Wealth International, Limited (trustprofessionals.com) : Where There's W.I.L., There's A Way

W.I.L. Offshore News Digest :: April 2010

This Month’s Entries :


Carter Clews introduced Nicaragua to his Clews’ Views column readers this past September. His summary conclusion might be summarized thusly: Beautiful places, cheap prices, nice people ... only problem is X-factor Daniel Ortega, the once but hopefully not future dictator. Having been elected, Ortega persuaded the country’s Supreme Court to gut the Constitution’s term limit law. Does not sound great on the surface.

What does Clews say now? Despite the country being run by “an unregenerate Marxist,” he thinks the price is right – thanks to Ortega, who has scared off investors and buyers – for “ prime real estate in one of the most beautiful locales in the Western Hemisphere, if not the entire world.”

So you pays your money and takes your chances. Maybe the risk/reward ratio is good, but what about the absolute risk in and of itself? According to a Clews contact: “Nicaragua is a country with a huge perception problem. But if you look at substantive reality you’ll quickly find that the country is very pro-private property and pro-foreign investment. ... What really matters for retirees is quality of life and that has gotten better these past 3 years.”

Nicaragua, as Churchill said of the Soviet Union decades ago, is “a puzzle inside a riddle wrapped in an enigma.”

It is a land of unparalleled beauty, impeccable people, and inestimable potential. Yet, it is also a land haunted by tragedy, crippled by poverty, and mired in the throes of yet another unresponsive, unrepresentative, and repressive government. To paraphrase Dickens, it is the best of nations and the worst of nations, embodying at once the spring of hope and the winter of despair.

I first wrote of Nicaragua nearly a decade ago when Arnoldo Aleman was president. Then, the nation was booming with investment and brimming with dreams. Violeta Chamorro (Latin America’s first female president) and her “Glorious Revolution” having scored an upset electoral victory over the Daniel Ortega’s horribly oppressive Marxist Sandinistas, freedom seemed firmly entrenched.

The piece I wrote tracked the breathtakingly beautiful resort communities springing up almost overnight along what was then known as the “Pacific Riviera.” From Leon in the north to San Juan del Sur in the south, some 20 resorts dotted the map, each a beckoning haven of cresting waves, pristine beaches, and the welcoming warmth of an endless summer. Writing the article was a labor of love. And I often wonder what became of them all.

By 2006, despite the economic and political vicissitudes inherent in any newly formed democracy, Nicaragua was, in my opinion, set to emerge as the single best investment in Latin America. And I was deeply pleased.

Costa Rica had long-since ceased to be the golden opportunity it had once been, with property values rapidly rising and many of the pensionado benefits it once offered slowly being modified or revoked. Panama had rightly emerged as the “next Costa Rica,” but even there, an influx of tourists and high-ticket investors (such as The Donald, himself) had begun to trigger a rise in prices and the subsequent evanescence of opportunity.

And then, there was Nicaragua – perfectly beautiful, perfectly priced, and perfectly positioned to be the next investment opportunity bonanza. I recently came across that piece I wrote way back when about the Pacific Riviera. And, it still warms my heart.

It painted a palpably provocative picture of Nicaragua as a land that had “traced the rainbow through the rain.” A rather poetic picture (if I must say so myself) of a land that had emerged from the ashes as a beacon of hope and tranquility; a land where the price was right for a new beginning

Nicaragua, I averred, had (and, in fact, still has) it all. Which is why U.S. News & World Report had just named it one of the world’s 10 best places to retire, adding, “It’s a hot new travel destination and expatriate haven.” Conde Nast Travelers had enthused that Nicaragua “is poised to attract a new generation of travelers with its vibrancy and variety. It is still a little rough around the edges, but has a world-class lake, miles of empty beaches, and land is still a BARGAIN” (their caps, I should add, not mine).

In Nicaragua, now, as then, you will find Central America’s two largest rainforest reserves, teeming with more than 15,000 species of exotic wildlife and 250,000 species of fragrant, flowering plants. And you will find six active volcanoes, three of which still tremble under your feet as your ascend their verdant peaks.

You will find quaint colonial towns with centuries-old homes surrounded by iron-railed patio gardens lush with tropical plants. And you will find hundreds of miles of pristine beaches washed by the warm waters of the deep blue Pacific to the west and the turquoise Atlantic to the east.

For those (like me) who love the bright lights of the big city, you will also find one of Latin America’s most festive, fun-filled venues: Managua – the capital of the country, the heart of the nation.

All but leveled by an earthquake in 1972 ... strafed by its own national guard in 1978 ... and left to stagnate under the Sandinistas, Managua has risen Phoenix-like from its own ashes, its past problems containing the seeds of their own solution. Its once terribly depressed economy has served as an open invitation to investment. Today, even its most expensive locales are entirely affordable when compared with other capitals like San José or Panama City. And they are a fraction of the cost of New York or Miami.

That helps explain why Managua is fast becoming a city transformed. From the open air restaurants of Rotonda Bello Horizonte to the lakefront Malecon and old Cathedral ruins ... from the grandeur of the El Teatro Ruben Dario opera house to the excitement of Denis Martinez National Baseball Stadium – change is almost palpable in the air.

On Carretera Masaya, the highway heading south from Managua, the Plaza Familiar mall features a gourmet coffee shop, a Sushi Itto franchise, a nightclub and a bank. A short distance away, the Galeria mall houses name brand anchor stores and a state-of-the-art cinema. And the nearby La Colonia superstore has all that any tourist could want, including Haagen Das ice cream.

Throughout the area, major free market reforms have drawn in top corporations including McDonalds, Liz Claiborne, TGI Fridays, Osh Kosh B’gosh, Payless Shoes, Kodak, Benetton, Burger King, Radio Shack, Domino’s, and more.

As the Wall Street Journal noted, “Suddenly, Managua has a skyline. New hotels and shopping centers – with elevators, and even escalators – have sprouted in a capital flattened by a 1972 earthquake and laid low by failed socialism. Arco gas stations, Pizza Huts, and McDonald’s golden arches rise from the gentle hills. Once a live-fire franchise of the Cold War, Nicaragua and other Central American countries have embraced franchise capitalism.”

With the lowest crime rate of any Central American city, and a ready-made population of more than one million consumers, Managua is becoming a magnet for savvy investors.

With the lowest crime rate of any Central American city, and a ready-made population of more than one million consumers, Managua is becoming a magnet for savvy investors. And it is a haven for expats and transpats looking for all the conveniences of home – at a fraction of the price and a smidgeon of the stress.

But, I know that most Clews’ Views readers are not like me – a city guy more at home on a crowded crosswalk than a pristine beach. When you think of the Caribbean, you do not conjure up sugar-plum visions of “city sidewalks, busy sidewalks, dressed in holiday style.” Like Rick in Casablanca, you come for the waters.

So, let’s get back to the beaches, and why I am recommending that you now consider investing in a country admittedly run by an unregenerate Marxist.

Simply put: the price is right. Daniel Ortega may not be my idea of the ideal neighbor, but one advantage of his glowering, gloaming presence is that – rightly or wrongly – he has driven down investment and driven off buyers. And that means you can still get land in Nicaragua for a fraction of what I predicted 10 years ago that it would now be selling.

And remember: I am not talking about distressed properties or handyman specials. I am talking about prime real estate in one of the most beautiful locales in the Western Hemisphere, if not the entire world.

This hit home with me when I recently received two promotional pieces, each from well-known entities I have grown to respect over the years. They were writing about investment opportunities, and I have been in this business long enough to know when it is time to tell you about what I consider a good deal. Ironically, both promo pieces were about the same resort development: beautiful Gran Pacifica, on the Pacific Riviera, one of the developments I first wrote about 10 years ago.

Now, please, before we go any further, allow me to remind you of two important criteria for any Clews’ Views recommendation. First, the Clews Full Disclosure Disclaimer: I do not make one red cent off of any property I recommend. Second, the Clews Caveat: Particularly with offshore properties, you buy what you see. That said, here are the opportunities I think you might want to explore.

The first came from a promo for the area of Gran Pacific known as Milagro del Mar Beach Club.

Right now, you can get a 2-bedroom, 1,466 square foot condo, with an exquisite ocean-front view for just $299,990 – a full $25,000 below the usual price. Or, you can get a three-bedroom, 2,553 square foot condo, with volcano, golf course, and coast views for just $309,990 – $40,000 below the regular price. The homes could cost millions stateside.

