I’m reminded today of the phrase “Get Your Money Out of the Country, Before Your Country Gets Your Money out of You.”  The expression was coined years ago in one of the old PT books, I forget exactly which. Specifically, you have a deadline: December 31st, 2012, when most of this legislation is due to come into force.

“This is in fact the capital constraint legislation that seasoned economic experts have been predicting” says one commentator.

I’m not easily shocked, but after reading the HIRE Act (Hiring Incentives to Restore Employment Act) just passed a little over a week ago by the US Congress, I am convinced that the US has already introduced currency controls. That was even sooner than I expected and this is an extremely serious concern for anyone who holds any assets in the USA, or even in US dollars (read on to find out how this also affects you even if you are not American and have never even set foot in the United States…)

The HIRE Act sounds harmless enough, right? It sounds like something to do with job creation, yet another round of incentives. It was passed quickly and quietly by Congress around the same time as all the hullabaloo about Obama’s healthcare reforms. Healthcare reforms are another of those things I honestly don’t understand, and I haven’t yet met anybody who does… that’s why I didn’t write an article about it adding to the noise. Suffice to say it’s definitely bad news. But this HIRE Act is even worse. It introduces strict currency controls in all but name.

I’ve read some of the HIRE Act and if you download the pdf file here and skip to page 27, you will see my reason for concern:

Title V – Offset Provisions

Subtitle A: Foreign Account Tax Compliance …

Taxes to Enforce Reporting on Certain Foreign Accounts

The Act adds a whole new chapter to the 1986 Internal Revenue Code, which introduces a whole new tax… a tax on foreign bank accounts. In a nutshell, here’s what it says:

Any funds transferred from the US to any overseas account are subject to a new tax equal to 30 percent of the total amount of the payment – unless the payment is sent to a foreign bank that has agreed to report all American-owned accounts automatically and electronically to the US government.

What kind of payments are included? Almost anything. The act specifically mentions “interest, dividends, rent, salaries, wages, premiums, annuities, compensations, remunerations … and any gross proceeds from the sale or other disposition of any property of a type which can produce interest or dividends from sources within the United States… ”

This is incredible stuff. The section after the section about foreign bank accounts goes on to talk about foreign financial assets, including for example stocks, not just offshore bank accounts. Any holdings of foreign stocks over $50,000 will have to be reported by US taxpayers. And this provision kicks in earlier – starting with the next tax year.

It then continues to talk about foreign trusts, dividends… before drawing to a sudden close, and disappearing to where it came from!

It’s early days yet to give you a full analysis of this new law. We will have a detailed article on this topic in the next edition of Q Wealth Report, which is due out next week (if you join now you will receive it automatically… and see what else you are missing if you’re not already a member). But it’s clear that Americans have serious decisions to make – and fast!

If you are a regular reader of our reports, this news won’t come as such a surprise to you. A group of our readers discussed this very scenario earlier this month at our Strategies for Success event in Cancun. And we’ve been predicting this kind of extreme measure for some time – it’s a sign of sheer desperation. The US government must surely understand that they are fighting a losing battle with free markets – but they are certainly determined to fight to the bitter end. And believe me, the worst is still to come.

As the effects of this legislation sink in, a lot more Americans will be looking for second passports as a first step towards renouncing citizenship.

There will be a huge knock-on effect too, however, for foreign banks and their account holders. Bankers have tolerated a lot, even the new far-reaching qualified intermediary (QI) rules imposed by the US. But how much more will they tolerate? Is continued access to the US financial system from 2013 onwards worth the price the US government is now charging? I would think for many offshore banks, this is just one step too far. A lot of banks will now be saying “to hell with the US government.” Is compliance even possible any more?

We’ll have more detailed analysis as promised in the Q Wealth Report very shortly. But in the meantime our advice is:

• Don’t panic – stay calm
• If you don’t have an exit strategy for getting all your assets out of the US, start planning one now. You need to protect your assets against burdensome taxation and the devaluation and decline of the dollar.
• Consider expert advice and invest in self-education about these matters. Don’t rely on the mainstream media as they won’t give you the full story.
• You have the rest of this year – nine months – to have appropriate offshore asset protection structures in place. Consider things like offshore gold bullion and international real estate investing.
• Don’t waste time. Don’t procrastinate.
• If you haven’t already, sign up now for Q Bytes, our free weekly newsletter, in which we will give you lots of additional tips gratis.

Related article on a Panama blog here: Disturbing new U.S. law aims to end individual foreign bank accounts

Following is an edited version of our Press Release announcing the new 2010 edition of our ever popular Practical Offshore Banking Guide which is now available….

While the days of James Bond-style numbered Swiss bank accounts may be over, the world of discreet private banking and offshore wealth management is growing apace as financial uncertainty continues to make people seek safe havens.

