Offshore Asset Protection BLOG - Bob Bauman

The Bogeyman Will Get You

The "bogeyman" in many cultures is a folkloric or legendary ghostlike monster.

The bogeyman has no specific appearance, and conceptions of the monster can vary drastically even among families and communities. In most cases the bogeyman has no clear appearance in the mind of a child, but is an amorphous embodiment of terror.

In a misguided effort to make them behave, less educated parents may threaten their child with the cruel statement that if he or she is naughty, "The bogeyman will get you."

Under My Bed

I don't know about you, but as a small child, there were times in my darkened bedroom when I was afraid even to look under my bed, lest that feared bogeyman would get me!

And those were in the ancient days when there was no mind screwing television, only The Inner Sanctum and a few other shows on the radio, that created mythical characters that were feared in the mind's eye.

During the era of old time radio, I recall The Inner Sanctum, and its host "Raymond," (he with the creepy voice and squeaking door), a show that gave us listeners grizzly tales of murder and madness, evoking enough chills to keep us breathless. It was a tightly formatted show with horror and suspense designed to keep you on the edge of your chair or holding tightly to your sheets if you were listening just before bedtime. It featured spine-tingling stories of ghosts, murderers, lunatics, vampires, wolf men, zombies and man-eating plants.

Just right for creating that bogeyman under my little bed.

Bigger, Better Bogeymen

But, as the more observant well know, the bogeyman concept can be used metaphorically to demonize persons, whole groups, or things in a conscious effort to promote irrational fears in the minds of the less informed.

Thus the Jews became Hitler's bogeyman -- and in the world of the U.S. Internal Revenue Service, the leftist media and big spending politicians such as U.S. Senator Carl Levin (D-MI), "offshore" is a major bogeyman.

The political Left never misses a chance to put forth new explanations as to why individual Americans and business banking, investing and engaging in financial activity offshore must be suspected of crimes and tax evasion, (notwithstanding that it is legal to conduct all such activities).

I often quote (and will here again) a United States assistant attorney general during the Clinton administration that I heard tell an audience that at the U.S. Justice Department the policy was to assume that any and all offshore financial activity was probably illegal. (So much for the constitutional presumption of innocence!)

The Madoff Offshore Bogeyman

In the last 25 years the IRS and leftist politicians, hungry for ever more tax revenues, regularly have trotted out one after another reason as to why "going offshore" financially was wrong, immoral and, probably fattening. Tax havens in particular became the focus of their attacks.

First it was the excuse of the (now failed) "war on drugs" since drug kingpins were alleged to be hiding millions offshore. No proof was offered. Then, after the 9-11, 2001 terror attacks, the attacking terrorists' cash was said to be hidden offshore -- a claim absolutely disproved subsequently. Then it was the Enron scandal, the Parmalat bankruptcy, the Liechtenstein bank records theft, and now comes the latest of this dubious string of anti-offshore attacks.

You guessed it -- now the evil Bernie Madoff is the latest trumped up "proof" that offshore is evil.

The Usual Suspects

The New York Times reports (Dec. 30 that: "The investigations into Bernard L. Madoff are expanding into offshore tax havens. Federal prosecutors are beginning to consider what role offshore fund operations may have played in the $50 billion Ponzi scheme that Mr. Madoff is accused of orchestrating. Of particular interest is whether Mr. Madoff and some of his investors used funds based in offshore tax havens to evade American taxes, according to a person briefed on the investigation."

Well, folks, most of the decade-long Madoff chicanery and fraud took place onshore right under the nose of a somnolent SEC..

Does that automatically make all domestic American financial activity suspect? (Put aside the fact that, at the moment, all U.S. banks and Wall Street qualify as what Claude Rains’ crafty Inspector Reynaud called in the classic flick Casablanca, "the usual suspects.")

Strictly Legal

Yes, Virginia, for the moment, forget the bogeyman. Obama pending, it still is legal to bank, invest, protect your assets and do business offshore -- so take advantage of these freedoms while you still can.

For more information about offshore banking, investing, finances in general and tax havens, see my book, Where To Stash Your Cash, Tax Havens of the World.

Year End Tips: Six Ways to Protect Your Assets Right Now

As we at the Sovereign Society have been telling folks for over ten years now, if you have wealth, you need wealth protection.

And procrastination can steal more than your time - it can destroy your wealth. So act today. Just a few simple steps - plus some offshore advantages - can ensure that your hard-earned assets remain yours and can be passed on to your family and loved ones.

And, for Americans, these steps are especially important to consider now, with the likelihood of drastic tax and law changes coming under an Obama government.

1) Keep a low profile. Owning assets in your own name too often is like throwing chum in the water for the circling schools of sharks -- lawsuit-happy lawyers and litigants. If people think you're rich, your chance of being sued skyrockets.