The second Gran Pacifica opportunity came from the Caye International Bank, offering reduced prices on properties that might be too good to pass up – especially for those, like me, who want to buy in low. For example, you can get a nearly 5,000 square foot lot, just two and a half blocks from the beach, that usually sells for $69,000 for just over $30,000. Or, you can get a 10,000 square foot lot, with a golf course view, for the same price.

Clearly all of those are great deals. As I wrote of Gran Pacifica in my original article a decade ago: “Imagine a luxury oceanfront city with miles of sandy beaches, palm trees waving under azure skies – and a modern cornucopia of shopping malls, movie theaters, supermarkets, casinos, nightclubs, bars, spas, and trendy restaurants. And then throw in a 27-hole designer golf course. Welcome to Gran Pacifica.”

For me, in fact, the only possible drawback to taking advantage of these opportunities – as well as others throughout Nicaragua – can be summed up in two words: Daniel Ortega. Under the country’s Constitution, he was term limited out of the presidency in 2011. And then, he prevailed upon the Sandinista Supreme Court to gut the law. So now, he can be a Chavez-type “president for life.”

What might that mean for you as an investor? Well, I asked Mike Cobb, the developer of Gran Pacifica and a very dear and trusted friend. Here, verbatim, is his straight-from-the-shoulder response:
“Nicaragua is a country with a huge perception problem. But if you look at substantive reality you’ll quickly find that the country is very pro-private property and pro-foreign investment. Politics is like theatre here. People say what makes the headlines. Law making is what counts. A very pro-private property coastal law was passed in 2009 along with a very favorable retirement law. Both passed at the urging and support of the current government.

“What really matters for retirees is quality of life and that has gotten better these past 3 years. The electricity is more reliable, the roads have fewer potholes, and generally the process for paperwork in the bureaucracy has improved. Of course one should always use enhanced due diligence when purchasing property outside North America. We have 15 questions that help protect you from most of the major hurdles. You can request a free copy from 15questions@ecidevelopment.com.”
That is it. Now, it’s up to you. Would I invest? Yes, I would, and probably will. Nicaragua may be “a puzzle inside a riddle wrapped in an enigma,” but it is also as near as most of us are likely to get to the Garden of Eden. And even “presidents for life” do not live forever.

Read the source article.


Just a 3-hour flight from Atlanta.

There is nothing is this article about how easy and cheap the living is in El Salvado, a country that was referenced in these pages early last year and then in December. Instead the author attempts to evoke how dynamic the business environment is there. The people there are “desperate to own and trade goods and services,” and still trying to shed the reputation left from the civil war which ended 18 years ago.

Just how dynamic is encapsulated in this example: “[Three large shopping malls] are all located next to one another along the Pan-American Highway, the major artery that bisects El Salvador. ... [T]his proximity caused a traffic nightmare. Not content with the state’s timetable on traffic improvements, the mall owners themselves paid for an ingenious series of bridges and overpasses that relieved the congestion. State highway workers performed the actual construction but it was a round-the-clock operation that could have taken years to finish without private intervention.”

Imagine that happening in the U.S. On the hand, better not. You might hurt yourself. “Visit El Salvador,” the writer counsels. “Enjoy its beautiful beaches and mountain scenery. ... Above all, witness the true beauty of an almost forgotten art, that of the country’s people and their keen efforts to get ahead.”

We would point out that the sea coast referenced is the Pacific coast. It gets plenty hot there, but the climate is a lot drier than on the Caribbean side of Central America ... for those who might be tempted to move there.

El SalvadorIn the years since the end of its civil war in 1992, El Salvador has developed an amazingly vibrant economy. There is good reason for this and Peruvian economist Alvaro Vargas Llosa describes the situation perfectly. In El Salvador people are “desperate to own and trade goods and services.” Salvadorans are hard working and friendly people and here individuals from all walks of life are busy trying to get ahead. Most seem weary of politics and wish to move beyond the troubled past. El Salvador really has two economies, especially in the capital, San Salvador. One economy features upscale shopping malls and exclusive beach hotels. The other exists on the streets of the city. Despite the pressures of a worldwide economic downturn, people in both sectors are making heroic efforts in the pursuit of free enterprise.

San Salvador has a dynamic business community. One trip down the street that bisects the city’s central shopping district, known locally as El Paseo, is proof of this phenomenon. The street is lined with restaurants, nightclubs, shopping centers, home stores, supermarkets, and shops of every description. The cornerstone of El Paseo is the Gallerias Mall, a rectangular three-story shopping center actually constructed around a historic house. The Gallerias food court is an international dining experience. One can feast on sushi or McDonalds, tacos or Pizza Hut. The shopping center caters to an endless stream of customers seeking luxury goods and the best coffee in the world.

A mile or two from the city center are three large shopping malls. The first, Las Cascadas, has a store so much like a Wal-Mart that it is actually now owned by Wal-Mart. The place is crowded with customers, day and night, seven days a week. Best of all, every line, more than twenty in all, is open, cashiers at the ready. Retired people bag your groceries. Printed on the backs of their shirts is this motto: “I am here to serve you.” Another mall, La Gran Via, is a luxury goods haven with a vast plaza, fancy clothing and shoe stores, an ultra-modern cineplex, and such well-known chain restaurants as Bennigan’s and Benihana. A third, Multiplaza, is a three-story architectural marvel. Its soaring atrium has escalators large enough to accommodate grocery store shopping carts. Multiplaza is anchored by high-quality department stores and has countless specialty stores, bars, coffee shops, restaurants, cell phone kiosks, pharmacies, and a first-rate supermarket. All three of these malls have multi-level underground parking garages that feature hand car washing while you shop.

Since entrepreneurs here can pretty much locate a business wherever they please, these malls are all located next to one another along the Pan-American Highway, the major artery that bisects El Salvador. As one could imagine, this proximity caused a traffic nightmare. Not content with the state’s timetable on traffic improvements, the mall owners themselves paid for an ingenious series of bridges and overpasses that relieved the congestion. State highway workers performed the actual construction but it was a round-the-clock operation that could have taken years to finish without private intervention.

Outside of San Salvador are factories where workers sew garments from pieces shipped in from the United States and elsewhere. El Salvador is ideal for this type of manufacturing. San Salvador is just a 3-hour flight from Atlanta. In addition, the country has a willing labor force and the latest technology. El Salvador can thus compete with China on the basis of turnaround time. New orders can be processed and shipped in a matter of weeks, not months in the case of China. This is highly important in the ever-changing garment industry. El Salvador’s textile factories have also fueled additional development. The suburban town of Lourdes, ten miles from the capital, is a manufacturing hub. Lourdes has experienced an explosion of related construction – shopping centers, apartment complexes, supermarkets, gas stations, movie theaters, and hundreds of new moderately-priced single-family residences. The area is so busy that traffic often slows to a crawl on the “Carratera Panamericana.”

Another vital aspect of El Salvador’s current economy is tourism. It has been a tough sell, given the years of civil war and bad press (or NO press), but this is beginning to change. For example, the country’s beaches are becoming ever more popular as destination spots and are engines of economic activity. Posh restaurants overlook breathtaking Pacific Ocean views. New “all-inclusive” beachfront hotels have the most modern facilities and, better still, provide thousands of jobs for Salvadorans. The coastal area is gorgeous year round and cries out for more development. This is already evident on the main highway to the port of La Libertad, the hub of El Salvador’s beach scene just 45 minutes from the capital. There are lots for sale and houses are going up. On either side of La Libertad’s main drag are mom-and-pop surfboard shops, “surfer-friendly” motels, and internet cafés. El Salvador’s near-constant “break” has become the best-kept secret in the international surfing community and the beach is less than an hour away from the international airport. Needless to say, the La Libertad area is famed for its high-quality fresh seafood.

The “informal” economy is equally dynamic. Vendors are endlessly on the make in San Salvador. Talk about human action! The city center is literally jammed with "informales" selling all manner of goods, giving the historic part of a town a jostling, casbah-like feel. Men and women sell flowers, cigarettes, fruit, pirated DVDs, lottery tickets, newspapers, car parts, flags and maps of El Salvador, clothing, even furniture and household appliances. Services include shoe repairs, barber shops, nail salons, and sidewalk clothing alterations. In the “centro,” dealers offer a wide array of inexpensive goods and services in an area near major bus terminals. These vendors are convenient for a multitude of people streaming into the capital city from all parts of El Salvador.

In every neighborhood, men hawk fresh bread from bicycles with oversized baskets. The same goes for ice cream, sold from pushcarts and announced by the gentle tinkling of a bell. Add to this the makeshift stands where women set up propane tanks and griddles near bus stops and construction sites to sell “pupusas.” The pupusa is the national staple, invariably described in the guidebooks as “a small tortilla stuffed with beans and cheese.” This description does not do justice to the pupusa. It is a delicacy that is, in itself, a reason to live in El Salvador.