Despite highly-publicized government crackdowns on tax evasion around the world during the past year, spearheaded by the G20-OECD “anti tax haven” blacklisting and the US attack on UPS after defection of Bradley Birkenfeld,  more billions are headed for offshore banks and tax havens than ever before – with good reason, and it’s all completely legal. That is the conclusion of the new Practical Offshore Banking Guide 2010, advising high net worth individuals and entrepreneurs on offshore banking and asset protection, that is released today. In it you will find information on nine of the best offshore banks.

In the 2010 update of his annual Q Wealth Practical Offshore Banking Guide, offshore banking expert Peter Macfarlane points out that tax evasion is far from the only factor encouraging smart individuals to go offshore. “There are more good reasons than ever to go offshore. Taxes are certainly a factor, but many people these days are motivated by deeper feelings – they just don’t trust the system any more,” said Macfarlane today. “Basically, they are demanding full control of their own money. The human right to privacy is definitely part of the equation. Why should an individual´s finances be an open book?”

“Bank failures and bailouts are on everybody’s minds, and rational individuals are looking to open accounts at conservative and respectable banks, in countries that respect the rule of law and private property, that do not have this toxic exposure. Clients seek to protect their assets not just against the perceived injustice of many lawsuits, but more fundamentally against a decline in the value of the dollar and other major currencies like the euro and pound. Expecting the imminent devaluation or collapse of the dollar, they are diversifying into better-backed currencies, and of course into precious metals like gold and silver – something made easy by offshore multi-currency bank accounts,” comments Macfarlane, adding: “We’ve all heard about the risks of keeping eggs in the same basket.”

The Practical Offshore Guide 2010 includes special sections for US and European Union citizens, explains information exchange in detail, and proffers practical advice on choosing, opening and operating an offshore bank account.

The Practical Offshore Banking Guide 2010 is published FREE for readers of The Q Wealth Report, a privately-published newsletter covering to offshore banking, asset protection and wealth management. The Q Wealth Report was established in England in 1996 and has a global readership. Englishman Peter Macfarlane, 38, is joint editor, besides running his own professional practice in Panama City, Panama and being a regular speaker at offshore events.  Further bio on Peter Macfarlane is here. The free Secrets of the Super Rich course edited by Peter Macfarlane and others is available here.

The ‘underwear bomber’ incident on Christmas Day on the NWA flight landing in Detroit should serve as a wake-up call for us all.  All the security measures put in place by governments supposedly to protect us against terrorists are not working. The government’s knee-jerk response is to increase security checks. Both these facts are of serious concern to our security, privacy and freedom. Allow us to explain…

Here at Q Wealth our intention is to bring you the common sense analysis behind the headlines. We base this analysis on our extensive experience and our good friends in both the ‘civil liberties’ and ‘intelligence’ communities. Bearing in mind that few facts of the case are known as yet and we are relying on TV reports for our information, here is our initial analysis – first of the actual event, then of the consequences. Warning: It is scary stuff.

First the good news: no-one was badly hurt. The underwear bomber burned his butt. Initial reports suggest he did not have a bomb, but rather some powder sewn into his underwear that he tried to inject with a liquid to cause a fire. Fortunately aircraft interiors are designed to be flame resistant, cabin crew are suitably trained and equipped with fire extinguishers, and one brave passenger physically restrained the terrorist. These three basic, sensible precautions saved the passengers and crew on that flight and the people on the ground below.

Whatever one may think of multi-billion dollar global spying operations and intrusive airport security measures, if they worked it would at least be a strong argument in favor of them. But this incident shows they do not work. The suspect’s father, a prominent banker, had taken the extraordinary step of reporting his suspicions about his son to the US embassy. The UK had refused to renew the suspect’s student visa because of his apparent terrorist connections. Yet here he was in possession of a valid US visa, travelling in his own name, allowed on board a flight to the US.

Airport security in Amsterdam, where the suspect boarded, is as ‘good’ as anywhere else. This writer passed through one of the new full body scanners there nearly a year ago. These are the super-duper new machines that are due to be rolled out over the USA next year. On my particular flight, the business class passengers were being checked by the new machine, while economy class passengers were being checked using the older method.

Nobody informed us what the machine was so I guess the majority of business class passengers had no idea they were having these photos taken. But a properly trained terrorist, especially one with a mechanic engineering degree like this one, who had something sewn into his underwear would surely have recognized the machine and snuck into the other line.

We are civil libertarians but we certainly recognize the need for airport security. The normal airport security that was in place in Europe (but not the US) in 2001 did not particularly bother passengers. It involved a quick scan of the hand-luggage and passing through a metal detector, as well as routine scanning of all checked baggage – measures which would very likely have prevented the 9/11 hijackers. I can also see the logic behind separating laptops at the scanner.

