The countries of the developed world are experiencing a new class of refugee – members of the middle and upper class. These rungs of the socioeconomic ladder are realizing that their countries of residence are in many ways going rapidly downhill without much hope of a short- or medium-term reversal. This is particularly true for national economies, taxes, and regulations, and in terms of deteriorating individual liberty.

As a result, many are seeking permanent expatriation, or a “back door” destination, should a sudden move become necessary. In fact, after internationalizing your assets, establishing a back door is the next most important diversification strategy for most. This article will provide valuable insights toward that goal.

The first big hurdle is determining which destination is the right fit for you and your family. This task can be time-consuming and frustrating.

Many in the developed West contemplating personal internationalization (particularly Americans) are saying, “There’s nowhere to go – the whole world is falling apart.” This is far from the truth. Although much of the developed world is in serious decline, there are exceptions. Further, some of the world’s developing countries are on the rise both socially and economically. However, some of the greatest opportunities for those hoping for a better life outside of Europe or America lie in less-developed countries.

The less-developed countries are generally perceived by dwellers of the developed West as impoverished nations, where ignorance and disease are the norm. This is certainly true of some countries such as Somalia, which is the far extreme. However, it is certainly not the case with other locales that technically fit in this category, such as Uruguay, which is almost entirely unaffected by the present First World crisis.

Perhaps your idea of a new home is on a beach in the Caribbean where there is minimal violence, and where your wealth is relatively secure. Possibly you would prefer a home where there are old-world values and traditions, where you can frequent cafés and surround yourself with the arts. Whatever fits your tastes and needs, such a destination is likely to exist. However, finding the right combination of ingredients is time-consuming and requires some research and a bit of travel.

Our first recommendation is that you begin with a list of what is important to you. This can include such items as low taxation and limited government. However, it may also contain gourmet food and good hair salons. While the latter may seem frivolous, it may not be. Many have expatriated to a new jurisdiction only to discover that it’s the “frivolous” things that they miss most. Therefore, create a table that covers all these things for all who will be going with you. Below is an example of how you might go about this.

Possible Exit Destinations

The table shown here was used by a Scottish acquaintance of mine when he began his search for a second residence. In the end, his final choice was not even a country on this table. He decided on Chiang Mai, Thailand, also now home to the well-known contrarian investment advisor Marc Faber.

Using a table similar to the one above and ranking your priorities for each contending country is an extremely valuable exercise. While not entirely scientific and obviously subject to personal biases, by conducting extensive due diligence and applying the results to such a document, the person or family looking for a second residence will be less prone to making a commitment that is later regretted. You can ensure you cover all bases before making a decision.

Once the list of contenders has been decided, a bit of travel will be in order. While research can reveal information about any potential destination, getting a feel for the country and how things actually work requires personal experience. By planning a vacation at the place of interest, the priorities in the table can be confirmed and new ones added. Some time on the ground taking notes and refining the table will assist you in determining if a potential choice is a good fit for you and your family.

Once the decision on where in the world to settle is reached, other choices will surface over time: do you wish to work, start a business, or retire in the new location?; will you pursue citizenship or legal residence? As the answers to these questions surface, you will need to set the appropriate process in motion. In many countries, accomplishing some or all of these goals can take a long time, so plan accordingly and expect a few hurdles along the way.

Finally, you will need to rent or purchase property and set up a residence whether you plan to relocate fulltime or establish a backdoor destination as a nice place to vacation. If you select a destination where the economy is on the upswing, chances are even if you never need to move there, you can sell the property later at a profit. In the meantime, purchasing foreign real estate gives you diversification beyond one economy and one currency

Purchasing foreign property is one of the best wealth-protection strategies there is, but it’s far from your only option. You can buy precious metals and store them abroad… invest in other countries’ currencies… move your IRA to a foreign jurisdiction… or implement any number of other measures that your government would prefer you not know about. If you’re at all interested in learning more about this increasingly important subject, you need to see Internationalizing Your Assets, a new Casey Research web video that premiers on Tuesday, April 30 at 2 p.m. Eastern time. This free event features some of the world’s foremost experts on international diversification, including Casey Research Chairman Doug Casey, World Money Analyst Editor Kevin Brekke, and Euro Pacific Capital CEO Peter Schiff. For more information and to register, click here.

“The Libertarian creed rests upon one central axiom: that no man or group of men may aggress against the person or property of anyone else.”~ Murray Rothbard, For a New Liberty

Recently, I was advised by an American that, “This is still the greatest country in the world. If you don’t believe it, just look at all the people that want to come here. Everybody wants to be an American.”

On the surface of it, this comment appears quite valid. There are, indeed, large numbers of people from less-advantaged countries who would hope to be allowed to reside in the US. And this is understandable. If, for example, you were Mexican and were poor, the US, with its vast entitlement opportunities, would undoubtedly seem a major step up. And there can be no doubt that the US is in need of inexpensive labour, as so many Americans, even many of those who have not had a job in years, are unwilling to perform menial tasks or accept minimum wage.

The view of the US as the Great Melting Pot therefore remains intact. However, there is another facet to the immigration tale in First-World countries today. Whilst it is easy to be cognizant of those who are just arriving, the departures are quite a bit less noticeable.

This being the case, if one were to assess the departures with any accuracy, one would need to be stationed in one of the “destination” countries – those countries that are now attracting the greatest number of expatriates from the First World. A quiet exodus has begun. Increasingly, citizens of the troubled First World are investigating the possibility of expatriating to more favourable destinations.

At present, a “flood” has not occurred into any jurisdiction; however, the numbers are unquestionably on the rise in quite a few countries. Many of these people come from those countries that, until recently, were considered to be the best places to be.

Of greater interest than the actual percentages, however, is the description of those expatriating. And for this, it may be helpful to look at a little background.

The Brain Drain

As I am a West Indian, I tend to be especially conscious of those mass exits that have taken place in the Caribbean in my lifetime. In 1959, there was a sudden exodus from Cuba, as a result of the revolution. Those who left were not “refugees” in the classic sense. They were the more educated, the more entrepreneurial, the more successful residents – both Cuban and expat. Although Fidel Castro had not yet proclaimed himself as a communist, those who recognised that such a change was coming, and recognised that they would fall prey to the new government, chose to exit.

In 1962, Jamaica went independent of the UK, and, without the Crown to limit the direction of the Jamaican Government anymore, the local politicians quickly headed in a more socialist direction, to the cheers of all… or at least all but the more educated, the more entrepreneurial, the more successful residents – both Jamaican and expat.

Then, in 1973, Home Rule was achieved in the Bahamas. As the first Prime Minister of the Bahamas, Lynden Pindling adopted the policy, “Bahamas for Bahamians.” An immediate result was, at the time, called the “Brain Drain” – an exit of the more educated, the more entrepreneurial, the more successful residents – both Bahamian and expat.

There are other examples, but these three should suffice.

The net result was twofold. First, the countries that moved to a more socialistic, more dominant government lost many of their best and brightest. Although the countries remained “in business,” that business declined as a result of the loss. Second, those who expatriated found homes in jurisdictions that were only too pleased to take on the best and brightest from their neighbouring countries. Not surprisingly, these new residents brought their expertise, their inspiration, and their investment funds with them. Both they and their new home countries prospered as a result.

The Libertarian Principle

Libertarians tend to have a fairly simple message. It goes something like this:

I believe that I can find my own way in life. I’m content to sink or swim on my own. I don’t ask anything from others, including my government. In return, I only ask that others, my government included, not burden me with controls instituted over me without my consent.

Sounds reasonable enough. And yet, libertarian thinking may well be regarded by all governments (and a large percentage of the population in many countries) as being downright dangerous.

Why should this be? Why should, say, a Ron Paul be such a threat that both the liberal and conservative media refuse him air-time, whilst treating him with a hatred that goes well beyond the hatred that they hold for their traditional enemy – the opposition party?

The reason is that libertarians threaten the sanctity of government itself. For a finely-stated description of this condition, we can again consult Mister Rothbard:

While opposing any and all private or group aggression against the rights of person and property, the libertarian sees that throughout history and into the present day, there has been one central, dominant, and overriding aggressor upon all of these rights: the State.

Small wonder, then, that most libertarians choose to simply exit quietly, seeking a new home where, hopefully, “they won’t mess with me.”

So, this exodus that has begun… Where are the new, most-favoured destinations for those who are expatriating? Well, they are a disparate group. They consist of those countries whose governments are, at present, less intrusive by design (Hong Kong, the Cayman Islands, Singapore, etc.), and those countries that lack the funds and organization to be intrusive (Belize, Mongolia, etc.). Additionally, there are those countries that are offering new opportunities for business (Chile, Canada, Australia, etc.).

At any given time in history, there will be people seeking a better life for themselves. However, when there is a major change in some countries toward a totalitarian state, as we are now seeing in much of the First World, an increased percentage of those expatriating will be the best and the brightest. Whenever this happens, there is a decline in the prosperity of the countries that are abandoned, as a replacement “best and brightest” does not simply come along and fill the void.

It is of interest that many of these departees do not even regard themselves as libertarians at the time that they become dissatisfied. However, those who take up even a cursory study of libertarianism often conclude that they had been libertarians all along but simply didn’t know it. They find thatinternationalisation and the libertarian principle are virtually synonymous.

For those readers who are in the process of internationalising, a study of libertarian thinking, however brief, can be a major asset in making the transition.

Note: A definitive source on libertarian principles and thinking is For a New Liberty by Murray Rothbard.

Recently by Jeff Thomas: Seeking Galt's Gulch

“The Libertarian creed rests upon one central axiom: that no man or group of men may aggress against the person or property of anyone else.” ~ Murray Rothbard, For a New Liberty

Recently, I was advised by an American that, “This is still the greatest country in the world. If you don’t believe it, just look at all the people that want to come here. Everybody wants to be an American.”

On the surface of it, this comment appears quite valid. There are, indeed, large numbers of people from less-advantaged countries who would hope to be allowed to reside in the US. And this is understandable. If, for example, you were Mexican and were poor, the US, with its vast entitlement opportunities, would undoubtedly seem a major step up. And there can be no doubt that the US is in need of inexpensive labour, as so many Americans, even many of those who have not had a job in years, are unwilling to perform menial tasks or accept minimum wage.

The view of the US as the Great Melting Pot therefore remains intact. However, there is another facet to the immigration tale in First-World countries today. Whilst it is easy to be cognizant of those who are just arriving, the departures are quite a bit less noticeable.

This being the case, if one were to assess the departures with any accuracy, one would need to be stationed in one of the “destination” countries – those countries that are now attracting the greatest number of expatriates from the First World. A quiet exodus has begun. Increasingly, citizens of the troubled First World are investigating the possibility of expatriating to more favourable destinations.

At present, a “flood” has not occurred into any jurisdiction; however, the numbers are unquestionably on the rise in quite a few countries. Many of these people come from those countries that, until recently, were considered to be the best places to be.

Of greater interest than the actual percentages, however, is the description of those expatriating. And for this, it may be helpful to look at a little background.

The Brain Drain

As I am a West Indian, I tend to be especially conscious of those mass exits that have taken place in the Caribbean in my lifetime. In 1959, there was a sudden exodus from Cuba, as a result of the revolution. Those who left were not “refugees” in the classic sense. They were the more educated, the more entrepreneurial, the more successful residents – both Cuban and expat. Although Fidel Castro had not yet proclaimed himself as a communist, those who recognised that such a change was coming, and recognised that they would fall prey to the new government, chose to exit.

In 1962, Jamaica went independent of the UK, and, without the Crown to limit the direction of the Jamaican Government anymore, the local politicians quickly headed in a more socialist direction, to the cheers of all… or at least all but the more educated, the more entrepreneurial, the more successful residents – both Jamaican and expat.

Then, in 1973, Home Rule was achieved in the Bahamas. As the first Prime Minister of the Bahamas, Lynden Pindling adopted the policy, "Bahamas for Bahamians." An immediate result was, at the time, called the “Brain Drain” – an exit of the more educated, the more entrepreneurial, the more successful residents – both Bahamian and expat.

There are other examples, but these three should suffice.

The net result was twofold. First, the countries that moved to a more socialistic, more dominant government lost many of their best and brightest. Although the countries remained “in business,” that business declined as a result of the loss. Second, those who expatriated found homes in jurisdictions that were only too pleased to take on the best and brightest from their neighbouring countries. Not surprisingly, these new residents brought their expertise, their inspiration, and their investment funds with them. Both they and their new home countries prospered as a result.

The Libertarian Principle

Libertarians tend to have a fairly simple message. It goes something like this:

I believe that I can find my own way in life. I’m content to sink or swim on my own. I don’t ask anything from others, including my government. In return, I only ask that others, my government included, not burden me with controls instituted over me without my consent.

Sounds reasonable enough. And yet, libertarian thinking may well be regarded by all governments (and a large percentage of the population in many countries) as being downright dangerous.

Why should this be? Why should, say, a Ron Paul be such a threat that both the liberal and conservative media refuse him air-time, whilst treating him with a hatred that goes well beyond the hatred that they hold for their traditional enemy – the opposition party?

The reason is that libertarians threaten the sanctity of government itself. For a finely-stated description of this condition, we can again consult Mister Rothbard:

While opposing any and all private or group aggression against the rights of person and property, the libertarian sees that throughout history and into the present day, there has been one central, dominant, and overriding aggressor upon all of these rights: the State.

Small wonder, then, that most libertarians choose to simply exit quietly, seeking a new home where, hopefully, “they won’t mess with me.”

So, this exodus that has begun… Where are the new, most-favoured destinations for those who are expatriating? Well, they are a disparate group. They consist of those countries whose governments are, at present, less intrusive by design (Hong Kong, the Cayman Islands, Singapore, etc.), and those countries that lack the funds and organization to be intrusive (Belize, Mongolia, etc.). Additionally, there are those countries that are offering new opportunities for business (Chile, Canada, Australia, etc.).

At any given time in history, there will be people seeking a better life for themselves. However, when there is a major change in some countries toward a totalitarian state, as we are now seeing in much of the First World, an increased percentage of those expatriating will be the best and the brightest. Whenever this happens, there is a decline in the prosperity of the countries that are abandoned, as a replacement “best and brightest” does not simply come along and fill the void.

It is of interest that many of these departees do not even regard themselves as libertarians at the time that they become dissatisfied. However, those who take up even a cursory study of libertarianism often conclude that they had been libertarians all along but simply didn’t know it. They find that internationalisation and the libertarian principle are virtually synonymous.

For those readers who are in the process of internationalising, a study of libertarian thinking, however brief, can be a major asset in making the transition.

Note: A definitive source on libertarian principles and thinking is For a New Liberty by Murray Rothbard.

Reprinted from International Man with permission.

Jeff Thomas [send him mail] is British and resides in the Caribbean. The son of an economist and historian, he learned early to be distrustful of governments as a general principle. He began his study of economics around 1990, learning initially from Sir John Templeton, then Harry Schulz and Doug Casey and later others of an Austrian persuasion.

The Best of Jeff Thomas

We are fast approaching the stage of the ultimate inversion: the stage where the government is free to do anything it pleases, while the citizens may act only by permission; which is the stage of the darkest periods of human history, the stage of rule by brute force.~ Ayn Rand

For those who are unfamiliar with Galt’s Gulch, it is a fictional location in the US, created by Libertarian author Ayn Rand in her prophetic book, Atlas Shrugged. In the book, the business leaders of the world finally get so fed up with the endless restrictions placed upon them by the powers-that-be that they simply walk away from their factories and move to a valley (Galt’s Gulch) where they establish a capitalistic haven.