San Salvador’s street vendors are highly resourceful and creative. Merchandise varies according to the season. During one rare cold snap, hawkers appeared with sweaters, stocking caps, and blankets. They found numerous customers at the bus stop on Redondel Masferrer, a busy traffic circle at the top of El Paseo. Around Independence Day, El Salvador flags are available at every street corner. Similarly, whenever the national soccer team plays a match cheap knock-offs of the official team jersey appear as if by magic. Near Mothers’ Day one can find roses of every variety. For the “Day of the Cross,” vendors will sell you not only a small hand-made wooden cross, but all the paper decorations needed for traditional backyard displays. Some street entrepreneurs are superb entertainers. Jugglers, clowns, and mimes appear regularly at an intersection in San Benito, a residential neighborhood a mile or so from the city center. One man does a fire-eating act – while standing on 5-foot stilts. He has an assistant to collect the spare change from passing motorists.

Another aspect of the Salvadoran scene is the painted wooden bric-a-brac known locally as “artesenia.” These Salvadoran knickknacks are good business and their production is an object lesson in free enterprise. There is an artesenia shop in every market and in all the ritzy malls. The undisputed king of artesenia is Fernando Llort (pronounced “Yort”), who started an artist colony in the northern town of La Palma. His operation, though simple, has been a huge success. Llort creates the original designs and his employees mass produce the items for sale. His designs have been adopted as the semi-official symbols of El Salvador and even adorn the fašade of the national cathedral. In addition to his artesenia operation, Llort maintains “El Arbol el Dios,” a high-end art gallery with a brand new location in the posh section of San Salvador. There one can find his original paintings and drawings, some of which fetch thousands of dollars. A multitude of other styles of artesenia is available. One can go the backpacker route at the Artesenia Market near San Benito and haggle with assorted vendors. But why bother when one can find the same merchandise at the same price at an air-conditioned shopping mall?

Artesenia quality varies, beauty clearly being in the eye of the beholder, but most is fairly inexpensive and make great gifts for the folks back home. One thing of real beauty, however, is Salvadoran entrepreneurship. Visit El Salvador. Enjoy its beautiful beaches and mountain scenery. Go to the shopping malls and take a drive down El Paseo. Above all, witness the true beauty of an almost forgotten art, that of the country’s people and their keen efforts to get ahead.

Read the source article.


Here are some general tips from an Escape From America Magazine editor on how to live cheaply abroad. Mostly it is common sense. Start by figuring out where your money will go furthest. (She suggests that those really tight on funds consider India, the Philippines, Costa Rica or Nicaragua; Malaysia, Argentina, Brazil, Panama or Belize can be added if you have a little more to spare.) Once you have moved, start looking for opportunities that use your skill set in ways valued by the local people. Learn to live – and buy – as the locals do. Be prepared to shed your established way of doing things in favor of adopting new ways from your new home which work better and cost less.

Whilst we can all sit and dream of a perfect life living overseas on a beautiful Caribbean island, surrounded by luxury and splendour, the reality for most of us is that we would have to win the lottery to achieve a lifestyle like that. Despite this fact however, there is nothing stopping any of us from achieving a better life abroad – even if we currently live on a fairly tight budget!

The fact of the matter is, there are places where your current budget will stretch much further, there are places where you can perhaps increase the amount you have to live on each month, and there are some excellent expatriate tips that will see you living very well for whatever you have to spend each month, because you will learn how to live like a local abroad.

In this report we want to show you that you do not have to be restricted by the financial constraints in your life – and if your dream is to one day escape from your current lifestyle and move abroad in search of adventure and fulfillment, money does not have to be a barrier in your way and holding you back.

Where Will Your Money Buy You More?

The U.S. dollar is in relatively good health these days, compared to the British pound and the ever more vulnerable euro – but whichever major currency you have in your pocket, there are places in the world where it can stretch far further. Britons looking to stretch their budget would be best advised against the eurozone at the moment, but Americans could certainly contemplate Eastern Europe if they want to buy more with their dollars. Countries such as Bulgaria, Romania and stunning Croatia remain very affordable if you are prepared to step off the beaten track for example.

Other countries such as those in the Central and Southern Americas or in Asia can offer a good choice for all. Consider India, The Philippines, Costa Rica or Nicaragua if you are really tight on money – or Malaysia, Argentina, Brazil, Panama or Belize if you have just a little more in your pocket and you want a bit more familiarity or accessibility in terms of your lifestyle.

Do your currency and country research, looking on forums and expatriate sites to compare the cost of living overseas to that which you are used to paying at home – find out where your currency will buy you more, and where your tight budget is actually a small fortune in the local environment. Such research will literally pay dividends and allow you to find somewhere where you can afford to live well abroad.

There are a number of resources you can use to help you choose a country based on the cost of living, both Mercer and the Economist Intelligence Unit provide cost of living indices; summaries of both appear on the Internet for free. Full access is extremely costly however, so try a relatively new resource called Numbeo.com for a free cost of living comparison.

You will need to look at rental costs, basic food and fuel needs and once you are sure you can afford the basics in life, anything you have left in your bank account or wallet at the end of the month will be a bonus that you can put towards enjoying life and getting the very most out of your new destination abroad.

What Can You Do to Enhance Your Budget

In your current hometown perhaps you are restricted by the local economy in terms of that which you can earn. Maybe there are few employers, few employment opportunities and you would have to travel too far to find anything in the way of gainful and well paying work. Maybe you are a stay-at-home mom who does not have the luxury of expensive childcare available to you because of the budget you have to play with each week – naturally, caring for your kids means you have limited time available to offer to an employer. Alternatively, perhaps you are living on a fixed pension income?

Well, it is incredible how moving country and really setting out and committing to changing your life for the better can move mountains in all fundamental areas of your life. It can cement relationships, forge new friendships, and it is an undertaking that can certainly open your eyes to a world of new opportunity.

Moving abroad seems to knock the blinkers off even the least blinkered people you know! In other words, you will find that by living overseas you will suddenly be able to sniff out and even create opportunities where once perhaps you would have seen none ...

As a foreigner abroad you may be able to bring new skills and new experiences to the local people that they will pay or barter and swap to learn. You could swap English language lessons for a friend’s children after school for her babysitting your own children by night to allow you to go out and work a bar job occasionally. You could perhaps teach the sewing, cooking or homemaking skills you take for granted at a local college or school for much valued cash.

Maybe you could see an opportunity for importing something from your old home nation for sale to the new local community. Or, conversely, maybe there are crafts or goods that you can work with someone in your old home nation to export and sell on for profit?

If you find you move to an area of high seasonal tourism, maybe you can secure a seasonal job doing anything from acting as a tour guide to an entertainer in a tourism hotel. Alternatively, find out if there are there cash paying jobs available to those willing to help with a local harvest. Or could you write about your experiences abroad and sell your works to travel resources online of offline?

People often find that because they are no longer fettered by social constraints once they relocate, they can be far freer, far more open, creative and even pushy when it comes to requesting employment, or creating opportunities for paid work.

How Can You Make Your Money Stretch Further Abroad

Having identified a country you can move to live in and afford a decent standard of living, and perhaps having worked on ways you can enhance your budget, it is time to explore some expatriate tips for living well on a tight budget – by learning to live as the locals do!

Never shop where the tourists shop – no matter how easy it seems to go to the local supermarket and fill your basket with named and known brands, you will be paying a massive premium for so doing! Set tolearning the local language and get out and practice it, take a phrase book or dictionary with you, and head for the local market, the local butcher, baker and greengrocer. As long as you do not turn up at their busiest time and practice your new language skills on them, you will be amazed how positive and happy they will be to see you making a real effort to fully integrate.

Give it time – don’t expect friendly faces and customer loyalty perks immediately. But if you use the same shops and work hard at perfecting at least the basics of the local language, after a couple of months you will be enjoying the better prices and better deals.

If you are going to purchase a big price tag item such as a new sofa, refrigerator or even perhaps a car, it pays to have some local knowledge, some local language skills and some bartering experience too. It can, in fact, make sense for you to take along a trusted local friend or colleague to help. Just as you would back home, make sure you shop around, ask for a discount, and then state the most that you are willing to pay! Don’t be too forward or the shopkeeper/salesperson will think you are rude and turn their back; but do be open, rather than cocky, and show that you are really in the market and just want to find a good deal. If you can pay in cash you will find most places will be far more willing to give you a generous reduction in the cost of large purchases especially if you are buying more than one item.

