Four Reasons to Open an Offshore Bank Account Now

Recently by Simon Black: The Most Dangerous Woman in America

There’s a lot to cover today, so let’s dive into this week’s questions.

First, Charles asks, “Simon, when you write about international diversification, I appreciate that you have so much personal experience. Multiple passports, overseas business, foreign bank accounts, storing gold abroad, etc., you’ve actually done it all yourself. For newbies, which of these do you think is the most important?”

I think everyone ought to consider opening a foreign bank account and moving a portion of their savings there. This is the most important step, for four key reasons:

First, most western banks are sitting on hundreds of billions of dollars in losses to their asset portfolios, not only from the sub-prime debacle, but also from sovereign default issues.

Since 2008, there has really been no positive change in asset quality… and rather than update their balance sheets to reflect this grim reality, governments have simply authorized funny accounting tricks to hide the truth.

To put it bluntly, the bank which holds your money in the US or Europe is probably insolvent. And your government, which theoretically guarantees the deposit, is insolvent too.

Many foreign banking systems are much, much healthier. Singapore has never had a banking failure. Ever. Banks in the Middle East (such as Abu Dhabi Islamic Bank) are extremely well capitalized. Other foreign banks (like Capital Security Bank in the Cook Islands) hold their deposits in cash and don’t make loans.

These banks are much more secure stewards of your hard-earned savings.

Second, foreign banks typically make it easier to diversify your currency exposure. If you want to get out of the dollar or euro, for example, a single bank account in Hong Kong lets you diversify into over a dozen different options – Chinese renminbi, Singapore dollars, Aussie dollars, etc.

When I was in Mongolia a few weeks ago, I opened up a bank account there in the local currency (the tugrik). It’s been one of the best performing currencies in the world for the last few years, and what’s more, my account pays a whopping 13.5% interest just to hold cash. Not too shabby.