Image via Nevit Dilmen/Wikimedia
Praised be the 17th-century Italian wisecrack who noted that you shouldn’t “keep all your eggs in one basket.” It’s still true today and just as applicable to life as to investing.
If you live and work in the US, bank in the US, invest with a US brokerage, and hold your savings in US dollars—your eggs could use some diversification.
A prudent investor would never put all his money into just one company—no matter how healthy the firm’s balance sheet. So why would anyone put it all in one country, then? If you have all your assets in one place, you are taking a great deal of risk.
Take, for example, the German hyperinflation of 1922–1923. Germans who held all their assets in the banks of the Weimar Republic lost everything to hyperinflation. Those who had savings or property across the border in France escaped total wipeout.
One doesn’t have to travel to Germany to find examples of 20th-century wealth transfer. In 1933, Franklin D. Roosevelt used his quill to sign away the right of Americans to “hoard” gold.
The executive order required citizens to trade in any gold they owned in exchange for $20.67 in paper dollars. Eight months later, Congress fixed the price of gold at $35 an ounce. As the United States was on the gold standard at the time, this move eroded the value of Americans’ dollars by 69%—a double whammy.
If history has taught us anything, it’s that when governments get desperate, they take desperate measures.
When the next downturn hits in the US, how will the over-indebted federal government react? Bank deposits, retirement accounts—they may all be fair game.
If you have all your assets in the US, you are taking on a great deal of political risk. In order to mitigate this, you must diversify your assets across many countries.
So where does one start?
Action #1: Open a Foreign Bank Account
Most people think opening a foreign bank account is a good option, but it’s actually not. In fact, for Americans, the option isn’t even on the table these days.
That’s because Uncle Sam has made reporting requirements for foreign banks with US citizens as customers so onerous, to them, it’s no longer worth the hassle.
US citizens can still open an account in Canada. However, given that when Washington says, “Jump,” Ottawa says, “How high?” this can’t be considered a true safe haven.
Action #2: Buy Foreign Real Estate
Owning foreign real estate is an excellent way to diversify your assets. No government agency can force you to repatriate real estate from another country. If your bank accounts are seized and capital controls enacted, your investment is safe.
Foreign property is also largely insulated from adverse economic conditions outside of the country it’s located in. Buying real estate overseas does require a big investment of time, capital, and effort, but it could be a viable option if things turn sour stateside.
Action #3: Store Gold Offshore
As mentioned above, 84 years ago, President Roosevelt signed an executive order that outlawed gold ownership in the US. The order only applied to bullion held inside America. Gold held outside the country was safe. This shows why storing your gold across many jurisdictions is necessary.
So, how does one go about storing gold offshore?
You could buy gold from a bullion dealer in the US and transport it to an offshore storage facility yourself. However, moving gold overseas from the US is risky.
When physically transporting gold, declaration of that gold is a bit of a twilight zone. Do you have to declare it, or don’t you? The rules state that you don’t. Nonetheless, there have been several cases of individuals being stopped and questioned about their bullion at airports.
Taking this option leaves you open to potential seizure through money laundering or asset forfeiture abuse… and that’s just from US Customs. How will your yellow metal be viewed by foreign customs agents? Clearly, it’s not a risk worth taking.
Instead, you could buy gold abroad, then choose a vault to store it in. This option also has many pitfalls. How will you source a reputable dealer and a safe storage facility? Finding both requires that you do substantial due diligence.
The best option for anyone looking to purchase and store gold abroad is to find a company that provides international buy-and-store programs. Firms like JM Bullion, APMEX, and the Hard Assets Alliance provide such services. Buying gold through this avenue ensures your bullion is kept within your chain of custody and can easily be liquidated if need be.
You must make sure the firm stores your bullion in an allocated, private storage facility. It’s also essential you have the option to take physical delivery of your gold. This option gives you the full benefit of owning physical gold abroad, but with none of the headaches.
To optimize gold’s attribute as disaster insurance, you should store some overseas. For those who already own bullion located in the US, moving at least a portion into an offshore storage account would be prudent.
An important caveat here is that if the government really, really wants to get to your gold or foreign real estate, it will. However, taking these steps greatly increases the safety of your wealth.
In closing, diversifying your assets across multiple countries frees you from dependency on any one country… and its government. History has shown crises can hit suddenly. Therefore, you must take these steps before a crisis hits, not when you’re in the midst of one.
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