If you are moving to a very different climate than the one you are used to, you are going to need to acclimatise to economize! Those who move to hot countries and live in air-conditioned “comfort” will soon rack up a massive electricity bill for example. So, buy a fan, leave windows open, favor mosquito nets and blinds to a sterile, cold, air-conditioned reality and you will save massively on fuel.

At the same time, if you relocate somewhere colder, layer up, wear a hat, watch how the locals cope with the weather and find ways to save on fuel by perhaps having an open fire, and working to earn wood to burn on it at a local farm where they maybe have scrap wood lying around that you can legitimately take home with you at the end of the day.

The Number One Tip for Living Well Abroad on a Tight Budget

Perhaps the number one tip available, and the one that really sums up all that has been written above, is be adaptable when you relocate abroad. Don’t take all your old ways, beliefs, customs and habits with you – be prepared to change, to learn, to find ways around and ways forward, open your mind and see opportunity rather than obstacles. Those who are open, friendly, positive and adaptable will find it far easier to make good and lasting, true friends abroad, and through these contacts your life will be enhanced as well.

Read the source article.


We are always find it interesting to read articles by others on asset protection. The basic concepts presented are almost always the same, as they should be. There are usually slightly different emphases or spins. You never know what you might learn from seeing a slightly different perspective.

Here the writer, a writer and editor for Escape From America Magazine, seems to be most concerned with lawsuits and predatory lawyers. Whether that is due to direct experience, hearing the experience of others, or essentially arbitrary we do not know. Based on what we at W.I.L. have seen first- or secondhand, we find the threat of government forfeiture-type action a somewhat more compelling threat than private party lawsuits.

Any threat assessment is just an educated guess until an actual threat materializes. And whatever the specifics of the assessment, the appropriate asset protection measures which help deal with one threat will work well against most every threat.

Asset protection as a basic concept is very simple to understand: It is the protection of anything that you value.

However, the term “asset protection” in legal phrasing is used nowadays to specifically relate to techniques used for the protection of the assets of individuals and business entities, particularly from civil money judgments and financial litigation.

Asset protection is also intrinsically linked to the offshore business and financial marketplace, because there are those who utilize the different legal structures available around the world to protect their own or their client’s assets by means of “clever” positioning of the ownership of certain assets. The likes of trust entities, offshore corporations and partnerships can be used to hold legal title to an individual’s assets for example, thus making it more difficult for any potential creditor to go after said assets.

For you, perhaps as an expatriate with physical assets dotted around the world, or who perhaps works in a public facing role, who works in a position of trust, or who is a high net worth individual, an asset protection strategy could be well worth considering.

A word of warning before we proceed ...

Naturally, every individual’s personal and financial position in life is different, so no one asset protection strategy “fits all.” Therefore, before we go further and explore what the concept of asset protection could potentially mean for any given individual, it is necessary to state that if you are considering positioning your assets out of the reach of potential creditors or out of the reach of litigious action, you need to take professional and personalised advice before embarking upon any action.

Not only could you inadvertently embark upon a path that is not legal for you if you are not correctly advised based on your current position in life, and which could open you up to serious criminal charges, you could lay yourself wide open for those who are in the business of scamming and stealing from people searching for a legitimate offshore solution. Added to this is the fact that if you do not take professional advice, you could end up with a worthless but expensive strategy in place that has not protected you or your assets at all.

If asset protection schemes are potentially so risky, why would anyone consider one?

Unfortunately, in this day and age of increased litigious action and behaviour, where “no win no fee” lawyers almost encourage the taking of risky and ill-advised legal action, anyone who has anything to protect – from their reputation to their wealth for example – needs to consider the real fact that at some point in the future, they could be the subject of a law suit.

The more you acquire in life – in terms of assets or even your position as a professional – the greater at risk you potentially are. Those who work in a public facing role such as a teacher or an adviser, as well as those in the medical profession from doctors to dentists, are all sitting ducks and weak targets for anyone who feels in some way aggrieved.

Therefore, asset protection planning is an important consideration for increasing numbers of people. What is more, done properly under the guidance of expert legal help, risk is greatly reduced from any asset protection plan put in place.

What is asset protection planning?

Asset protection planning involves examining an individual’s position, and then determining and applying a lawful series of techniques to protect their assets, mainly from claims of future creditors, or even from a divorce settlement claim perhaps. Techniques utilized are basically designed to deter potential creditors from laying a claim against the individual in the first place, and frustrating any potential creditor sufficiently that they drop their action if they do initially initiate a claim.

The techniques generally make it as difficult as possible for future potential creditors to access, lay claim to, value or view an individual’s assets, or collect judgments against the protected person.

Retrospective asset protection is illegal!

It is very important to note and know that trying to apply an asset protection plan to secure yourself from any claim that has already been leveled against you is illegal. You cannot “hide” assets from a claimant once a lawsuit or claim has been brought – therefore, if you believe that you are in a vulnerable position when it comes to potential claims from creditors in the future, from an angry spouse or because of your position in life or your wealth, the sooner you get your assets protected the better.

You can leave it too late when it comes to the protection of that which you value – so don’t.

Why you need qualified advice every step of the way.

As stated, there are serious criminal offences related to the retrospective protection of assets, and should doubt exist as to whether you knew a claim was going to potentially be brought against you before you moved your assets, you could be entering a grey area of the law if you have acted without counsel in shielding your assets. This is a risk no one can afford to take.

Anyone who is simply at a point in their life where they have worked hard to achieve their position and their wealth, and who is well aware of the way society is going in terms of people taking zero responsibility and suing whenever a perceived wrong has been done against them, will want to take the right, careful steps towards securing that which they value.

Because well-placed and structured asset protection plans usually take legal ownership of assets offshore, complexity is introduced by the very fact that one is dealing with the legal and regulatory systems in different jurisdictions. It is therefore highly recommended that anyone embarking upon an asset protection strategy does so with the expert legal assistance of one who not only understands the law in all jurisdictions, but who understands what can and cannot be legitimately achieved.

Consideration has to be given to the individual who requires protection, to the assets needing protection, to the jurisdiction in which said individual resides and works, where assets are physically located, who needs access to the assets or who perhaps derives an income from assets and where that income is received. Further consideration needs to be given to where legal action could be brought against the protected person. With all facts detailed, an expert is then required to assess the facts and choose the best, most protected and applicable path.

As you can imagine, getting the right path in place every time, taking into account all the legal structures that can be used – from offshore trusts to international business corporations to partnerships – and taking into account an individual’s entire and complex personal situation, requires skill and professional experience. Do not attempt to buy an “off the shelf”’ asset protection plan, and know that you will require personal advice to find the right path.

In conclusion ...

There are very real and very legitimate reasons for anyone to want to protect their assets and their position in life. The reasons are increasing all the time. Those who are high net worth, who perhaps have assets in more than one country, who live or work overseas and who are therefore exposed to the legal systems in more than one country, or who believe that because of who they are, what they do or what they own could face an attack from a potential creditor in the future, may well consider getting an asset protection plan and strategy in place.

Legitimate and effective plans and structures exist – but they are bespoke and honed to suit the individual. What is more, they are often complex legal, layered structures. For these reasons, it is a fact that anyone considering protecting their assets should seek qualified, legal expert and professional assistance.

Read the source article.


Litigation costs consumed 2.3% of the U.S. GDP, or approximately $322 billion, and there is no end in sight.

We provide a medium-length introduction to the use of limited liability companies for asset protection in an appendix to our free report, Introduction to International Asset Protection. Here is a short introduction from another asset protection specialist, who shares our assessment of the power of a properly set up LLC as an asset protection device. He usefully points out that to obtain the promised asset protection benefits, the LLC needs to be from a state (or international jurisdiction) where the protections are explicitly incorporated into the LLC legislation. As he points out, California LLCs are worthless by that measure.

Our choice U.S. domestic jurisdiction is New Mexico, for reasons detailed in IIAP. New Mexico LLCs have the desirable characteristics given below, and come with a comprehensive operating agreement.

While we have found there are two main threats to your wealth, litigation and government intervention, the focus for today will be primarily on litigation. In 2008, there were nearly 1.2 million practicing attorneys in the U.S. alone and nearly 400,000 students in law school. Costs of litigation consumed 2.3% of the U.S. GDP, or approximately $322 billion, roughly equivalent to Switzerland’s total GDP. This is an enormous cost that businesses and wealthy individuals must bear with no end in sight. In this issue, we will discuss the benefits of an LLC and how it should be a core component of your asset protection planning.

The most widely used, and misused, form of business ownership around the world.

