© Copyright 2000 Wealth International, Ltd.

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Your Assets Are at Greater Risk Than You Realize

Why go diversify internationally? We enumerate our reasons piecemeal, but they are causally related. Their common root is the actions and machinations of government – a ubiquitous institution in our lives we would do well to relate to realistically. Government represents many things to many people, but it is undeniably parasitic in nature: Its members live off the output of the productive while returning as little as possible. That is not a value judgement; it is a useful metaphor. It is an accurate characterization of how things work in practice. A farsighted parasite would try to avoid weakening its host to the extent that its own well-being is jeopardized, but political systems are governed by perverse dynamics. They resist intelligent guidance and lack the feedback/response mechanisms that promote a return from the brink once that point is approached. Pressures can build up over time and eventually get out of hand, leading the system to crack under the burden.

“And now that the legislators and do-gooders have so futilely inflicted so many systems upon society, may they finally end where they should have begun: May they reject all systems, and try liberty.” ~~ Frederic Bastiat

It is a certainty that in a crisis a government will do all it can to ensure and justify its continued existence by exerting more control, rather than relenting on the laws and controls that are causing the problem. In critical instances new rules cause further breakdowns, which lead to new rules, which cause further breakdowns, and so on in a vicious cycle. We believe the current economic situation is in a slow motion version of this. The threat that it could careen out of control is very real. Thus the primary risk which moving a substantial portion of your assets to a foreign jurisdiction defends against is:

• Economic dislocation – the risk that spares no one. Disorderly economic conditions manifesting, e.g., in the U.S. dollar losing its value, bank holidays where your account balance is inaccessible, and bare store shelves, could easily result in the U.S. imposing currency and capital controls. At this point your options for moving any of your wealth out of harm’s way are desperately limited.

Other risks that moving a substantial portion of your assets abroad can defend you against, all of them entirely plausible, include:

• The litigation epidemic. The U.S. is the world’s dubious leader in lawsuits per capita. Your risk profile may be high or low (a self-assessment test is provided below), but anyone with something to lose could easily find themselves defending that “something” – at great expense.
• A rapacious body politic which begats a rapacious government. The value system which undergirds the cycle described above. Beyond performing government’s traditional role of transferring wealth from the politically unconnected to the connected – after a middleman’s cut – governments today are helping themselves to increasingly liberal portions of their subjects’ assets for their own account. Constitutional checks and balances and centuries-old human rights and legal traditions have been dispensed with in favor of expediency and greed, leaving the exploited class with little recourse against, in Ayn Rand’s turn of phrase, “the looters”.
• The prying eyes of Big Brother. Arguably not a distinct risk in itself, it inarguably aggravates the other risks. Technology and its users have joined in an unholy alliance that makes your financial life an open book to essentially anyone who is minimally motivated – of which there are plenty with less than your best interest at heart.

A distinctly positive reason for looking internationally is the vast world of business and investment opportunities that is opened up. Many such opportunities are closed to, e.g., a U.S. person; thus taking advantage of the opportunities requires – yes – getting your assets out of your home jurisdiction. Now let us look a little deeper into the matter ...

An economic crisis looms

We see this as the most imminent risk to the financial well-being of the average reader. To be blunt, the danger of a severe economic contraction which could destroy a large percentage of your wealth is greater than any time since the worldwide depression of the 1930s.

Equivalent to pumping a pneumonia-ridden man with increasing doses of amphetamines to keep him going, Uncle Sam and his minions have repeatedly come up with string and baling wire solutions that enable the world economy to wheeze along, delaying the comeuppance that follows from massive and egregious policy errors. Every crisis since the 1960s has been papered over by increasing the systemic level of debt, public and private. But the resources expended to results achieved ratio keeps going up. The NASDAQ/dot.com mania of the late 1990s gave way to the far more dangerous real estate mania. In turn the effects of that crash have been temporarily held in abeyance by an unprecedented and appalling all-out government borrowing and money-creation binge. The system’s debt-carrying capacity may finally have been saturated, and the only Plan B which makes any sense – a return to fiscal sanity – is not on the table. When the music finally stops, the historical lesson is clear. Stocks, bonds, real estate, and most real assets, as well as economic and political liberty, experience significant bear markets.

