Chapter One
Challenges and Threats
The Chinese character for "crisis" is a combination of two characters: "danger" and "opportunity." For me, this interpretation by the Chinese is a very interesting cultural, philosophical, and linguistic phenomenon-one that also contains a very nice lesson for living. But I also feel that it is a picture of a crossroads that applies to our current world. Today we are quite likely at the brink of a global economic crisis-and that sounds bad, right? It''s critical that we prepare for the danger inherent in crisis, but also stay alert for the opportunities during much of what is ahead for us. More than anything, this book is about this concept.
You have chosen to read this book; clearly that puts you among those who are aware that daily we are sensing crisis in our lives-possibly even impending doom. It means you have taken the hardest, first step to making things right for yourself and your family: awareness. But those feelings of doom and gloom can be harnessed, like parade horses, to march to your advantage. Your survival instincts tell you something bad could be on the horizon. Good! Keep your eye on that ball, take charge of your own destiny, and realize that no matter what they say or we might hear, the powers that be most likely really don''t care about what happens to you. But that''s okay, because it''s within your power to care and to act to do something about it.
A good place to begin is to take a close look at yourself-to take inventory, make a few hard decisions for the good of yourself, your family, and your future, because no one else will worry about your situation, now or any time soon.
Likely you already sense that sometimes you need to think philosophically, adapt new ideas, change your thought processes, open your mind, and think outside the box, the envelope, the cage. Sounds like a lot of clich?s-but therein resides the core of what we need to do to find our own reality. Perhaps the place to start can be found in this quote by Epicurus: "Wealth consists not of having great possessions but in having few wants."
Personally, I''m tired of being taxed, even on my few wants. But isn''t that the job of Madison Avenue, anyway-to create demand for things we really don''t need and didn''t know we wanted in the first place? And, thereby, to fuel American consumerism and ultimately fund sources of cheap imported goods like China. Isn''t your personal debt inflated enough? Red China, for one, is the real beneficiary these days. It has become the fourth largest economy in the world, in part, thanks to the support of American buyers for their exports. We helped; and we may be creating a monster, as China is still a communist nation and a real threat to the United States. International trade is wonderful, but we might want to think twice about financing our enemies in any form. We can use those same dollars to invest in our future.
Herein you will learn about the state of Switzerland today, how it has changed, and what it has to offer you. Fortunately, there is plenty to talk about. All the information you need to pursue your interest in banking and/or investing in Switzerland is covered, including how to begin, and where to go. Swiss banks can handle every form of investing, either directed by you or managed by an expert. Certain investments and economic subjects are covered at length, such as the importance of precious metals and strong currencies in your portfolio, and what causes inflation, and how you can actually profit from it, instead of letting it erode your wealth. I reveal an ultimate plan, showing you how, if your situation fits the parameters, you can avoid U.S. reporting requirements and defer taxes on investment earnings. You can accomplish this automatically while getting the world''s best asset protection and estate planning known anywhere. Incredibly, you even can bank in secret through this creative and legal shield. I also explain how to establish a perfectly legal and totally secret bank account that can be your last resort in an extreme emergency. Your own private monetary policy is more than just a personal financial survival plan, as it will show you how to right your course before it''s too late, toward future profits and personal freedom, as you will discover in Chapter 4. You can preserve your individual sovereignty without relying on the government and the destructive monetary practices of the Federal Reserve. Consider this your owner''s manual to quietly building a fortune even in the midst of looming crisis. What better way to profit from economic and political change?
The Economic Front
Why discuss challenges and threats when perhaps you bought this book just to learn about Swiss banking? Well, the two are intricately tied. Aside from the fact that Switzerland is the third largest financial center next to London and New York and manages up to 40 percent of the world''s private assets, it has also been the premier haven for frightened money for decades. That has been the driving force underlying Switzerland''s profound development and growth for decades. Many threats in history drove the more fortunate to use Swiss banking when they had the need and opportunity.
Some choice examples are presented throughout this book, but right now, as you are reading these words, headlines are being made reminding us of what a crazy world we live in. History is on the verge of repeating itself in many ways, including via government oppression, war, and more war, economic chaos, and worse. We should learn from the past and from the lessons others have paid a high price to discover. But we need to be aware of not only these developments that we hear about in the news, but also the ones that are taking place behind the scenes. If the present-day scenario in America seems bad, with its threats from local crime, terrorists, and rogue states, try to imagine these things as just a prelude to bigger, more drastic developments in the world. Do you believe the hands of time can be turned back to a simpler, less threatening existence? As a nation, we may have already crossed the point of no return. But, as sovereign individuals, there is still a window of opportunity.
