outside your home country. Consider setting up an offshore asset protection trust. These things aren't as easy to do as they used to be. But they'll likely be much less easy in the future.
  2. Make sure you have a significant portion of your wealth in precious metals and a significant part of that offshore.
  3. Buy some nice foreign real estate, ideally in a place where you wouldn't mind spending some time.
  4. Work on getting official residency in another country, as well as a second citizenship/passport. There's every advantage to doing so, and no disadvantages. That's true of all these things.

One more thing: Don't worry too much. All countries seem to go through nasty phases. Within the lifetime of most people today, we've seen it in big countries such as Russia, Germany and China. And in scores of smaller ones – the list is too long to recount here. The good news is that things almost always get better, eventually.

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suckerfishzilla's picture

I'm staying put.  Let the bankers leave. 

traderjoe's picture

I'm kind of tired of these articles that discuss foreign assets and bank accounts. From what I've read, Community is the first word in surviving a SHTF episode. So, have your money local, where you can see, feel, touch it. Apartments, farms, real estate, commercially relevant skills, barter goods, supplies, etc. You want to lose money quickly - put it into a foreign bank account and then have the SHTF. You think you'll actually be able to go get it? Ha!

iDealMeat's picture

I wish I could have the 2 minutes back that I wasted reading this crap..

 

Rainman's picture

me too...I already live in a foreign country...people's republik of Kali

J U D G E M E N T's picture

I did not even waste 2 minutes...

CompassionateFascist's picture

No, I think Casey's analysis of the why's and wherefore's is well-done, if obvious. But U cannot run away from the ZOGlobalists. This is a zero-sum game. Either Zion will violently gulag the planet, or we will defeat them via similar means. I have no particular expectation as to outcome or personal survival, but it will all be most interesting. Invest in lead. 

MillionDollarBonus_'s picture

 

I was watching Saturday Night Live last week, when it occurred to me just how isolated and uncool libertarians really are. Here I am, feeling part of a community with awesome TV personalities and hilarious witty TV hosts, while lonely doomer libertarians cry about ridiculous end-of-the-world conspiracy theories. It’s quite sad really. Here’s just a small list of cool people that are vehemently opposed to libertarianism:

1.      

Brad Pitt

2.      

George Clooney

3.      

Angelina Jolie

4.      

Snoop Dogg

I feel sorry for libertarians. Not only are wrong about economics and morality, but they are also uncool.

 

Renfield's picture

hehehe

I thought 'cool' was officially declared a rayciss term now?

Anyways. Voted up for snark.

Pure Evil's picture

The word "cool" is the most overused word in American culture.

If kiddie juice drinks are considered "cool" than what isn't "cool" nowdays.

I guess even a turd blossom can be cool, and I can only guess that you'd know about that personally, wouldn't you MDB?

Golden Balls's picture

"The word "cool" is the most overused word in American culture." sure its not "Let me tell ya sumthang"

akak's picture

The "uncool", from high school onward, have consistently been those who have made the most of their lives, led the most well-adjusted lives, and contributed the most to society via their hard work and dedication to such "uncool" endeavors as science, philosophy, engineering and medicine, while the "cool" become fat former football-playing couch potatos and garbage men, drug dealers, self-destructive celebrities and general wastrals.

One has to question the worth of any society which places value on those who undermine it the most.

SemperFord's picture

The "uncool" people during my high school years were the Mopar guys so unlike the Chevy and Ford guys, they rarely got laid.

I do agree with the rest of your comment though.

neidermeyer's picture

That's racist ... everyone knows that MoPars factories were almost 100% black ,, they were located in the worst sections of Detroit.

GeezerGeek's picture

Most of the MOPARs I owned (64-68-71-74-84-98) were assembled in Canada. Zero quality. Let me rephrase that: quality equated to the square root of -1. Great engineering, however.

toady's picture

Jocks & freaks in the Northeast, circa 1979

Arnold Ziffel's picture

The U.S. Conference of Mayors, meeting in Orlando, Florida, on Saturday unanimously endorsed "parent trigger" laws aimed at bypassing elected school boards and giving parents at the worst public schools the opportunity to band together and force immediate change.

 

Such laws are fiercely opposed by teachers' unions....

 

http://www.reuters.com/article/2012/06/18/us-usa-education-trigger-idUSB...

prole's picture

Yeah I'm sure that'll work. What are they going to do- fire every black teacher?

Demand to double the taxes, on themselves? lol Fvcking idiots.

It's like giving the inmates of the Gulag the right to vote, on how much and how often to increase the whippings.

HoofHearted's picture

I'm sure MDB thinks that guy is totally uncool. Me- I tend to disagree.

TWSceptic's picture

There's a reason those people are actors, they're not very good at anything else including economics.

Marginal Call's picture

They're actors because they are talented (for the most part).  There are no talented economists.  Just bullshit artists with opinions that have the accuracy of a broken clock. 

sitenine's picture

I would trust the broken clock over an economist.

prole's picture

You can trust an Austrian Economist to tell you the truth Comrade.

AND- 90% of the 'actors' are there because of who their fathers are, n'est pa Madam Pompadour/Jolie? What's that fvcking idiot son of Donald Shalom Sutherland? That 24 Troll? #Winning!

GeezerGeek's picture

Family occupations aboud, and not just in acting. Look at auto racing (Petty clan, Andretti clan, on and on) and, worse yet, politics. Cuomo. Clinton. Kennedy. Bush.

It's not what you know, but who you know.

Floordawg's picture

I don't know about #'s 1-3 (and don't give a shit either), but #4, Snoop Dogg is a Ron Paul supporter... so your wrong there.