One way to lower your profile is not to title your assets directly in your own name. Instead, use a privacy-protected offshore corporation, family foundation or an asset protection trust (APT) to hold title. In many places such ownership is not a matter of public record.

2) Shrink the target. Let's say you own a number of rental properties. A tenant slips and falls at one of these places and decides to sue you. Unless you take precautions, total damages could amount to the value of all your rental properties. Whether it's a rental property, a restaurant, or something else, segregate risks - consider creating a separate corporate entity for each liability generating asset. Especially, never mix large liability-generating assets. For example, an apartment house should not be owned by the same company that owns a trucking company.

3) Going offshore adds a strong layer of protection. Whether it's in a Swiss or Liechtenstein life insurance wrapper, retirement annuity or an Isle of Man or Panama asset protection trust, placing your assets offshore puts them out of reach of most frivolous lawsuits. Even litigants with an ax to grind usually are ready to settle for pennies on the dollar when they find out how difficult it is to locate and collect your money offshore.

For example, if you place your 401k or other retirement plan in a suitable jurisdiction - Panama or Switzerland, for instance - it can be configured to be essentially claim and judgment proof, plus it is covered by strict financial privacy laws that are non-existent in the United States.

4) Get Good Advice. Avoid pushy domestic and offshore hucksters - the ones claiming falsely that you can lower your tax bill to zero if you just put all your money in their "pure trust," a "constitutional trust" or a "corporation sole." Well, you might not pay any taxes, but only because these hood winkers will take all your money and run with it. And you could go to jail.

And avoid those Bernie Madoff types who promise you the moon on investment returns. The rule is - if it sounds too good to be true, then it is too good to be true.

Always work with carefully vetted bankers, investment advisors, financial experts, and legal professionals from select tax and asset haven jurisdictions. Always check references and do your due diligence homework on a service provider before sending them a single penny. Asks us if you want recommendations for good, solid contacts.

5) Pass on your legacy with an offshore trust. In most cases, while an offshore trust will protect your assets, it won't reduce your U.S. tax bill. However, an offshore trust can incorporate provisions that can reduce future estate tax liability. It can protect your wealth, notwithstanding efforts by the U.S. or other governments, to discourage legal offshore financial transactions and investments.

Frivolous litigation, expensive legal defense costs, outrageous jury awards, and government privacy invasions and asset forfeiture all create an urgent need to protect your family and business wealth. An APT can do all that and more.

6) File all returns and reports. certain path to asset loss is ignoring U.S. tax filing and reporting requirements or giving inaccurate or partial information. Get a good CPA who knows the reporting and other rules.

Almost every nation now has "know your customer" laws that require bank account applicants to prove their identity, the source of their funds and their life story. Cash transfers of US$10,000 or more are reported electronically to the U.S. government. U.S. persons, on their IRS Form 1040, must say if they have an offshore account, and if activity therein exceeds US$10,000 an annual U.S. Treasury Form TD F 90-22.1 must be filed. Lying or failure to file these reports are separate felonies.

We at the Sovereign Society can and will help you with all of the above (and more) asset protection devices. Our executive director, Erika Nolan, myself and our Sovereign Society editors often have visited many tax and asset protection havens. We've made strong banking, legal, trust and other professional contacts that are useful to our members with offshore business and financial interests.

That’s another good reason why you should protect yourself and your wealth by joining this unique organization that, for more than a decade, has shown the way for sound offshore banking, prudent investing and real financial peace of mind -- the Sovereign Society.

After 700 Years Andorra Open to Foreign Investors

Bloomberg News reports that the government of the Principality of Andorra is opening up investment in resorts and other businesses to foreign investors for the first time in seven centuries.

The rumored goal is to plug a national budget deficit but, in my opinion, this new opening to the world doesn't means that Andorra is about to change what is arguably the strictest bank secrecy policy in Europe, (a view confirmed by an old friend who has lived there for many years).

In the past part of the government budget has been financed by loans from Andorra’s five commercial banks until rising private defaults curbed this lending.

All Andorran banks now are locally owned and one of their major attractions, especially for foreign depositors, is a bank secrecy law so tight that the country is one of only two in Europe still on the blacklist of the Financial Action Task Force (FATF) of the Organization for Economic and Community Development (OECD), because of their refusal to share tax and other information with other governments. (Monaco is the other one still on the FATF list).

Outside Investment Welcome

Foreigners, previously restricted to owning no more than a third of any Andorran company, can now hold up to 49% in its main industries, including luxury clothing retailers, real- estate developers and ski resorts. They will be able to own 100% of companies in 200 industries the government wants to develop, such as research firms and Internet commerce. Prime Minister Albert Pintat said the government aims to remove all foreign investments restrictions within six years.