A deeper examination of current background economic factors could lead one to conclude that an economic crisis that makes the 1930s look comparatively tame is in the cards. To say the U.S. macrofinancial situation looks precarious is to engage in gross understatement. Any further decline in confidence in the dominant world economy could lead to a collapse in economic activity, the dollar, the stock and bond markets, i.e., wealth. We are not alone in this outlook. Check out the commentary at sites such as The Daily Reckoning, especially articles by the late Dr. Kurt Richebächer and ranter extraordinaire “The Mogambo Guru” (Richard Daughty), or Prudent Bear to get an alternative perspective to the standard pap. Decide for yourself whether the events that they fear – which admittedly they have been warning about, Cassandra style, for years – are at least possible, and therefore worth insuring against.

There may be a more pressing risk still to consider, as even a “collapse” unfolds over time. The attacks of September 11, 2001 succeeded in closing the financial markets for a week. Another attack could conceivably close them down for much longer, if knowledgeably and expertly executed. (The reasoning behind accepting that this is a possibility is elaborated on here.) History shows how empires have terrorism and military risks that regular nations do not, and the U.S. is the only candidate for this appellation today. The consequences of a prolonged closure of the U.S. markets is difficult to imagine, but surely they are not ones that anyone would wish to subject themselves unprepared.

A treatise on investment strategy is beyond the scope of this report, but if the risks touched upon above are plausible then initial appropriate actions are clear. Start with an incisive assessment of your current situation. The perils to your wealth and assets do not just come from the markets as such. Governments consistently use a crisis as a cover to further limit freedoms and appropriate assets. Laws and plans authorizing government control or seizure of financial assets are already in place which could be put to use in such an event. The 1933 U.S. gold confiscation, and the lack of accompanying outcry or resistance, is a historical example of the use of such laws. (Holders of gold were forced to sell their holdings to the Federal Reserve for $20.67/oz. Gold was then revalued to $35.00/oz.) Before overt appropriation is resorted to it is reasonable to anticipate capital controls restricting the exchanging of dollars for other currencies and the moving of assets abroad – as occurred during World War II. Assets that remain within the U.S., immobilized within the system, would be vulnerable to inflation and future government decrees and actions. Numerous instances of this general course of action by governments render the plausibility of a future repetition beyond dispute.

The risks discussed above apply to everyone without exception, regardless of economic class, political ideology or affiliation. We believe that alone constitute a compelling reason to start internationally diversifying your financial assets, including jurisdictionally. Next, we detail the risks emanating from the leviathan that the U.S. legal/governmental complex has become. They provide a somewhat different motivation and entail additional methodologies to shield your assets. While the potential horror stories warned against may seem abstract and low probability, we submit that their potential is very real and, again, worth insuring against – provided this can be accomplished at a reasonable cost. Diversifying your financial holdings internationally is one element of a sound and cost-effective asset protection strategy.

Care to play legal roulette? You are in the game, like it or not

The word “epidemic” is an overused but appropriate cliché for describing the proliferation of lawsuits in the United States. With over 50,000 lawsuits filed each week, the word fits. Not just coincidentally, most of the world’s lawyers live in the U.S. No claimant is unable to find an attorney to offer representation – if the target is sufficiently asset rich. Everyone with assets is a potential target, not just those in high-risk professions. And once you are in a litigant’s crosshairs it is easy to locate everything in your name in short order, as is discussed below.

• Where there are multiple defendants to a suit, the one with the “deep pockets” usually gets to pay the bill if the others cannot, however little involvement that party had in actually causing the injury.
• In some high-risk professions, the cost of malpractice or liability insurance is so high that the party at risk is faced with the choice of “going bare” or shutting down.
• The cost of defending oneself in court with professional representation is sufficiently high that the mere threat of litigation is often enough to induce the target to cooperate, i.e., bribe the complainant to go away. This is essentially legally sanctioned extortion.
• Courts are now allowing their judgments to be enforced against assets held in the names of spouses and children.
• Some courts are letting creditors seize or lien pension or retirement account assets to satisfy claims.
• If you are charged with a liability that exceeds your liability insurance coverage limits, or if your liability insurance carrier becomes insolvent, then your personal assets are subject to judgment.
• Time and distance provide no insulation against malpractice or liability exposure. Lawsuits may be commenced against you for events occurring years in the past.
• If the corporation of which you are a director or officer is successfully sued then you too may be sued, held to be one of the liable parties, and have your personal assets attached. Many new and “innovative” legal theories have been used to attempt to “pierce the corporate veil.” Meanwhile, new laws are passed making corporation directors and officers responsible – read, liable – for additional unfavorable outcomes to shareholders and “stakeholders”, e.g., earnings came in a penny per share below expectations and therefore caused losses to the holders of overpriced shares.

