One of our familiar themes here at Q Wealth is the decline and devaluation of the dollar – and how you can not just protect yourself against it, but actually turn it to your profit!

Devaluation was brought one step further last week by the latest round of currency controls on the US dollar introduced in the new HIRE Act.

Some people have written that these restrictions do not in fact amount to back door currency controls. We agree to an extent – they are not traditional exchange controls like we still see in some countries like South Africa or Brazil. But they are very much currency controls nonetheless. They amount to just one part of the stealth devaluation we have frequently talked about (see related links below).

Recently, legendary guru Marc Faber wrote that printing money represents a silent way for governments to default on their debt. When a government openly defaults on its debt, says Farber, the workout process is reasonably equitable.  But if a government devalues silently by printing, the burden of the default isn’t shared equally. Those who hold more of the currency being devalued, in this case US dollars, are disproportionately hit. Inevitably those hit hardest are not big sophisticated international investors, who have hedged their risk, but small investors who have simply never thought of hedging against currency risk.  That means, for example, average Americans who have savings in their retirement accounts.

Very few Americans have had the foresight to move their IRA assets out of dollars. Yet it’s something perfectly legal and quite easy to do… at the moment! The restrictions in the HIRE Act will make this much more difficult because they simply make it very difficult to transfer money abroad.

Yes, there are exemptions. The HIRE Act does not in theory impose any tax on an American who transfers his or her own money, to a foreign account in his or her name.

But, there is a big but, banks around the world will be running scared of the regulations. First of all, foreign banks won’t want the US account holders in the first place. Secondly, US banks will be desperately trying to cover their liability by checking the exact purpose of the payment, to make sure it doesn’t come within the scope of the legislation. The burden of proof will naturally pass to the account holder who is trying to transfer money, to demonstrate that the transaction is not subject to the new withholding tax. If the sending bank in the USA has any doubt at all about the purpose of the transaction, they will be forced to deduct 30% tax.

Net result? It is going to be darned difficult for anyone to transfer money out of the USA. If that isn’t a form of currency control, then I don’t know what is!

Faber is predicting that US Treasuries will collapse, sending yields up to a range of 10 percent  to 20 percent during the next five to 10 years, as inflation and supply explode.

Here at Q Wealth our intention is to keep you informed and provide actionable things you can do to protect your savings and your future. Right now, you can still transfer assets legally and openly out of the USA into offshore structures, offshore investments, and offshore banks where your assets are better protected – but for how much longer? I would give it until the end of this year, if that.

Right now, US citizens can legally acquire a second citizenship and passport, and legally avoid taxation on their worldwide income. But it is getting harder.

Where the US leads, the UK, the euro zone and Australia will follow. Subtle, hidden currency controls like this will become the norm in the developed world, particularly the OECD countries. We will continue to expose them while we can. And we will continue to provide real solutions, especially to our paying members. If you are not on our mailing list for the free weekly Q Bytes newsletter, and this matter concerns you, then sign up today for Q Bytes! And if you would like to know what you are missing if you are not a paid-up member of Q Wealth, please see Why Join Q Wealth?

Legendary Swiss market pundit Marc Faber recently advised a group of high flying investment managers to ‘buy farmland and gold,’ reports the Times of London.

Dr Marc Faber is an interesting and often controversial commentator. His greatest claim to fame is having advised investors to pull out of the stock market a week before the 1987 crash. Now his belief, he reportedly told an assembled group of pension and sovereign wealth fund members in Tokyo the US is going to go bankrupt. The best way to achieve international asset protection and diversification is to buy physical gold and farmland, he believes.

So who is Dr Marc Faber? Dr Faber moved to Hong Kong in 1973 and – although he still keeps an office there – he resides in Chiang Mai, Thailand, along with a number of our subscribers and friends. As well as having penned several books, Faber has his own monthly investment newsletter The Gloom Boom & Doom Report.  Faber has been long term bearish about the American economy for a number of years and continues to be so.

According to Wikipedia, he concluded his June 2008 newsletter with the following:

The federal government is sending each of us a $600 rebate. If we spend that money at Wal-Mart, the money goes to China. If we spend it on gasoline it goes to the Arabs. If we buy a computer it will go to India. If we purchase fruit and vegetables it will go to Mexico, Honduras and Guatemala. If we purchase a good car it will go to Germany. If we purchase useless crap it will go to Taiwan and none of it will help the American economy. The only way to keep that money here at home is to spend it on prostitutes and beer, since these are the only products still produced in US. I’ve been doing my part.

The reporting in the Times also offers insight into Faber’s way of thinking:

His investment advice, which was the first keynote speech of CLSA’s annual investment forum in Tokyo, included a suggestion that fund managers buy houses in the countryside because it was more likely that violence, biological attack and other acts of a “dirty war” would happen in cities.

He also said that they should consider holding part of their wealth in the form of precious metals “because they can be carried”.

One London-based hedge fund manager described Mr Faber’s address as “excellent, chilling stuff: good at putting you off lunch, but not something I can tell clients asking me about quarterly returns at the end of March”.

Needless to say, we agree with Dr Faber’s predictions. We have been telling people for several years to get out of the financial system by buying physical gold, as well as diversifying with multi-currency offshore bank accounts.

We also recommend purchase of productive and useful real estate, as opposed to real estate held for speculation. Farmland in countries like Paraguay, Uruguay and Brazil, for example, has proven to be an excellent investment over the past few years, but will only show its true value in the future. Our planned Paraguay Citizenship and Real Estate Investment Tour has been delayed somewhat due to pressure of work, but we are still planning to go ahead with it, now probably in early May. Anyone interested in coming along is more than welcome to contact us.