Bolweevil's picture

A to the motherfuckin' K homeboy.

GeezerGeek's picture

Brad and Angela are big gun supporters. I know because I saw them blasting away in a movie together using Smith as an alias.

Everybodys All American's picture

When the shtf that list will be on the first lear jet out of here and for good reason of course (for the children).

Normalcy Bias's picture

MDB's troll-fu is m e l t i n g ...

The Gooch's picture

Fuck! I'm going to get some "Just For Men", "Grecian Formula" and some cool, new duds @ JCP!

IndicaTive's picture

MDB, I posted a couple of months ago that your finesse was slipping IMHO.  http://www.zerohedge.com/news/guest-post-you-aint-seen-nothing-yet-part-one#comment-2309764

Seems like you're getting it back. So thanks FWIW.

tocointhephrase's picture

MDB your free to make comment, hence you are too a libertarian! How cool lol

BeetleBailey's picture

Man, are you twisted. Keep worshipping the douche-list, douche.

You are easily amused - something your leaders figured out years ago; appease the masses (your fucked up community) and brain-wash their pea-brains with bullshit.

It's worked "wonders" on you.

Renfield's picture

@traderjoe: Agree. Your comment was better than the article IMO.

Don't know why some "foreign" country is going to be any more stable than "home", no matter where your home is. Foreign assets are a lot easier for governments/banks to seize, than those of nationals. (Foreigners don't get a vote or much of a voice.) Globalization has, ironically, made "stay local" the only real economy for most of us.

andrewp111's picture

If you have a job that requires a US Security Clearance, just try and get a foreign citizenship. You will lose your livelihood really fast. In the current environment, anyone with a decent job will want to keep it. Taking stupid risks is well... stupid.

FeralSerf's picture

The Jooze don't seem to have a problem getting a U.S. security clearance.

TWSceptic's picture

Doug Casey is right. Why do you think all these rich investors have places outside the US? You think they just don't like it in the US? Of course not. They know what's coming and they know it will not be safe anymore. I'll be interested in seeing how your community is going to deal with riots, food shortage, crime, government arresting people here and there... and you in the middle of it with your gold and silver and food reserves. That 'supporting community' of yours will soon turn into your worst enemy.

flattrader's picture

>>> They know what's coming and they know it will not be safe anymore.<<<

Holy freakin' gawd...like foreign countries don't have riots,, food shortages, etc...

I've been in two foreign riots, two separate countries.  Fortunately, they were more interested in killing each other than Americans on both of those days.

>>>Why do you think all these rich investors have places outside the US?<<<

Moron, the operative word here is "rich" not "outside."  The truly rich can be "safe" until the money runs out...or their money doesn't matter anymore...and when the latter happens, they are not "safe" anymore regardless of where they are.

sethstorm's picture

No amount of money will protect someone from a superpower like the US.

The Navigator's picture

AND, if you think you can hide from EMPIRE, there's not many corners of the earth that you can hide in - the EMPIRE is everywhere - and always asking who you are - they need your productivity and taxes thereon.

unununium's picture

Doug Casey is just a big enough part of the status quo that he wants it to remain, believing he is smart enough to do "better than the average Joe."

Capital accumulation and technology. Agreed. Progress comes in two forms. What we've built and what we've learned. Question is, Doug, have you built anything or taught anyone anything?

prole's picture

That is pretty superior sounding talk there unim, do you walk on water?

In this world it is hard enough to put food on the table, and a roof over your head/children's head, (without stealing it from someone else) who are you to judge someone based on your definition of perfection?

Sean7k's picture

Well said Traderjoe,

Good to read some common sense and more, the realization that countries do not completely fall apart (as Casey intimates) and that local communities are where our greatest strength and security reside. The global disaster story is getting old. Maybe Casey just wants to sell some more worthless Argentinian land...

Winston Smith 2009's picture

"You want to lose money quickly - put it into a foreign bank account and then have the SHTF. You think you'll actually be able to go get it?"

For US citizens, the safest place to keep your money is in the US.  His recommendations would be valid if you were living in one of the PIIGS.

FeralSerf's picture

The US may become one of the PIIGS.  From a balance sheet standpoint, some of the PIIGS actually look less insolvent.

Bolweevil's picture

USPIIGS. As in, "Us pigs are happy living in our squalor. Together."

Rasna's picture

These guys are all the same...

sarc on/ First I'll scare the SHIT out of you by telling you that the sky is falling, and then you will break out in hives and boils... Nowm for a reduced price of only $200 I will save you and your IPad... This offer lasts for only a short time and the price sill revert back to $595 fo the one year subscription.

BTW, by following our advice, you are guaranteed to get onto the Homeland Security "No Fly List", so you will never get to see your offshore accounts. /sarc off

There was a guy in the 70's - Howard Ruff - who made a fortune peddling his newsletter - The Ruff Times.  We followd his advice and filled our basement with hundreds of pounds of whole soybeans, wheat corn, rice, MRE's, dry milk, a grain mill and food dehydrater.  The Mormons made a fortune off of us.  The freezer was filled to the brim with 2 sides of beef, lamb, chicken and anything else that could be frozen.  After Volker, We ended up donating most of the food to a shelter.

Yes things are serious and we can be prepared, but guys like Casey, Sinclair and the others are in the Newlsletter business... Their marketing strategy is to stir up the bottom of the pond and then prey on the fear and rake in the dollars...

I get better info on ZH than these jokers gin up...  Join the Boy Scouts and Be Prepared.