Atlas Shrugged was written in 1957, and, at that time, Rand’s supporters were not numerous, although future Fed Chairman Alan Greenspan was a pal and agreed largely with her philosophy. (How things change.) However, in the last fifty years, the book has proven to be amazingly prophetic, even in some of the details, as to where the US, and by extension, the First World in general, was headed.

If ever there were a time that a Galt’s Gulch should be created by those seeking an escape from bureaucracy, it would be now. Certainly those of us who reside outside Europe and America are seeing an influx of people seeking to escape the countries that were at one time regarded as “the best place in the world.”

So, what we are seeing is individuals and families that are, in effect, economic refugees, each hoping to find a better place than they are leaving. The concept of a purpose-built community for libertarians is, however, a less likely development; yet, some do exist.

One is Cafayate, an upscale community that is being created by Doug Casey in Salta, Argentina. For those who may not be familiar with it, it is well away from the capitol, Buenos Aires, and therefore, hopefully, removed from much of the political influence of Argentine governments, which have been serially corrupt and dysfunctional. Plans for Cafayate include golf, polo, good restaurants and locally-made wines. An upscale community hoping to attract like-minded people.

Another community is developing in Chile and seems to have a strong focus on self-sustainability – organically-grown meats, fruits, and vegetables, plus grapes for the making of wine. It is based on a large, existing farm and house lots are now for sale.

We can’t say at this point that such communities are a way of the future, but, if so, they are a worthy concept. Surely, if an individual seeks to expatriate himself, he is likely to want neighbours who share his point of view and choice of lifestyle. If such communities are to be successful over the long haul, they will need to either include locals, or, at the very least, have a symbiotic relationship with locals – an interplay in which both groups benefit significantly. (History has shown that isolation from indigenous people breeds resentment.)

Are these communities a good thing? I would say, emphatically, YES. The more, the better, and the more varied they are, the better.

Will such communities come to represent a significant percentage of the world’s population in the future? I would guess that this is unlikely, particularly as the determination to maintain the present concept of the nation-state is so prevalent and so heavily enforced. These are communities for the independently-minded, and, truth be told, most people seem to gravitate toward the concept of being ruled by others.

Some have suggested that such communities are a regressive move and represent a return to the Middle Ages. However, modern communication and transportation could make such communities vibrant. Most people today see the Middle Ages as a period in which kings reigned in their castles and communities of huts surrounded them – small fiefdoms separated from each other, with relatively little interplay. However, in the latter part of the Middle Ages, towns sprung up, many of which revolved around manufacturing.

For example, the town of Perouges, near Lyon in France, was a walled town on a mount, whose population of one thousand or so was almost solely involved in weaving. A modern version of this could conceivably develop in which entire communities would be constructed that manufactured widgets. Assuming that the power of the nation-state was diminished, it is entirely possible that such a community could establish and maintain its own moral values and legal system. Such communities would not only offer a far greater variety of jobs and lifestyles; they would, as a by-product, create a tremendous expansion of freedom in general.

The greater the number of choices of different types of communities, the greater the freedom of all individuals. If one were to try one “Galt’s Gulch” and find it not to his liking, he could then try another.

If the next stage of the development of the world was to be in this direction, not only would each person have a greater range of countries from which to select his home, but an additional development would occur: the developers of the prospective destinations would learn that to attract new residents would mean that they would need to offer options – rights – that would appeal to prospective residents. If this was to happen – if countries needed to compete for residents the way businesses in the free-market system compete for customers – those who seek freedom would indeed experience a new awakening.

Recently by Jeff Thomas: The Disappearing Gold

We are fast approaching the stage of the ultimate inversion: the stage where the government is free to do anything it pleases, while the citizens may act only by permission; which is the stage of the darkest periods of human history, the stage of rule by brute force. ~ Ayn Rand

For those who are unfamiliar with Galt’s Gulch, it is a fictional location in the US, created by Libertarian author Ayn Rand in her prophetic book, Atlas Shrugged. In the book, the business leaders of the world finally get so fed up with the endless restrictions placed upon them by the powers-that-be that they simply walk away from their factories and move to a valley (Galt’s Gulch) where they establish a capitalistic haven.

Atlas Shrugged was written in 1957, and, at that time, Rand’s supporters were not numerous, although future Fed Chairman Alan Greenspan was a pal and agreed largely with her philosophy. (How things change.) However, in the last fifty years, the book has proven to be amazingly prophetic, even in some of the details, as to where the US, and by extension, the First World in general, was headed.

If ever there were a time that a Galt’s Gulch should be created by those seeking an escape from bureaucracy, it would be now. Certainly those of us who reside outside Europe and America are seeing an influx of people seeking to escape the countries that were at one time regarded as "the best place in the world."

So, what we are seeing is individuals and families that are, in effect, economic refugees, each hoping to find a better place than they are leaving. The concept of a purpose-built community for libertarians is, however, a less likely development; yet, some do exist.

One is Cafayate, an upscale community that is being created by Doug Casey in Salta, Argentina. For those who may not be familiar with it, it is well away from the capitol, Buenos Aires, and therefore, hopefully, removed from much of the political influence of Argentine governments, which have been serially corrupt and dysfunctional. Plans for Cafayate include golf, polo, good restaurants and locally-made wines. An upscale community hoping to attract like-minded people.

Another community is developing in Chile and seems to have a strong focus on self-sustainability – organically-grown meats, fruits, and vegetables, plus grapes for the making of wine. It is based on a large, existing farm and house lots are now for sale.

We can’t say at this point that such communities are a way of the future, but, if so, they are a worthy concept. Surely, if an individual seeks to expatriate himself, he is likely to want neighbours who share his point of view and choice of lifestyle. If such communities are to be successful over the long haul, they will need to either include locals, or, at the very least, have a symbiotic relationship with locals – an interplay in which both groups benefit significantly. (History has shown that isolation from indigenous people breeds resentment.)

Are these communities a good thing? I would say, emphatically, YES. The more, the better, and the more varied they are, the better.

Will such communities come to represent a significant percentage of the world’s population in the future? I would guess that this is unlikely, particularly as the determination to maintain the present concept of the nation-state is so prevalent and so heavily enforced. These are communities for the independently-minded, and, truth be told, most people seem to gravitate toward the concept of being ruled by others.

Some have suggested that such communities are a regressive move and represent a return to the Middle Ages. However, modern communication and transportation could make such communities vibrant. Most people today see the Middle Ages as a period in which kings reigned in their castles and communities of huts surrounded them – small fiefdoms separated from each other, with relatively little interplay. However, in the latter part of the Middle Ages, towns sprung up, many of which revolved around manufacturing.

For example, the town of Perouges, near Lyon in France, was a walled town on a mount, whose population of one thousand or so was almost solely involved in weaving. A modern version of this could conceivably develop in which entire communities would be constructed that manufactured widgets. Assuming that the power of the nation-state was diminished, it is entirely possible that such a community could establish and maintain its own moral values and legal system. Such communities would not only offer a far greater variety of jobs and lifestyles; they would, as a by-product, create a tremendous expansion of freedom in general.

The greater the number of choices of different types of communities, the greater the freedom of all individuals. If one were to try one "Galt’s Gulch" and find it not to his liking, he could then try another.

If the next stage of the development of the world was to be in this direction, not only would each person have a greater range of countries from which to select his home, but an additional development would occur: the developers of the prospective destinations would learn that to attract new residents would mean that they would need to offer options – rights – that would appeal to prospective residents. If this was to happen – if countries needed to compete for residents the way businesses in the free-market system compete for customers – those who seek freedom would indeed experience a new awakening.

Reprinted from International Man with permission.

Jeff Thomas [send him mail] is British and resides in the Caribbean. The son of an economist and historian, he learned early to be distrustful of governments as a general principle. He began his study of economics around 1990, learning initially from Sir John Templeton, then Harry Schulz and Doug Casey and later others of an Austrian persuasion.

The Best of Jeff Thomas

Recently by Jeff Thomas: Equality — The Great Socialist Ideal

During the Cold War, Germany moved much of its gold to New York in case the USSR invaded Germany. It was assumed at that time that the US would be a safer storage location, and of course, they could always ask to have it returned if they wished.

But German citizens have become increasingly worried about the security of the 1,536 tonnes of German gold reputedly held at the Federal Reserve in New York. This has resulted in the Bundesbank pursuing repatriation of the gold, beginning with a request to view it in the basement of the Federal Reserve Building, where it is claimed to reside.

Of course, the German government had received periodic assurances from the Fed that the gold is there; however, the issue began to get a bit sticky recently, when the Fed refused a request for inspection.

The world then raised a collective eyebrow, and, whilst not panicking over this development just yet, closer attention has come to bear, not only on the Fed, but on any institution that is entrusted with the storage of gold for other parties.

Concern spread to Austria, where a question arose in Parliament as to where Austria’s gold is stored. The answer provided was that 80% of it (224.4 tonnes) is in the UK. (It was claimed that the reason for this is that, if a crisis of some kind were to occur, it could be more easily traded from London than from Vienna.)

Seems reasonable enough, except that the return of the gold to Austria, if it were requested, may be a bit difficult, as the gold seems to have been leased out by the UK.

To many, a second eyebrow might go up at this point. Lease out the wealth of another nation? Isn’t this a bit… irresponsible?

The New Gold Shuffle

Not to worry, it’s done all the time. In fact, the practice has been endorsed by none other than Alan Greenspan, former Chairman of the Fed. The gold is leased to a bullion bank, which typically pays one percent interest to the Fed, with a promise to return it on a specified date. The bullion bank then sells the gold on the open market and uses the proceeds to buy Treasury bonds, which will net a three to four percent return.

The nicest thing about such an arrangement is that the lessor continues to claim it on his balance sheet as a line item: “gold and gold receivables.” After all, an asset that we have leased out is still an asset, even if it has now been sold by the lessee.

In effect, this means that, if you bought a gold bar today, it is possible that it is a bar that was shipped from the Bundesbank to the Federal Reserve decades ago and is presently listed by the Fed on its balance sheet as “gold and gold receivables.”

Both you and the Fed are claiming to possess the same gold bar. The fly in the ointment, of course, is that only one bar can be the actual bar. The other is a receivable and therefore is an asset on paper only. This, of course, means that there is less gold in the world than has been claimed. How much less? That’s anyone’s guess.

The New Risks

But even if it became generally known that the Fed (and others) are holding paper, rather than physical gold, couldn’t we carry on as before? What could go wrong? Here are some immediate possibilities:

If there were a dramatic rise in the price of gold and the lessor were to call in the return of the gold by the bullion bank, the bullion bank could easily lose far more than the small two to three percent margin it had been enjoying.

If there were a crash in the bond market and hyperinflation set in, the bonds that the bullion bank had purchased could become worthless.

If the nations who shipped their gold to London and New York for safekeeping were to request their return, the storage banks could only deliver if they were to purchase gold at the current rate. If that rate were significantly above the rate at which the gold had been leased to the bullion banks, the storage banks would sustain a significant, possibly unsustainable, loss.

That’s quite a bit of risk.

In the present market, there are any number of possible triggers that could cause the people of Germany, Austria, or a host of other nations to demand that their gold be returned home. Indeed, pressure is on the increase. The governments who have shipped out their gold for “safekeeping” would have a lot of explaining to do to their constituents, if the storage banks are not forthcoming.

So, is it time for the odiferous effluvium to hit the fan? Not quite yet. Before that occurs, there will still be some dancing around by the Fed and others.

The Fed has already stated, in so many words, “We’re sorry, but we can’t let you have all your gold at one time, but we’d be prepared to send it to you over a period of years.”

For many observers, the present situation should be well beyond the point of the raised eyebrow. It should be glaringly apparent that the amount of gold presently claimed to be in storage in the world’s banks is, to a greater or lesser extent, overstated.

Continuing the Charade

The Bundesbank should, of course, now say, “I’m afraid that’s not good enough. It’s our gold. We’ve advised you how much of it we want back now, and we must insist that you produce it immediately.”

If they were to take this perfectly logical step and the Fed refused, there could be a run on the banks, and, very possibly, within as short a period as twenty-four hours, a worldwide bank holiday might be declared with regard to gold.

However, this is not what will transpire. Neither logic nor sound banking practices are the object here. The object is to maintain the charade that exists within the banking community. The Bundesbank is just as fearful of a run as the Fed and will be only too willing to accept the Fed’s terms.

What must be borne in mind is the root cause of the request. It was not the Bundesbank itself that originally wanted the transfer to take place; it was the German people who, quite rightly, have become distrustful of the fact that their gold has been in New York for so long and want to see it repatriated. It is not the banks who wish to correct the situation. Not one bank wishes to expose the inappropriate practices of any other bank. Their loyalty is to each other and not to their depositors.

So, is that it? Have we heard the last of this issue? I think not. The cat is out of the bag at this point, and the depositors’ distrust and uncertainty will not be quelled by the counter-offer. Tension will continue to mount amongst depositors, and, at some point, the situation will reach an impasse.

All those who presently have gold in a banking institution would be prudent to keep an eye on the present situation. We might consider taking delivery of any gold we have in a bank, wherever it may be. Regardless of what form it is in, from ETFs to allocated gold, we would do well to assess the degree to which we feel our gold is at risk. In doing so, we may determine that a gold account is more at risk in, say, a New York or London bank than a Swiss bank. (Not all banks will be equal in terms of risk.)

If we do resolve to divest ourselves of bank-related precious metal holdings, it would be prudent to take action soon. (Clearly, those who attempt to remove their wealth the day after a run has occurred tend to do less well than those who attempt to remove their wealth the day before the run.)

We might also consider whether a possible run may become systemic, causing a bank holiday on all the bank’s activities, thus freezing any currency that we may have on deposit. We may conclude that it is prudent to only retain in our bank enough money to allow cheques to clear – an amount sufficient to cover a few months’ expenses.

In the near future, we may well find that a significant amount of gold that is claimed to exist in the world will “disappear.” Whilst we cannot control this eventuality, we may be able to save the gold that is being held in our names from disappearing.

Reprinted from International Man with permission.

Jeff Thomas [send him mail] is British and resides in the Caribbean. The son of an economist and historian, he learned early to be distrustful of governments as a general principle. He began his study of economics around 1990, learning initially from Sir John Templeton, then Harry Schulz and Doug Casey and later others of an Austrian persuasion.

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Recently by Jeff Thomas: Election Time

Defining Equality

The free-market system is, in one sense, equal. Anyone with ideas, abilities or ambition has the opportunity to improve upon his lot in life. Therefore, at any given time, there are people in a free-market society who are at every level of economic success – some on their way up, some on their way down.

Beginning in the early 19th century, some philosophers argued that this system is in another sense, unequal, as there are many people who do not possess those new ideas, do not have unique abilities and/or have a lesser ambition. They argued that the free-market system is a decidedly imperfect concept for this reason, and they were correct. They asked, “Is it not possible to create a system in which all could prosper, rather than a select few?”

The trouble with socialism is not in the basic objective. The trouble is that no one has actually come up with a workable means to achieve the objective. The philosophers who created the socialist approach settled for a plan that does not answer the question at all. It does, however, seek to diminish and discourage those with ideas, abilities and ambitions, in order to lower them to the level of those who do not possess these attributes. The net result is an entire society that operates on a lower level, eliminating advancement for all concerned, as well as for society as a whole.