But none of the rules introduced since (restrictions on liquid, taking shoes off etc) make any sense. Does anyone think for a moment that a terrorist is incapable of forging a prescription from a Nigerian doctor that would allow him to take a syringe and more liquid that normal on board a plane? Depriving us of blankets and pillows or restricting hand luggage is just about inconveniencing passengers for absolutely zero security benefit.

Frankly, there is nothing more we can do in terms of physical airport security. It is impossible to introduce a fool-proof system. If a person is smart and determined enough they will be able to carry dangerous items past poorly-paid security guards – people who are taught to function like robots by reacting to whatever the latest threat is and, especially in the USA, to using scare tactics to bully passengers. And while the west wages war in other parts of the world, there will always be those smart and determined people.

Then another personal gripe of mine. More pressure on the use of cash payments for airline tickets. Last night US media were making a big deal of the fact that this guy paid cash for his ticket in Nigeria. All the ‘experts’ claim this is a warning sign of potential terrorist activity. I hope the people who are really in charge, rather than the so-called experts on TV, aren’t so stupid. I took the liberty of checking out the State Department’s website and here is what they say about use of credit cards in Nigeria:

The Nigerian currency, the naira, is non-convertible.  U.S. dollars are widely accepted.  Nigeria is a cash economy, and it is usually necessary to carry sufficient currency to cover the expenses of a planned visit, which makes travelers an attractive target for criminals.  Credit cards are rarely accepted beyond a few upscale hotels.  Due to credit card fraud in Nigeria and by cohorts in the United States, credit card use should be considered carefully.  While Citibank cashes some traveler’s checks, most other banks do not.  American Express does not have offices in Nigeria; however, Thomas Cook does.  Inter-bank transfers are often difficult to accomplish, though money transfer services such as Western Union are available.

So any airline flying from Nigeria had better accept cash payments……

But this is not an article about airport security. Travelling is a hassle these days but lack of pillows is a minor annoyance in the greater scheme of things.

Think for a moment about what would have happened if this attack had succeeded. The indirect consequences could be much worse than the direct ones. Think back to September 11th, 2001. Only this time imagine it worse. A lockdown of the USA. Borders could be sealed. Banks could be closed (Google the ‘bank holiday’ conspiracy theories…) and ATMs switched off. Assets could be appropriated by the government, as is common in times of war. Telecommunications and the internet could stop working. Martial law could be imposed. Events could easily get out of hand – causing blood in the streets, figuratively if not literally.

Similar things could easily happen elsewhere too. In the UK, for example, it is well known that the military have an emergency plan to seal off the whole of Greater London.

As smart individuals we need to make sure we are properly prepared for such catastrophes. Unfortunately, I think the probability of a successful major terrorist attack within the next few years is high, and it is more than likely to target the financial system. This would in many ways be awfully convenient for the powers that be, too – since then they would have somebody else to blame for a total collapse of the financial system that is happening already (see the related post links below to read about the decline in the value of the US dollar or ‘dollar devaluation‘)

I certainly hope I am wrong, and I am by no means saying that all the above things are going to happen. But I consider it would be smart to be prepared. It’s clearly better to have contingency plans in place and never have to use them, than the other way around.

So let’s treat this incident as a wake up call. We all get lazy. We all get stuck in our routines as soon as we feel a little bit comfortable and secure. But it should be a serious New Year’s resolution to put into place strong strategies to protect not just your assets but yourself. Don’t put it off. Do it now before it’s too late!

What do I mean? Different people have different necessities. But here are some of the basics:

• Physical gold and silver: The majority should be stored outside your home country, but you need some at home. Silver coins are better to barter for things like food. Both silver and gold are great investments. But if trading on the markets is suspended then all your ETFs, mining stocks, Perth Mint Certificates and the like will be worthless, at least in the short term. You need a proportion of your portfolio in physical metals. More on Buying Physical Gold Bullion Offshore here.

• Second residencies and passports: Again, it’s all about diversifying risk. Identifying yourself and your family as citizens of a neutral country may just come in very handy one day. Mobility is essential for your security. In the meantime, having legal residence (the papers) and/or a bolt hole (physical property) in a secure jurisdiction like a tax haven, well away from potential problems, is also reassuring. Rather than being forced to flee to an unknown place, you can just step comfortably in to a new life you have waiting for you. And the legal residence can lead to a second passport by naturalization after a few short years. More on Second Passports and Residencies here.

• Offshore Banking: Something as simple as opening a multi currency bank account outside your home jurisdiction can reduce and spread risk. Hold funds in various currencies and financial instruments. Any prudent investor should have international and foreign currency holdings and a multi currency account is a good starting point. For greater security and personal privacy consider the use of a Panama Foundation or Corporation. More on Offshore Banking matters here.

• Alternative Incomes: What would you do if you had to abandon your business tomorrow and leave the country? You should have not just assets in place overseas, but also a secure income stream from some sort of business you can run internationally. More on Offshore Wealth Creation here.

