Dateline: Tbilisi, Georgia
The world has a debt problem. This is old news. People have been talking about world debt issues for years now, so I’m not going to rehash all the details.
What people don’t talk about enough, though, are the personal strategies you and I should be constructing in order to deal with the problems that already exist and will result from the poor financial decisions of irresponsible governments.
Suffice it to say, if you’re interested in the diversification strategies that we talk about here — or if you have considered all-out leaving your home country — chances are you’re probably from a country that is deep in debt. Even if your home country’s debt problem isn’t the main reason you’re looking for offshore solutions, it probably has something to do with it.
One of the reasons we talk about emerging market economies here at Nomad Capitalist is that they have a better debt situation. Even so, there are countries in the developed world that have a good situation. Some of these countries may not be good to live in, (i.e. Norway), but they do run their affairs relatively well.
On the other hand, you look at a country like Singapore that has no net debt and you can understand the appeal that draws investors, businessmen and expats alike to the tiny island country.
Still, too many “developed” countries have landed themselves in a hot mess of debt. Just look at these statistics from Visual Capitalist:
The bigger global debt offenders
After the United States (more on that in a minute), Japan is the worst offender with almost 20% of the world’s sovereign debt. In fact, Japan is even worse off than the United States, with a debt-to-GDP ratio above 229% — the worst in the world.
I’ve been saying for years that Japan is a mess. They don’t allow immigration and yet their population continues to age and nobody wants to reproduce. On top of that, companies are leaving and they aren’t doing much to motivate them otherwise. Corporate tax rates in Japan are among the highest in the world. And that’s not to mention the predicament of their currency or the pitiful 4% yield on real estate.
Why anyone is going to Japan other than to eat sushi and hang out for a week is beyond me. Japan has had nothing but stagnation for 30 years. Sadly, that’s what happens when you’re a tiny island with 20% of the world’s debt.
Another glance at the statistics shows that the next biggest offender on the list is Europe. In fact, you can account for 75% of total global debt just by combining the debt from Europe, Japan and the United States.
Though Germany, France and the UK all contribute higher numbers to total global debt, Italy, Greece and Portugal have bigger problems with debt-to-GDP ratios of 132.3%, 178.6% and 130.2% respectively.
Unfortunately, it’s no surprise that Italy is in such terrible shape. They haven’t even figured out how to take credit cards in most places, they chase you out of their store, and they’re rude. I personally don’t get the appeal of Italy and why people are going there.
Now, on to the biggest offender…
The world’s largest sovereign debt contributor
According to Visual Capitalist, the United States has the biggest debt problem. No surprise there. The US makes up 23.3% of the world economy and 29.1% of world debt, which means its debt-to GDP ratio is 103.4%.
Peter Schiff, who spoke at our first Passport to Freedom conference, points out that the same fundamental problems that led to the Great Recession have only gotten worse in the past eight years. He explains:
The problems are much worse. We’re much more deeply indebted now than we were then. All the problems have been exacerbated. And what we have now is not a legitimate recovery. All we’ve done is borrowed additional money and spent it; and we’re counting the spending as economic growth when it’s not. The debt is growing much faster than the GDP and ultimately we’re going to have to pay this money back with interest. … But when we let interest rates go up, the US government can’t pay its debts, many of our major banks are going to fail. You think that two billion dollar loss at JP Morgan is big? Wait until you see how much JP Morgan and Morgan Stanley and Bank of America are going to lose if the Fed let’s interest rates go to where they need to go.
The US has sustained itself so far with bad fiscal policies and a backdoor printing press, but you can only kick the can down the road so far before you run into a dead end. US government spending has gone up 75% in the last ten years and efforts to cut back are seemingly futile.
There is, of course, the option that Trump will somehow win the presidency and come through on his promise to get rid of the national debt of almost $20 trillion in just eight years by a form of default involving paying back the Chinese at a discount. Whether or not such a strategy would eventually fix the debt problem is overshadowed by the fact that it would undoubtedly set off an unparalleled financial crisis.
Without default, other potential consequences of the staggering US debt include hyperinflation (think Venezuela), high interest rates (and the associated consequences), and even slower economic growth than what the US is currently experiencing.
Building a debt-conscious offshore plan
So, the question remains, how do you work such knowledge into your offshore plan?
My recommendation: Watch out for arrogance.
One look at the biggest offenders on this list and you can see that each of these countries have a culture of arrogance. Whether their arrogance takes the form of the US shouting “We’re number one!”, the Japanese insisting “We don’t need immigrants”, or European countries that are just snobbish, it’s too much of a coincidence that the countries that think they’re the best also have the biggest debt issues.
You can just tell.
Conversely, the countries that stay out of everyone’s business, including places like Norway or Singapore, they’re not on this list.
I’ve always said that you should “Go where you’re treated best” and an important part of that equation is culture. Harry Dent talks about demographics, other guys talk about tax rates and this and that. I say culture. There is a culture of arrogance in these countries that simply creates problems.