There is one exception to this lack of advancement, however. Instead of the free-market system, which has opportunity for anyone to increase his position, socialism has, at its core, the leaders – the people who enforce the equality. They tend to be a relatively closed group who enjoy a far higher standard of living, in addition to enjoying far greater freedom of choice. (Equality for some; not for others – back to the original problem.)

Friedrich Von Hayek, in his book, The Road to Serfdom, states:

The choice open to us is not between a system in which everybody will get what he deserves according to some absolute und universal standard of right… but between a system where it is the will of a few persons that decides who gets what….

The Great Lie of Socialism

In order for socialism to appeal to the masses, a great lie has been put forward: the concept of the “haves” and the “have-nots,” or the “rich” and the “poor”. Most any socialist will refer to these categories regularly and is unlikely to characterise himself as “rich.” Even celebrities, with incomes in the seven-figure range will never refer to themselves as “rich.” Rich is equated with “evil.” Therefore, a businessman who may earn under $100,000 per year is “one of the greedy rich,” whilst a celebrity whose annual income is in the millions is “one of the people.”

How, then, is “rich” defined by those of a socialist bent? Well, in fact, it is unlikely that any socialist has ever put a number on it, but there is a decided trend to suggest that, if my neighbour has more than me, he is rich. Further, there is often the inference that my neighbour needs to be taken down a peg by the authorities. Perhaps a new tax on the rich, or a higher percentage of tax will work. (Of course, should I become more prosperous next year, the bar will need to be raised, so that I, once again, am below the level that may be characterised as rich.)

For this reason, the terms are kept vague, as no political aspirant who espouses socialism could ever succeed if he actually put a dollar value on “rich.” In practice, the term does not refer to a specific level of income, but to an attitude about the method of government. Only merchants, businessmen, bankers, etc. tend to be categorised as rich.

It is this very vagueness that gives socialism its appeal. In practice, socialistic proposals from leaders do not truly raise anyone up. They, instead, seek to drag others down. Those citizens who respond supportively to such proposals are those whose thinking is subjective enough that they imagine that all those to be dragged down will be “those above my economic level – not me.”

This Great Lie is an intoxicant – something we can take to assure us that, whatever our personal shortcomings, be they a lack of talent, a lack of ambition, or even outright laziness, our peers who do not share these shortcomings will not be allowed to excel. We will not be bypassed by others and made to feel small.

Socialistic philosophy claims that the free-market system is a top-down system, engineered to hold down the little man. It claims that, in order to protect the little man, a bottom-up system is necessary and socialism is that system. Yet, the opposite is true. Under socialism, the decision as to what is produced comes from the small enforcer-class, not from the entrepreneurs. It is therefore a top-down society, directed by an Elite.

In a free-market society, the decision as to what is produced is not (as socialist philosophy claims) determined by the entrepreneurs, it is determined by the masses, since they will only buy what they actually want. The free-market system is therefore a bottom-up system, which, interestingly, is the very object which socialism purports to create, but does not.

As stated by Ludwig von Mises in his book, Human Action: A Treatise on Economics,

The entrepreneurs and capitalists are not irresponsible autocrats. They are unconditionally subject to the sovereignty of the consumers. The market is a consumers’ democracy.

The Enduring Nature of the Socialist Concept

Considering all of the above, why, then, does socialism continue to appeal to so many people? In a word, resentment. It is easy for us to build up a resentment for the landlord who appears once a month, wanting to take our hard-earned money from us. Or the merchant who demands more for his goods than we feel is affordable. Or the employer who pays us for our labour, whilst paying himself more than he pays us.

Somehow, in our vanity, we imagine that these acts are “unfair,” simply because we wish to be paid more for our services and charged less for the goods and services provided by others. Over time, these people grow large in our perception as “the greedy rich,” who somehow are holding us down – keeping us from attaining a higher economic standard. We grow to detest those who have achieved more economically than we have, even as we envy their achievements. We may not wish to invest the money and hard work necessary to become a merchant, landlord or employer, but we do become jealous of the fruits they have earned from their efforts.

This resentment makes us easy marks for those political hopefuls who say, “Elect me and I’ll eliminate the disparity between the haves and have-nots. I’ll legislate rent control. I’ll demand employment benefits. I’ll create price controls.” For those who are short-sighted enough to fail to understand why there will always be those who have more than we do, these promises seem not only plausible, but entirely justified. They promise Equality for All. The trouble is, they do not deliver equality, they merely do away with the bi-products of ideas, abilities and ambitions and replace them with the arbitrary policies of an enforcer class.

If I can leave the reader with one thought regarding the concept of social engineering to achieve equality, it would be this:

Socialism claims to be the great equaliser. However, it does not lift those at the lower levels to a higher economic level. Instead, it takes from those that have achieved a higher economic level, discouraging their ideas, abilities and ambitions, assuring a form of lower equality for all, through the elimination of the motivation to achieve.

Reprinted from International Man with permission.

Jeff Thomas [send him mail] is British and resides in the Caribbean. The son of an economist and historian, he learned early to be distrustful of governments as a general principle. He began his study of economics around 1990, learning initially from Sir John Templeton, then Harry Schulz and Doug Casey and later others of an Austrian persuasion.

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"Anybody who wants the presidency so much that he’ll spend two years organizing and campaigning for it is not to be trusted with the office." ~ David Broder

"If voting could actually change anything, it would be illegal." ~ Noam Chomsky

Generally, I tend not to comment on elections, as I consider them to be largely unimportant. That is, regardless of which candidate is elected, the actual outcome tends to be much the same. In most countries, the higher the office being contested, the less real difference there is between the candidates.

First, unlike, say, a beauty pageant, in which the voter may have up to fifty contestants to choose from (as in the US), the governments of the world do all that is in their power to limit the choices to two contestants. Second, the more sophisticated the electoral system, the more likely it is that the two candidates are quite similar in both their level of ability and their apparent sincerity in serving the public who elect them. Third, the more apparent an issue is in the eyes of the voters, the less likely it is that the candidates will actually offer a specific plan to solve it.

In times of economic emergency, as the First World now finds itself in, these facts are even more apparent.

The facts should, in themselves, serve to inform voters that, in fact, it is not the primary goal of the candidates to actually "solve" the problem at hand. The goal is to accede to the throne. Once on the throne, the goal is to remain there. When exiting the throne, the goal is to do so with as favourable an image as possible.

For the candidates, solving the problem may be a secondary goal…but not necessarily. This is a very difficult realisation for the populace to accept.

The US election is the most prominent in the world media at the moment, as the world economy is in a shambles and so much depends upon the Americans with regard to how it will all turn out. They are the most powerful country in the world; their currency is the world’s default currency; they ostensibly hold seven million tonnes of gold in their Treasury (estimates differ significantly), plus an additional seven million belonging to European countries (again, estimates differ), and they have assured Europe that they will back up the EU in their quest to stave off their collapse.

There can be absolutely no doubt, at this point, that, if there is a central issue, nearly every voter has concluded that, "It’s the economy, stupid." And justifiably so – the US government is essentially bankrupt. In such a situation, some will feel that taxes should be raised, whilst others will feel that further taxation will stifle growth. However, even if the income tax to the "one percent" were raised to consume the total incomes of that group, the proceeds would be insufficient to fund the government. At a time when the country has a debt load of sixteen trillion dollars that it cannot repay, and has additional unfunded liabilities of one hundred and twenty trillion dollars, both parties confirm that it is their intent to increase government spending (although the "conservative" party claims that it will increase spending less than the liberal party.)

There are those who believe that the US has gone past the point of no return and that a collapse of the monetary system is inevitable; however, it is likely that far more Americans would like to believe that, somehow, there can be a solution, and so they look to their candidates for an "answer."

Let us suppose that the latter group is correct. If so, then the very first premise of this argument would necessarily be that both political parties genuinely want to reverse the situation; that they want to spend less, if they only could.

If this were the case, the very first consideration would be to eliminate waste. At any given time, there are hundreds, possibly thousands of government programmes that could be either cut back on, or eliminated altogether. Of course, studies would need to be done to identify waste in a thorough manner. In addition, not all voters would agree on what is wasteful and what is not. Democrats may feel that the staggering amount that is spent on "defense" is far beyond what is reasonable, whilst Republicans may say it is essential. However, those programmes do exist that all would agree, could easily be cut or eliminated. Indeed, there are programmes that, amazingly, may have no value whatsoever, yet demand considerable funding each year.

It therefore follows that, if either party were truly focused on keeping the economic train from running off the cliff that is ahead, surely, they would begin by eliminating these. Surely, these programmes should be major campaign issues, as they represent the quickest and most obvious place to begin to cut expenditure.

For the sake of simplicity, let’s look at only one of these – the Department of Energy. It has cost the taxpayers hundreds of billions of dollars since it was created by President Carter in 1977. Its annual budget is over twenty four billion dollars and it employs sixteen thousand federal workers, plus over one hundred thousand contract workers.

Although most Americans realise that this department exists, few seem to know what its purpose is. It would be understandable, therefore, if they failed to understand whether or not the department would fall into the category of (a) essential, (b) expendable, or (c) a complete waste that should be done away with immediately.

So, here it is: The purpose of the Department of Energy is to lessen America’s dependence on foreign oil.

Let that thought sink in for a moment, bearing in mind that this is not just one of the Department’s interests, but its stated purpose.

The Department of Energy has, arguably, in its thirty five year history, failed entirely to deliver on its objective, yet has grown into a vastly expensive bureaucratic monster that expands annually. Surely, a government that had spending cuts in mind would begin with departments such as this one, taking immediate action, then working its way down the line with other departments, in accordance with their level of real contribution, if any.

Yet, such programmes are not even an issue. Whilst no one should be more aware of such waste than a candidate for Presidential office and no one should be more concerned with cost-cutting than a candidate for Presidential office, cost cutting is not even a matter for consideration. The candidates only dispute how much costs should increase.

Hence, neither candidate, neither party, intends to actually solve the central economic problem.

But, lest we be too unfair to the American government, let us not overlook the fact that, throughout the First World, the situation is largely the same. Although most countries do not have the enormous budget that the US has, their budgets, too, are growing annually. After all, this is the nature of governments – to grow themselves. Other countries do not spend as much money that they don’t have, as the US does, but that does not mean that they are more frugal. For example, a comparative description of, say, the UK and the US might be as follows:

The UK is the equivalent of someone with a gold credit card who is maxed out at Marks & Spencer and planning to spend more, as compared to someone with a platinum card, who is maxed out at Harrods and planning to spend more.

The US is the equivalent of someone with a gold credit card who is maxed out at K-Mart and planning to spend more, as compared to someone with a platinum card, who is maxed out at Saks and planning to spend more.

Whether we look at Greece, Spain, France or any other First World country, the formula is the same. All that differs is the number of zeros on their relative debts.

The lesson to be learned from this is that, in the final end, those who are running for office, regardless of their party affiliation, invariably claim, "I sympathise with the average guy out there. I understand how hard this economic situation is for you," yet, this is far from true. In fact, neither party has the slightest intention of cutting waste – waste that is in the billions and possibly trillions. As much as the average voter would like to believe that one candidate or the other "might have the answer," neither one has any intention of effecting a true solution. They offer, instead, to increase the very cause of the problem – government spending.

And, if we look this conclusion straight in the eye, what then? Do we then say, "Well, then, all is lost"? Hopefully not. Hopefully, we take the difficult decision to say, "Neither party will solve the problem. That means that it is up to me to provide my own future.

Some First World residents may find a way to remain where they are and still have a good future, even if it is somewhat diminished from what they now enjoy. Others may consider the fact that the entire world is not at the cliff edge and are actually doing rather well economically. Many will consider planting flags elsewhere.

Sometimes the wisest course is to choose not to wait for the storm to hit, but to move away from the storm.

If you enjoyed this article, you might like our complimentary report, The Best of Jeff Thomas. Pulling no punches, Jeff shares his thoughts on the greatest threat to gold ownership, finding a bolthole on a budget, as well as the coming hyperinflation. You may download this free report immediately in our member’s area. Or, if you are not a member, register for free here.

Reprinted from International Man with permission.

Jeff Thomas [send him mail] is British and resides in the Caribbean. The son of an economist and historian, he learned early to be distrustful of governments as a general principle. He began his study of economics around 1990, learning initially from Sir John Templeton, then Harry Schulz and Doug Casey and later others of an Austrian persuasion.

The Best of Jeff Thomas

The above quote is from William Gouge, commenting on the Panic of 1819. The panic had been caused when the First Bank of the United States had first expanded the money supply dramatically by offering loans, then contracted the money supply by tightening its requirements for new loans, causing a crash.

This is a useful quote, as, in its simplicity, it states the very nature of crashes brought on by irresponsible banking practices. In every case in which this occurs, it is possible through the complicity of the government of the day.

The origin of this syndrome goes back to Mayer Rothschild, a very clever fellow who, in the late 18th century, offered financial benefits to politicians in Germany in trade for political support for whatever activities his bank might practice. Rothschild was a long-term thinker; his method involved the offering of regular emoluments to politicians without their having to provide him with anything immediately. Then, when he needed a large favour, he would call it in.

Movie buffs may see a similarity between Rothschild’s method and the deals made by Don Corleone in The Godfather. "Some day – and that day may never come – I’ll call upon you to do a service for me."

Rothschild created boom-and-bust cycles which were highly profitable for his bank, but depended upon the support of the government when the "bust" part came along.

As described above, the bank would offer loans to the public on generous terms, then suddenly rein in those terms on all future loans. The claim the bank would make would be that inflation was taking place and the bank was taking action to control that inflation. (Of course, Rothschild did not bother to mention that it was the bank itself that had caused the inflation.)

The net result would be a "panic," or, in today’s terms a "depression." Everyone involved would be harmed by the event except the politicians and the bank.

This scheme was accurately and succinctly described by G. Edward Griffin in 1994:

"It is widely believed that panics, boom-and-bust cycles, and depressions are caused by unbridled competition between banks; thus the need for government regulation. The truth is just the opposite. These disruptions in the free market are the result of government prevention of competition by the granting of monopolistic power to the central bank."

Mayer Rothschild’s five sons followed in his footsteps and would go on to control much of the banking in Europe. The Rothschilds are perhaps best known for the Bank of England, which is still in operation today as one of the world’s most powerful banks.

So, let’s have a brief look at central banking in America.

In 1782, the Bank of North America was opened in America during the infancy of the United States. It was modelled after Rothschild’s Bank of England. It operated as a central bank and, as it was organised by Congressman Robert Morris, it was intended from the start to serve both its directors and the politicians of the day.

The bank did indeed serve the bankers and politicians – at the expense of the depositors. Although the bank lost its charter in 1783, an effort was soon afoot to create a virtually identical bank, called, "The Bank of the United States." The proposal was backed by the Rothschilds, who intended to control it.

Having just seen, first hand, how much damage a central bank, with a fascist relationship to the government could do, a terrible (and ongoing) row took place within the Cabinet of President George Washington as to whether another potentially disastrous bank should be allowed. The main protagonist was good Secretary of State Thomas Jefferson, who said,

"The system of banking [is] a blot left in all constitutions, which, if not covered, will end in their destruction… I sincerely believe that banking institutions are more dangerous than standing armies; and that the principle of spending money to be paid by posterity…is but swindling futurity on a large scale."