Along with lifting this curb on foreign investment, the Andorran government paid the usual lip service of now wanting to be seen as an “investment haven” and not a “tax haven.” That has become ritual language in a public relations effort to appease the OECD/FATF without really yielding financial privacy. In fact, Andorra levies no taxes on foreign income and, all things considered, is one of the better tax havens in the world.  They rely on revenue from about 10 million visitors a year for more than two-thirds of their $4.1 billion economy, less than half the size of Malta’s, the smallest state in the European Union.

Hidden Andorra

Andorra is a tiny, mountainous country of about 83,000 souls…with no taxes, no army and no poverty.

Nestled between Spain and France high in the Pyrenees, this is a residential tax haven for very wealthy foreigners who enjoy winter sports. If you live in this independent nation 20 years you can become a “privileged citizen” and enjoy all rights of citizenship except voting. Citizenship may be somewhat difficult, but you can establish immediate residency fairly easily. Just move in and apply for a resident’s card. But you must rent or own property in order to stay.

Andorra consists of 185 square miles. It’s about one-fifth the size of Rhode Island. Andorra’s rugged terrain consists of gorges and narrow valleys surrounded by mountain peaks that rise higher than 9,500 feet above sea level. It is an independent nation-state governed by 28 elected members of the General Council.

Banking Evolution

Over the past 50 years, Andorra has evolved. It’s transformed from being a very poor mountain mini-principality, into a sort of duty-free shopping center with ski resorts and banking secrecy. And it’s all thanks to the growth in purchasing power from the middle class in Cataluñ, the neighboring Spanish province. There is no income or estate taxes for anyone living in Andorra.

The banks now require anyone who wants to open an account to appear in person. Lawyers cannot open accounts for them. U.S. persons who reside here are not allowed to have any U.S. securities in their Andorran bank accounts because the banks don’t want to be bothered with excessive time and costs for U.S. reporting and SEC visits. Non-U.S. securities and investments are no problem. There are several banks. The three largest are Credit Andorra, Andbank and Banca Mora.

With political and economic stability, no labor problems, virtually no unemployment, and the lowest crime rate in Europe, remote Andorra could be your safe haven away from the modern world’s problems. But bring warm clothes and plan on driving because the only access is three hours by road from the nearest airports in Barcelona, Spain or Toulouse, France. (A new airport in Andorra le Vella for small planes will be ready sometime next year).

Best Offshore Uses: Quick tax-free residence, duty-free bargains, banking in strict financial privacy, skiing nine months of the year

For more information about Andorra and many other tax havens, see my book, Where To Stash Your Cash, Tax Havens of the World.

When In Doubt -- Choose Switzerland

I often have reported on the steady flow of corporate relocations by many companies from the United Kingdom (and elsewhere) to Switzerland.

In most cases the motivation for these moves has been the lure of reduced Swiss corporate taxes, compared to the high taxes in places happily being abandoned.

U.S. Companies Moving Out

Now comes the news that the threat of president-elect Obama's anti-tax haven legislation is prompting several major U.S. companies to move their offshore incorporation status from tax haven Bermuda to Switzerland.

The move to Switzerland will help the companies preserve the tax benefits they had in Bermuda and the Cayman Islands, while using Switzerland's tax treaty with the U.S. to shield them from possible adverse legislation from the incoming Obama administration and the next Democrat-controlled Congress.

Bermuda imposes no corporate income tax but no U.S. tax treaty. Switzerland has a corporate income tax, but doesn't levy it on profit earned by subsidiaries overseas.

Conglomerate Tyco International Ltd. and oil industry contractors Foster Wheeler Ltd. and Weatherford International Ltd. announced their moves last week. Transocean Inc., a big offshore driller, received shareholder approval Monday for a similar move. The board of Bermuda-based insurer ACE Ltd. earlier this year approved a "redomestication" from the Cayman Islands to Zurich.

Not A Tax Haven

Relatively low tax rates, respect for financial privacy, and attractive, low business tax laws have given Switzerland a reputation as a "tax haven." But Switzerland is not a low tax country for Swiss residents or their domestic companies, although tax rates are much lower than in the surrounding left-leaning socialist EU nations, such as France and Germany.

Swiss policy makers have changed the Swiss cantonal tax codes to make Switzerland even more attractive to foreign businesses. (Each of the 26 Swiss "cantons" or provinces set their own corporate and other tax rates.) This has caused envious European Union high tax advocates to complain that Swiss low taxes are "unfair tax competition."

It is true that foreign investors can avoid many Swiss taxes by choosing certain types of investments that escape Swiss taxes. The tax system is strictly "territorial," meaning that the government does not tax income that is earned outside Switzerland, even if it is not subject to tax in other jurisdictions.

Corporate Attraction

As I have noted before, this emerging trend has attracted a major increase of new companies to Switzerland in the past few years. According to one recent study, 40,000 new companies were established in Switzerland in 2007. An impressive third of these companies were foreign firms. Many of Switzerland's 26 cantons have seen the numbers of their registered companies jump by more than 50%.