• Understand and Use Privacy Technology: Secure your internet communications. And, though this is certainly more difficult, think about what you would do if you didn’t have access to the internet. I don’t believe the whole internet will collapse, but parts of it certainly could. More on Privacy Technology in our new Secure Computing report, available in the members area.

There are lots more contingency plans you might need to put in place, depending on your family, your business, and your personal situation. For this reason we offer a free e-mail consultation to all paid-up Q Wealth members (obviously in our own time, it can take a few weeks for your reply) and we encourage you to attend our events where such contingency plans are discussed.

The first and most important step, if you like this article and haven’t already done so, is to sign up for our free Q Bytes newsletter to benefit from free weekly tips on major themes like offshore banking, asset protection, personal security, precious metals, and offshore wealth creation.

As I’ve frequently stated, the problem with conventional asset protection is that it frequently focuses on preserving the numbers in your offshore bank account. What I mean by this, is that if you have a million dollars, your traditional asset protection lawyer will seek to protect it against unjust lawsuits, greedy ex-spouses, and government seizure – maybe even taxation!

That’s fine as far as it goes… but it completely ignores what is perhaps the most important risk – currency devaluation, specifically devaluation of the dollar. No matter what complicated and convoluted theories economists might come up with, it doesn’t take a genius to figure out that if you print a lot more dollars, each one will be worth less. Every time Bernanke fires up the printing presses, he is devaluing the dollar. If you want to see statistics to back this up, see my earlier post: USA Bankrupt? Here’s the Evidence.

So if you have a million dollars in any of the best offshore banks at the beginning of 2010, and a million dollars plus today’s measly interest in your account at the end of 2010, you will really have made a big loss. So much for asset protection!

The solution, of course, is diversification. You’ve heard the story about the eggs and the basket. Physical gold bullion is one excellent hedge, and has the advantage of being non-reportable on the FBAR form (for US taxpayers) since it’s a physical thing, not a financial account. If you are interested in finding out more about How to Buy and Store Physical Gold Bullion Offshore, click here.

Another good solution is holding a multi-currency bank account. This is a financial service that is simple to use and understand, yet essential for protection against the devaluing dollar. A multi currency account, as its name suggests, is simply one bank account in which you can hold a variety of foreign currencies.

For example, you will log in to your internet banking and see you have X amount of US dollars, Y amount of Swiss Francs, Z amount of Aussie Dollars, etc.If you wire in an amount in a certain currency, the bank will simply hold it in that currency. Of course if you want to switch part or all of your balance to another currency within the account, you can do so with a few clicks of the mouse or a simple phone call.

Multi currency accounts are standard in some of the best offshore banking countries where I typically assist clients in opening their accounts. Despite the government’s propoganda, it is completely legal for most nationalities to hold offshore bank accounts – for the moment!

A question I am often asked is “is it possible to open a multi currency account in the USA?” Unfortunately, the answer is no. There are a few US banks that open foreign currency accounts, the pioneer being EverBank. Even EverBank, however, does not open multi-currency accounts – they simply open separate accounts for each currency you want to hold. This is not bad, but is less convenient.

Another problem with Everbank is this statement on their application form: Please note: Date of Birth, employment information and Social Security Number will be required from all account holders, including trustees and signers on the account. So no accounts for non-US residents, either.

To me, opening a multi-currency bank account in the USA seems like an oxymoron anyway. The whole idea is to diversify out of not just the US dollar, but the US banking system in general. According to bankimplode.com, 208 banks have ‘imploded’ since the beginning of the financial crisis – most of them in the USA.

That is why I have always recommended clients seeking multi-currency accounts to go offshore. For added security and privacy, it’s also wise to use an offshore entity like a Panama Foundation or Corporation to serve as the owner of your bank account. (If you haven’t read our free report yet on the advantages and disadvantages of Panama as an offshore centre, visit our Panama Foundations, Corporations and Offshore Banking page)

So how best do you go about opening a multi currency bank account? Which are the best offshore banks and the best offshore banking countries? Switzerland, Austria, or elsewhere? Where were the best places to open such accounts in 2009, and what will be the best offshore accounts in 2010?

For that information I suggest you download our Practical Offshore Banking Guide which is free for our paid-up members. If you are not a paid-up member yet, you can either subscribe online right now (it only costs $87 and takes a few minutes), or you can test our services with no obligation with our Free Five Part introductory course on Offshore Banking, Asset Protection and Wealth Creation that we would be delighted to send you starting today. Simply enter your e-mail address in the box above to receive yours.

Prefer a personal meeting? Then why not come along and meet me and the team in Cancun, Mexico in March 2010? Details from events@qwealthreport.com

by Peter Macfarlane

In my Gold Report ( a.k.a. “How to Purchase and Hide Gold Bullion Offshore”) earlier this year, I wrote that the USA, UK and other major countries are bankrupt. This may not be news to some readers, but the vast majority of the population carry on believing the mainstream media, in spite of all that has happened.