On the other side, Secretary of the Treasury Alexander Hamilton led the argument in favour of the creation of a second central bank. Incredibly, even though Congress had just seen what a disaster this could be, they approved the charter for the new bank in 1791. It opened with less than nine percent of the private funds required by its charter.

A primary object of the bank was to provide fiat currency for the government, whilst collecting deposits from the public. Immediately, the new bank began to print money and to lend it, with predictable results. By 1811, it had closed its doors, having rewarded only its directors and some politicians, whilst the depositors lost their money.

This, surely, would be the end of the failed concept of a central bank, a fascist partnership between financiers and politicians. However, in 1816, Congress granted a charter to the second "Bank of the United States." Within three years, the bank had caused the Panic of 1819, as stated in the opening paragraph of this article and, again, as Gouge said, "the bank was saved and the people were ruined."

In 1832, President Andrew Jackson was up for re-election and he risked his success on a campaign to stop the renewal of the charter of the Bank of the United States. Although he won both his re-election and his bid to stop the renewal of the charter, both the Rothschild family and their American counterparts continued their efforts to create a central bank that would provide both bankers and politicians with wealth whilst using depositors as cash cows.

They succeeded marvelously in 1913 with the creation of the Federal Reserve, a more sophisticated relationship between bank and State that has operated ever since. In the boom-and-bust cycles it has created, the US dollar has been devalued by over 96% and, in 1999, the repeal of the Glass Steagall Act allowed bankers to create the Mother of All Loaning Sprees, resulting directly in the collapse of the real estate bubble in 2007 and the crash of the stock market in 2008.

But the system today is far more advanced than in the eighteenth century. It is no longer necessary to fold the banks involved, or at least not immediately. In the aftermath of the 2007/2008 crashes, Government has declared that the closing of the central banks would be the worst catastrophe that could befall the country and therefore, the country must borrow heavily to re-fund them. No requirement was made of the banks to actually offer these funds on loan, let alone to bail out the debtors. The banks have instead been able to absorb the funds, continuing the massive bonuses to the very directors who caused the disaster in the first instance.

The above history is a brief, thumbnail sketch of events relative to central banking in the US since the formation of the country. It is not meant to be all-encompassing and the reader is encouraged to study the subject further. But the sketch does have a purpose.

Today, most of the First World is in the midst of an economic crisis that has been caused by debt. That debt has been the product of bankers and governments working together.

History shows us that the present situation is not an accident. It is the repetition of a very successful method by which bankers, with the complicity of governments, create boom-and-bust cycles; cycles that, whilst damaging for nearly all citizens of a country, are very profitable for those who create the cycles.

If we are to watch the evening news, there are, daily, politicians and pundits offering "solutions" – "Provide quantitative easing," "tax the one percent," or simply, "kick the can down the road." Through endless debate, viewers are encouraged to believe that somehow, the government and the directors of the banks and the Chairman of the Federal Reserve will come up with a solution to the problem.

However, a brief read of the history above suggests that there will be no "solution," as no solution is intended by those who have created the problem. The entire concept is to periodically hang the depositor out to dry. (It’s not done to be purposely unkind; it’s done because it’s so very profitable.)

If the reader has not yet been squeezed to the point that his net worth (value of assets, minus debt) is under water, he would be well advised to consider means by which his liquid assets can be removed from the banking system, a system that, if history repeats, may soon take those remaining assets, as the second half of the Great Unravelling unfolds.

Does this mean that the reader should run right down to the bank and withdraw his assets? Not necessarily. What it does mean is that it would be best to recognise that a clear pattern has existed for hundreds of years regarding boom-and-bust banking and the reader would be well-advised to ask himself some unpleasant questions. Here are a few:

• Will my bank be one of those that crashes?
• Will my savings be lost partially or entirely?
• How much time do I have before I should remove my deposits?
• Will my bank honour the agreement of the paper gold that they have sold me?
• Will I be able to take delivery of allocated gold that they "hold" for me?
• What do I do with my assets if I withdraw them from the bank?
• Will there be banks that will remain in business? Which ones?

The above questions should be asked periodically, as events unfold. Doing so may mean the difference between the retention or loss of assets that the reader now trusts his bank to hold for him.

If you enjoyed this article, you might like our complimentary report, The Best of Jeff Thomas. Pulling no punches, Jeff shares his thoughts on the greatest threat to gold ownership, finding a bolthole on a budget, as well as the coming hyperinflation. You may download this free report immediately in our member’s area. Or, if you are not a member, register for free here.

Reprinted from International Man with permission.

Jeff Thomas [send him mail] is British and resides in the Caribbean. The son of an economist and historian, he learned early to be distrustful of governments as a general principle. He began his study of economics around 1990, learning initially from Sir John Templeton, then Harry Schulz and Doug Casey and later others of an Austrian persuasion.

The Best of Jeff Thomas

There is much discussion these days as to whether the price of gold is being manipulated. The answer is simply “yes.”

It is likely that most potential gold investors would agree that the major financial institutions have the ability to influence the gold price. They would also agree that to do so would be of benefit to those institutions. Yet, many investors still have difficulty making the final leap to agree that, if the institutions can manipulate the gold price and, by doing so, will profit from it, they will actually manipulate the price. Odd, as this would seem to me to be the easiest of the three premises to accept.

However, there are also many investors who do believe that manipulation exists. From time to time, investors have commented to me, “I don’t know how they’re going about it, but I’m sure it’s being done.”

This view suggests that the method of manipulation is difficult to understand.

Much of the manipulations that financial institutions perform are complex and confusing to those who are not involved in the industry, and this is intentional. The muddier the waters, the less transparent the activities are.

So, let’s take away the detail and express one common method of gold price manipulation in simple terms:

Bullion banks generally hold only a small percentage of what they sell. Banks claim to hold 10%, but a real number may be as low as 1%. This is possible because most buyers keep the gold stored in the bank where they bought it. All the buyer really has is a piece of paper stating that the gold exists in the bank and is being held for him.

As the economy worsens, the price of gold will rise. The worse the economy is, the greater the fear of owning fiat currencies. The greater this fear is, the greater the demand to hold gold. The greater the demand, the more the price goes up.

As the price of gold rises, the banks will make periodic moves to cause it to drop. They will make an offering of more gold for sale (which, again, they do not possess). Like any commodity, the more there is on the market at any given time, the lower the price will be. Thus, the price is forced down by the banks, collectively.

The manipulation is made possible due to the fact that what has been sold does not exist. The regularity of manipulation is unlimited, as the bank is only buying a fraction of the gold it sells. As long as the bank’s clients are willing to invest in “paper” gold, the price may always be driven down, due to new “sales.”

Of course, this charade cannot go on forever. Eventually, the buyers realise what is being done and will then demand delivery of their gold. This will bring about two major events: a crash in the paper gold market and a dramatic increase in the price of physical gold.

The Crash of Paper Gold

Here is an assessment of how this is likely to play out:

The demand for allocated gold increases. Traditionally, a large portion of gold investment has been in ETFs and similar methods. As more investors get word of rumours that banks are actually holding only a small fraction of the gold that has been sold, they will decide only to buy if the gold is “allocated”; that is, that specific numbered bars or specific boxes of coins are being held for the buyer. (This trend already exists and is becoming more prevalent.) At this point, there is no panic, as the allocated gold simply replaces the ETFs. The amount of money invested in gold with the banks overall remains about the same.

Fear increases that allocated gold is no safer than ETFs. Rumours surface that the “allocated” gold does not exist. Either it never existed, or it has been sold without advising the owner. (This stage has also begun.)

Investors begin to lose faith in the banks. Holders of allocated gold show up at the bank, demanding to view their gold. They will be shown a portion of the gold that the bank actually holds. Some owners will recognise that what they have been shown is not the gold that had been allocated (incorrect serial numbers). The owners may then demand to withdraw their gold from the bank. (This has begun in a small way in London, Zurich and other European centres, but is, at present, a rarity.) As rumours spread of the above, an increasing number of owners will show up at their banks to view their gold and will demand to withdraw it.

The ability of the banks to deliver gold on demand breaks down. At some point, a given bank will have to deliver more than it has in its vaults, as very little of what has been sold exists. That bank will then fail to provide the gold to the owner on that given day. As more banks reach this point, rumours become rampant.

There is a run on the banks. As word gets around that banks are failing to deliver, owners panic and make demands upon the banks en masse. In a very short space of time, all the bullion banks in the world who rely on a fractional reserve system will fail to deliver, and the paper gold industry will end abruptly.

The above scenario is not merely a possibility; it is a near-certainty. It may be argued that if one bank cannot deliver, it may quickly ask the bank across the street to cover for it by loaning it their gold. But, at some point, the demand for delivery exceeds what the banks can collectively deliver, and a crash is inevitable. It is only a question of when.

It is important to understand that this last stage will happen very quickly. No one will be able to predict the day on which it will occur.

When it occurs, the paper gold crash will send a shock wave around the world. It is well-known that the world’s banks are building up their own inventories of gold, and these are kept separate from what they owe the buyers of allocated gold. It remains to be seen whether the banks will be ordered by the various governments to deliver their own gold to the owners, but this seems unlikely when we observe the many cases in which banks are allowed to fail to compensate their clients whist walking away with large sums themselves.

The Climb of the Gold Price

So, then, what happens to the price of gold at this point? Clearly, it would become obvious overnight that the amount of gold that had been sold greatly exceeded that which has ever been mined in the course of history. Yet, the pre-existing level of demand for gold certainly would still exist, and even increase. Whilst some of the owners of paper gold have now been wiped out and cannot purchase more, the demand will increase, as those investors who still have cash come to be more aware of how finite gold is. In fact, that very quality will assure an increase in demand following the crash.

With the increased demand will be a predictably increased price. But there will be a second reason for increased price: the elimination of the price manipulation due to the sale of non-existent gold. Gold, once free of its primary form of manipulation, will experience greater and more regular increases in price, which will introduce the mania stage of gold’s rise.

Ten years ago, those of us who predicted a gold mania needed to be careful what we predicted. Back then, I commented to a lunch group that I believed within ten years we should expect to see gold as high as $1500. At the time (gold was around $300), this projection seemed, on the surface of it, to be ludicrous. A friend in the group, the senior partner of an accounting firm, looked at me with derision and said, “What have you been smoking?” At the time, I didn’t have the courage to state that I additionally anticipated a subsequent mania that would eclipse the $1500 price. (At that time, I didn’t have a firm picture in mind as to what the eventual high of the mania would be and, to be truthful, I still don’t, although forecasters whom I respect have predicted $3500, $6000, $10,200 and $18,000.)

Today, $1500 gold is old hat, yet most people still doubt that a mania stage will occur. In fact, as a result of the length of time since the drop from $1900, an increasing number of pundits are predicting that the gold bull market is over, and that the price will soon head further south.

However, if the above supposition regarding a paper gold crash is correct, this event will most assuredly usher in a mania stage (if no other event does so first). It could occur in a year or two, but it could also occur tomorrow. All that is needed is enough fear in the market for a small percentage of those who hold paper gold to call in their chits.

Therefore, for any investor whose gold is held in any way by others (ETFs, allocated gold in a bank, physical gold in a bank safe deposit box), he would be well-advised to take delivery as soon as possible, if he is to be assured of actual ownership.

If you enjoyed this article, you might like our complimentary report, The Best of Jeff Thomas. Pulling no punches, Jeff shares his thoughts on the greatest threat to gold ownership, finding a bolthole on a budget, as well as the coming hyperinflation. You may download this free report immediately in our member’s area. Or, if you are not a member, register for free here.

Reprinted from International Man with permission.

Jeff Thomas [send him mail] is British and resides in the Caribbean. The son of an economist and historian, he learned early to be distrustful of governments as a general principle. He began his study of economics around 1990, learning initially from Sir John Templeton, then Harry Schulz and Doug Casey and later others of an Austrian persuasion.

The Best of Jeff Thomas

Power affects people in strange ways. In great nations (the ones we admire most – not necessarily the ones that are the most powerful), power is generally expressed quietly in most instances and is only expressed dramatically when events necessitate it. This was largely the case for most First World countries in, say, the 1950′s. However, as a nation declines, and as its people have less and less faith in their respective governments’ authority to rule them, governments typically tend to beef up the level of force.

Of course, the reader can see where this observation is going – Today, in Europe and America, we are seeing increasingly draconian laws being passed to allow the powers that be to express their dominance ever more forcefully and arbitrarily. There can be little doubt that the objective is to instil a level of fear amongst the population that their leaders still hold the mace and that it can come crashing down at any moment.

In recent years, this has been seen dramatically, especially in America, with the passage of the Patriot Act some ten years ago and the more recent National Defense Authorization Act one year ago, along with a host of other, similar laws.

But other First World countries are just as involved in this effort. The degree of authority has been ramped up dramatically recently; however, autocratic rule has generally been on the rise for several decades.

Along the way, Europe and America have also been at work at controlling the rest of the world. In the last twenty years, the Organisation for Economic Cooperation and Development (OECD), which is made up of thirty countries and is headquartered in Paris, has led a campaign to force all countries to adopt the same financial standards that they adhere to. Any country that fails to burden its people with a level of tax equal to OECD countries is threatened with being cut off from First World banking transactions.

In addition, should a citizen flee from a First World country and seek asylum in a foreign country, the First World countries have, increasingly, been dictating to other countries whether or not their offers of asylum will be acceptable.

Just fifty years ago, this sort of behaviour was almost unheard of. Yet today, we have become accustomed to accepting that "the big guys can bully the little guys if they wish."

Whilst bullying by the most powerful nations has existed for millennia, the world has never before seen the sophisticated minutiae of dominance that we are now witnessing, universally.

So, what is the logical outcome of this trend? Certainly, thanks to computers, the internet, etc., the breadth of opportunities for power-centre control will become ever-greater as the future unfolds. But the question is whether the unlimited power that political leaders typically seek will be possible.

Certainly, the present economic crumbling of the First World may play a major part. If currencies collapse, if stock markets tumble, if entire governments fall, what level of power will these countries have to continue their effort of ever-increasing force?

Whilst there can be no doubt that the desire to control will not diminish (and the bluster from political leaders indicates that they continue to believe in their omnipotence), if we are watchful, we may begin to spot fissures in the ramparts that were not there previously.

At present, these cracks are small – Greece laying off a large percentage of civil servants, cities in the US cutting back on basic services, such as police and fire departments, the UK closing public buildings due to lack of funds. All of these suggest a trend in the collapse of the bureaucracies that provide force. Although this trend is only in its beginning stages, each time we see these minor cracks in the walls, we should step over to the mental blackboard and make another chalk mark next to the examples that are there.

As we remind ourselves that these initial occurrences are taking place, we can begin to balance them with the claims that the leaders are an unstoppable elite force that will one day have total power.

"Ecuadorean court ratifies political refugee status for Belarus former investigator" ~ MercoPress, 28 August, 2012

The quote above is from a Uruguayan newspaper. The publication is a useful daily read, as it regularly reports events that often do not see the light of day in the First World media.