The Limited Liability Company, or LLC, traces its roots back to the German law of 1892 authorizing Gesellschaft mit beschrankter Haftung, or GmbH. Once established in Germany, other countries from all around the world followed suit. In 1977, Wyoming became the first U.S. state to enact a true LLC act modeled closely after the 1892 German GmbH code. Today, LLCs, or the local variation thereof, are the most widely used form of business ownership around the world. They are also the most widely misused.

Most entrepreneurs take great care in starting their company, but forget about the dual nature of asset protection and therefore neglect to properly structure their LLC. Not only do you want to protect your personal assets from the activity of the business, you also want to protect the business, and thus your income, from your personal activities.

This is where a properly structured LLC comes into play. If you are registering an LLC in the U.S. to conduct business and/or to own assets there are the 3 main considerations: Step one is to register the LLC in a state where a charging order by statute is the sole remedy for a creditor to collect distributions from an LLC. There are several states that only allow creditors a charging order as the sole remedy, but not all of those states are a good choice due to other factors like excise taxes or capital values tax. Due to the nature of the charging order (in the proper state), creditors are only entitled to distributions, but cannot force a distribution, take ownership of assets, foreclose on business assets, or be granted membership interest in the LLC. This means if your assets are held in a properly structured LLC, your creditor can only gain rights to your distributions, but as manager, you can elect to withhold distributions to member(s) leaving your creditor with a tax liability. In some states, like California, creditors can foreclose on business assets held in an LLC or even be granted a membership interest allowing them to gain control over the assets. You do not want to register in those states.

Simply making your assets invisible to public record searches puts up a significant roadblock.

Step two should be to register your LLC in a state that allows anonymous managers, or at least utilize a nominee manager. In most cases this veil of privacy is enough to keep the wolves at bay. Imagine getting into a car crash. Nowadays the first reaction of the “victim” is the grab their neck or back and claim an injury. Of course their attorney will run a public record search for your assets to determine his “payday.” If there is no fat piggy bank to smash, in most cases he will not pursue you beyond the limits of your insurance. By simply making your assets invisible to public record searches, this puts up a significant roadblock.

And step three is to make sure your operating agreement is rock solid. I cannot tell you how many entrepreneurs that cross my path who either have no operating agreement all, or the one they do have is so inadequate, they might as well not have one. At least 90% of the operating agreements we review for clients are completely useless. Most are 7-10 page boilerplate agreements that offer no asset protection whatsoever. That is just not enough space to spell out a contractual obligation. Ours is approximately 70 pages. The operating agreement is the contract between you and your business and is the first thing the court requires for guidance in dealing with your assets. In the absence of a good contract, you are at the mercy of the court should you find yourself to be a defendant. ... I will be discussing in a later article what constitutes a good operating agreement.

With proper asset protection planning, the LLC can be a very useful tool in minimizing your risk. There are many creative ways to use LLCs for structuring your assets like using a Nevis LLC to own your domestic LLC thereby giving you an additional layer of protection and making your assets completely invisible. You can also use a combination of LLCs to segregate business assets or strip equity from real estate using liens that you control. If you have any questions or would like to schedule your free 30 minute consultation, feel free to contact me either by email or phone. You can also sign up for our free weekly newsletter where I discuss tips and tricks on asset protection or sometimes just rant about politics and economics.

Read the source article.


U.S. citizens living or with assets abroad had best be aware of certain filing requirements.

U.S. citizens living abroad get a foreign earned income exclusion (earnings from wages or self-employment) of $91,400 for the 2009 tax year – enough to live like a king in low-cost locales such those in Latin America covered in these pages. One can take advantage of deductions geared towards those living in London, Tokyo and Hong Kong. But – big “but” – you must file a tax return to avail yourself of that exclusion. Similarly, to get a tax credit for foreign taxes paid (where a tax treaty with the U.S. is in place) you must file.

If at any time during the tax year your combined highest balances in your foreign bank and financial accounts ever equal or exceed $10,000 you must file a FBAR form with the IRS by June 30th for the prior calendar year or invite a penalty of $10,000 or more including criminal prosecution.

We are gratified that the author of this brief piece, an attorney and CPA who is an expert in international tax matters, chose to include a mention of group of rules we have expounded on elsewhere: “If you own 10% or more of a foreign corporation, LLC or partnership or are a beneficiary of a Foreign Trust ... you must file special IRS forms each year or incur substantial penalties ... if the IRS discovers you have failed to file these forms.”

If you get the idea there are lots of filing requirements for Americans living abroad who earn anything or have any financial assets to speak of, you are getting the right idea.

Expatriate Americans can easily feel like they have left everything behind when the left the USA, including their unilateral relationship with the IRS. That feeling is misleading. The IRS does not interpret things that way, and they are constantly working to make sure that their interpretation is honored. As the author warns: “In the past year the IRS has hired more than 800 new employees to audit, investigate and discover Americans living abroad who have failed to file all necessary tax forms.”

You better pay for your “protection”; otherwise an accident might happen.

If you are a U.S. citizen you must file a U.S. tax return every year unless your income is less than $9,350 (for 2009, lower for earlier years) or have self-employment and independent contractor net income of more than $400 per year. You are taxable on your world wide income regardless of whether you filed a tax return in your country of residence.

As an U.S. expatriate living abroad on April 15, your 2009 tax return is automatically extended until June 15, but any taxes due must be paid by April 15 to avoid penalties. The return can be further extended until October 15, 2010 if the proper extension is filed.

For 2009 if you are a qualified expatriate you get a foreign earned income exclusion (earnings from wages or self-employment) of $91,400, but this exclusion is only available if you file a tax return.

If your spouse works and lives abroad, and is qualified, she can also get at $91,400 foreign earned income exclusion.

You get credits against your U.S. income tax obligation for taxes paid to foreign country but you must file a return to claim these credits.

If you own 10% or more of a foreign corporation, LLC or partnership or are a beneficiary of a Foreign Trust such as a Fideicomiso in Mexico, you must file special IRS forms each year or incur substantial penalties which can be greater including criminal prosecution if the IRS discovers you have failed to file these forms.

Your net self-employment income or independent contractor income is subject to U.S. self-employment tax of 15.3% (Social Security) which cannot be reduced or eliminated by the foreign earned income exclusion unless you work in one of the few countries the U.S. Social Security Administration has a social security agreement with. If you live in one of those countries you must secure a required certificate to prove your exemption from U.S. self-employment tax.

If at any time during the tax year your combined highest balances in your foreign bank and financial accounts such as brokerage accounts, etc. (when added together) ever equal or exceed $10,000 you must file a FBAR form with the IRS by June 30th for the prior calendar year or incur a penalty of $10,000 or more including criminal prosecution. This form does not go in with your personal income tax return and is filed separately at a separate address.

We understand the foreign income tax laws and can coordinate your U.S. taxes with those you pay in your foreign country of residence to help you achieve the optimum tax strategy.

In the past year the IRS has hired more than 800 new employees to audit, investigate and discover Americans living abroad who have failed to file all necessary tax forms.

Often due to foreign tax credits and the the foreign earned income exclusion expats living abroad when filing all past year unfiled tax returns and end up owing no or very little US taxes.

Beginning in 2010 a new law is in effect which requires all U.S. Citizens report all of their worldwide financial assets if in total the value of those assets are $50,000 or more. Congress has left it up to the IRS to define what is a “financial asset.”

We will see how that gets interpreted. So far physical precious metals have not been so defined. We assume that over time it will be very hard to avoid reporting anything remotely fungible held in one’s own name.

Income from certain types of foreign corporations are immediately taxable on the U.S. shareholder’s personal income tax return. If your corporation only provides your personal services to customers you may have a Foreign Personal Holding Company which would cause all income to be immediately taxable to you.

If you own investments in a foreign corporation or own foreign mutual fund shares you may be required to file the IRS forms for owning part of a Passive Foreign Investment Company (PFIC) or incur additional, taxes and penalties for your failure to do so. A PFIC is any foreign corporation that has more than 75% of its gross income from passive income or 50% or more of its assets produce or will produce passive income.

The IRS is now matching up your U.S. passport with your U.S. tax records and now knows if you have not been filing all required U.S. tax returns while you are living in Mexico. The IRS recently sent Agents to Australia and China to locate bank accounts owned by Americans who are not reporting the income and ownership on the required IRS forms.

Read the source article.


Not yet, although the steps are indicative of the federal government’s continuing assault on economic freedom.

Writes Simon Black: “Capital controls give the government authoritative, sweeping economic powers, providing for total control over the currency and regulation of inflows and outflows. This benefits corrupt, overspending governments by trapping wealth within a nation’s borders and enslaving capital to further taxation and inflation.”