Uncle Sam and his dependents want your money

“The dog with the bone is always in danger.” ~~ Chinese saying

• Big government keeps getting bigger, and its beneficiaries are insatiable. This reality drives everything else. Today taxes take roughly 50% of a middle class family’s income. The federal budget increases every year, no matter who is in power and what their professed philosophy. In the end this reflects the thinking of the general public, who find no problem with using the middleman government to extort wealth from their fellow citizens. The rugged individualist has given way to the politically organized entitlement seeker. In the words of Oscar Wilde: “If you rob Peter to pay Paul, you can always count on the support of Paul.”
• A letter from the IRS always occasions an increased heart rate. Congressional hearings in 1997-98 depicted an IRS that is, in the words of Newsweek, “ruthless, lawless, and out of control.” A few victims have been driven as far as suicide, after their businesses and lives were ruined by persistent IRS efforts to collect money that was not even owed. The government’s unquenchable thirst for cash guarantees that any “reform” of the IRS (such as those passed after the above hearings) will in the long run collide with the reality that the funds have to come from somewhere, notwithstanding temporary ebbs in the level of IRS enforcement activity that occur from time to time.
• The government uses laws and regulations to attack and confiscate from the innocent. 60 Minutes once aired a show concerning property owners who were forced to spend their life savings on litigation with the EPA after their properties had been classified as toxic waste sites, despite their having had nothing to do with the contamination. More generally the laws of this country are so huge in number, and often so vague and contradictory, that it is impossible to live entirely within the written law. Any technical violation of any law could be used against you at any time. “Show me the man and I’ll find you the crime,” said Lavrentiy Beria, Stalin’s secret police chief.
• The U.S. federal and lower level governments have evolved into kleptocracies worthy of comparison with various notorious Third World regimes. Your lawfully acquired assets can be summarily seized under a multitude of forfeiture laws on the mere suspicion or claim that the assets may have been involved in a crime. No notice or judicial process is required: Steal first and ask questions later. The process for attempting to recover the property is neither swift nor designed with your success in mind. The government agency involved has access to significant resources to fight your attempts at repossession while they have already taken the assets that you might need to fund a legal counterattack. Gory details are available from the F.E.A.R. (Forfeiture Endangers American Rights) website.
  The U.S. Supreme Court has repeatedly failed to overturn these forfeiture laws when given the opportunity. (In one ruling, a dissenting Justice complained that the majority decision would imply that the government could seize an entire ocean liner if a single passenger unknowingly was allowed to bring one marijuana cigarette on board!) The seizing agency agency usually gets to keep most of the proceeds, creating an obvious corrupting motivation, as well as a powerful lobby against attempts to reform the forfeiture laws. As with those “reforms” concerning the IRS, marginal modifications to the laws do not evidence any real turn in the trend of increasing arbitrary government power and decreasing due process. “Someone has taken justice in this country and hidden it under the law,” goes a movie line.
• If you go to your bank and made a $10,000 cash withdrawl, the bank is required to submit a form to the federal government reporting that transaction. If you attempt to avoid cash transaction reporting requirements by making two withdrawls of $5000 each, you risk being changed with the crime of “structuring” your affairs, by breaking one large reportable transaction into several smaller (hypothetically) non-reportable ones, or of “money laundering” for failing to fill out a government form. The economic rewards from these seizures, and the career and political payoffs from such prosecutions, provide the incentives to conduct more of either or both, without regard for the the inherent injustice involved. Even if you successfully defend yourself against a clearly egregious action, the agent will not be penalized.
• Your banker, your broker and other financial service providers, and now your real estate agent, jewelry dealer, and car dealer have been ordered to spy on you. They are supposed to report any “suspicious” transactions or transfers. Any objection on your part to the privacy invasion will probably be interpreted as “suspicious”. Better keep those thoughts to yourself! Given the penalties imposed for failure to report, you can bet that many otherwise innocuous transactions will be written up and reported ... just in case.
• Generally, in adversarial encounters with the government, whether administered by someone with a gun or with a gavel, standard operating procedure treats the Constitution, Bill of Rights, and the written law as, at best, a list of nonbinding suggestions. Obtaining redress for abuses means seeking a remedy within the same system, a system that has been disdainful of holding its members accountable.
• True to historical form, the U.S. governent has used the crisis atmosphere emanating from the September 11, 2001 tragedy to accelerate its acquisition of police powers. The federal government has granted itself a blank check to monitor your communications and finances, and even enter your home, without needing to have a warrant. Anyone who is deemed a “threat” to national security can be subjected to this surveillance. Anyone who publicly defends the Constitution or challenges the government party line risks being labeled a threat under this regime. And of course the forfeiture laws have been extended to any funds deemed to have the vaguest taint of terrorism, however indirect. The effectiveness of these new laws at preventing further attacks is open to question, but ordinary citizens can expect to find themselves vicitimized by the new attacks on privacy and due process. The further gutting of the Bill of Rights is being challenged by some, but it is a bit late in the day to be waking up to the erosion of freedoms, and the public seems not to object to the new laws. In the period immediately following the attacks, a congressperson who was arguing that we were giving up our freedoms too quickly and without sufficient thought to the consequences was shouted down by the audience! There have been some second thoughts since, but what if there is another terrorist attack?