The headline refers to Aliaksander Barankov, a Russian whistleblower who had the temerity to reveal that the family of Russian President Alexander Lukashenko had been involved in fraudulent activities. Ecuador announced last year that they would provide Barankov with asylum. Recently, Russia appealed the decision, putting increased muscle on Ecuador. In response, Ecuador’s highest court threw out the renewed Russian request for extradition. Whilst this may not be news in the First World, First Worlders may be aware that Ecuador recently granted asylum to another whistleblower, Julian Assange, who feared his death if the US authorities were to get custody of him.

Chalk up another one for Liberty.

Again, at present, these events are small demonstrations of refusal to the bigger, more powerful countries. In themselves, they are of little importance to the average world resident. However, historically, whenever the "little guys" have gotten fed up with the tyranny of the "big guys" and sensed that the big guys were weakening, it has always been small incidents such as these that have been the bellwether of things to come. The more often such resistance occurs and the more light is shone on such occurrences, the more other "little guys" tend to question whether, in fact, the "big guys" still maintain the power to bully them to the degree they wish.

The fact is, as any empire begins to crumble, it finds itself short of the funds to pay to fight such battles, as other, more critical areas are short of funding and must be attended to. Historically, the maintenance of the periphery of the empire (be it geographical or ideological) becomes increasingly unmanageable.

At some point along the way, the resistance from the little guys begins to succeed and, through general awareness, grows. When this occurs, the reaction by smaller countries becomes more unified, as they realise that "We don’t have to tolerate this nonsense any longer."

In recent history, there have been quite a few examples of Second and Third World countries that have experienced diminished control, but, to date, no First World country has had to concede its ability to dominate over smaller countries.

So, are we at the tipping point? Unfortunately, no, but the cracks are now showing. Every crack is a step in the right direction – the liberty for small sovereign nations to determine their own way forward, without the interference of the "big guys."

For those who value liberty, this concept is of central importance. If the country in which we live is headed in a direction that is not to our liking, we would like to believe that there are other, more favourable countries that we could choose to relocate to. In recent decades, Europe and America have worked to close off or neutralise these possible exits.

As we observe the Great Unravelling, we would do well to keep an eye on increasing resistance by the rest of the world to dominance by the big guys. As a growing trend, it can only mean greater freedom for all people, the world over, to be able to choose where they wish to reside.

Presently, our consciousness is focused on the increased effort of the world’s biggest powers to enforce subjugation of their populations. Historically, this is always an endgame move, as the powers grow nearer to the end of their run. In the coming years, we would do well to regularly assess the opening-up of other jurisdictions as the old leaders decline.

If you enjoyed this article, you might like our complimentary report, The Best of Jeff Thomas. Pulling no punches, Jeff shares his thoughts on the greatest threat to gold ownership, finding a bolthole on a budget, as well as the coming hyperinflation. You may download this free report immediately in our member’s area. Or, if you are not a member, register for free here.

Reprinted from International Man with permission.

Jeff Thomas [send him mail] is British and resides in the Caribbean. The son of an economist and historian, he learned early to be distrustful of governments as a general principle. He began his study of economics around 1990, learning initially from Sir John Templeton, then Harry Schulz and Doug Casey and later others of an Austrian persuasion.

The Best of Jeff Thomas

In 2010, it occurred to me that Thomas Jefferson has not been interviewed for some time on the state of things and that, as his comments are invariably insightful, there couldn’t be a better time to seek his advice. Despite the fact that Tom has not been alive since 1826, he was very gracious in granting an interview in late 2010, in which we discussed The Proper Role of Government.

In 2011, I sought a second interview to discuss his views on Debt and Entitlement, as US debt had risen dramatically to pay for continued and growing entitlements, becoming a primary concern in the present economic crisis.

Recently, I was in Williamsburg Virginia, where Tom was staying at the home of his old friend, mentor and law teacher, George Wythe. I went by for a visit one evening. Tom got out the sherry decanter and we sat down for a chat.

Jeff Thomas: It’s good to see you again. Looking around at all the papers here on the desk, I see you’ve been busy. What’s been on your mind?

Thomas Jefferson: The issue is the same today as it has been throughout all history, whether man shall be allowed to govern himself or be ruled by a small elite.

JT: Well, I couldn’t disagree with you on that. The presence of those who regard themselves as a ruling elite has never been more prevalent. I can’t remember a time when so many people feared the loss of their liberty.

TJ: The natural progress of things is for liberty to yield and for government to gain ground.

JT: That seems to be so. There’s no doubt that it’s a progression that we’re seeing throughout the First World. It’s not just here in America.

TJ: Human nature is the same on every side of the Atlantic and will be alike influenced by the same causes.

JT: Isn’t that the truth. It seems that, politically, in every country, worldwide, there’s a liberal party and a conservative party, but no matter who’s in power, the liberties of the public are continuously eroded.

TJ: In every country, these two parties exist … Call them therefore Whigs and Tories, Republicans and Federalists, Aristocrats and Democrats, or by whatever name you please. They are the same parties still and pursue the same object.

JT: Do you think any one party has a better answer than the other?

TJ: I never submitted the whole system of my opinions to the creed of any party of men … where I was capable of thinking for myself. Such an addiction is the last degradation of a free and moral agent.

JT: But doesn’t it seem expedient to side with a party if you agree with them in general? I think we grasp the idea that both parties are corrupt, but doesn’t affiliation with one party give us some sort of edge?

TJ: If I could not go to heaven but with a party, I would not go there at all.

JT: So, do we, in effect, have a one-party system? Is the outcome the same no matter which we align ourselves with?

TJ: Every government degenerates when trusted to the rulers of the people alone. The people themselves are, therefore, its only safe depositories.

JT: Well, I wanted to ask you about that. You’ve always been deeply suspicious of the concept of democracy – stating that rule by the majority may endanger the rights of the individual.

TJ: A democracy is nothing more than mob rule, where fifty-one percent of the people may take away the rights of the other forty nine.

JT: You’ve said that before. The original concept of the United States was that it was to be a republic; which is to say that the rights of the individual come before the rights of the many. That spirit seems to have been lost over time.

TJ: Bear in mind this sacred principle … that the minority possesses their equal rights, which equal law must protect, and to violate would be oppression.

JT: And as to the right of others to disagree?

TJ: I tolerate with utmost latitude the right of others to differ with me in opinion without imputing to them criminality. I know too well all the weaknesses and uncertainty of human reason to wonder at its different results.

JT: We seem to be having a renewed problem with that principle lately. I don’t know if you’ve been following the civil unrest that’s been growing. The demonstrators are quite disorganised and often don’t even agree with each other on their concerns. In many ways, they are such a nuisance that …

TJ: God forbid we should ever be twenty years without such a rebellion.

JT: Wouldn’t it at least be reasonable to expect them to be quiet until they can get together on what they are objecting to?

TJ: The people cannot be all, and always, well-informed. If they remain quiet under such misconceptions, it is lethargy, the forerunner of death to the public liberty. And what country can preserve its liberties if its rulers are not warned from time to time that this people preserve the spirit of resistance?

JT: I just meant that …

TJ: Liberty is to the collective body what health is to every individual body. Without liberty, no happiness can be enjoyed by society.

JT: Well, at least for the moment, the majority seem to want to be sure that the police maintain control of demonstrators.

TJ: The majority, oppressing an individual, is guilty of a crime, abuses its strength, and by acting on the law of the strongest, breaks up the foundations of society.

JT: It’s certainly true that control seems to be the greatest goal of government today. I don’t know if you’ve heard, but Congress has passed the National Defense Authorization Act, which some believe declares the entire US a battlefield. I don’t know if many people have figured it out yet, but, essentially, that means that all Americans are classified as “suspected enemy combatants” and can be treated accordingly by the military. That means that the Fourth Amendment that you drafted is out the window.

TJ: I own I am not a friend to a very energetic government. It is always oppressive … Rightful liberty is unobstructed action according to our will within limits drawn around us by the equal rights of others. I do not add “within the limits of the law,” because law is often but the tyrants’ will, and always so when it violates the rights of the individual.

JT: And here we are back to the concept of a republic – You and the other Founding Fathers defined individual rights as being paramount.

TJ: No man has a natural right to commit aggression on the equal rights of another, and this is all from which the laws ought to restrain him … I hold that a little rebellion, now and then, is a good thing. It is a medicine necessary for the sound health of government.

JT: I think that the American people are divided on that perception. I would guess that all Americans would want greater freedom, but not at the cost of not feeling safe.

TJ: A society that will trade a little liberty for a little order will lose both and deserve neither … We are not to expect to be translated from despotism to liberty in a feather bed.

JT: I’m not sure if Americans presently see their leaders as despots. They were elected, after all, and …

TJ: An elective despotism was not what we fought for, but one which should not only be founded on true free principles, but in which the powers of government should be so divided and balanced among general bodies of magistracy, as that no one could transcend their legal limits without being effectually checked and restrained by the others.

JT: And yet that very system of checks and balances seems to be collapsing … It’s been said that the natural and historical progression of any nation is that it rises out of bondage during a period of great courage to a state of liberty. The liberty creates a collective consciousness of hard work, resulting in abundance. The abundance eventually gives way to selfishness, which, in turn, gives way to complacency, then to apathy. The period of apathy is always followed again by a state of bondage. It’s certainly true that this is the path that America has followed. All that is yet unfulfilled is the final stage – bondage. But how can it be? Although America is now deteriorating rapidly, not long ago, it was the greatest country in the world. In my belief, that was due to the fact that, back in the 18th century, you produced a near-perfect republic.

TJ: Yes, we did produce a near-perfect republic, but will they keep it? Or will they, in the enjoyment of plenty, lose the memory of freedom?

JT: I’d have to admit that America seems to have lost its character along the way, having supplanted traditional values with a reverence for material abundance. Is this not reconcilable?

TJ: Material abundance without character is the path of destruction.

JT: So, history seems to tell us. From the fall of Rome until the present day, each nation seems to have a shelf life – its day in the sun. To date, no nation has ever turned the process around at the last minute. The baton is invariably passed to whatever nation is waiting in the wings that is on its upward swing.

Editor’s Note: All of the views stated above by Thomas Jefferson have been taken from his writings and re-presented in this interview format.

If you enjoyed this article, you might like our complimentary report, The Best of Jeff Thomas. Pulling no punches, Jeff shares his thoughts on the greatest threat to gold ownership, finding a bolthole on a budget, as well as the coming hyperinflation. You may download this free report immediately in our member’s area. Or, if you are not a member, register for free here.

Reprinted from International Man with permission.

Jeff Thomas [send him mail] is British and resides in the Caribbean. The son of an economist and historian, he learned early to be distrustful of governments as a general principle. He began his study of economics around 1990, learning initially from Sir John Templeton, then Harry Schulz and Doug Casey and later others of an Austrian persuasion.

Back in the early 2000′s, the world was on a roll. Spending was at an all-time high, and people were drunk with the belief that the party would never end; that there was no limit to the amount that either they or their governments could borrow and spend and still, somehow, all would be well.

At that time, in a reverse of the old adage, “It’s always darkest before the dawn,” a small number of people were putting a wet blanket on this thinking, with the prediction that, as history shows, “Bull markets do not end with a whimper, but with an upside spike,” or, in simpler words, “It’s always brightest before the crash.”

As one of the latter group, it’s safe to say that, at that time, almost no one was listening to us.

My own predictions had been that, as the economic decline progressed, there would be several major stages of decline. But, in addition, there would be three major stages of denial by the great majority of people, and it is that denial that is the subject of this article.

1. The Initial Crashes

Although the initial crashes that occurred in 2007/2008 were, by far, the easiest aspects of the Great Unravelling to predict, their likelihood was, predictably, rejected by the greatest number of people. The reason for this is that the crashes represented a change of direction – from positive to negative.

2. The Greater Depression

Once people have acknowledged a change of direction, it is easier for them to accept that the trend may become more extreme than it is at present. Correspondingly, after the 2007/2008 crashes, most people were now willing to accept that a recession was underway. However, very few were willing to accept the dreaded “D” word. The term “Greater Depression” was coined by Doug Casey of Casey Research early in the game and is, to my mind, the most accurate two-word description of the economic period that we are now experiencing.

However, as I have stated, the “D” word is so repugnant to most people that, regardless of the indications that we are, indeed, experiencing a depression, most people simply cannot face the term as a reality. They prefer any number of euphemistic terms, such as “double dip recession,” in order to avoid accepting the unthinkable.

This is human nature. It seems that, whilst a small number of us would prefer to face the music right from the outset and begin a plan to deal with it, the great majority will accept the details of what is occurring, whilst rejecting the overall reality.

3. Food Crisis

In my belief, people will only begin to accept the reality of this depression after the next set of crashes has occurred, particularly a second crash in the stock market. Historically, it is only after the false recovery has ended in a major downward trend that people tend to swallow hard and admit to themselves, “I guess this is for real.”

So, in a sense, this may not be the time to raise the issue of what I consider to be the third unacceptable phrase of the Greater Depression: “Food Crisis.” However, recent developments suggest that it may be of value to have a look now.

In July of 2011, International Man published an article entitled “Food Crisis” (reprinted in May 2012). In this article, I outlined the reasons why a significant shortage of food is possible and even likely. At that time, I also pointed out the reason why a Food Crisis is the third great event in the present economic debacle that engenders almost universal denial by otherwise intelligent and informed people:

Historically, there is nothing so chaotic as famine. As long as people have a crust of bread and as long as it arrives regularly, there is a chance that events may be controlled. It is the very unpredictability of supply that causes panic. And the greater the concentration of potential recipients, the greater the panic.

Small wonder that, when I speak to friends and associates of The Great Unravelling, this one facet often makes them recoil in a desire to avoid the subject entirely.

In response to that article, I received many predictable comments that essentially said, “It can’t happen. They just can’t let it happen.” However, I also received quite a few that said, “I haven’t even been considering a Food Crisis, but it looks like I’d better. Can you offer suggestions as to how we can deal with it if it happens?” Hence the companion-piece, published in October, 2011 entitled, “Can You Afford to Eat?“

This article dealt primarily with the subject of internationalisation – in effect, travelling in order to eat.

Some may be saying to themselves, “But even if this occurs, it is a ways off. Perhaps two years, or even more. We have enough to think about right now. Can’t we deal with this issue when we get a bit closer to finding out if it will become a reality?”

The simple answer is, “Yes, you can.” However, a Food Crisis, if it occurs, will have a greater impact on people than any other development in the Great Unravelling. Therefore, it would be wise to keep tabs on its likelihood as events unfold.

As the reader is likely to know, the world is experiencing the worst drought since 1934. However, even though the drought is on the evening news, not much is being said about the overall effect that it will have over time.

A failed grain crop, especially if it continues for more than one season, warns of several developments over the next few years:

• Shortages of staple grains – Any food that is prepared using wheat, corn, soybeans, rice or other grain will become scarcer and significantly more expensive.
• Shortages may not be limited to grain – Much grain is used as cattle feed. A failed crop means that ranchers will cut the size of their herds, as they deplete their storehouses of grain and rely on grazing. (Grass, too, is affected in a drought.) Beef, pork, poultry and all other meats are likely to be in shorter supply.
• Few people will have personal food supplies – In 1934, more than 30% of all people lived on farms, and many others had home gardens. Today, less than 2% live on farms. In addition, in 1934, it was legal to store food. Today (at least in the US), FEMA has the authority to confiscate food. There is no limit as to what they may confiscate, but, as the FEMA website states that two weeks’ food is sufficient in an emergency, they may regard this as the allowable limit. It remains to be seen whether they would exercise this power.
• Inflation – Due to shortages, the price of food rises. In a period in which the Chairman of the US Federal Reserve has stated that his solution to the problem is to create more money, inflation is not only possible, but certain.