Recently, I received a call from a personal consulting client asking why I said the USA was bankrupt. I guess he had seen in the last few days gold surging ahead, breaking new records in terms of US dollar pricing, while the dollar was falling. Now of course that doesn’t necessarily mean gold is really gaining ground… it could just be taken as evidence of the dollar losing ground – since gold is real money. The Fed can’t print gold.

What was the evidence behind my claim of the USA being bankrupt? And how does one define a bankrupt country? And where do other countries, particularly the UK and Switzerland, fit into the equation?

I decided to answer these questions briefly here, for everybody’s benefit.

First of all, defining a bankrupt country is not easy. Iceland clearly went bankrupt in a more traditional sense. But Iceland was a relatively insignificant country of only a few hundred thousand people. My contention is that the USA is also bankrupt, but it is not so obvious because there are many other factors there supporting the currency – the greatest of which is China. While the USA is bankrupt, China is the richest country in the world.

Who says? And where is my evidence for that? No less authority than the Central Intelligence Agency, obviously a US government agency. Now don’t get me wrong, I know the CIA make mistakes, at least one of which led to a major war. But I think in this case the CIA’s figures are quite accurate…  Click here to visit CIA site and see the Current Account Balance ranking

Take a look at that page, which shows the Current Account Balance. In plain language, that just shows what countries have ‘money in the bank’ and which are operating in a permanent overdraft mode!

China is at the top of the list, with a huge positive balance – not far off that of Germany, which occupies the number 2 position.

The United States is at the bottom, with a negative balance more than five times greater than the next largest debtor, Spain.

You’ll also see the UK, France, Spain and Italy down there with the USA.

Here’s another interesting page to look at: Gold and Foreign Currency Reserves

You’ll see China up at the top again, with huge foreign exchange and gold reserves. Most of China’s foreign exchange reserves are held in US dollars.

On this chart, the USA is at number 19, with foreign exchange and gold reserves just above Switzerland’s (but note the USA has smaller reserves than Malaysia, Libya, Mexico and Iran)

So compare the figures – the USA’s negative current account balance with the USA’s reserves – what is actually there backing the dollar – and you’ll see a huge discrepancy. The current account deficit is almost nine times the amount of the reserves.

Here’s how I interpret those figures: The fundamentals of the US dollar are a disaster. It is being supported only because the Chinese and US governments want to keep its value up, and to a lesser extent because other governments see the dollar as a reserve currency. This arrangement has suited many parties for years, but it doesn’t really suit China any more.

Many other governments see the writing on the wall (especially the BRIC countries – Brazil, Russia, India and China) and are diversifying out of dollars for their foreign exchange reserves as well as for other important activities like trading oil. Take a look at where those four countries appear on the list. Very interesting!

So my conclusion is that the dollar is doomed. It has to weaken a lot further. I’ve explained in other articles why I foresee the continuing stealth devaluation of the US dollar rather than an outright dollar collapse. (See related article links below) I just cannot see how anyone, not even the might of the US and Chinese governments working together, can support the US dollar long term. Of course they might succeed in the short and even medium term.

Another interesting factor affecting the US dollar is the commercial real estate timebomb in the USA. We just emailed Q Wealth members with some important information on that this morning. If you are not yet a member, that’s something else you missed out on!

The Euro is a more complicated matter because there are such widely divergent economies in the Euro zone (Germany and Spain for example). Many people believe the Euro will break up. It might, but somehow I think that is unlikely. I think the Euro could benefit, at least in the short term, from the run out of the dollar. If you are going to keep reserves in fiat currency, and you want to avoid the dollar, the Euro is the logical choice. That said, its fundamentals are terrible too.

What about Switzerland? Switzerland is actually looking good. If I wrote that it was in bad shape in the Gold Report, that was because of its huge exposure to Eastern European currencies – another timebomb that I won’t get in to here. The other thing is that Switzerland is inevitably very dependent on whatever happens to the Euro. But I would probably revise my opinion from earlier this year on Switzerland. I keep some of my own assets in Swiss Francs.

And the UK? A lost cause in my view. They are stuck somewhere between the dollar and the euro. Sterling might recover in the short term.

Finally, I should say that I am no currency expert. I hold fairly strong views but don’t seek to impose them on other people. My work is offshore structuring and managing offshore banking relationships. Managing money is a big responsibility that I prefer to leave to others. But my own portfolio is heavily invested in gold, and I believe the next decade will belong to emerging economies. Buying currency is something akin to buying shares in a country. And my currency bets are on emerging markets.

Note: Peter Macfarlane is joint editor of The Q Wealth Report, a unique privately-circulated newsletter dedicated to achieving personal freedom, wealth and privacy – and to securing wealth and nurturing it offshore. If you are new here and would like to see more views like this, be sure to check out our free five part course on the fundamentals of offshore investing and international asset protection. Sign up now without obligation for this free course and our weekly Q Bytes free newsletter.

