I recently sat down with global economist, multimillionaire businessman, and New York Times bestselling author Doug Casey.
Doug has personally experienced and prospered through some of the worst financial crises of the past four decades. Bad decisions by our economic central planners and massive debt levels will cause another financial crisis sooner rather than later. Doug knows better than anyone how to prepare for it.
In the interview below, Doug and I discuss why international diversification is the ultimate form of crisis insurance, why so many Americans are renouncing their citizenship, and what Albert Einstein might have thought of the Federal Reserve.
You don’t want to miss this insightful discussion.
Until next time,
Nick Giambruno: Doug, why do you think international diversification is so important?
Doug Casey: My book, The International Man, was first published in 1976. It seems like a lifetime ago; the world has changed a lot. But the principle is still the same. That is, market risks are very great and arguably greater than ever now. But political risks are even greater than market risks. So don't put all your eggs in one geographic basket.
If you neglect to internationalize your financial life, you really are a sitting duck. You've signed up in advance to be a 100% participant in whatever program, rules, problems that your own government invents for you. If you don't internationalize, you're 100% exposed to what happens to the economy in your home country.
Just doing a simple thing like getting a foreign bank account, foreign gold storage, foreign brokerage account, or investing in securities outside the U.S., or buying real estate outside the U.S., will put you light years ahead of most of your neighbors. You won't be nearly as vulnerable.
You will have sources of stability and safety that they don't have, and it doesn't require a lot of magic or complexity. It just requires a little sense of urgency to go out and do it.
Nick: Why are a record number of Americans renouncing their citizenship?
Doug: Well, it's become just too expensive, too dangerous, and too much of a nuisance to be a U.S. citizen anymore. The country has changed radically just in my lifetime. It’s no longer the place the Beach Boys sang about in the '60s.
I understand why lots of people from the Orient, China in particular, are moving to North America. But Canada is now a much better destination than the U.S. for all kinds of reasons.
Having a U.S. passport is really a matter of convenience. For most people, it just reflects an accident of birth. A passport is like a driver’s license. It doesn’t really make much difference whether you have a Nevada driver's license or a Florida driver's license. Do you get attached to your New York driver's license if that's where you're from? No, not really; you don't care. And it's the same thing with these citizenships; they're just government ID. The only disadvantage of renouncing your U.S. citizenship – I have not done it yet, but suspect it's in the cards – is that you may have to get a visa to come back to the U.S.
However, if you get a good second passport, one that has visa-free travel to the U.S., then you can come back to the U.S as easily as a citizen.
Furthermore, renouncing U.S. citizenship will save you an immense amount of taxes, a lot of potential legal liability, and a lot of accountants' time spent filling out forms. You'll sleep better at night knowing that you’re no longer a milk cow for the government. It's a pity that you have to think that way. But living tax- and regulation-free is worth a great deal. Don’t forget that your ancestors all came to the U.S. and relinquished their former citizenships to improve their status in the world. It may be your turn to follow in their footsteps.
Nick: What are the best currencies to diversify into?
Doug: I'd say the Canadian and Australian dollars. They're both commodity currencies and have come down a lot. I think commodities are going to head back up and those currencies will probably go up, too. So if you're going to open a foreign bank account in a foreign currency, I'd pick those two…at least at the moment. These things change. Remember that currencies are floating abstractions, liabilities of the governments that issue them. And most governments are bankrupt.
Nick: Tell us about some of your experiences traveling to countries on the U.S. government's bad boy list, or the countries you're not supposed to go to. Cuba, for example.
Doug: Those are exactly the countries that you should go to.
I've been to Cuba four times. The first time was right after the Soviet Union fell and, of course, Cuba was living off the Soviet Union. It was wonderful because nobody else was there. I hate mobs of tourists.
Look, anybody can go to France, or England, or Germany anytime…big deal, everybody's done that.
Go to these strange places that you only hear about because they get negative coverage in the news. They’re much more interesting.
I was in the Congo for three weeks between a set of their wars. It was fantastic. I also went to Mozambique for the first time just as their long post-independence civil war was ending. Surprisingly, these places are both much less dangerous and full of much more opportunity than in normal times.
You're denying yourself a lot of fun and interesting, unusual adventures if you don't go to these strange places that get bad press. Unfortunately, most people have the mindset of medieval serfs. They’re afraid to venture out of their little village for fear there might be dragons.
Nick: What does it say about our economy and our society that people put so much effort into parsing the words of officials from the Federal Reserve and other central banks?
Doug: It's a shameful waste of time. 100 years ago, the richest people in the country – the Rockefellers, the Carnegies, and such – made their money creating industries that actually made stuff. Now, the richest people in the country just shuffle money around. They get rich because they’re close to the government and the hydrant of currency materialized by the Federal Reserve. I'd say it's a sign that society in the U.S. has become quite degraded.
The world revolves much less around actual production, but around guessing the direction of financial markets.
I have to tell you my favorite financial joke, which relates to this.
So Einstein dies and goes to Heaven and, of course, St. Peter welcomes him effusively: "We're so glad to see you here. Unfortunately, because we're a centrally planned economy, for obvious reasons we have a housing shortage. Until we get your home ready, we'll put you in a room with three other guys."
Einstein says, "That's fine."
So, he meets his three roommates. First guy comes up to him and says, "Mr. Einstein, pleased to meet you. I've got an IQ of 130 and I want to get to know you better."
Einstein says, "Okay, after lunch let's explore some concepts of astrophysics that have been on my mind."
The second guy comes up to him and says, "You know, Mr. Einstein…I'm not as smart as that first guy. I've only got an IQ of 100 but I still want get to know you."
So Einstein says, "Okay, after I put my stuff away, let's play a game of chess."
The third guy comes up to him and says, "I'm not as smart as those first two guys, Mr. Einstein. I've only got an IQ of 70 but I still want get to know you."
And Einstein says, "So, where do you think interest rates are going?"
Editor’s Note: Central planners’ bad financial decisions and massive debt levels will cause another financial crisis sooner rather than later.
This is a big reason why we think everyone should own some physical gold. Gold is the ultimate form of wealth insurance. It’s preserved wealth through every kind of crisis imaginable. It will preserve wealth during the next crisis, too.
But, if you want to truly “crisis-proof” your wealth, I urge you to watch our recently released video...
It will show you how to push some of your savings outside the “blast radius” so the next crisis can’t wipe you out. Click here to watch it now.