Today we ought to focus on underlying economic concerns and how they can impact us personally. It''s easy to be distracted by politics and the endless noise of war and terrorism. However, the United States is sitting on a ticking economic time bomb and a number of problems that could cause a major meltdown.
National and Private Debt
While the rest of the world appears to be doing well overall, the U.S. economy is running out of steam. Often, the United States has been the engine of the world economy. What happens when the engine stops running? Although, according to the talking heads on television, in the last five years we have experienced the largest economic expansion in U.S. history, this expansion has also been unsuccessful at paying down the deficit. In theory, the growth should have created a greater economic base on which to tax and collect revenues that normally would decrease the national debt. But, unfortunately, the war on terrorism, the war in Iraq, and the war in Afghanistan have cost a lot money. As I finish this book in September 2007, the United States is spending $10 billion a month in Iraq alone. And there is no end in sight to our "war on terror." Bush is seeking $110 billion from Congress to fund the war through 2008. David Walser, head of the U.S. Government Accountability office says the U.S. economy suffers from "fiscal cancer, and that the Iraq war will have cost the U.S. over $1 trillion before it''s over." Next we''ll have to deal with Iran and Pakistan.
According to George W. Bush, the national debt has been reduced from about $400 billion to $298 billion. If the deficit has come down at all, it''s because the "healthy" economy produced revenues to offset the growing national debt by some degree over and above government spending. But at some point the deficit figure will increase again as the economy slumps.
Remember, at the end of Bill Clinton''s eight-year reign, the nation was in the black and had a significant surplus. That surplus vanished quickly after Bush gained control, and we haven''t seen daylight since, not even after a "long" economic expansion. In the near future, the national debt could really balloon as revenues decline from slow economic growth. Hence, politicians want to close what they think of as tax loopholes while at the same time increasing taxes.
But wait just one minute! Bush recently gave us those figures regarding the national debt. Unfortunately we''ve been listening to the wrong man all along, so how can we believe those figures? Let''s examine the national debt a little closer. Bush is using cash-basis accounting as if he were balancing his personal checkbook. However, he''s running a government, not his household finances, and that requires better disclosure to the taxpaying public. Businesses use accrual accounting, and by law, public corporations have to use this method because it provides greater disclosure and a truer picture of a company''s financial health. Once again, we are not getting the entire truth. Bush is conveniently using cash-basis accounting that only reveals the current indebtedness of this country, not our total indebtedness. Estimates reflecting the true federal deficit run as high as $65 trillion.
This astronomical figure includes not only Bush''s $298 billion, but all the money due to holders of government notes, bonds, and bills from the past. These instruments alone exceed $8 trillion, and they come due regularly. Let''s not forget Social Security, which pays out public retirement benefits and government employee pensions and health care benefits to Medicare recipients. These additional debts are real obligations of the government, and they disclose important financial information needed to fully understand the country''s financial position. Illegal immigration also contributes to the increase of these figures. Government should be required to report economic figures the same way they require businesses to report so that stockholders don''t get conned by management and creditors don''t get defrauded.
The American consumer also has been busy spending at rates that are the highest in 20 years. These figures include mortgage debt, home equity loans, and secondary mortgages totaling $10 trillion, and consumer debt of $2 trillion. No wonder Wal-Mart is doing so well and China is directly benefiting at the same time.
Inflation
Right now the Federal Reserve (the Fed) and the U.S. government are holding their breath, hoping that inflationary pressures will ease in time to have a soft landing, as the Fed is in a tight spot. They do not feel they can drop the interest rate that stands at 5.25 percent due to inflationary concerns, nor do they feel they can raise them due to economic slowdown. Their hands are tied and they are hopeful that their liberal monetary policy-in other words, the printing of excessive amounts of money backed by no real value such as gold-doesn''t catch up with them.