“The Dethroning of the US Dollar could happen sooner than you think,” says Keith Fitz-Gerald in a recently published article. The implications of this for asset protection purposes are huge – now is the time to diversify out of the collapsing dollar, and protect your wealth and assets through the use of offshore corporate banking structures.

By Keith Fitz-Gerald Investment Director Money Morning/The Money
Map Report

By now virtually every investor has heard the argument that the U.S.
dollar is slated to lose its status as the global reserve currency. And that’s
good – as far as it goes.

What’s bad is that many of these investors have yet to latch onto the fact
that this could happen much sooner than many people realize and in a
manner that will catch most by surprise.

Let’s take a look at the three key reasons that this shift away from the U.S.
dollar happening – and sooner rather than later:

1. The Asian Region Currency Partnership: Japan, once the staunchest of
U.S. allies, is leading the charge to form a regional currency partnership
based on closer ties between itself, China and South Korea. Ostensibly
part of the second trilateral “leader’s meeting,” that happened earlier this
year, financial cooperation was front and center on the agenda (at Japan’s
invitation) as a means of coping with the ongoing global financial crisis
and with the subsequent resumption of worldwide financial growth. It was
also key to the Association of Southeast Asian Nations (ASEAN)
discussions that took place this past weekend – with the waning influence
of the U.S. economy again playing a key role in the discussion amongst
potential ASEAN trading block partners.

At a time when U.S. leaders are fooling only themselves by pretending
this country remains the key player in the health of the worldwide
economy, Japan’s newly elected Prime Minister Yukio Hatoyama didn’t
mince words following the trilateral meeting when making such comments
as “until now we have been too reliant on the United States” and “I would
like to develop policies that focus more on Asia” to press-corps attendees.

Having spent 20 years in the region, I can’t say I’m surprised by this
development. And you shouldn’t be, either. Between China, South Korea
and Japan, we’re talking about 16% of the world’s gross domestic product
(GDP) – a figure that’s growing almost daily, by the way.

There are obviously some significant challenges, given the cultural
sensitivities that remain in the region as a result of World War II. But even
those are being trumped by today’s serious global financial demands. After
the three-nations met, Chinese Prime Minister Wen Jiabao noted that “we
have agreed to seek common ground and shelve our differences.”

In a column written from my family home in Japan earlier this year, I
noted how important it is to “read between the lines” when investors are
attempting to decode English-language statements being made by officials
in Japan or China. It’s not what’s actually being said – at least, not as
Westerners hear it – that’s important. That’s actually been shifted a bit by
the translator. You really have to go back and make an effort to see just
what it was the official actually meant.

Granted, that’s not the easiest of exercises. But it does force you to really
look at what’s taking place – which will usually give you a much-more
accurate picture than if you just trust what’s said by the Western press.

So Wen Jiabao’s statement can be construed as it’s “time to get down to
business.”

2. When “Black Gold” is No Longer Quoted in Greenbacks: Middle
Eastern nations and members of the Organization of the Petroleum
Exporting Countries (OPEC) finally couldn’t contain themselves any
longer and leaked information a few weeks back that they’re pursuing a
non-U.S. dollar trading basket as a replacement for the current U.S. dollar-
traded oil markets.

We’ve been forecasting this for some time. The difference this time around
is that the Middle Eastern nations are now all but openly in cahoots with
China, Russia, Japan and France – all of whom the United States continues
to blithely believe it can outmaneuver.

While the meetings have been held in secret, my sources in Hong Kong
and the Persian Gulf region suggest that the move is imminent and that the
establishment of an independent trading market is all that’s keeping us
from a day in which oil prices are no longer quoted in dollars. Oil will
instead trade in the combined basket using currencies from the nations I
just mentioned. Led by China and potentially – although this is a big leap -
tied in good measure to the yuan.

As a side note, this may at least partially explain the rise in gold prices as
enlightened traders begin to hedge the dollar’s ultimate demise. This
makes sense for two reasons: First, China uses oil in an incrementally
greater proportion than the United States because it remains less energy
efficient. That means that China will take in an increasingly larger
percentage of world supplies.

Second, gold is the only “currency” that is potentially liquid enough to
serve as a transitional store of value until the new currency basket arrives.  Pun absolutely intended.

Incidentally, you can expect Brazil and India to join the party shortly,
leaving the United States even further out in the cold. And while we’re at
it, my guess is that the new oil markets will be based in Shanghai, and not
in New York or Chicago.

Watch, too, as the United Kingdom is dragged – kicking and screaming -
to the euro because it will have no choice but to abandon the U.S. dollar.