We and others have also warned against coming capital controls in the U.S. and other de facto bankrupt countries many times. It is metaphysically ordained, the way we see it. We all place high odds that this will happen soon enough. But the recent new law causing no small amount of consternation – in typical Orwellian fashion it is titled the “Hiring Incentives to Restore Employment (HIRE) Act” – does not, strictly speaking, impose capital controls. It does impose more stringent reporting and information exchange requirements on foreign financial institutions. It should be taken as evidence of things to come. The window of opportunity to do something before that happens is still open.

Taking a page from the EU, the new law extend withholding requirements on income sent from the U.S. to situations previously exempt. It imposes a 30% withholding tax on many types of U.S-source income and gross sales proceeds to foreign financial institutions, as well as on U.S.-source income paid to certain non-financial foreign entities. As Mark Nestmann points out: If you are a foreigner with U.S. investments, and you hold those investments through a foreign corporation or other non-U.S. entity, this provision will affect you.

In a further provison of the act, if the aggregate value of assets you hold offshore exceeds $50,000, you are now required to report any ownership of non-U.S. securities, any financial instrument or contract held for investment from a foreign issuer, and any interest of more than 10% in any foreign entity.

The remaining major provision applies to offshore trusts. As we explain in Appendix 1 to Introduction to Internation Asset Protection, a U.S. grantor of a foreign trust with a U.S. beneficiary is taxed on trust income. In effect the foreign trust does not exist for tax purposes. The HIRE Act expands the definition of U.S. beneficiary to include any U.S. person who may receive an interest in the trust contingent on a future event, or where the trustee has discretion to make a distribution to that person. The trust is treated as having a U.S. beneficiary unless the trust identifies unless all distribution recipients as non-U.S. persons. A property transfer from a U.S. grantor to a foreign trust creates a presumption that a foreign trust has a U.S. beneficiary.

Being a party to an offshore grantor trust is not a way to make your life less complicated.

I have been flooded with emails over the last few days about new law in the United States that many people believe to be government imposed exchange controls. Here is the deal, in case you have not heard:

On March 18th, President Obama signed into law the innocuous sounding “Hiring Incentives to Restore Employment Act.” Buried in the bill are several provisions that impose new taxes, penalties, and requirements regarding the reporting of foreign bank accounts.

One of the biggest issues is that the bill imposes a 30% withholding tax on most U.S.-source income paid to foreign financial institutions which do not comply with IRS reporting requirements.

Essentially, Tim Geithner expects foreign financial institutions to become unpaid spies of the U.S. government. Account holders of banks who do not wish to comply will have 30% of their funds withheld if those funds are income from U.S. sources.

It is this 30% withholding tax that has set off alarm bells across the blogosphere.

The bill goes on to aggressively expand the definition of a “U.S. beneficiary of a foreign trust,” extend the penalty period for erroneous reporting, and expand the offshore financial account reporting requirements.

I spoke with two asset protection and tax attorneys as well as a handful of CPAs about this bill, and I plan on interviewing a few of them soon to shed some light on the new law ... in the meantime, though, here is what you need to know:

All of these measures are a major step in the wrong direction and indicative of the federal government’s assault on economic freedom. To be clear, though, these measures are NOT capital controls, nor do they make it illegal for U.S. citizens to open a foreign bank account.

Remember, capital controls are laws that prevent the free flow of capital in and out of a particular currency, either through international bank transfers, purchase of gold and hard assets, or conversion into a foreign currency.

For centuries, capital controls have been extremely popular tools of government; in fact, they were used around the world as recently as the 1970s and 1980s. Today, capital controls are still in effect in many countries such as Cuba where locals are forbidden to hold foreign currencies.

Capital controls give the government authoritative, sweeping economic powers, providing for total control over the currency and regulation of inflows and outflows. This benefits corrupt, overspending governments by trapping wealth within a nation’s borders and enslaving capital to further taxation and inflation.

Given the dire financial straits of most governments, I am convinced that capital controls will once again be imposed in the western world and United States some day soon. But today is not that day.

Clearly, this new law is the strongest evidence of things to come. But the window of opportunity to do something is still open. The 30% withholding tax does not make it illegal to hold funds overseas, but rather it is an administrative penalty to ensure the flow of tax information.

You do not want to wake up one morning and realize that you are too late.

You can be sure that more invasive measures are coming soon ... so the time to heed the warning signs is now. Besides, when capital controls finally are passed, it will be in the exact same manner as these measures were passed – quietly. You do not want to wake up one morning and realize that you are too late.

The language in the bill is extremely complex ... so when I publish my interview with tax attorneys and asset protection experts, we will discuss the bill at length, as well as some long-term solutions.

In the meantime, I strongly recommend that you read the following level-headed, plain English interpretation of the bill from Mark Nestmann’s website.

I would also strongly encourage you to check out Mark’s book, The Lifeboat Strategy, which contains some excellent strategies and solutions for dealing with the decline in personal and economic freedom.

Read the source article.


The current rules were not given to us by a deity or by nature. They were written by the wealthy and powerful interest groups who benefit from them.

This article highlights in bold the issue we have with some of our leftist friends. They analyze the issue deftly, pointing out the nonsensical points made by friend and foe alike. If they would just stop there we would tip our hat in their honor. But then they insist on going on and proposing a solution ... a solution which consists of having government do what it has never done: reform the rules to make things better for the little guy.

Dean Baker is the Co-Director of the Center for Economic and Policy Research (CEPR). In their “about us” page CEPR explains that “In order for citizens to effectively exercise their voices in a democracy, they should be informed about the problems and choices that they face. CEPR is committed to presenting issues in an accurate and understandable manner, so that the public is better prepared to choose among the various policy options.”

Good luck to them. The public has yet to demonstrate its capacity to chose intelligently among policy options presented to it, and those who control government and its press mouthpieces – the rich insiders – make sure that none of the options presented rock the boat enough to get their cloths wet.

Which brings us to this particular piece ... Baker correctly points out that “the Right” loves to wear the “free market” mantle, where the reality is entirely different. “Conservatives” love government intervention, as long as it favors their interests. Baker then astutely points out that “progressives” immediately and significantly handicap their own cause by buying into the semantic turn of phrase that the Right’s interventions are the free market left to itself. Playing by those rules, any suggested alternative will appear to be going against the natural order of things. Baker gives several very interesting and significant government policy areas – patents, copyrights, health care, corporate governance – where the playing field is rigged in favor of existing interests.

The solution to all this? “[L]ike our conservative opponents, we should look for ways in which we can structure market rules so that markets have better outcomes from a progressive perspective.” Sigh. How about just getting rid of all government rules which design to effect a certain market outcome? All of them. Rules aspiring to effect a “progressive” outcome generally do not work, and shrink the economic pie in the bargain.

Progressives have wailed against “market fundamentalism” for the last quarter-century. They complain that conservatives want to eliminate the government and leave everything to the market. This is nonsense.

The Right has every bit as much interest in government involvement in the economy as progressives. The difference is that conservatives want the government to intervene in ways that redistribute income upward. The other difference is that the Right is smart enough to hide its interventions, implying that the structures that redistribute income upward are just the natural working of the market. Progressives help the Right’s cause when we accuse them of being “market fundamentalists,” effectively implying that the conservatives’ structuring of the economy is its natural state.

This is not just a question of framing; although the framing is important. Economic outcomes that appear to be the result of the natural workings of the market will always sound more appealing than the machinations of government bureaucrats, especially in the political culture of the United States. If we label the Right’s interventions as nothing more than the free market left to itself, then we place progressive policies at an enormous political disadvantage.

But the confusion that this misguided war against market fundamentalism creates in designing policy is even more serious than the political damage. Progressives have no reason to look to government to reverse market outcomes. Rather, like our conservative opponents, we should look for ways in which we can structure market rules so that markets have better outcomes from a progressive perspective.

The most obvious recent government intervention to redistribute income upward has been the bailout of the financial industry. Faced with complete collapse in the fall of 2008, Goldman Sachs, Citigroup, Morgan Stanley and the rest did not yell that they wanted the government to leave them alone. No, these financial behemoths insisted that the government lend them money at below-market interest rates and guarantee their assets. Firms like Goldman Sachs even insisted that the government make good on the debts of bankrupt business partners, such as AIG.

Deregulation also increases profitability and has nothing to do with the free market. In other words, the financial industry wants the government to provide “insurance” through the Federal Reserve Board, the Federal Deposit Insurance Corporation and various ad hoc channels, but it does not want to pay for it. It also does not want the insurance to come with any restrictions. In effect, the financial industry wants to run an explosives factory out of its home and pay only the standard residential insurance premium. That is not the free market.