I like countries that aren’t trying to take over the world — small, uninfluential countries. Not countries where dead bodies are washing up in the bay or countries that think they’re the best; not countries that don’t want anyone else to go there; and definitely not European countries where they’re all sitting on their behinds like Spain and Italy and Greece. Just countries that want a strong economy and go about getting it by attracting investors and promoting good business policies.
Simple enough.
A world of opportunity
So, when you go about choosing the countries where you are going to live, do business or invest, take a look at the culture.
Do they think they’re infallible? If they do, they’re probably on the road to failure. Do they look down on immigration? Fine, there’s no reason to beg when there are plenty of other great options. Do they make things difficult? If so, they’re not worth your time.
For instance, Brazil is another disaster easy enough to predict. They make everything difficult for everyone, especially investors. Do they have debt problems? Of course. These two things go hand in hand.
You do have to be discerning about this because Singapore — though shown in the infographic as having .52% of total global debt — has no NET debt. They have some debt, but they also have reserves and they’ve managed their money very well.
How can they do this? By not running around the world pushing their agenda on everyone else.
The most telling piece of information of all is that the rest of the world has less than 9% of the world’s debt. There are 24 countries shown in this image — and even some of the ones shown are pretty small offenders — and the rest of the world has 8.92% of total global debt.
That’s pretty telling when you’re the US. It’s unsustainable.
Such low debt for the rest of the world is good news for investors like you and me who aren’t afraid to pack our bags and leave our debt-ridden home countries behind. Many countries out there simply don’t have the kind of debt problems the United States or other western countries have created for themselves.
Why waste your time investing, living and doing business there when you have so many better options?
The US has sustained itself so far with bad fiscal policies and a backdoor printing press, but you can only kick the can down the road so far before you run into a dead end. US government spending has gone up 75% in the last ten years and efforts to cut back are seemingly futile.
There is, of course, the option that Trump will somehow win the presidency and come through on his promise to get rid of the national debt of almost $20 trillion in just eight years by a form of default involving paying back the Chinese at a discount. Whether or not such a strategy would eventually fix the debt problem is overshadowed by the fact that it would undoubtedly set off an unparalleled financial crisis.
Without default, other potential consequences of the staggering US debt include hyperinflation (think Venezuela), high-interest rates (and the associated consequences), and even slower economic growth than what the US is currently experiencing.
Building a debt-conscious offshore plan
So, the question remains, how do you work such knowledge into your offshore plan?
My recommendation: Watch out for arrogance.
One look at the biggest offenders on this list and you can see that each of these countries have a culture of arrogance. Whether their arrogance takes the form of the US shouting “We’re number one!”, the Japanese insisting “We don’t need immigrants”, or European countries that are just snobbish, it’s too much of a coincidence that the countries that think they’re the best also have the biggest debt issues.
You can just tell.
Conversely, the countries that stay out of everyone’s business, including places like Norway or Singapore, they’re not on this list.
I’ve always said that you should “Go where you’re treated best” and an important part of that equation is culture. Harry Dent talks about demographics, other guys talk about tax rates and this and that. I say culture. There is a culture of arrogance in these countries that simply creates problems.
I like countries that aren’t trying to take over the world — small, uninfluential countries. Not countries where dead bodies are washing up in the bay or countries that think they’re the best; not countries that don’t want anyone else to go there; and definitely not European countries where they’re all sitting on their behinds like Spain and Italy and Greece. Just countries that want a strong economy and go about getting it by attracting investors and promoting good business policies.
Simple enough.
A world of opportunity
So, when you go about choosing the countries where you are going to live, do business or invest, take a look at the culture.
Do they think they’re infallible? If they do, they’re probably on the road to failure. Do they look down on immigration? Fine, there’s no reason to beg when there are plenty of other great options. Do they make things difficult? If so, they’re not worth your time.
For instance, Brazil is another disaster easy enough to predict. They make everything difficult for everyone, especially investors. Do they have debt problems? Of course. These two things go hand in hand.
You do have to be discerning about this because Singapore — though shown in the infographic as having .52% of total global debt — has no NET debt. They have some debt, but they also have reserves and they’ve managed their money very well.
How can they do this? By not running around the world pushing their agenda on everyone else.
The most telling piece of information of all is that the rest of the world has less than 9% of the world’s debt. There are 24 countries shown in this image — and even some of the ones shown are pretty small offenders — and the rest of the world has 8.92% of total global debt.
That’s pretty telling when you’re the US. It’s unsustainable.
Such low debt for the rest of the world is good news for investors like you and me who aren’t afraid to pack our bags and leave our debt-ridden home countries behind. Many countries out there simply don’t have the kind of debt problems the United States or other western countries have created for themselves.
Why waste your time investing, living and doing business there when you have so many better options?