3. U.S. Firms Are Already Adopting a China Focus: While ostensibly
supporting the recovery here, major U.S. companies are already looking at
what it will take to list their shares on China’s stock exchanges. Although
I’ve been following this story for at least two years, it’s received almost no
attention in the U.S. news media. When it does happen – and it will – this
will be one of the biggest wakeup calls yet for those Western investors
who refuse to acknowledge Asia’s economic ascendance.

I’m not talking about fringe companies here, either. I’m talking about
stalwarts like Wal-Mart Stores Inc. (NYSE: WMT), The Coca-Cola Co.
(NYSE: KO), and General Electric Co. (NYSE: GE), to name just a few.
In short, companies that U.S. investors view as American as apple pie are
pushing to be viewed as Asian as quickly as possible.

I originally thought this wouldn’t happen for five to seven years (which is
still faster than most investors believed possible). Instead, I give this shift
12 months to 24 months – at most – before we see the first listings.

The fallout from this will be considerable. The historic financial centers of
London and New York will take yet another step to the sideline as new
Asian markets emerge.

To some, this will sound like scary stuff. But uncertainty breeds
opportunity. And savvy investors will welcome the changes because there
will be a fascinating fallout that almost no one is talking about.

The emergence of Asia as a true global financial center will make it so
much easier to raise capital in that part of the world. All this new Asian
capital will likely lead to a new golden age of investing – certainly in Asia,
but also in the United States and Europe to the extent that companies that
pursue these listings will have newfound sources of capital to buttress
their balance sheets.

Not all companies will be regarded equally, however. For investors, the
best choices will be those companies that can immediately use the money
they raise through Chinese offerings to enhance their global operations,
increase worldwide sales, and cement their relationships with sources of
Asian capital.

So if there’s one key take away in all this, it’s this to paraphrase the words
of American writer Ruth E. Renkel: “Don’t fear shadows – they simply
mean there’s a light shining somewhere nearby.”

Note: Keith Fitz-Gerald  is the Chief Investment Strategist for Money Map Press LLC, as well as for Money Morning, a daily global investing news service with more than 500,000 daily readers in 30 countries. He is one of the world’s leading experts on global investing, particularly when it comes to Asia’s emergence as a global powerhouse. He contributed this article to Q Wealth Report.

“In the years leading up to mid-2007 keen observers noted dangerous leverage in the US debt markets and some predicted that the bubble would pop. Predictions like this were contrarian while the market was rising, and they were ridiculed. But then when the bubble did pop, those same contrarians became nearly household names as network TV invited them on to explain their predictions.”

So begins a lengthy and informative article by blogger FOFOA, in which he claims that the coming devaluation of the dollar will be sprung on us without warning. If you have time, I recommend you read it (here is the link)

Your editor is in partial agreement with FOFOA. Indeed, I would say the devaluation of the dollar is already well underway. Unfortunately, the vast majority of people are currently living in a world of illusion… just this week, against all odds, the stock market rose again. When people see a rise in the nominal value of their investments, they believe they are making money. But they are wrong. Few take in that the cost of living is rising disproportionately higher… so they are actually losing. This is the fundamental strategy behind what I call the stealth devaluation of the dollar. The purchasing power of the dollar has fallen drastically since the Second World War, with a notable increase in the velocity of the fall in the last couple of years.

Another informed and respected commentator on the collapse of the dollar is John Rubino, who recently interviewed yours truly for an article on offshore banking and asset protection. In recent comments he refers to some news passed on by veteran newsletter writers Harry Schultz and Bob Chapman, that verges on what I would call a conspiracy theory…. or does it? You decide! The story goes like this:

“Some US embassies worldwide are being advised to purchase massive amounts of local currencies; enough to last them a year. Some embassies are being sent enormous amounts of US cash to purchase currencies from those govts, quietly. But not £’s. Inside the State Dept there is a sense of sadness & foreboding that ‘something’ is about to happen, unknown re a date-just that within 180 days, but could be 120-150 days.”

Bob quotes another source that “Panasonic has told their people to be back in Japan by Sept 09.”

Harry Schultz’s remarkable take on the situation:

“My HSL suspicion is that the elite plan another FDR style “bank holiday” of indefinite length, perhaps very soon, to let the insiders sort-out the bank mess which is getting more out of their control every day. Insiders want/need to impose new bank rules. Widespread nationalization could result, already under way. It could also lead to a formal US$ devaluation, as FDR did by revaluing gold (& then confiscating it). But devalue against what? The euro? Doubtful. Gold? Maybe. Or vs. the IMF basket of currencies (which seems more likely)-& much in the news recently.

Any kind of bank holiday will push the US$ lower, which may be a bonus benefit to their ongoing scenario of letting the $ fall. Such a fall would get the devaluation they want without having to declare it. In sum, the insiders want more bank & system control, fewer banks & a lower US$. A bank holiday would suit all their needs.”

So there is the question. Can we expect a sudden dollar devaluation, complete with suspension of markets and a so-called ‘bank holiday’? Or will we see the stealth devaluation of the dollar continue to accelerate?