Along with these extra low tax incentives, Switzerland already has the largest number of double tax avoidance treaties with other nations. Under these treaties, Switzerland gives you credit for corporate taxes you pay in another country against the corporate Swiss taxes you may owe.

Deserved Reputation for Stability

The Swiss successfully have played the role of bankers to the world for centuries. A survey of private banks a few years ago found that the single most important factor in Switzerland's financial success is its reputation. This inspired trust rests on the old saying that "a good name is better than riches." Switzerland has enjoyed both.

Even in the current global recession, Swiss banks still manage one third of all assets the world's offshore wealth.

Total cash assets of the Swiss banking system are estimated at US$2 trillion or more, while the total value of security deposits is well over US$3 trillion. Assets under Swiss management have risen significantly in recent years, reaching a high of US$4 trillion in 2008, according to the Swiss National Bank and the Swiss Bankers Association. Only two major Swiss banks, UBS and Credit Suisse, suffered from the subprime mess, while the other nearly 400 banks have had few problems.

You Too?

In my opinion, president-elect Obama and his new administration may try to bully offshore tax havens, but mighty Switzerland is neither a traditional tax haven nor an easy pushover. Historically, from Hannibal to Hitler, the Swiss usually have managed to defend themselves successfully.

And let me suggest that you may want to emulate those corporations that are re-directing their financial activity to Switzerland.

The Sovereign Society can recommend Swiss banks for your account, independent financial and insurance and annuity advisors and even explain possible residency.

For the insider facts on all these attractive Swiss financial possibilities, you can read my book, Swiss Money Secrets.

Offshore: True Safe Haven in Time of Trouble

"When was the last time you invested in something that you knew wouldn't make money?" That seemingly odd question was posed in a New York Times article last Tuesday.

But investing with no hope of any return was exactly what thousands of otherwise sane but scared investors were doing this week.

In the market equivalent of what The Times called "shoveling cash under the mattress," hordes of bond buyers were eager to park their money in what they apparently consider to be one of the world's safest investments -- United States government debt! Indeed they were so eager for a perceived safe haven that they agreed to accept a zero percent rate of return.

"The last time this happened was the Great Depression, when people were willing to accept no return on their money, or possibly even a negative return," said Edward Yardeni, an independent analyst. "If people are just protecting the cash they have, it's not a good sign."

Sign of Very Hard Times

The experts say this is a sobering signal that in these troubled economic times, when many have lost huge amounts on stocks, bonds and real estate, making an investment that offers supposed security, but no gain, is seen as somehow coming out ahead. They claim that this extremely cautious approach reflects concerns that a global recession could deepen in 2009 and continue to jeopardize all types of investments for the foreseeable future.

Perhaps so, but my question is this: How can these supposedly "cautious" investors possibly think that the bankrupt United States government is a safe place to invest?

Granted, this week's bond sales involved $30 billion worth of short-term securities that mature in just four weeks. Being optimistic, one probably can assume that the U.S. government will not suffer a financial collapse within the next month. But who knows when that inevitable day of reckoning will arrive?

Learn from History

Doesn't anyone remember 1923 and the hyperinflation of Germany's Weimar Republic? Or the decade-long collapse of the Japanese economy in the 1990s? Read history. The first recorded major bear market took place before the United States was born. It started in 1720 with the crash of the London stock market, better known as the "South Seas Bubble" and its effects lasted for decades.

But ignoring history, this week the demand for U.S. Treasuries was so great, even with no promise of a return, that the government could have sold four times $30 billion based on requests.

What was it that P.T. Barnum said about the steady birthrate of suckers?

Sucking Sound

Borrowing by the U.S. Treasury already has ballooned since the Congress approved the $700 billion financial rescue plan, and the federal budget deficit is expected to swell further, possibly to $1 trillion both this year and next, as auto makers, plus everybody and his brother, demands still more bailouts. "That sucking sound is all the world's capital going into the U.S. Treasury market," Mr. Yardeni said.

But, trying to apply a little logic, can't we reasonably predict that, at some point, American and other investors will no longer see as "safe" bonds issued by a bankrupt government with a faltering currency, an enormous budget deficit and national debt and a policy of irrationally throwing billions, even trillions, in paper money at every problem?

Real Safety Offshore

Let me suggest that, before the run on the U.S. government starts, if you really are concerned about the protection of your cash and assets, you'll do far better to:

1) immediately open an offshore bank account in a sound financial institution unsullied by the U.S. sub prime mess (say in Switzerland, Liechtenstein, Panama or Singapore);

2) use your offshore account to covert faltering dollars into stronger currencies, such as the Swiss franc;

3) use your account to invest in precious metals and other hard assets located outside the United States.

