Can you afford the next crisis?

Nick Hubble

Recessions happen. Financial crises happen. Markets crash. Currencies collapse.

The odd thing, given how often it happens, is that people still don’t expect it.

Are you expecting some sort of crash in coming years? A recession perhaps?

This week’s The Gold Podcast featured Grant Williams. He sees the monetary experiment since the 1970s as an anomaly. Going off gold is an aberration. One that’ll correct itself eventually.

Housing bubbles, tech bubbles, and the global debt bloom are the consequences of abandoning sound money in the meantime. That’s what it all traces back to. Most of our economic messes, anyway. And some social ones according to Grant.

The obvious way to opt out of the credit confidence game is to own gold. That’s also the reason gold standards worked. Individuals could opt out of the system with their wealth if they thought the government was misbehaving. The constant accountability mechanism prevented monetary mismanagement. Or cut it short pretty quickly.

Even though we don’t have gold-backed money, so there is no accountability, the same opt-out mechanism does still operate. You can still buy and hold gold outside the reach of the financial system and even the government.

It would’ve worked out rather well for you recently if you’re Turkish. The gold price surged as the currency tumbled. Another confirmation of gold’s power to protect you when you need it.

In the podcast, Grant mentioned holding gold outside your home country as another layer of security. Boaz Shoshan mentioned his own rather innovative solution, which you can read about here. I wish I’d used it.

Gold is just one way to be robust to the regular cycle of crises. You can also try to profit from them.

The good thing about defensive moves like gold is that you don’t have to predict a crisis accurately. But if you want to profit from such a crisis, things get more complex.

Still, as Grant pointed out to Boaz in the podcast, there’s no shortage of examples in history for our situation, or Turkey’s. If you can learn how history rhymes, you can learn to profit. That’s what’s behind my prediction of another debt crisis for Italy. It’s probably also how Deutsche Bank traders managed to make $35 million in two weeks betting against Turkey.

Turkey’s crisis is so familiar that everyone is arguing about which historic episode it is most similar to.

There’s also plenty of debate about who’s next. Poland? Italy? China?

Today, instead of engaging in that game, I want to ask a different question. Actually, I want you to ask yourself a different question.

Take a look at your personal finances. Are they robust enough to withstand a crisis? How would you fare?

If the stockmarket dropped like in 2008, or during the Asian financial crisis, what would happen to your wealth? If a new banking crisis in Europe froze lending, how would your retirement plans change? What would your pension look like if the tech bubble in the US burst again?

If you don’t like what you see, find out what you can do about it here.

Escaping the taxation nation

If you’re already perfectly positioned to take advantage of the next financial rout, perhaps by reading our guides on how, there’s a different threat you should be worried about.

Just like fund manager Rob Arnott in the analysis we discussed recently, Grant discussed how property will likely be governments’ focus when they try to deal with the national debt problem.

Labour and capital can move or disappear. So they’re hard to tax effectively when things get rough.

But real estate can’t move. And someone tends to own it. Taxing it is the only sure way to rob your citizens blind.

Also, the value is an abstraction because there is no liquid market. You can assign a value and tax that.

Wealth taxes like this have a long and sordid history because they’re politically effective. Only rich people are wealthy.

But they also tend to be mobile, along with their wealth. Their property is the exception. Tax the rich and tax the rich’s property tend to come together.

Britain’s inheritance tax is a prime example of this. One reader of our new report on how to minimise inheritance tax wrote to this to us: “Why didn’t I act sooner you may ask, but I didn’t realize I had a problem until we sold the house.”

How many Britons who haven’t sold their house are in for a shock? Well, its their families that’ll be the ones struggling with HMRC’s extraordinary inheritance tax powers and bullying tactics…

As mentioned, Zero Hour Alert analyst Connor Whitlock has come up with the solution to inheritance tax. Eight of them, in fact. The report has proven extraordinarily popular so far. So if you haven’t had a look, do so now.

But I’d like to add a suggestion to Connor’s list of strategies: become internationally mobile.

Some of the countries I’ve called home have inheritance tax. Some don’t. Apart from me trying to move to London, the extended family’s migration patterns are all one way. Out of inheritance tax nations and into nations without inheritance tax.

How much could you save your family by making a move?

Until next time,

Nick Hubble
Capital & Conflict

Category: Investing in Gold

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