In summary, the principles of human rights, due process, justice, fairness, consistency and logic, as people normally understand them, do not guide the agenda and rulings of the U.S. justice system, especially when one of the parties is the government. The guiding principle is force, which they have the overwhelming capacity to administer and are willing to use, often to excess. The judiciary was allegedly designed to be a check against legislative and executive branch power expansion. The reality is that the courts are part of the government and administer government rules. Every government employee has a direct pecuniary interest in maintaining a well-funded and intimidating government. Juries have historically been the last barrier and ultimate check against unrestrained government power. This is no longer the case – not even close. Judges’ instructions limit jurors’ discretion, and the juries are chosen with an eye to weeding out independent thinkers. And the chances are that half a given jury’s members will be dependent on direct or indirect government subsidies anyway.

Your privacy is low to nonexistent

The demand for information by government agencies, commercial entities that treat their customers as “assets” to be milked like cows, and, now, identity thieves, shows no sign of moderating. The basis of emerging technology giants like Google and Facebook is information on people, and they have shown little discretion in reigning in their collection, storage, and often sharing of that information. We indeed have become a “database society”.

A recent search on the internet using the search-term “SSN” revealed that often for less than $100 the following information about you is readily available:

• Address History
• Bank Account Search – National
• Bank Account Search – International &Offshore
• Civil Records Check by County
• Civil Records Check by Federal District
• Corporate Affiliations
• Criminal Conviction History by County
• Criminal Conviction History by Metro Area
• Criminal Conviction History by Federal District
• Criminal Conviction History by State
• Criminal History National
• Criminal History – National Media Scan
• Criminal Incarceration – Past/Present Prison Incarceration (Federal)
• Date of Birth Search
• Death Records – National SSN Search
• Driving Records (with date of birth and/or license #)
• Driving Records (without full information)
• Education Verification
• Employment Verification (Maximum Historical Record)
• Household Demographics (names of people living in house)
• Insurance Policies with Cash Value and Annuities
• Package Tracker (UPS, FedEx and Airborne shipments)
• Phone Number Trace #1: Finds address from known listed #
• Phone Number Trace #2: Finds address from known unlisted #
• Phone Number Trace #3: Finds listed # from known address
• Phone Number Trace #4: Finds unlisted # from known address
• Phone Number Trace #5: Finds unlisted phone # and address by name, city and SSN
• Phone Number Trace #6: Finds unlisted # by name and city
• Phone Records: Cellular Calls
• Cellular Calls with Dates and Times
• Phone Toll Records: Long Distance from residential number
• Phone Toll Records: Local Area Tolls from residential number
• Post Office Box traced to address
• Professional License Search (not available in all states)
• Public Filings Scan – Bankruptcy, Liens, Judgments, UCC, etc.
• Real Estate Ownership by County
• Real Estate Ownership by State (not available in all states)
• Safe Deposit Box Search
• SSN Locator – Find a person’s SSN #
• SSN Fraud Search
• Stocks, Securities and Mutual Funds Search
• Utilities Search
• Worker’s Compensation Records (not available in all states)

Most of this information is available within hours, if not more quickly, and can be obtained using one’s credit card right over the internet. Note that the common denominators necessary for finding this information are the numbers associated with your name and the property that you own. All of this information is available commercially. One can imagine what the government with its unlimited resources already knows or can find out about you. Proposed legislation that would have imposed greater restrictions on the sharing of collected information was substantively gutted by the lobbying of the affected corporations. Federal guidelines require the use of Social Security Numbers on Drivers Licenses going forward. Without some form of privacy protection, your life is transparent to anyone with a few dollars and a computer. Attacking your assets is a simple matter when they can be located so easily due to being held in your name and/or associated with your Social Security Number.