A Safe Banking Guide for You

The Sovereign Society always has made it our policy to provide an international banking guide exclusively for our members.

Drawing on years of experience, we have contacts with selected banks in jurisdictions where friendly governments support the needs of foreign investors, banking institutions that provide services investors require. You can be sure that each of these banks are financially stable, offer modern faculties and services and possess the understanding to serve an international clientele effectively. These banks are safe and with liquidity ratings well above the international minimums set by the Bank for International Settlements in Basel, Switzerland.

Yes, there is an economic crisis that makes some people act irrationally, buying bonds that pay no interest.

But if your concern is for true safety of your cash and assets, you should protect yourself by joining the unique organization that, for more than a decade, has shown the way for sound offshore banking, prudent investing and real financial peace of mind -- and that is the Sovereign Society.

Socialism In Action: Democrats Nationalize Auto Industry

The definition of "socialism" in The American Heritage® Dictionary of the English Language, 4th Edition, reads as follows:

1) Any of various theories or systems of social organization in which the means of producing and distributing goods is owned collectively or by a centralized government that often plans and controls the economy. 2) The stage in Marxist-Leninist theory intermediate between capitalism and communism, in which collective ownership of the economy under the dictatorship of the proletariat has not yet been successfully achieved.

Unscripted Revelation

You may recall how, during the recent presidential campaign, president-elect Barack Obama told "Joe the Plumber" that he wanted to "spread the wealth around."

That revealing lapse of the carefully scripted Obama game plan opened the Democratic candidate to charges that he was advocating socialism. Samuel J. Wurzelbacher of Ohio instantly became a symbol for Senator John McCain's assertions that Obama was an incipient socialist.

At the time, Obama not only denied that he was a socialist, (Heaven forbid!), he made jokes about it, implying that such a charge was just plain silly.

One Election Later

Fast forward to this week.

In Chicago and Washington newly triumphant Democrats, from Obama on down to Rep. Blarney (sic) Frank and that leftist San Franciso treat, House Speaker Nancy Pelosi, are falling all over themselves, trying to spend billions of your tax dollars to bail out the failing "Big Three" auto makers. They want to coddle the thousands of highly paid union members -- whose union funds and workers aided the Democrat campaigns.

We are indebted to David E. Sanger of The New York Times who, in today's paper, with unusual candor, summed up what really is happening, as follows:

"When President-elect Barack Obama talked on Sunday about realigning the American automobile industry he was quick to offer a caution, lest he sound more like the incoming leader of France, or perhaps Japan. "We don’t want government to run companies," Mr. Obama told Tom Brokaw on "Meet the Press." "Generally, government historically hasn’t done that very well."

"But what Mr. Obama went on to describe was a long-term bailout that would be conditioned on federal oversight. It could mean that the government would mandate, or at least heavily

influence, what kind of cars companies make, what mileage and environmental standards they must meet and what large investments they are permitted to make — to recreate an industry that Mr. Obama said "actually works, that actually functions."

"It all sounds perilously close to a word that no one in Mr. Obama’s camp wants to be caught uttering: nationalization".

Nationalization Doomed to Fail

Anyone with half a brain can read history -- government’s record as a corporate manager is miserable, which is why the world for the last 30 years has been on a privatization kick, turning nationalize railroads, nationalized airlines, nationalized mines and nationalized defense industries into private companies.

It took the great Maggie Thatcher and the Conservatives a decade to reverse the economic ruination that Labour's socialism and nationalization wrecked on once Great Britain industries.

And isn’t it odd there is no talk of offering aid to Toyota, Honda, BMW or the other foreign automakers that have built factories on American soil, employed thousands of American workers and managed to make a profit doing so?

Political Payment

Everyone knows, even if the politicians wont admit it openly, that the pending proposed $15 billion auto bailout is only the first installment of many. They also know that auto company bankruptcy would be the best route to take, just as when any other business is a financial failure.

And to compound the irony, the hapless President George Bush seems ready to sign this socialist mess into law – a fitting coda to the reckless government power expansion and deficit spending that marks his unprincipled legacy.

Joe Got It Right

It looks as if Joe the Plumber really did get to the heart of Barack Obama's true political philosophy -- a true socialist willing to spread the wealth around -- except that in this case there is no wealth -- only printing press greenbacks whose value will evaporate by the minute as the inevitable inflation destroys us all.

Time to get your "wealth" into strong currencies, sure fire investments or something substantial, such as gold. And there are ways that you can do that. We’ll tell you how.

Offshore Trusts for Wealth Protection

This is one in a series of comments I'll be posting  in the coming days, looking at ways you can protect your assets before any projected law changes occur in the United States.

There's a lot of financial uncertainty in America just now, and I'm not referring to the officially declared recession that is now upon us.