  The most important commodities are food and fuel, in that order. Corn is used to produce ethanol, an alternative to fossil fuel. With a shortage in corn, there would be an equal shortage in ethanol, driving up the price of fossil fuel. Additionally, the Environmental Protection Agency requires that up to 40% of all US-raised corn be used to create ethanol. In a time when corn is experiencing a shortage, Larry Pope, CEO of Smithfield Foods, has called this “a government-mandated disaster.”

• Extended effects – No one can say how long the present drought condition will last. Should it become extended, as did the drought of 1934, another dust-bowl is entirely possible. Either way, though, farmers who have lost their annual crops will find it hard to recover, especially after more than just one year of drought. Likewise, it will take several years for meat-producers to build up their herds again until they have sufficient meat to fill the ongoing demand. Recovery will not occur immediately after the drought ends.
• Food Crisis – And here we come full-circle. When the world is already experiencing a major food shortage, nothing could be less welcome than a collapse in the food delivery system. If the events described in the “Food Crisis” article were to develop during the present drought, we would be facing a similar or worse situation than in the 1930′s, when a climatic calamity compounded an economic calamity.

  Almost no one in the First World has experienced such a situation. Small wonder that we seek to hope that, “It can’t happen. They just can’t let it happen.”

  It is left to the reader as to whether it is wisest to a) plan ahead for this eventuality, b) keep a close eye on developments, or c) simply “wait and see.”

  In the words of Robert Heinlein,

  “After three missed meals, most men are willing to kill for food.”

If you enjoyed this article, you might like our complimentary report, The Best of Jeff Thomas. Pulling no punches, Jeff shares his thoughts on the greatest threat to gold ownership, finding a bolthole on a budget, as well as the coming hyperinflation. You may download this free report immediately in our member’s area. Or, if you are not a member, register for free here.

Reprinted from International Man with permission.

Jeff Thomas [send him mail] is British and resides in the Caribbean. The son of an economist and historian, he learned early to be distrustful of governments as a general principle. He began his study of economics around 1990, learning initially from Sir John Templeton, then Harry Schulz and Doug Casey and later others of an Austrian persuasion.

With all the study and thought that are required to make sense out of how the Great Unraveling will play out, we seldom take time to think of what it will be like on the other side. Those of us who are, by nature, long-term thinkers and/or optimistic, have a vague picture in mind of a rebirth of libertarian thinking, and a vibrant economy. However, we tend not to think too much more about these hopes than that, because we are caught up in the Great Unraveling itself – a very time-consuming topic.

The other day, an associate whom I like to think of as having a decent, if not holistic, view of the present depression, commented to me, “I wish we could just have the crash tomorrow and everything that goes with it, so that, next year, we can get back to normal.”

Oops … maybe his expectations are a bit more simplified than I thought. And, if others share his view, possibly the topic needs a bit of fleshing-out. While it may not be ready to be a prime topic of the ongoing conversation, possibly an outline of what may happen after all the fireworks have gone off would be in order.

Ten Years Down and Ten Years Up

Economic wizard (and favourite ‘Uncle’) Harry Schultz stated back in the early 2000′s that what he anticipated was “ten years down and ten years up.” At the time, many thought that his projection was extremely prolonged. I didn’t think so. People do commonly seem to take the view that, once the various crashes have taken place, we simply walk out into the sun, brush the dirt off the knees of our trousers, and, with a spring in our step, walk into the bright new day.

However, a depression is not at all like that. It is more like a town after a hurricane has hit. The storm may have been swift, but the recovery is not. Power lines are down. Roads are blocked. Homes and stores have been destroyed. Having personally been highly involved in the reconstruction of a small country after the devastation wrought by a category five hurricane, I can attest that, even if the population is hardworking and motivated (which they were), the task of rebuilding is monumental, and the time period required to achieve it is prolonged.

I see the period after the various crashes very differently from those who anticipate immediate recovery symptoms. This is not because I imagine myself a visionary; my view is based on history. If we look at the economic collapses of the past, (inclusive of their possible knock-on effects, such as hyperinflation and destruction of the currency), from the fall of the Roman Empire to Weimar Germany, to Argentina and Zimbabwe – take your pick – the pattern is extremely similar.

So, let’s have a look at that pattern and ask ourselves if the present situation might not play out much the same (except far worse and more prolonged, as the conditions that led to this particular depression have been more extreme). The various stages are likely to be a given, but the various factors within each stage are a bit more uncertain. In every major economic collapse, some combination of these factors takes place.

Also, consider that the stages themselves are like dominoes – they almost always fall in order. The reason? Details change in history, but human nature remains the same. The same knee-jerk reactions by people will repeat themselves over and over. (As an example, we are now experiencing a decline in exports from the First World. I believe that a repeat of the disastrous Smoot-Hawley Tariff of the 1930′s will be passed in America, which undoubtedly would trigger increased hardship for Americans.)

Stages of The Crash

The stages are laid out below. The first three have already occurred.

1 INITIAL CRASHES

• Crash of the residential property market
• Crash of the commercial property market
• Crash of the stock market

2 INITIAL KNOCK-ON EFFECTS OF CRASHES

• Loss of homes
• Loss of jobs
• Inflation

3 IMMEDIATE ACTIONS BY GOVERNMENT

• Bailouts for select groups
• Dramatic increase of debt
• Politicians going in the opposite direction of a real solution

The first knee-jerk reaction began immediately, with the Government attempting to “make the problem go away” as quickly as possible. Almost invariably, at this stage, the corrective strategy is hastily prepared and shortsighted, assuring further deterioration of the economy.

In this stage, the politicians on both sides fail to focus on a real solution. Instead, their primary focuses are, first, to avoid a painful real solution, and, second, to engage in finger-pointing, each political party blaming the other for the problem. The problem worsens steadily until one of the next series of major dominoes falls. This is usually sudden and triggers the toppling of other dominoes.

4 SECOND WAVE OF CRASHES

• Major crash in stock market
• Currency plummets
• Increased bankruptcies
• Increased unemployment

5 INTERNATIONAL TRADING PARTNERS REACT

• Foreign countries refuse to accept more debt
• Foreign trade slows dramatically

At this point, the Government introduces dramatic change, such as ill-conceived protectionism, which backfires almost immediately.

6 GOVERNMENT INSTITUTES DESPERATE SELF-DESTRUCTIVE MEASURES

• Defaults on debt
• Restrictive tariffs on imports
• Currency controls

7 ECONOMY REACTS IN LOCKSTEP TO GOVERNMENT ACTIONS

• Hyperinflation – dramatic increase in food and fuel costs
• Massive unemployment
• Extensive foreclosures
• Extensive bankruptcies

At this point, the dominoes are tumbling quickly, and a rapid unraveling of control is about to take place.

8 SYSTEMIC COLLAPSE

• Bank closures
• Extensive homelessness
• Food and fuel shortages
• Electric power becomes sporadic, blackouts common

As these factors unravel, the public mood turns to a combination of blind fear and anger.

9 SOCIAL COLLAPSE

• Crime rises dramatically (particularly street crime)
• Food riots
• Tax revolts
• Squatters’ rebellions

10 MARTIAL LAW

• Creation of special army to address “domestic terrorism”
• Random killings become commonplace

At first, the authorities focus mostly on violent subjugation and arrests; then, as prisons quickly become hopelessly overcrowded, camps become the norm. Soon, these too become unmanageable, particularly as a result of high cost of food and manpower. At that point, the solution turns to the killing of anyone who is suspected of a crime and, more frequently, anyone who is not submissive. (This will not resemble the Gestapo of the late 1930′s. It will be less organized and more chaotic.)

11 REVOLUTION

If revolution is to occur, it will happen at this point. Many people will feel that they have nothing to lose, and anger will be at its peak. If revolution does take place, it will not be an organized movement as such. It will be spontaneous, and breakouts will manifest themselves like popcorn popping, largely at random, with ever-increasing frequency. At some point, it may possibly evolve into something more organized.

If you enjoyed this article, you might like our complimentary report, The Best of Jeff Thomas. Pulling no punches, Jeff shares his thoughts on the greatest threat to gold ownership, finding a bolthole on a budget, as well as the coming hyperinflation. You may download this free report immediately in our member’s area. Or, if you are not a member, register for free here.

Reprinted from International Man with permission.

Jeff Thomas [send him mail] is British and resides in the Caribbean. The son of an economist and historian, he learned early to be distrustful of governments as a general principle. He began his study of economics around 1990, learning initially from Sir John Templeton, then Harry Schulz and Doug Casey and later others of an Austrian persuasion.

"How can an otherwise sane individual become so enamored of a fantasy, an imposture, that even after it's exposed in the bright light of day, he still clings to it — indeed, clings to it all the harder? No amount of logic can shatter a faith consciously based on a lie."

~ Lamar Keene, a scam artist who posed as a psychic, describing why it was so easy to fleece people.

Homo sapiens is a creature of habit. Most people have a strong desire to do what they can to create a life (and lifestyle) that is comfortable for them. Once this is done, we curl up and settle in. We then may add the occasional improvement to this situation, but, otherwise, we prefer then to be left alone to maintain what we have created.

It should not, therefore, be surprising if, when that comfy situation is threatened, we wish the threat would simply go away. Similarly, it is understandable if, when that threat begins to grow, we may simply pull the covers over our heads and pretend the threat either does not exist, or is far more benign than it appears.

Hence, it is a perennial condition of human nature to behave as described by Lamar Keene, when we discover that the government that we have been brought up to believe exists for our protection, has become no less than the greatest threat to our well-being.

Consider the following events, with regard to the USA:

• The Patriot Act (Passed in 2001 and extended in in 2011 with additional controls) expands law enforcement powers and removes civil liberties and constitutionally guaranteed rights.
• The National Defense Authorization Act, passed on 31st December, 2011, allows the indefinite imprisonment by the military of any "suspects" (including American citizens on American soil) without allowing due process of law.
• The MAP-21 Bill, which allows the Internal Revenue Service to suspend the passport rights of Americans, based on the premise that their tax obligations may be unfulfilled.
• The National Defense Resources Preparedness order, created in March, 2012, allows the President to take over control of all food, water, labour and industry in the US, "to promote national defense."
• 30,000 Drones to fly over the US allowed by executive order, February, 2012, providing the government with an Orwellian surveillance ability and a killing capacity ranging from selected individuals to entire communities.
• FEMA Interment Camps, to be constructed in every state, with 3-15 in each state, for an undisclosed purpose.
• Compounds to store "disposable coffins," each with hundreds of thousands of 4-5 person coffins stored near city centres around the country.
• 450 million hollow point bullets ordered by the Department of Homeland Security To be used domestically. (The DHS is not responsible for addressing national invasions or overseas wars; it exists solely for the control of internal disorder. Hollow point bullets are not intended for sharpshooting — they are designed specifically to maximize tissue damage.)

The above are all actual occurrences. The reasons for them can be debated. (After all, the DHS may well have ordered 450 million rounds of hollow-point bullets because they were thinking of doing a bit of target practice. And the disposable coffins may be intended to be given out as grow-boxes on the next Earth Day.)

In fact, each of the above, conceivably could have been the product of well-meaning legislators, planning for what they conceived as "a better tomorrow." The trouble is, taken together, it is difficult to imagine that this may be the case. Indeed, taken together, they suggest the creation of a police state that rivals what Joe Stalin or Brother Adolf created.

Circa 1885, folk philosopher James Whitcomb Riley, said, “When I see a bird that walks like a duck and swims like a duck and quacks like a duck, I call that bird a duck.”

At some point, when we observe a government that consistently institutes executive orders and legislation that walks like a duck and swims like a duck and quacks like a duck, it behooves us to conclude that it is in fact, a duck. Is it possible that we may be proven incorrect? Yes, absolutely so. However, when the overwhelming evidence points to the unpleasant realization that our comfy life is soon to end, we would be wise to take preparatory action.

Just how many ducks does it take before we decide there are enough to call them a flock? If such a flock represents a significant and uncontrollable danger to us, we would be advised to get out of the way. In such cases, it is infinitely wiser to err on the side of caution.

Not long ago, I overheard a discussion between an American businessman and an associate from my own country. The American was describing the seemingly endless array of draconian laws and executive orders that have been coming his way, courtesy of his government, in recent years.

His associate said, "I have only one question: "Why aren't you packing now?"

Jeff Thomas [send him mail] is British and resides in the Caribbean. The son of an economist and historian, he learned early to be distrustful of governments as a general principle. He began his study of economics around 1990, learning initially from Sir John Templeton, then Harry Schulz and Doug Casey and later others of an Austrian persuasion.

Throughout the First World, and, particularly in the US, there is an increasing consciousness that fiat currency, far from being the solution to economic problems, is, in fact, a cause of them.

There are even those who, over the years, have predicted that the continued massive creation of fiat dollars may well lead to price controls, destruction of savings, looting, riots and, possibly, even revolution. A decade ago, such predictions were regarded by most as nonsense. Today, all of these eventualities seem more likely, although there still remains a strong contingent (possibly even a majority) who believe that, "It can’t happen here."

A Brief History of Colonial US Fiat Currency

At this juncture, with regard to the US, it may be helpful to mention that not only can it happen here… it in fact, already has – back when the US was first created.

Much has been said about the American founding fathers having been "visionaries," and this is most certainly true. But how was it that so many people in pivotal positions in late 18th-century America possessed such insight, such inspiration in terms of designing a country whose Constitution was based upon free-market values, and avoided, as much as possible, a central government that had its fingers in the economic pie?

The answer lies in the simple fact that they had not only experienced the outcome of the use of a fiat currency, but had done so in recent memory.

In the 1750s, the use of fiat currency by the colonies (particularly in the financing of military endeavours against the French in Quebec) caused massive inflation. The situation became so dire that Mother England stepped in and called an end to the creation of debt-related promissory notes. There was an immediate return to using coinage.

The result was prosperity. Although the colonies did not yet possess their own coinage, they used gold and silver coins from England, France, Holland and Spain as unofficial currencies. (Note: The word "unofficial" is key here as a free market prevailed and was able to adjust itself, as necessary, with regard to the purchasing value of each form of coinage.)

But this was not to last. When the American Revolution broke out in 1775, the Continental Congress saw fit to "solve" the cash-flow problem by starting up the printing presses. (Once again, war created the incentive to print paper currency.) At that time, the colonial money supply had been some $12 million. Within five years, over an additional $600 million had been created. Whilst this monetary creation initially served as a boost to the economy, the predictable end result was that massive inflation returned, laying waste to the economy.

Then, as now, many people could not understand why the Continental Congress did not simply keep printing until the problem went away.

By the time the war had ended, the newly-formed United States was deeply mired in economic troubles. Although there were those who called for an end to the rolling of the presses, the government did what governments typically do: exert a greater level of force to get the people to use the debased currency. Wage and price controls were created, in addition to stiff penalties for anyone who refused to use the Continental Dollar. Congress declared that, any person shall hereafter be so lost to all virtue and regard for his country as to refuse to accept its notes, such person shall be deemed an enemy of his country.

It may be beneficial to read this simple statement a second time, whilst considering just how timeless and universal it is. It is the position governments typically take whenever they have created a problem that the public have ultimately paid the price for. When the public ultimately realise that they have been victimised, and back off from the government "solution," they (the public) are described by the government as being "unpatriotic." In this case, Congress went so far as to describe the public as "enemies."

