Are we on the verge of another global food crisis? asks Peter Macfarlane. And if so, how can we protect ourselves and profit from this crisis? This could have a huge impact on your offshore investments and assets, and – more importantly still – your safety and security. How to protect your assets and yourself? Read on for more…

Editor’s note: If you are not yet a subscriber to our free asst protection and offshore investing newsletter, Q Bytes, we thought you might be interested in the following article by Peter Macfarlane from last weekend’s edition. Sign up now to Q Bytes to receive Peter’s insight in your e-mail each weekend.

Are we on the verge of another global food crisis? Some people think so. This could have a huge impact on your investments, and – more importantly still – your safety and security.  There are even ways to combine secure investments in this area with second passport opportunities. That’s why we’ve decided to focus this weekend’s Q Bytes on this important theme.

Last month was marked by large-scale anti-government protests in Tunisia and Egypt. It’s fair to say that the Tunisian revolt inspired the Egyptian one. The Tunisian riots were sparked by a simple dispute about the right to sell food. Last year we also saw food riots in other African countries, such as Algeria, Mauritania and Mozambique.

Wheat prices have surged 50% since early June, the biggest jump in 30 years, according to HSBC. Droughts in Russia, Ukraine and Kazakhstan, which together account for 26% of world wheat exports, are leading to fears of tight supply and super-charging prices.

Today’s scares are just the latest sign of what could be one of the biggest challenges facing the global economy over the next 20 years – the fight to feed the world. Investors and speculators should definitely be paying close attention.

Food, of course, isn’t like other commodities traded on world markets. No country wants to run out of food or watch sky-high prices dump people into poverty and malnourishment. So both exporting and importing countries often take extreme, knee-jerk populist measures if they think a shortage is coming or prices will keep rising. These measures include things like hoarding and export restrictions. For example, Russia slapped a ban on wheat exports from mid-August last year, while Argentina has severely restricted beef and soybean exports.

Severe structural problems in the world of agriculture have made the balance between supply and demand very precarious. On the production side, there is a severe lack of investment in the rural infrastructure and agricultural research that we need to keep yields increasing. On the consumption side, all those newly wealthy Chinese, Indians and Brazilians are now buying more food than previously… more meat, for example, which means more grain gets turned into livestock feed instead of people-feed. Also don’t forget to add the new diamond for bio-fuels into the equation.

According to the OECD and the UN’s Food and Agricultural Organization (FAO), world population is expected to grow by 2.3 billion people between 2009 and 2050 with nearly all this growth from developing countries. They estimate that feeding a population of 9 billion will require a 70% increase in global food production by 2050.

World Bank Chief Robert Zoellick writing in the Financial Times, in an article that already caused controversy by suggesting that major economies look at a partial return to the gold standard, warned that “with food accounting for a large and volatile share of tight family budgets in the poorest countries, rising prices are re-emerging as a threat to global growth and social stability.”

Another problem many people have not taken into consideration is the falling value of the dollar.  Ben Bernanke’s quantitative easing will continue to cause a greater demand for dollar-denominated commodities, from people like us who are seeking to exchange fiat money for tangible assets.

Where are we going with all this? It’s well known that the Chinese are buying up large swathes of Africa, mainly for natural resources, while Latin America is seen as the new breadbasket – or perhaps the meat producer. Argentina’s government is certified nuts as far as we are concerned, so even wealthy Argentines are investing their capital in production in neighboring countries, particularly Uruguay and Paraguay. Brazil, meanwhile, is speeding ahead in agricultural production.

As some of you may know I recently attended a closed doors briefing in Paraguay with a small group of Q Wealth readers, during which we heard presentations from agricultural and forestry experts (Paraguay’s former consul in Hamburg to be precise, who has now returned to his home country and is heavily involved in forestry.)

I’ve invested quite a substantial part of the assets of my personal investment vehicle in Latin America’s southern cone area recently (including Paraguay and Uruguay) as I believe this area definitely represents future growth opportunities. Another very positive thing about this region is that it’s eminently liveable. That is, you can easily enjoy a safe, clean and reasonably priced first world lifestyle in the area. Africa has lots of potential too for the more adventurous amongst us, but I’m not about to move my family there. However, my family have spent time in Uruguay and got on great.

Last but not least, both Uruguay and Paraguay are quite liberal when it comes to naturalizations – that is, second passports.

At Q Wealth we are not a share-tipping newsletter, but there are certain plays on agriculture in the southern cone region you can buy on international markets. Do your research and due diligence. More generally, you can also expect further significant gains on stock market investments in the ag sector.

Most important, however, is that you understand the big picture, that governments with their short term mentalities are not telling you. This is a region you should watch. With the largest fresh water reserves in the world, plenty of land that is ideal for food production, and relatively hands-off governments, it is probably the world’s best hope to solve the future food problems, and your best hope if you are looking for a safe place to hide out where you’ll never want for food or water.

More to follow in Q Wealth Report.

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