The recession is bad enough, certainly. But I'm referring to the fact that if president-elect Barack Obama's campaign statements and his past Senate record are any measure of what he will do once he takes office, those concerned about protecting their assets from high taxes and other threats should be very much concerned -- and that well placed concern should prompt immediate action.

Obama's Anti-Tax Haven Bill

The Anti-Tax Haven Act sponsored in 2007 by then Senator Barack Obama, if it becomes law, will allow Obama's new Secretary of the U.S. Treasury to issue rules that could restrict the now free offshore activity of American banks, businesses and individual Americans.

That being a real possibility, here's something you can do now to protect not only your assets, but your right to conduct your financial business offshore in relative freedom.

I'm talking about creating an offshore asset protection trust (APT) in one of the selected offshore financial centers that specialize in these useful legal entities. 

The last thing anyone needs is a lawsuit filed against them. Statistics say show that in the US over 50,000 lawsuits are filed each week; that in one recent year $163 billion was paid in damages and lawyers fees for plaintiff's lawsuits alone. Add  to threats to your wealth and assets, huge jury awards, government  invasion of financial and personal privacy, and you should be able to see the need for the best asset protection available -- an offshore asset protection trust.

If you're a U.S. person, there are several tried and true domestic legal entities that are partially protective; family limited partnerships, living trusts, limited liability companies.

More Protection Offshore

But for an extra, stronger level of asset defense, (and much stronger privacy guaranteed by law), one of the best vehicles is an offshore asset protection trust (APT).

An APT located in an offshore haven nation can defend against U.S. civil judgments that aren't recognized or quickly enforced by offshore courts. Haven nations have a shorter statute of limitations, (the time in which a suit must be filed), on claims and suits; far greater privacy; diversification of financial risk and better investment flexibility.

The offshore asset protection can protect your wealth, regardless of efforts by the U.S. or other governments to control legal offshore financial transactions and investments. With some limited exceptions, as in the case of estate taxes, a foreign trust can't save on most U.S. taxes, but asset protection is the key.

All in all, for the greatest level of asset and wealth protection, you should consider creation of an offshore APT. The Sovereign Society can show you how to do it.

Click here for my special report, Offshore Trusts: Your Key to Flexible Asset Protection.

The Economic Crisis: A Problem of Psychology

As one who loves history and has read hundreds of histories and biographies, I must agree with the late George Santayana’s sentiment carved into the wall of the National Archives in Washington, D.C. – “Those who cannot remember the past are condemned to repeat it.” Of course, as with many memorable aphorisms, William Shakespeare got there first with: “What is past is prologue.”

Some time ago I recommended for your reading Professor Niall Ferguson's impressive book, Empire (2002 Basic Books), which details the rise and fall of the British colonial empire. The parallels with present day America are there to see, enough to make a thoughtful reader more than uneasy.

Financial Collapse

But aside from the moral objections to abusing military power to achieve laudable colonial ends, Professor Ferguson points to the real reason the British Empire fell.

It wasn’t just the loss of colonies in India and Africa that killed the Empire. The British Empire rapidly disintegrated after World War II because the U.K.’s financial and material resources were depleted by its war against Germany. The country was worn out by massive borrowing and expenditures the U.K. couldn’t afford. It was this financial and economic over extension that drained the imperial lifeblood and caused a rapid global demise.

Does that description suggest perhaps the current situation of these United States of America?

Advice From Beyond the Grave

This is not the first time that America's economy has collapsed into recession or even a major depression. (Read "Rainbow's End: the Crash of 1929" by Maury Klein (Oxford Univ. Press, 2001) . And in many respects, the causes  now and then  have too many frightening parallels.

Benjamin Strong, Jr. (Dec 22, 1872 – Oct. 16, 1928) was an American economist and vice president of Banker’s Trust of New York. He was one of the founders of the Federal Reserve System and served as the first Governor of the Federal Reserve Bank of New York for 14 years until his death. Strong exerted great influence over the policy and actions of the entire Federal Reserve System.

Born in Secrecy

Strong was J.P. Morgan's emissary to the secret Jekyll Island, Georgia, gathering in November 1910 -- one of the selected members who stayed at the luxurious Jekyll Island Hunt Club retreat for a private ten-day conference that included some of America's wealthiest men, many of them bankers, led by Senator Nelson Aldrich (R-RI), maternal grandfather of the late New York governor and U.S. vice president, Nelson Rockefeller.

Out of this meeting eventually came the Federal Reserve system created by the Glass-Owens Act and signed into law by President Woodrow Wilson in 1913,  after a conference between the president and the New York financier, Bernard Baruch, one of Wilson's largest campaign donors and a leader of the Democratic Party.

A Matter of Psychology

Benjamin Strong was one of the strongest a leaders of the Federal Reserve System at a critical time. His policy of maintaining price levels during the 1920s through the open market purchase of securities, and his willingness to maintain the liquidity of banks during panics gained many supporters, as well as critics such as President Herbert Hoover, elected in 1928, blamed Strong for the easy money policy that he said fueled the stock market rise, leading to the Crash of 1929.