The demands of the financial industry on government are not qualitatively different from what other sectors get as a result of government interventions in structuring the market. To take another example, the government grants pharmaceutical companies patent monopolies that allow them to mark up the price of prescription drugs by several hundred percent or even several thousand percent above what the same drugs would sell for in a competitive market. As a result of patent protection, many drugs sell for hundreds or even thousands of dollars per prescription. By contrast, if all drugs were sold as generics in a competitive market, the overwhelming majority could be bought for $4 or $5 per prescription.

Patent monopolies do serve an important economic function – they provide an incentive for researching new drugs – but they clearly are not the only way to finance research. The government spends more than $30 billion a year financing biomedical research through the National Institutes of Health, an amount comparable to what the industry spends on research. In principle, we could replace the industry-funded research through direct, publicly funded research. Or, as Nobel Prize-winning economist Joe Stiglitz has suggested, research could be carried on in its current manner, but new patents could be bought out through a prize system. Under this system, a committee would assess the value of new patents and pay this amount to patent holders. This would allow the drugs based on new patents to be sold as generics in a competitive market.

We can debate whether these alternative mechanisms are better for supporting prescription-drug research than the patent system, but the patent system is clearly not the free market, and it is not essential for financing prescription drug research. The proponents of drug patents cannot claim to support a free market.

There is real money at stake. The country spent $250 billion last year on prescription drugs. In a competitive market, the cost likely would have been closer to $25 billion. The difference of more than $200 billion swamps the size of the payments to such programs as Food Stamps, the State Children’s Health Insurance Program (SCHIP) or Head Start.

Furthermore, the drain from this patent monopoly is projected to grow rapidly through time. Prescription drug spending is the most rapidly rising component of health care costs. In 2019 the country is projected to spend almost $500 billion on prescription drugs. Over the course of the next decade, expenditures are projected to exceed $3.5 trillion, implying excess payments to the drug industry of more than $3 trillion, more than three times as much as will be spent on the health care reform proposed in Congress at this writing in early winter.

A similar story can be told about copyrights. Bill Gates is an incredibly rich man because the U.S. government gives him a monopoly on Windows, threatening to arrest anyone who sells it or even gives it away without Gates’s permission. Without the monopoly created by copyright protection anyone would be able to instantly download Microsoft software anywhere in the world at no cost. As with drug patents, copyrights serve an important economic function. They provide an incentive for creative and innovative work, like developing new and better software or producing good movies and music, but we already have alternative mechanisms for supporting this work and can develop new ones.

Copyright monopolies lead to an enormous transfer of income to software and entertainment companies. Microsoft alone pockets more than $60 billion a year in revenue, almost all of which would not be possible without copyright protection. The industry association claims that, taken together, copyright industries accounted for 6.6 percent of GDP. This is more than one-third of the tax revenue collected by the federal government.

I could list more mechanisms and beneficiaries, but the point should be clear. The idea that a “free market” is allowing some people to get incredibly rich and causing other people to be poor or financially insecure is nonsense. The distribution of income is determined by government policies that favor some groups and work against others. If progressives accept the structures put in place by conservatives as the free market and then look to use tax and transfer policy to redress the inequities, we have given ourselves a hopeless task.

We must instead focus on altering the rules that redistribute income upward. There are many different ways to structure markets. We must be as opportunistic and creative as the Right in finding rules that both produce efficient outcomes and lead to better distributions of income.

The health care bill illustrates the need for a fundamentally different approach. It does a good job of meeting the important goal of extending coverage to most of the uninsured. However, it does very little to address the problem of exploding cost growth. As a result, we will have created a system that we know will be unaffordable over the long run. The idea that we can somehow pay for this system in future decades with progressive taxes is absurd on its face. It will almost certainly not be possible politically to raise taxes high enough to cover public-sector health care costs. We will eventually either have to ratchet back the extent of coverage and/or the quality of care or impose substantial taxes on the middle class.

The alternative route is to directly attack the structure of the health care system that leads to such bloated costs. In this context, it is important to remember that we pay more than twice as much per person for care as people in other wealthy countries. As any number of studies have shown, the reason for higher costs in the United States is not the better quality or greater volume of services but rather the higher cost of the services that we get. This can be addressed by changing the markets for these services.

Let’s return to prescription drugs. The current system leads to enormous inefficiencies from any perspective and leaves us with absurd choices that would disappear with a more rational system of financing prescription drug research.

Consider the situation of an 80-year-old woman, in generally good health, who develops a form of cancer. Suppose that the only treatment likely to be successfully is a new, bioengineered drug that would cost $250,000 a year. Should the government be willing to pay this expense?

As our moral philosophers labor over this problem, consider that the drug would probably cost $200 a year in the absence of patent protection. That would be the marginal cost of manufacturing and distributing the drug. Although the drug company may have spent a huge amount of money developing the drug, this is money out the door. We have already paid the research cost (ideally through one of the mechanisms discussed above.) The relevant question is, what does it cost to produce the next dose. In the world where the year’s dosage costs $200 we will not have to spend too much time debating the treatment.

This is not the only problem with the patent system. When the government intervenes to artificially inflate prices, it creates unexpected perverse incentives. As a result of the enormous profits on its drugs, the pharmaceutical industry spends a fortune marketing them. This causes them to court and even bribe doctors to get them to prescribe drugs. It leads to expensive direct-to-consumer marketing campaigns. It leads the industry to buy politicians to ensure that Medicare, Medicaid and other government programs pay for the drugs. And, it gives the industry an enormous incentive to conceal research results that call into question the effectiveness and safety of its drugs.

Progressives should have been pushing these “free market” arguments in discussing prescription drugs. The amount of money at stake dwarfs the sums at issue with either the “Cadillac” plan tax or the millionaires’ surtax in the health care plans approved by the Senate and the House.

Similarly, we could use a little free trade in health care. Trade policy has been quite explicitly designed to place our manufacturing workers in direct competition with low-paid workers in the developing world. Progressives often point to the loss of manufacturing jobs in the United States and the depression of wages for non-college educated workers as evidence that free trade does not work. This is completely wrong. These outcomes are exactly what the trade models predicted would be the result of the trade policies that the United States has pursued. I would be surprised if there were any other outcome.

However, we can design “free trade” policies that produce different outcomes. In the case of health care, we can start by allowing Medicare beneficiaries to buy into the health care systems of other wealthy countries. Because health care costs are so much lower in Germany, Canada and everywhere else, if beneficiaries opted to move to another country to receive their care, there would be enormous savings that could be split between the U.S. government and the beneficiaries. We recently did calculations showing that a few decades out the projected savings would be tens of thousands per beneficiary each year. This was even after allowing for a substantial premium above costs to the receiving country of treating elderly patients, to ensure that they also benefited from the deal.

In fact, since these countries would be getting a premium above their cost of care, this could be a major source of growth for these countries. The fact is that everyone has a huge comparative advantage in health care relative to the United States. Our health care industry only survives because of the extraordinary protectionist measures that restrict foreign competition. It is easy to devise mechanisms through which foreign countries could provide care for U.S. citizens and use the profits to provide better care for their own populations. An international Medicare voucher system could allow retirees to enjoy a much higher standard of living than would otherwise be the case, while at the same time saving the U.S. government tens of trillions of dollars in Medicare costs over the long term. By reducing demand for health care in the United States, it would also lead to downward pressure on domestic medical costs more generally.

There are other ways in which the government can promote trade in medical services. For example, it can license facilities in other countries to ensure high standards and also standardize rules on legal liability to ensure that people who go overseas for treatment can be assured of reasonable legal redress in the case of malpractice.

Given the enormous gap in costs for health care services between the United States and Europe, not to mention high-quality facilities in places like India and Thailand, there would likely be a huge flow of patients for treatment outside the country, if we created the proper institutional structure.

Of course, it would be much better to reform the system in the United States so that people did not have to leave the country to get decent affordable care. But, if we lack the political power to reform the domestic system, as is obviously the case now, it is absurd to hold patients here as hostages of a broken system. After the forces of market competition have worked their magic, we will be much better able to discuss reform with the domestic health care industry.

It is far more productive to talk about ways to use market mechanisms to fundamentally restructure the health care system than to try to scrape together nickels and dimes in tax revenue to pay to maintain a broken health care system for a few more years. The same approach can be applied to almost any social problems. We can and should push for progressive taxation, but it is even better to change the institutional structures that lead to gross inequality.