My bet is on the latter. Why would politicians and those in power risk the wrath of the people by devaluing the dollar so explicitly from one day to the next, when they have successfully got away so long with devaluing the dollar on the quiet with few people noticing. But of course I may be wrong, and the situation may be even more out of control than I think.

Either way, I’m not sitting waiting for it to happen, and you shouldn’t either! If you are properly prepared, such a collapse would be a huge profit opportunity. But you would not be able to rely on usual market mechanisms… we have to consider that the stock markets and financial system might be completely suspended. It happened in the aftermath of 9/11, but it hasn’t yet happened during this global financial crisis. Never say never!

My advice is that markets are a nice convenient way of speculating play money for short term gains, but every serious investor needs to keep wealth outside the financial system too. That may be in your own business (if it is resilient) or it may be in real estate (people will always need places to live) or it may be by stashing gold bullion in an offshore safe deposit box.

The Q Wealth Report is here to advise you on all these options and more. If you haven’t yet read our free five-day e-mail course The Secrets of the Super Rich, I would urge you to sign up for it now. As I said, it is absolutely free and without obligation. I think you will find it an eye-opener!

In this article: a quick preview of a way to profit from economic turmoil… Canada’s largest ever gold discovery. This is something our Q Bytes subscribers already received details of today. If you are not yet on the Q Bytes list (and remember it’s FREE!) you have a second chance, because we will send out this link again on Saturday. Read on for more details…

The $787 billion approved in February was not enough, it seems! For example Laura Tyson, an  adviser to President Barack Obama, is quoted by Bloomberg as saying it was “a bit too small.” See also this link about Gold Price Speculation.

As I seem to remember there have been quite a few stimulus deals already…  so where somebody got the idea that this is only the second, I don’t know. But anyway, the chatterers are asking for a “Second Stimulus.” Whether this craziness actually goes ahead or not, it is once again highlighting the potential for decline of the dollar – and the consequent rise in Gold.

I see inflation as the most imminent threat to your capital. Allow me to explain. The Monetary Base is made up of currency in circulation, reserves that banks have on deposit with the Fed, and (last but not least) Federal Reserve Notes (FRNs)  stashed away in bank vaults. This is themoney used in our daily transactions, and as such is the most accurate indicator of inflation.

Between 1960 and 2008, the Monetary Base grew at roughly 6% annually, with a spike around 15% just before the turn of the century. But get this: Between September 2008 and April 2009, the Monetary Base exploded to a 110% growth rate. That means cash available to do business more than doubled in the space of just eight months. And since April… well, you get the idea!

With this level of liquidity, prices have to start rising in a big way. In fact, market guru Marc Faber says he is sure that U.S. will soon go into hyperinflation. Meanwhile other experts suggest that the UK is equally on the edge of a serious currency crisis.

What does all this mean? One short, four letter word:  G O L D ! We’ve written many times about Gold and Precious Metals Investing generally, and more specifically in our Members Section about how to buy and hold gold bullion offshore for the ultimate privacy, hedging and completely legal non-reportability.

But today I am not writing about Gold Bullion. While gold is slow, steady and relatively conservative… there is a way to leverage gold investments and make a lot of money very quickly when the gold price soars. I’m talking of course about gold mining stocks. And right now there is a very interesting opportunity that has come my way, from a couple of highly reputable people, both industry insiders, that has a very high potential upside. It’s interesting because it has two upsides… not just the leverage on the soaring gold price, but the fact that it’s currently undervalued and this is a chance to get in on a new gold find at the ground floor.

It’s not every day that the biggest gold find in Canadian history goes on record! But that’s what’s about to happen.

So I believe the time is right to introduce you to a contact who has all the inside information on it… an veteran ‘hands on’ investor of the Canadian mining business. I named him to Q Bytes readers in an email this morning, but will decline to name him in public here.  Suffice to say, if you missed out you still have a chance. Get on our Q Bytes list by midnight Friday, and I’ll make sure you get this information on Saturday.

He is going to tell you a great story… about a “renegade geologist” and his “mom-and-pop” company who are right now sitting on a mother lode of 10.6 million ounces of gold on their mining property. It’s soon going to go on record as the biggest gold find in Canada… the seventh largest in all of North America.

Now I’d like to point out, to those people out there who want everything for free, that good, hands-on type research costs money (just look at my travel bills each year…) So I’m not saying I’m going to give you all the insider research and contact information you need to take advantage of this deal for free. But Q Bytes readers will have the opportunity to read this story and get full information and insight on how this could work,  and very importantly how you could make money in short order. We mailed some info to our readers today, and we will repeat the relevant links on Saturday, to anyone whois a current Q Bytes reader as of midnight tomorrow Friday.  And Q Bytes is completely free and without any obligation whatsoever. You can sign up to Q Bytes here. Don’t miss out!