This time around (in 2012), Americans have not yet reached this point; however, it should not be surprising if, as the US dollar declines more severely, they are once again described as enemies of the state, should they move away from using the dying dollar in favour of a more stable form of wealth, such as precious metals.

Money in the US Constitution

It was in the immediate aftermath of the 1787 monetary debacle that the Constitutional Committee met to create the Constitution. Having read the foregoing, it should not be surprising to the reader that a primary concern of the American founding fathers was that, in future, neither the state nor the federal governments should have the ability to create fiat currency, period.

Oliver Ellsworth, a Connecticut attorney, stated at the time,

"This is a favourable moment to shut and bar the door against paper money. The mischief of the various experiments which have been made are now fresh in the public mind and have excited the disgust of all the respectable parts of America."

It was under this sentiment that the Committee consciously rejected a recommendation for the federal government to "emit bills of credit." And, instead, allowed the federal government only to "… coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures."

Central Bank Tug-of-War

It is clear that, in 1787, there existed a true "vision" as to a government’s rightful role in the economy. However, it should be stated that, as early as three years later, in 1790, a move was afoot to create a central bank, modeled after the Bank of England, and that that bank, in addition to having the power to borrow for national interests, would have the exclusive right to issue bank notes.

For another century, a tug of war existed over both the wisdom and the Constitutional legality of a central bank that could issue fiat currency, and this struggle waxed and waned throughout the 19th century. In 1913, a cabal of bankers succeeded in creating the Federal Reserve, and, for the last hundred years, the US economy has been subject to its manipulation.Currency is one manipulation, but the Fed’s manipulation extends beyond currency manipulation.

Back in the late 18th century, the former colonists found themselves in a disastrous economic situation which was a direct result of debt and fiat currency. In 1787, businesses were bankrupted, looting became commonplace, and there was mob violence in the streets. However, the situation was saved by a small group of people who had been given the responsibility to craft the American Constitution. In my belief, the greatness that the US experienced was due, in no small part, to the rejection of fiat currency and a focus on free-market values.

However, by 2012, the American Constitution has largely been abandoned, and the economic debacle of the late 18th century is being repeated. It is conceivable that the present situation is so dire that the US will again see the currency controls and riots that occurred in 1787.

It is left to the reader to consider whether the present situation will generate a movement to re-establish both the word and spirit of that exceptional document – the American Constitution – or whether the powers that be will dig in their heels in favour of their own ability to control both the population and the economy. The answer could well determine whether the US can rise again as a great nation, or whether it will fall to the wayside.

If you enjoyed this article, you might like our complimentary report, The Best of Jeff Thomas. Pulling no punches, Jeff shares his thoughts on the greatest threat to gold ownership, finding a bolthole on a budget, as well as the coming hyperinflation. You may download this free report immediately in our member’s area. Or, if you are not a member, register for free here.

Reprinted from International Man with permission.

Jeff Thomas is British and resides in the Caribbean. The son of an economist and historian, he learned early to be distrustful of governments as a general principle. He began his study of economics around 1990, learning initially from Sir John Templeton, then Harry Schulz and Doug Casey and later others of an Austrian persuasion.

Recently by Jeff Thomas: Germany Invades Poland

In Latin-American culture, the beating of a piñata began as a religious activity, but, today, it is more secular and generally takes place at celebrations. The general idea is that someone (usually a child) is blindfolded and given a stick, then spun around several times to disorient him. He then begins swinging the stick in the air, trying to locate the piñata, which is suspended overhead. Once he finds it, he beats it until it breaks open, spilling out goodies — sometimes candy, sometimes toys, coins, or food.

In concept, this is much like taxation, with the rich being the piñata.

Taxation Seems Reasonable

Throughout the world today, governments pay for their existence mostly by way of taxation. On the surface of it, this isn’t an especially unreasonable concept. Candidates are elected to take charge of the government, and they then need to be paid to do their jobs.

Taxes are also intended to pay for the programmes that government representatives come up with. Unfortunately, a common trend in politics is that once someone has been elected to office, he wants to remain there, often for the remainder of his working life. Once someone has become a career politician, it is a logical step for him to realise that the more he can tax the population, the more goodies he can get for himself. After all, he is in a position to be able to increase his own salary and benefits. Additionally, he may be tempted to siphon off a portion of funds intended for government programmes as they pass through his control.

The difficulty for politicians who increase taxes is that, if they increase taxes on the majority of the people, the people may not vote them back in. Consequently, politicians find that they are more likely to be re-elected if they create or increase taxes that only apply to a minority of the electorate.

Whenever the middle- to lower-income taxpayers outnumber the more wealthy (which is, of course, most often the case), politicians tend to propose higher taxes on “the rich.” The reason this is a safe bet is that the rich are in the minority and therefore do not have the power (on their own) to vote such politicians out of office. Hence, most developed countries not only tax the rich more heavily than others, but also create and maintain a “tax the rich” mentality amongst the electorate. Today, most every country that regards itself as a democracy has a “tax the rich” consciousness, and those who are not “rich” generally support the concept. As George Bernard Shaw said,

“A government that robs Peter to pay Paul can always depend upon the support of Paul.”

But Excessive Taxation of the Rich is Not Necessarily Reasonable

And why not tax the rich? After all, the rich have more, so why shouldn’t they give more? Well, there are two reasons why not. The first is that the concept is inherently unjust. As Thomas Jefferson is said to have argued,

“A democracy is nothing more than mob rule, where fifty-one percent of the people may take away the rights of the other forty-nine.”

The second reason why the rich should not automatically pay more is that they may possibly be taxed to the point that they choose to opt out of the system. As Maggie Thatcher said,

“The trouble with socialism is that, eventually, you run out of other people’s money.”

Of course, who “the rich” are has never been accurately defined. Is it the top 5% of earners? The top 10%? Politicians avoid such questions; they prefer to keep it vague. After all, if they got specific, many of them would qualify as being amongst “the rich.”

And of course, one of the best aspects of taxing the rich, from the politician’s point of view, is that they can’t really do anything about it. The rich are, by their very nature, generally speaking, very responsible citizens. They are easily tracked down and will generally prefer to pay a higher tax than to be imprisoned. Consequently, there is much to gain and little to lose for a politician if he proposes further taxes on the rich.

The Rich Are Much Like a Piñata

The rich are much like a piñata:

• Those who are gathered around the piñata know that it contains goodies and they would like to get some share of those goodies.
• They are unconcerned as to whether the piñata is destroyed, as long as the goodies are forthcoming soon.
• Someone is elected, who beats the piñata repeatedly, knocking the goodies out.
• This person wears a blindfold, so, although he knows what his objective is, he cannot actually see the results of his actions.
• The more he beats the piñata, the more goodies fall out.

But, beyond this point, public opinion would diverge as to the comparison of the piñata and the rich. Those who wish to be receivers of the government largesse would argue that the process is endless, as the rich will always have plenty of money. But those who are more productive and choose to sustain themselves through their own efforts will take a different view.

How to Stop Being a Piñata Through Internationalisation

The fact is, the rich do, in most cases, have an ability to opt out. Historically, this does not take place through violent means, such as revolution. Rather, it is by quiet means — by exiting the jurisdiction if it becomes too oppressive.

There is now a growing trend toward internationalisation. It has never been easier to physically move one’s self or one’s possessions from place to place. Through technology, it has also never been easier to move wealth from place to place. In fact, the only exception to this trend is governments themselves. Some governments are placing ever-increasing restrictions on the ability to move one’s self and one’s wealth from one jurisdiction to another.

Considering this to be the case, many older people are quietly moving themselves and their wealth away from those countries that are becoming increasingly draconian in their laws. Additionally, many younger people are beginning to see the handwriting on the wall. Whilst they may not yet have amassed much in the way of wealth, many are assessing their futures in jurisdictions that are becoming oppressive, and choosing to vote with their feet now, rather than wait until it is no longer possible.

Many people are fond of their present jurisdiction but are watching the door slowly closing. Those who take the next step — that of seeking out other possible destinations — are finding that in some other jurisdictions the doors to personal economic prosperity are opening wider. However, should an exodus occur into these countries by frustrated First-Worlders, there is the possibility that, in time, their immigration laws may tighten up. Therefore, the time of greatest opportunity may well be right now. Those who are older and have attained some measure of wealth would do well to consider whether they are tiring of being hit with a stick and worrying that, in the future, they may well be hit a great deal harder. Those who are younger may feel that, if they succeed in creating wealth for themselves, their reward may well be to become a piñata.

If you enjoyed this article, you might like our complimentary report, The Best of Jeff Thomas. Pulling no punches, Jeff shares his thoughts on the greatest threat to gold ownership, finding a bolthole on a budget, as well as the coming hyperinflation. You may download this free report immediately in our member’s area. Or, if you are not a member, register for free here.

Reprinted from International Man with permission.

Jeff Thomas is British and resides in the Caribbean. The son of an economist and historian, he learned early to be distrustful of governments as a general principle. He began his study of economics around 1990, learning initially from Sir John Templeton, then Harry Schulz and Doug Casey and later others of an Austrian persuasion.

During the 1930s, Adolf Hitler made a habit of making Europe nervous with his increasingly demonstrative speeches regarding his view of Germany’s place in the world. The speeches were popular with Germans, as they had recently gone through a devastating war, followed by an economic collapse. Hitler provided a much-welcomed image of Germans as a proud and ethnically superior people and Germany as a country that had a manifest destiny to take its place as a world leader, if not the world leader.

Amongst Hitler’s ambitions for Germany’s destiny was a claim that lands that had been lost to Poland in the Treaty of Versailles should be returned. He spoke publicly that he wished to “liberate” these lands, and, not surprisingly, the majority of Germans supported his view, in spite of the treaty.

Predictably, Hitler’s speeches made the leaders in other European nations a bit nervous. Some, notably the UK, hoped to placate Germany by arranging concessions from Poland. Understandably, Poland felt that they were being bullied and resisted the concessions. (After all, they were getting nothing out of the deal.)

As the situation heated up, the UK and France feared military action from Germany, and provided a guarantee to Poland that they would side with them, should Germany opt for a non-diplomatic solution.

False Flag Attack

On the night of 31st August,1939, German troops, dressed as Polish soldiers, attacked the Gleiwitz Radio Station in Germany. A few hours later, German troops (dressed as such) invaded Poland in “retaliation,” and World War Two was on.

Fast Forward to 2012

Today the US is in serious economic trouble. Its dollar has been the world’s default currency since the end of World War Two, and that status is now in danger of coming to an end. Several years ago, Saddam Hussein threatened to cease using the dollar exclusively for oil trading, and the US successfully quashed his efforts by invading Iraq and deposing him. Other countries in the Middle East have registered their own interests in eliminating the dollar’s exclusivity.

Recently, Iran worked out a deal with India to bypass the dollar. The US threatened economic sanctions against Iran if they went through with the deal. Other countries, notably China and Russia, expressed their support for India and Iran if the US launched an economic attack against Iran.

Around this time, some (myself included) speculated that, as history appeared to be repeating itself, a false-flag attack should not come as a surprise (a dust-up at the Strait of Hormuz?), but this has not taken place…at least, not yet. Instead, the US launched its attack economically by removing Iran from the SWIFT system, stopping bank transfers in and out of Iran.

Again, those defending Iran’s right to free trade stated their support for Iran and awaited a response from the US.

This is the point in the narrative when, if there is any sanity in the world, the referee trots out onto the field and indicates the signal for “time out.” Then, the various countries would sit around a conference table somewhere and talk things over.

This could be 1939 all over again, and we are now at the point at which an attack has occurred. The next step is the one where everyone takes up sides. The following step would be the one where everyone makes threats to the opposing side if the situation is not reversed.

No “Time Out”

But, as yet, there has been no “time out.” What has happened is that the US has shown further aggression by stating that, if India does not stand aside and accept the economic attack against Iran, sanctions may be taken against India as well. (Oh-oh.)

And so, we collectively step back, take a deep breath, and ask ourselves how this is likely to play itself out. Certainly, the US government has done a good job of convincing its people that Iran is a country of madmen, religious fanatics and terrorists. Through the prompting provided in the news media, the American public seem more favourable to warfare than they were at the beginning of World War Two. Even the US president, considered by many to be a Leftist, states that he agrees with the Right that, if the US is “pushed,” military action must be used.

In the meantime, not a single news programme is speculating on what sort of reaction may be expected from “the other side.” The major Middle Eastern and Asian countries most certainly understand that the US economic system is on the ropes, and that the attack on Iran is a last-ditch effort to try to hold onto its position of top doggie. They are also aware that they are on the economic upswing in terms of production and may well be in a better position economically to wage an actual war than is the US.

World War III?

The following concept is one that I often make use of when considering the likely outcome of any war:

“Any country that is considering waging war against another country should first consider that the loser is almost always the country that runs out of money first.”

The trouble with waging war is that those who provoke it almost invariably fail to think through the likely developments in their entirety. National leaders tend to think either in terms of their immediate goals, or, if they do consider the likely first response by their adversaries, tend to forge ahead anyway in the belief that the first response can be contained. It would seem that those who pull the strings in the US have taken the egotistical (and, arguably, very unrealistic) view that, if they show enough bravado, the world will cave to their wishes.

I believe that they are dead wrong.

Is the world on the precipice of World War Three? It is not too late to avoid this eventuality; however, it does seem as though the US, much like Germany in 1939, is plunging headlong in a direction that is quite likely to result in such a war.

Like Germany in 1939, the US is also clearly setting itself up for a war at home. The rights of citizens are being removed on a massive scale, and the US is clearly gearing itself up to function as a police state. As in Germany, some people are seeing the handwriting on the wall and are voting with their feet, but the vast majority are just looking a bit more worried and seem to be hoping that, whatever happens, it will not be too bad.

Under the present circumstances, “wait and see” may not be the best plan. If the reader is in a situation that exposes him either physically or economically to the above situation, he may wish to consider a change.

If you enjoyed this article, you might like our complimentary report, The Best of Jeff Thomas. Pulling no punches, Jeff shares his thoughts on the greatest threat to gold ownership, finding a bolthole on a budget, as well as the coming hyperinflation. You may download this free report immediately in our member’s area. Or, if you are not a member, register for free here.

Reprinted from International Man with permission.

Jeff Thomas is British and resides in the Caribbean. The son of an economist and historian, he learned early to be distrustful of governments as a general principle. He began his study of economics around 1990, learning initially from Sir John Templeton, then Harry Schulz and Doug Casey and later others of an Austrian persuasion.

It has been said that every great nation has its rise and fall; that its rise occurs as a result of the population (in general) becoming determined to work hard to create a better life, and that its fall occurs when the population becomes spoiled, then complacent and then finally, apathetic.

Much of the First World has reached this latter stage, all (to varying degrees) at the same time. Unfortunately, from a historical standpoint, the period of apathy is almost invariably followed by a period of bondage — a marked social and economic decline in which the people of the nation become little more than serfs of the state that rules them.

While most readers would agree that this describes the First World in its present state, they would likely argue that this time around, bondage will not be the end result. While reason might tell them that this is exactly the predictable (and historical) outcome, the idea of bondage is too frightful to consider as being a possibility. While a few seem to be railing against this eventuality, the great majority simply open a beer and turn on the TV. A very comfortable form of apathy, but apathy just the same.