CEOs in the United States get paid tens of millions of dollars a year because we have created a corporate governance structure that allows top managers to plunder the corporation for their own ends. This corporate governance structure was created by the government, it did not develop through the free market. No other country allows for the same sort of plundering. Changing the rules in ways that return control to shareholders is not government interfering with the market; it is simply repairing a dysfunctional system. Europe and Japan both have dynamic capitalist economies, but they do not have the huge executive compensation packages of the United States. This is not due to legal restrictions on pay, it is due to the fact that they have governance structures that do not allow the top executives to pilfer the corporations that they ostensibly work for.

In the same vein, although minimum wages and other direct income supports for less-educated workers are desirable, it is better to restructure markets in ways that increase the relative demand for their services. For example, we should insist that the Fed allow the unemployment rate to fall to low levels, rather than raise interest rates to choke off any possibility of inflation. Former Federal Reserve chief Alan Greenspan made this choice in the ‘90s (over the protest of Bill Clinton’s appointees to the Fed), allowing the first sustained period of real wage growth for workers at the middle and bottom of the wage distribution since the 60s. More union-friendly laws, such as serious civil or even criminal penalties for employers who violate workers’ right to organize, would also help equalize the distribution of income.

We can also apply some good free market principles to highly paid professionals, such as doctors, lawyers and economists. Easing professional and immigration restrictions that largely protect the most highly educated workers from international competition will reduce pay for those in the top 1 percent to 2 percent of the wage distribution and help to lower the cost of everything from health care to a college education.

There is an endless list of policies that alter economic rules to lead to more egalitarian outcomes. The current rules were not given to us by a deity or by nature. They were written by the wealthy and powerful interest groups who benefit from them.

These people are absolutely not free market fundamentalists, nor are they opposed to a well-working government. No one can mass market unauthorized versions of Pfizer’s latest drugs or Microsoft’s new software. Even under Republican administrations the government would quickly arrest a large-scale violator of patent or copyright law. The wealthy want and expect a government that enforces the rules that protect their wealth and power. They do not care about government social programs, but that is because they do not depend on these programs. No rich person died in Hurricane Katrina.

A serious long-term progressive agenda must move away from a focus on tax-and-transfer policy and instead concentrate on changing the rules that lead to undesirable market outcomes. We must be as aggressive and creative as the Right in designing new rules that redistribute income downward rather than upward. And, we must bury the concept of “free market fundamentalism.” There are no free market fundamentalists in this debate, just conservatives who want to pretend that their rules are the natural working of the market. Progressives should not help them in this effort.

Read the source article.


Command-line interfaces are for nerds.

A major new release of Ubuntu, the most popular Linux distribution, is out. According to this review from The Register – a mainstream rather than Linux-dovotee tech site – this release is a great leap forward for Linux user interfaces, and reduces the interface polish gap with Mac OS X. The review takes note that Ubuntu is clearly aiming at the mainstream audience, and that you can expect that trend to continue.

Review Ubuntu 10.04 ... is an important update for this popular Linux distro. It is a Long-Term Support (LTS) release – the first since 8.04 two years ago – and it wraps social network with media capabilities and a brace of online services in a brand new look.

As an LTS edition, Lucid Lynx will be supported for the next three years on the desktop and five years on the server instead of the usual 18 months of free security updates.

Therefore, it will set the scene for Ubuntu for a decent chunk of time and provide a launch pad for the distro’s move down a more refined and user-friendly path that subsequent releases should build upon.

Ubuntu founder Mark Shuttleworth wants Ubuntu to beat Apple’s OS X on features and interface polish. While Lucid Lynx still has some rough edges, this release is a huge leap for UI design in Linux and puts Ubuntu well on its way to Shuttleworth’s goal.

There are, however, some changes that will no doubt raise the ire of die-hard Linux fans. ... Other, less annoying changes give Ubuntu a nice, more polished look. Most of the GNOME panel widgets look much nicer in this theme, and the icon set is considerably better than what we saw in the beta.

But the changes in Ubuntu 10.04 are not just skin deep. There are quite a few new applications, features, and services that make Ubuntu seem more like a consumer-friendly operating system like OS X than the Linux of the command line loving past.

Looking more like like, well, what everyday consumers want in an operating system.

Between Canonical’s web-based syncing service Ubuntu One, the coming U1 music store and the new Me Menu, Lucid Lynx is looking less like the stoic Linux desktops of yesteryear and more like like, well, what everyday consumers want in an operating system. It has even got quite a few features Apple cannot match. Oh, and it’s free.

The installation process for Ubuntu has not changed much over the last few releases, though the installer 10.04 does give you a glimpse of the new default theme, called Ambiance. A nice mixture of muted purples, oranges, and browns, Ambiance has a somewhat darker and more professional look than the old human theme.

Aside from the slick new looks, the default GNOME desktop has been considerably changed in Ubuntu 10.04, with redesigned widgets and the new Me Menu. The Me Menu is a gateway to quickly access chat clients and “broadcast accounts” – which include Twitter, Facebook, and the like – through the very slick social networking tool, Gwibber. Ubuntu One adds online backup and file sharing. ...

The new Ubuntu Software Center features a completely redesigned interface for finding and installing software. The new look maker Ubuntu Software Center a bit more user friendly and almost App-Store-like in its design and layout.

The basic GNOME apps all see updates in this release as well. Firefox, OpenOffice, and Evolution have all been updated to latest version.

Overall one of the most polished looking Linux distros on the market.

Those that consider GUIs [to be] bloat and think a good user experience involves green monospaced fonts on a pure black terminal window will not be pleased with the new Ubuntu. Unfortunately, from the looks of things, you are Ubuntu’s past. The real world of everyday, dare I say ordinary, computer users are Ubuntu’s future.

The default human theme may be gone, but the emphasis on “Linux for everyone” remains well intact at the Ubuntu camp. Overall, Ubuntu 10.04 is certainly one of the most polished looking Linux distros on the market. With built-in cloud syncing, a new music store and quick access to social networks, Ubuntu is clearly aiming at the mainstream audience and you can expect that trend to continue.

Read the source article.


42 Practical Ways To Improve Yourself

Some of these ideas might strike a chord.

Are you someone who likes to grow? Do you constantly seek to improve yourself and become better?

If you do, then we have something in common. I am very passionate about personal growth. It was just 4 years ago when I discovered my passion for growing and helping others grow. At that time, I was 22 and in my final year of university. As I thought about the meaning of life, I realized there was nothing more meaningful than to pursue a life of development and betterment. It is through improving ourselves that we get the most out of life.

After 1.5 years of actively pursuing growth and helping others to grow through my personal development blog, I realize there is never an end to the journey of self improvement. The more I grow, the more I realize there is so much out there I don’t know, so much that I have to learn. For sure, there is always something about ourselves we can improve on. The human potential is limitless, so it is impossible to reach a point of no growth. Whenever we think we are good, we can be even better.

As a passionate advocate of growth, I am continuously looking for ways to self-improve. I have compiled 42 of my best tips which might be helpful in your personal growth journey. Some of them are simple steps which you can engage in immediately. Some are bigger steps which takes conscious effort to act on. Here they are ...

Read the rest of the article.

Modern Maturity: Create More, Consume Less

From the Art of Manliness website comes this provocative contribution to the discuss of just what it means to be mature these days.

After doing the podcast on the “Making of Modern Immaturity” a few months ago, and reading the comments left on that post, I got to thinking about this question: “What makes a man mature anyway?”

Masculine maturity used to be easy to spot and define: A man got married, sired some progeny, and got a job to support his family. He knew he was a grown man and everybody else did too.

These days those kinds of markers are being put off more and more. There are a variety of reasons for this, some cultural, some economic. There is nothing inherently wrong with this trend. While I am a proponent of working hard at your job and getting hitched to the right woman once you know she is the one, these things simply do not happen at the same time for every man.

And while I personally believe that getting married and having kids is one of the most effective ways to grow and mature as a man, I am not comfortable saying that men who do not do these things are not mature men. Otherwise, you are stuck with the position that men who are Catholic priests or Buddhist monks are not mature men. If you believe that, you need to go say ten Hail Mary’s and then rejoin this discussion.

The problem is, in the absence of these old markers of maturity, guys do not know how to transition from boys to men. They may not find the marriage/kids/corporate job gig appealing, but they also are not keen on remaining a perpetual adolescent. They feel stuck between these two guideposts – no longer boys but not yet “settled down” – and do not see any models on how to proceed. The gap has become a life stage wasteland for men, where guys are drifting along like amoebas.

So I would like to suggest a definition of maturity for our modern age. And it is embodied in this phrase: Create More, Consume Less.

Read the rest of the article.