The M3 money supply, which will be defined in a moment, has been the best measurement of true inflation in the United States, not the Consumer Price Index (CPI), as most people think, which is an estimate that the government highly understates. Unfortunately, Ben Bernanke, the newest Fed chairman, has decided that this information is no longer relevant since inflation is under control; at least that''s what he would like everyone to believe. Maybe the real reason is that the government cranked up the printing presses yet again to stimulate the economy to avert a crash landing and don''t want that fact detected anytime soon. It''s a lot like a hot air balloon. As the balloon is coming down, the pilot always turns up the thruster to blow hot air into the fabric bag and slow its descent. Add too much hot air, and the balloon takes off again.
Here are the U.S. Federal Reserve''s definition of the various money aggregates, including the M3:
M1: The sum of currency held outside the vaults of depository institutions, Federal Reserve Banks, and the U.S. Treasury; travelers checks; and demand and other checkable deposits issued by financial institutions (except demand deposits due to the Treasury and depository institutions), minus cash items in process of collection and Federal Reserve float.
M2: M1 plus savings deposits (including money market deposits accounts) and small-denomination (under $100,000) time deposits issued by financial institutions; and shares in retail money market mutual funds (funds with initial investments under $50,000), net of retirement accounts.
M3: M2 plus large-denomination ($100,000 or more) time deposits; repurchase agreements issued by depository institutions; Eurodollar deposits, specifically, dollar-denominated deposits due to nonblank U.S. addresses held at foreign offices of U.S. banks worldwide and all banking offices in Canada and the United Kingdom; and institutional money market mutual funds (funds with initial investments of $50,000 or more).
MSM (money, zero maturity): M2 minus small-denomination time deposits, plus institutional money market funds (that is, those included in M3 but excluded from M2.)
But Bernanke''s rhetoric has been that threats of recession will have to sit on the sidelines while the Fed monitors its progress until inflation is well under control. In the meantime, the Fed hopes that another economic force, such as the mortgage money market, does not tip the boat. If inflation were really under control, why would the Fed be so concerned about it? History shows us that often what''s really happening is the opposite of the assurances given by politicians and government. Well, if you steal from someone, you don''t tell them about it. The Fed manipulates the economy through the money supply.
Let''s look at some facts that will shed light on the truth. Before the M3 money supply was discontinued as a measure of inflation effective March 23, 2006, in the United States, the money supply was 11 percent, but in the fourth quarter of 2006, the inflation rate was being quoted at only 3.4 percent.
Real inflation numbers closely mirror the M3 rate as the money supply is increased. Therefore, the Fed-quoted inflation numbers do not correspond with the last known official M3 rate, and between the first and fourth quarters of the same year, they would not have changed as drastically as the conveniently offered inflation rate quoted by the Fed.
Interestingly, the 3.4 percent figure offered up by the Fed corresponds nicely with the Consumer Price Index (CPI) average of 3.5 percent inflation over the past decade. As we know, the CPI is a less accurate and more favorable indicator for the Fed''s argument and their distortion of the facts.
Then, on July 18, of 2007, Bernanke addressed the U.S. Congress and stated that the current rate of inflation, as the Fed preferred to monitor it by the CPI, was only 1.9 percent during the preceding 12 months ending in May 2007. The Fed is obviously using statistics that highly underestimate the true rate of inflation to disguise the facts, and the statistics appear to be inconsistent with their own statements. Keen outside observers know what is really happening. The U.S. economy has been greatly inflated and continues to be. Today in the United States, the M3 can only be estimated since the Fed discontinued publishing this economic measurement.
And what about the ever-expanding global economy? Well, there''s an ever-expanding money supply to go along with it, and it has been ramped up to alarming proportions. In these countries, the M3 money supply has increased significantly by the following percentages over just the previous year. The European Union experienced a 9.3 percent increase; Korea, 10.3 percent; Australia, 13 percent; Britain, 13 percent; China, 16.9 percent; and Russia, 45 percent.
In reality, the soft landing is a tad bumpier than the Fed had hoped. As the Fed chairman himself states, it''s not over and promises to get worse. Well, he knows the truth on the real inflation numbers that he''s not sharing with the public. The fact is, the economy is at the threshold of a major downturn, and it''s going to effect the global economy.
(Continues...)
Excerpted from Secrets of Swiss Bankingby Hoyt Barber Copyright © 2008 by Hoyt Barber. Excerpted by permission.
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