Big Brother wants to get to know you real well

While “1984” may have arrived a little later than the title of the famous novel implied, it is here now. In addition to the information above, considered private by most people, your credit record and a transaction-by-transaction record of your credit or debit card purchases are easily accessed. For frequent card users an intimate X-ray into the card owner’s life is easy to obtain. For instance, anyone thinking of issuing you a credit card or extending a loan can access that database. Of course any government employee will have no problem gaining access. Requiring more effort, but easy enough, is the gathering of transaction histories from checking accounts. Courts have repeatedly ruled that there is no right to privacy that extends to banking records. In effect, the banking system is a government agency and they can use their records as they see fit.

A not implausible conspiracy-ilk theory is that the cost of each checking transaction has been subsidized in order to encourage people to put their transaction records where they can be monitored. Now with the infrastructure in place the people are obviously being encouraged to make all transactions via debit or credit card, where they can be tracked in real time. No need to deal with all that inconvenient cash any longer! The total phasing out of easy-to-spend, hard-to-trace cash is only a matter of time.

Meanwhile, proposals and laws too numerous to detail have followed the 9/11/2001 attacks and taken the onslaught on privacy to a new level of intensity. Any one person could be a terrorist, and any financial transaction could be supporting a terrorist operation, so the reasoning goes, and thus every person and transaction should be tracked and analyzed. Welcome to the Surveillance State. The image just above to the right is the old logo for the Defense Advanced Research Projects Agency (“DARPA”), part of the U.S. Department of Defense, “Total Information Awareness” project. The Latin phrase translates to “knowledge is power.” After a public outcry the project name was changed to “Terrorism Information Awareness,” the above logo was toned down, and the project was nominally defunded by Congress. Sure it was. It is now hiddened away in less visible parts of the government budget. Click on the logo to see what they had in mind for all of us. (As with the logo, that diagram is also no longer available on the DoD web site.)

Later may be too late

An old Wall Street saw cum warning is: “Wall Street’s graveyards are filled with men who were right too soon.” In investing, your idea and your timing have to be correct. As Ernest Hemingway said “There is no premature anti-fascism,” there is also no such thing as “too soon” when it comes to insuring yourself against the risks we are discussing – only “too late.” Once you are sued, charged, or otherwise dragged into the judicial system it is too late to institute preemptive protective measures. Any transfers of assets to entities or locations seemingly safer from potential judgement can be ordered reversed, on pain of incarceration or further monetary penalty. Transfers of assets in order to escape an exisiting judgement (these days you could probably be charged on the basis that you suspected or should have known that you would soon be subject to a judgement) is called “fraudulent conveyance” and is itself a crime. Too late is exactly that ... too late.

What to do?

“Thinking about,” or ignoring or just living in fear of the potentialities recited above are ineffective. What is effective is to to take cost-efficient action, starting with investigation.

A Quick Test

We invite you to consider the following questions:

1. Does your annual income exceed $50,000?
2. Are you expecting to receive or bequeath an inheritance?
3. Do you have liquid assets or home equity worth more than $100,000?
4. Do you serve as a director or an officer of a corporation?
5. Are you a general partner in a partnership?
6. Are you contemplating marriage or remarriage?
7. Do you own a boat or plane?
8. Do you have teenage children?
9. Do you own or lease equipment, residential property, or commercial property?
10. Are you a contractor, manufacturer, dentist, physician, surgeon, architect, CPA, professional, or self-employed individual?
11. Have you been uninsured or underinsured for any period of time?
12. Do you work in a profession that is heavily regulated by the government?
13. Do you live a lifestyle where an observant outsider could conclude that you are a person with enough assets to be worth going after?
14. Do you engage in activities that members of government might deem threatening?
15. Could any entries on your past tax returns be challenged at some point?

Draw your own conclusions here. You know your situation best. But as the number of affirmative answers and the income/asset numbers increase then, we think, the more relevant the concept of taking active measures to protect your assets becomes.

If you read the rest of this report you will be presented with tools with which one can:

• Protect your home, investment real estate, liquid assets, anything of value.
• Protect a business or other valuable assets from government and other claimants.
• Reduce or eliminate expensive liability insurance premiums.
• Avoid estate taxes, death taxes, and inheritance taxes. Avoid costly and time-consuming probate.
• Reduce your small business and investment taxes.
• Defer taxes on the income and capital gains from investments.

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