But Strong had a clearer sense than most of what was happening. In one of his last letters he summarized the dilemma:

"I do not think the problem is necessarily one of security prices or of available volume of credit, or even of discount rates. It is really a problem of psychology. The country's state of mind has been highly speculative, advancing prices have been based upon a realization of wealth and prosperity ... consequently speculative tendencies are all the more difficult to deal with .... The problem now is so to shape our policy as to avoid a calamitous break in the stock market, a panickyfeeling about money, a setback to business because of the change in psychology."

House of Cards May Come Crashing Down

Last January, (under the above heading), I asked my readers to "consider the current depressing economic statistics in the United States. As 2007 came to a close, the estimated national debt of the United States was about US$9.2 trillion. With a population of 304 million, that averages out to each citizen’s share of debt at US$30,000 plus.

"Then there is the continuing massive trade deficit. Since 2001, the trade deficit has doubled to more than US$700 billion. At best, these deficits will gradually harm all Americans’ future incomes. At worst, they could trigger a national fiscal crisis, which could accelerate and increase the economic damage.

"Since President Bush’s first presidential term began in January 2001, the dollar has also dropped over 36%. Meanwhile the housing market is in the doldrums, mortgage foreclosures are in the millions and rampant federal deficit spending continues unabated."

We Warned You

Of course you've read similar warnings from me and my colleagues at the Sovereign Society for a good part of the last decade. It wasn't that we were mystic soothsayers endowed with great powers of divination. It was because we know history -- and we can count. And to this day we continue to give you good advice, even in a time of great economic suffering.

Five years ago I noted in this column: "My checkbook balance tells me I can't spend what I don't have. In fact, writing bad checks is a crime in every state. And if a collective national confidence in the economy is a key to prosperity, what happens when Americans finally wake up and discover the financial cupboard is bare?"

The Last Resort

The stark contradiction in all these extant and proposed U.S. government bailout and stimulus billions, (nay trillions if  President-elect Obama has his way), is that the American people and the world have finally reached the point that a dying Benjamin Strong spoke of in 1928 -- the change in mass psychology has occurred.

People now are asking the pertinent question: How can a government that is bankrupt possibly act as lender and guarantor of last resort?

The answer is that it cannot  -- and so we will all be paying, for years to come, in taxes, in inflation, in lost freedom, the horrible price for our government's and our leaders' all too obvious failures.

“Those who cannot remember the past are condemned to repeat it.”

Will Obama Shut Down Tax Havens for Americans?

What follows is an excerpt from our friend and long time associate, Vernon Jacobs' newsletter, The International Wealth Protection Monitor

This makes interesting reading in the context of the pending Obama administration and what legislation the new president might support concerning offshore tax havens, given his stated positions opposing tax havens.

Vern reviews the political roadblocks to Obama's previously stated radical campaign proposals and suggests what may happen when practical tax and business factors come into play, especially in light of the current economic crisis. Bob Bauman JD.

Vernon Jacobs, CPA writes:

The real question is not whether Obama wants to shut off the opportunity for Americans to avoid, defer or evade taxes through the use of offshore tax havens, but whether he will be able to do so.

The conventional wisdom is that 1) with a Democratic Congress, he will be able to pass any tax laws or similar regulations that he wants an; 2) because of his substantial win over McCain, he will be perceived by the Congress as having a voter mandate to implement his campaign promises.

One of his stated goals is to eliminate tax deferral on the foreign source business profits of foreign subsidiaries of U.S. companies. But that tax deferral is one of the few ways in which U.S. multi-national companies can compete in the world market place where their competitors are subject to much lower tax rates and where they are only taxed on income in the territory where they are based.

Radical Attack

Obama will be attacking ALL of the largest and wealthiest corporations in the U.S., if not in the world.

Will they stand by and do nothing? Hardly. At a minimum, they will impose huge pressure on the members of Congress to resist such a stupid move. At the worst, many of them will find ways to either move their operations to another country or to even divest themselves of their foreign subsidiaries to their shareholders. That is what has been happening lately in the United Kingdom and it can happen here, even despite the tax rules that attempt to restrict corporate expatriation (also known as "inversion").

World Tax Collector

Another of Obama's goals is to somehow force sovereign nations to become de facto tax collectors for the United States and the European Union by imposing tax transparency on low or zero tax countries.

But just as water flows to the lowest point, money tends to move to the place where the after-tax returns are best. When all other factors are equal, that means money will move to tax havens. Some cynics have argued that many tax havens exist and will continue to exist so that corrupt U.S. politicians and the CIA will have a place to hide their ill gotten gains.