Feudalism, Past and Present

So, are there any differences this time around? I would say that there is one major difference, and that is that the packaging is more sophisticated.

In days of yore, the Sheriff of Nottingham and his men rode into your village and demanded what few silver pennies you may have earned recently. This was clearly a dictatorial government — one which was ruled by force, so that the people were clearly serfs and had no real say. Punishment was simple: If you did not pay, your hut was burned, your possessions confiscated, and you were thrown in prison to remain until the debt had been paid. (Nobles fared a bit better: In the 15th century an ancestor of mine, Lord James of Dartmouth, spent several months in the Tower of London until he could pay King Henry IV a sum of 2000 pounds, literally a “King’s ransom” — in spite of the fact that Lord James was said to have been a favourite of the King.)

Now, of course, things are entirely different. Today, the Sheriff does not ride into your village demanding your money. You are required to send it in yourself. If you fail to pay, your house is not burned. It is confiscated, along with your other possessions, and you face prison. Increasingly, people are ruled by force just as in the 15th century. But in spite of this, citizens of many First World countries still claim to have free elections — the last bastion of the democratic system.

The Democratic Process

The idea of the democratic process is that the people may elect their leaders and thus control their destiny. However, running for office is quite expensive, and this means finding donors. Understandably, anyone who provides a donation does not regard it as a gift. He seeks something in return. In national elections, this means very large donations, translating into very large compensations. Those who contribute the most (Big Oil, Big Pharma, Big Banks, the Military Industry, etc.) can demand quite a bit in return.

In any “democracy” that has been in existence for a long enough time, the relationship between donors and candidates has become circular; that is, after the candidate is elected, he repays the donor, by providing either tax dollars or rights to operate that others do not enjoy. Once the circular relationship is fully cemented for a period of time, the returns to the donor grow to far exceed the donations. As a result, voters are, unwittingly, actually paying the donors and the government to dominate their lives.

Not surprisingly, donors come to regard these tax dollar infusions as a regular source of revenue and seek to have them grow regularly. (If voters could understand this circular relationship, they would be less surprised when their legislators — whether they be conservative or liberal — consistently fail to diminish the government need for tax.)

So we are left with the remaining advantage of democracy: the ability to vote for those who will protect our freedoms, as we see them.

The Two Party System

In the majority of First World countries, there are a host of political parties (America is a notable exception), each claiming to represent a specific point of view. Most of the parties are fringe parties, and voting generally comes down to the two main parties: liberal and conservative. Liberals claim to champion the social freedoms (gay rights, abortion, etc.) whilst trying to limit economic freedom. Conservatives claim to champion the precise opposite.

Most voters seem to see the system as alternating between the two parties. For example, first the liberals win and increase the social freedoms of the country. Then after awhile they are voted out and the conservatives have their turn, increasing the economic freedoms. Described in this way, it would seem that the “two-party system” provides an ideal balance, moving ever-forward with increased freedoms for all.

However, if this attractive image were the case, liberal voters would not be filled with disappointment at the end of a liberal term in which their social freedoms somehow had not increased. (Their party somehow “needed to compromise” with the evil conservatives.) However, if the liberal party was successful in diminishing economic freedoms, this distraction would serve to keep these voters loyal to the party.

At the end of a conservative term, it is the reverse. While their stated objectives for regained economic freedoms somehow failed to come to pass (again, “compromise” was somehow necessary), the leaders still managed to limit social freedoms in some way. (The Patriot Act in America is perhaps the most extraordinary example in recent years.)

What voters seem to miss is that, along the way, far from increasing one type of freedom under one party, then increasing the alternate type of freedom under the other, the net effect is the exact opposite. Under a liberal government, economic freedom is diminished, and under a conservative government, social freedom is diminished. Freedom, in general, therefore, ratchets downward with each term.

It does seem that voters throughout the First World are beginning to recognize that they are getting short shrift no matter which party is in power, and that their country is headed inexorably downward (while the leaders seem to be doing rather well.)

Will the voters ultimately rebel?

Will the minor demonstrations of discontent evident now in the First World escalate into something more organized and more violent?

What do the politicians think is likely to happen? Whilst they are not commenting on the subject, we should be able to guess their predictions based upon their actions. If they plan to increase freedoms in the future, they would be providing a calming effect to the present frustrations. However, if their true goal is a return to a kind of modern serfdom, they would be preparing for it by increasing their controls, both economic and social. In much of the First World, the latter seems to be the intended direction. Nowhere is this more evident than in America, first with the renewal of the Patriot Act in May of last year, and more recently with the passing of the National Defense Authorization Act.

Modern Day Feudalism

As stated above, the main difference between the feudal system of five hundred years ago and the feudal system that is developing in the First World today is that the packaging is more sophisticated. Instead of having identifiable kings whom we may all hate, we have the distraction of two political teams that we may “choose” between. While we praise the good guys (our preferred political party) and hope that they will vanquish the bad guys (the opposing political party), they are in fact one and the same, and they both work for the kings.

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Reprinted from International Man with permission.

Jeff Thomas is British and resides in the Caribbean. The son of an economist and historian, he learned early to be distrustful of governments as a general principle. He began his study of economics around 1990, learning initially from Sir John Templeton, then Harry Schulz and Doug Casey and later others of an Austrian persuasion.

In 1999, I began to form a picture in my mind of what I termed "The Great Unraveling" – a period in which the economies of the First World would collapse. I believed that it would not all happen with one great crash, but would occur in fits and starts, with the relevant governments artificially propping up their economies as events unfolded, with a series of band-aid solutions that would delay the inevitable, but ultimately, would worsen the outcome considerably. Hence the choice of the word, "unraveling."

I projected that the first major event in this debacle would be the breaking of the real estate bubble in the US, which I expected to happen in 2006. I was wrong. It occurred in 2007. Since then, whenever projecting a date for an event, I have been fairly consistently premature by a year. (This is why economic forecasters often say, "Never predict a date – you’ll invariably end up looking like an idiot.")

Still, the events have taken place, largely as predicted. I believe that we are now on the cusp of a series of major events; the most significant and most destructive that I will see in my lifetime. These will play out until around 2015 (Chances are I’ll be wrong and the dust will not begin to truly settle until a year or more later. For many years, the esteemed Harry Schulz has said, "Ten years down and ten years up." He will probably turn out to be right, as he almost invariably is.)

One aspect of this period I had not anticipated was that, at this point, the vast majority of people out there are still in complete confusion as to what is happening to them. I had assumed that, once they began to see that their governments had been pulling the wool over their eyes for years, they would do an about-face and pursue a more accurate understanding of their situation. This, by and large, has not happened.

Instead, most people seem to be grimly hanging on to their misconceptions. In addition, many have reaffirmed their loyalties to their political parties and really dug in, not understanding that regardless of party, the members of their government are not their friends and protectors. Quite the opposite, in fact.

The other day, someone said to me, "I should have listened to you years ago and started studying what was on the way. I guess it’s too late to catch up now." That set me to thinking. Is it too late? It is true that what is happening is maddeningly complex, even for those of us who have been following developments closely for years? While some developments are predictable, there is chronic uncertainty as to what the governments will come up with next, since their actions often defy logic.

Still, there must be some basic truths that can assist those who are starting late in the game – basic principles to follow that might make it easier to grasp the true meanings of events as they unfold. Let’s give it a try, bearing in mind that adopting these principles may not be easy.

Abandon any political party loyalty that you now have

Regardless of what country you live in, you probably have a liberal party and a conservative party. (Many countries also have fringe parties, such as the social democrats, communists, etc.) Regardless of what party you favour, you may think of the major opposition party as evil and feel that, right or wrong, you must defend your party to the death. In truth, your party, and, by extension, your elected representatives, most likely have no loyalty to you whatsoever; nor do they see themselves as your representatives. They see themselves as your masters. Regardless of their positions on the issues, this is true, almost to a man.

Additionally, in order to achieve election, they have had to cut deals with those who make large donations to their campaigns. These people are the politicians’ true bosses and they dictate what will happen in the future – not you. You will therefore keep your head at its clearest if you go under the understanding that none of the promises that candidates make are necessarily true; that, regardless of what they claim, they will hang you out to dry, as surely as will the opposition party. While they pay you lip service, they do not take your wishes or needs seriously and, in many cases, hold you in contempt.

Your country and your government are two separate entities

Politicians are fond of speaking about the greatness of their country and praise those who are most loyal to the government, implying that those people are the true patriots. Not so. In most cases in the First World, governments have become so corrupted that what benefits them does not benefit the voting public. In effect, they have hijacked the country over a period of many decades. If you feel loyalty to your country, that’s fine, but do not be fooled into thinking that your government and your country are one and the same. They almost assuredly are not.

Stop thinking in the present

This is a really tough one; however, if you are to come out of this period with your skin still on, it is essential. Most of us tend to say to ourselves, "Okay, things are not as good as they were, but it’s not all that bad. I can live with it." I can’t overemphasise how shortsighted this assumption is.

Consider that millions of Jews took this position in the late 1930′s in Germany. Only a small percentage of them said, "If this is the direction things are going in, within a few years, our lives will be ruined." The latter group left Germany if they were able, often leaving behind their homes and businesses, but saving their future liberty.

Rather than allow your thinking to simply be a snapshot of your situation today, make the effort to examine the direction that events are headed in and picture what you will need to do to keep from becoming a victim of those events. (Of all of these principles, this one is the most important, if you are to fare well in the coming years.)

Seek out those who are most knowledgeable in the field

In every field of endeavor, there are many who are clawing their way to the top, fighting amongst each other for position. This is not true of those experts on economics who are of a libertarian bent. Invariably, those who are at the pinnacle of their field, recognize each other’s abilities, respect them and seek to learn from them. They tend to be known to each other and, if they don’t exactly get together every Thursday to play bridge, they do communicate with each other and meet on occasion if possible.

In the study of economics / politics / investment, I was fortunate to have stumbled upon Sir John Templeton many years ago. He was clearly at the top of his game and his record for being correct in his predictions was extraordinary. Through him, I learned of Harry Schultz. Through Uncle Harry, I learned of Doug Casey and so on down the line. As I learned to respect those who had been "referred", I learned to avoid those who were not. As a result, all those whom I have trusted over the years have been exceptional people, both in their analysis and perceptions, and in their willingness to tell the truth when they shared information.

(Along the way, I also bumped into some very successful, very well-known, but very disreputable people, but they did not come to me with "references" from those I respected. Consequently, I kept their influence over me at arm’s length and time has shown that, had I not done so, I would have paid a price.)

It is unlikely that, if you are coming late to the party, you will have time to become one of the most knowledgeable in the field. However, if you follow this principle, you will have the opportunity to home in on the most knowledgeable and trustworthy people and, more importantly, avoid those who would lead you astray. Stick with those advisors who are at the top of their game.

Avoid mis-information

Go under the assumption that the great majority of information that appears in the media is either not quite correct, or, often completely false. It does not matter whether you watch the liberal network or the conservative network – each has an agenda to follow and the great majority of information on the television and in print only adds confusion. So, where does that leave you?

The best source for truthful information at present is the Internet. Just as in the mainstream media, there is more utter rubbish available than truth. However, if you were to begin with some of the names mentioned above, you will soon branch out to more sites that will be of value.

Be honest with yourself regarding your abilities

I have been lucky in my lifetime to have been quite talented in some areas, while being pathetically incompetent in others. I seem to be a combination of extremes. This led me to build confidence in myself regarding my talents, while admitting my shortcomings.

Most people are less extreme than me, and, as a result, assume that they should be ashamed of themselves if they are not at least "pretty good" at most everything. This thinking is counter-productive. Self-honesty opens up opportunity to learn from others and to respect those who know more than you or are more talented than you on a given subject. While we all would like to think the best about ourselves, we can only improve ourselves if we recognise and admit our shortcomings to ourselves. Then we can actively pursue those who may fill in the holes in our abilities.

I had an embarrassing dream a couple of years ago. In the dream, I was standing at a podium, getting ready to give a talk on the Great Unraveling. Although I don’t think I tend toward smugness, in the dream, I was looking forward to the room filling up with people and thinking, "I’ll be the smartest man in the room tonight." Then people started filing in and sitting down – Harry Schultz, Doug Casey, Lew Rockwell, Jim Sinclair and so on. Thankfully the dream ended there, just as I came to the horrible realisation that I was actually the dumbest man in the room.

The goal should never be to be the smartest man in the room. The goal should be to have as great an understanding of the situation as possible. On rare occasion, I have come up with the odd point that Uncle Harry hadn’t conceived of; however, this does not change the fact that, 99% of the time, he is miles ahead of me. This doesn’t mean I’m going to go and hide in a hole in the ground, but rather that I am going to listen to Uncle Harry each and every time he has something to say, in the hope that some of his light will illuminate my brain. The same is true for the others I respect on the subjects of economics, investment and political events.

Don’t think you need to be an expert

This is similar to the principle above, but with a slight twist. I personally do not believe that I have a talent for either economics or investment, but I have been working on the study of both for decades and have ended up doing well – so much so that, now that so many of my predictions (particularly regarding gold) have come to pass, I am often asked for my opinion on what’s next.

I’m quite happy to offer my views, but, occasionally, I am introduced to someone as an "expert" in the field, which, for my own clarity as well as for others, I quickly correct. I am a student. Maybe I’ve been doing my post-grad for more than a quarter-century, but I am still a student, not an expert. The day I think I’m an expert is the day I’ll stop trying to learn, and I have not the slightest doubt that that would be my undoing.

It does seem to be the case in the western world that people somehow fear that they will be regarded fools if they do not present themselves as experts. All I can say is, don’t fall into this trap. Your future depends on your humility and willingness to learn.

Summary

So, in review, abandon any sort of conception that politicians hold an answer to your future. Recognise that your future must be created by you, independently of their machinations. Surround yourself with the best people (this can be done through the Internet) and have the wisdom that, when you don’t understand what they are saying, assume that they are probably right and you are probably wrong. Then seek out further clarification.

Do the best you can to envision the knock-on effects of what the leaders of the world are doing. This, as stated above, is a tough one, especially if it has not been your habit for many years. Either way, develop the new habit of seeking out information from those who are at the top of their game and have the respect of their peers.

Finally, one last principle to consider:

Be prepared for the possibility that your newfound knowledge may alienate your friends.

All of the above is not only difficult, it is also socially embarrassing. As you broaden your understanding, you will almost certainly discover that your peers have not done the same and they will not only think you are incorrect; but they may well see you as a threat to their own beliefs. Be prepared to do a spring cleaning of some of your long-held perceptions and accept that you may need to keep your new understandings largely to yourself.

I don’t often offer biblical quotes, but here is one that has proven true for me: "A prophet is not despised, save in his own country." It essentially means that your friends will not be likely to appreciate your new-found knowledge, in fact they may well think you’re dangerous.

Adopting the above principles will be difficult, time-consuming and, in some ways, disheartening. However, it may mean the difference between whether or not you exit the Great Unraveling with whatever wealth you now have and even with your freedom. It is absolutely worth doing.

Reprinted from International Man with permission.

Jeff Thomas is British and resides in the Caribbean. The son of an economist and historian, he learned early to be distrustful of governments as a general principle. He began his study of economics around 1990, learning initially from Sir John Templeton, then Harry Schulz and Doug Casey and later others of an Austrian persuasion.