Tax Havens Role

But many tax havens mostly exist and prosper because low tax rates or a zero income tax is a way to compete for businesses that produce jobs. Without that form of competition, some of the small island nations will become dependent territories.

Even if the zero tax countries are somehow put out of business by the high tax cartel, the money will move to the lowest of the low tax countries such as Ireland or Barbados or Hong Kong which are not currently perceived as tax havens. Many of the former states of the Soviet Union are now low tax countries with a flat tax and a territorial tax system.

Educated Opinion

Will President Obama and the EU be able to force all those countries to help the U.S. tax collectors?

It's just my humble opinion, but I doubt that will happen. I think his stated goal to shut down the tax havens actually will become little more than another failed campaign promise.

Let's hope Vern Jacobs is correct. We may know soon enough.

* While you can there still are many legal ways to bank and save taxes offshore; I tell you Where To Stash Your Cash: Click Here.  And if you're interested in Switzerland, Click here for Swiss Money Secrets.

Your Principles or Your Mistress

I am a child of the Great Depression in one sense; I was born right in the middle of it, although I don't remember much. I do know my father, a trained musician, had to work jobs in vaudeville theaters in the Washington, D.C. area where we lived, as well as drive a laundry delivery truck at night to make ends meet for my mother and their two sons.

All of which goes to my saying that what follows in no way diminishes my respect and sympathy for those suffering in the current domestic and international economic downturn. But it may diminish your respect for what is now obviously very much Rupert Murdoch's Wall Street Journal.

Curtailing

Yesterday the WSJ published an article entitled: "Rich Cut Back on Payments to Mistresses"

At first I thought it was a news spoof from The Onion but once I started reading I couldn’t stop. What a blessed release from the recession, Obama's cabinet picks, and the appalling news that, for the first time since 1956, a narrow majority of Missouri voters backed a presidential loser.

According to the WSJ article, a survey by Prince & Assoc., (not the Prince of Purple Rain fame), more than 80% of multimillionaires who had extra-marital lovers planned to cut back on their gifts and allowances. Only 12% of the multimillionaire cheaters said they plan to drop their lovers altogether for financial reasons.

"Rich people are getting hit, and they’re all expressing the need to curtail unnecessary spending," said Russ Alan Prince, president of a wealth research firm based in Connecticut. "Lovers are part of the same calculation."

Bisexual Liberation?

"Well..." I'm thinking to myself, "...who would be so stupid as to respond at all to such impertinent questions, much less respond truthfully?"

These potential dollar-a-year Obama administration officials certainly would never be able to pass the stringent background checks I've read about in the media. What would they say about, well, past e-mails that might be embarrassing to the latest ethically conscious new regime in Washington.

But on a "progress-on-the-sexual-liberation-front" note, the survey claimed to cover both cheating men and unfaithful women, (or the other way around, if you like).

Of course, any study of millionaires and their mistresses (or misters) should be taken with a large grain of salt. The survey, a subset of a larger wealth study, polled only a mere 191 individuals with a minimum net worth of $20 million who said they had lovers of at least a year or more, (this to screen out one night stands?).

About two thirds of the respondents were men and one third women. All were married and all had personal control over their finances, (at least until this survey goes public with names), meaning the women and men surveyed were the primary wealth holders in their homes.

Motherly Concern

Women were far more generous to their paramours in the face of the financial crises. Less than 20% planned to lower allowances, gifts and perks, while more than half planned to raise them!

The most surprising stats in the study relate to gender and what might be termed "length of service." Fully 82% of men in the study, (possibly some distressed hedge fund gurus), said they planned to lower the allowances to their mistresses, while more than three quarters planned to provide fewer gifts, less expensive gifts and fewer perks, like jet rides, resort vacations and top restaurant meals.

Sugar Daddy

All of which put me in mind of a famous George Galbreath cartoon that appeared in The New Yorker in 1936. In it, a tuxedo-clad sugar daddy croons to a chorus girl type: "And if Roosevelt is not re-elected, perhaps even a villa in Newport, my dearest sweet."

I guess this bit of WSJ statistical trivia underscores the depth and breadth of the economic mess in which we all, rich and not so rich, find ourselves.

Deadly Embrace

It also reminds me of one of the great ripostes of English politics, when two men who traded the office of Prime Minister back and forth in the late 19th century, went at each other.

The Liberal Party's William Gladstone, (a notorious consort of London's street walkers), was reported to have angrily said to the Conservative Party's Benjamin Disraeli: "I predict, Sir, that you will die either by hanging or of some vile disease".

To which the Rt. Hon. Mr. Disraeli coolly replied, "That all depends, sir, upon whether I embrace your principles or your mistress."

* Which proves what I often say, that you should keep some of your assets offshore for safe keeping. I tell you Where To Stash Your Cash: Click Here.  And if you're interested in Switzerland, Click here for Swiss Money Secrets.