Robert Kiyosaki Blog

Financial Education Portal inspired by Robert Kiyosaki

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Simon Black – Cyprus STILL has “an emergency situation”. And capital controls

April 9, 2014 Santiago, Chile Imagine that your country and banking system are so broke that you have to receive approval from a special committee just to send your own money to your kids who are away at university… Crazy, right? But that’s exactly what’s going on in Cyprus. And it all happened overnight. Just over a year ago, people across Cyprus went to bed thinking everything was just fine. They woke up the next morning to a brand new reality: their government AND their banking system were flat broke. In collusion with other European powers, the Cypriot government FROZE bank accounts across the country. Suddenly an entire nation had no access to their savings. The government spent weeks bickering about whose funds they were going to confiscate in order to bail out the banks… all the while maintaining the freeze. Finally they made a decision: wealthy people would have their funds seized. But this wasn’t a victory for everyone else… because simultaneously the government announced a flurry of severe financial restrictions. Sure, people could log on to a bank website and see an account balance. But it was nothing more than a number on a screen. It didn’t mean the banks actually had the money. Nor did it mean they were free to access their own funds. Cash withdrawal limits were imposed. Funds transfers were curtailed. Cypriots were even forbidden from doing something as simple as cashing a check. Peoples’ savings were essentially trapped inside of a highly insolvent financial system. These destructive tactics are called capital controls. And one year later they’re still in place. Some are being relaxed. Others are being maintained. But by its own admission, the Ministry of Finance still believes there is a “lack of substantial liquidity and risk of deposits outflow. . . that could lead to instability of the financial system and have destabilizing consequences on the economy and society of the country as a whole.” Naturally, since this is an “emergency situation” in their view, they have to impose these “restrictive measures” in order to safeguard “public order and public security”. In other words, capital controls are for your own good. This is exactly the sort of thing that happens when governments and banking systems go bankrupt. And every shred of objective evidence suggests that many of the ‘rich’ nations of the West are in a similar position. Some of the largest banks in the US (like Citigroup) have failed their stress tests; this means they are inadequately capitalized to withstand any major financial shock. Then there’s the FDIC, which is supposed to insure deposits in the Land of the...

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Simon Black – The easiest place in the world to establish second residency

Recently, we’ve discussed several different economic citizenship programs around the world. And while these programs are not for everyone due to their higher costs, they have all surfaced at the same time, and I would be derelict in my duties to not to inform you about these options. Bottom line—it’s all good news. The supply of potential second citizenships is increasing. And I’m certain it’s going to continue to in crease, even despite the occasional grumblings and misgivings. Malta is an interesting example; after passing their new economic citizenship program, the European parliament is scheduled to have a ‘debate’ in January to discuss the program. It clearly makes a lot of politicians uncomfortable. I shared the stage with a minister from the Maltese government at a citizenship conference in Miami a few weeks ago. It was nice to be around someone who actually ‘gets it’. We discussed how economic citizenship can be a huge benefit to the country. And in times when so many nations are broke, it’s quickly becoming a necessity. Rather than treat people like milk cows, nations are going to have to compete with one another for the most productive citizens and residents. That includes rolling out attractive economic citizenship programs like Malta has done. As one would expect, as the supply of these citizenship programs increases, the prices will fall… so they’ll become more affordable to the average guy. But that’s down the road. What we’re talking about today is something that just about everyone can do and afford today. We’ve discussed this several times before over the last year, but on the heels of so many alerts about economic citizenship opportunities, this one bears repeating. Since last year, Panama has become the easiest and cheapest option to establish second residency. And in a thriving economy to boot. The new residency visa category is called Permanent Residents Visa for Citizens of Friendly Nations. 45 countries are currently on the list of eligible nationalities for this program, from Australia to the United States. This immigration program is unique in the world. It was established by presidential decree, essentially because the Panamanian economy is growing so quickly and the labor pool began to dry up. There are simply not enough people in Panama for the number of jobs that the economy is creating. And they are in need of attracting foreign talent. This program definitely won’t be around forever. As soon as the economy cools off, the government will most likely do away with this incredible immigration opportunity. It’s also possible that the next President of Panama (the current President Martinelli leaves office next summer) will close the window for new enrollment....

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Simon Black – The amazing disappearance of GOLD from the American psyche

November 22, 2013 Dallas, Texas In George Orwell’s seminal work 1984, there’s a really great scene early in the book between Winston (the main character) and Syme, a low-level functionary at the Ministry of Truth. Syme is working on the 11th Edition of the Newspeak Dictionary, and he explains to Winston how the Ministry of Truth is actually removing words from the English vocabulary. In Newspeak, words like -freedom- have been struck from the dictionary altogether, to the point that the mere concept of liberty would be incommunicable in the future. I thought about this scene recently as I was testing out Google’s new Ngram Viewer tool. If you haven’t seen it yet, Google has digitized over a million books that were printed as far back as 1500, and they’ve made the contents searchable within their own database. The Ngram Viewer allows you to search for particular keywords. And you can see over time how prevalent the search terms were for particular years. Out of curiosity, I searched for the term “gold” in English language books starting in 1776. As one would expect back in the 18th and 19th centuries when gold was actually considered money, the instances of the word ‘gold’ favored prevalently in English language books at the time. The trend continued into the early part of the 20th century. But then something interesting happened in the mid-1930s. The use of the word ‘gold’ in English language books reached its peak… and began a steep, multi-decade decline. Further investigation shows that the peak actually occurred in 1933. And as any student of gold in modern history knows, 1933 was the same year that the President of the United States (FDR) criminalized the private ownership of gold. It remained this way for four decades. And by the time Gerald Ford repealed the prohibition on gold ownership, the concept of gold being money had been permanently struck from the American psyche, just as the Orwellian Newspeak dictionary had done. By the mid-1970s (and through today), people have become readily accepting of the idea that money was nothing more than pieces of paper conjured at will by central bankers. The good news is that, according to Google’s data, there seems to be slight uptick in the number of instances of the word ‘gold’ in English language books over the last 10-years or so. No doubt, this probably has a lot to do with gold’s seemingly interminable rise relative to paper currency. One can hope that the trend will hold… that more people will wake up to the reality that the central-bank controlled fiat currency system is a total fraud. The...

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Why can’t Germany get its gold back ! Interview with David Morgan

Gold was always considered as solid and save instrument. Many Countries currency was based on Gold reserves. People loved to make investment in Gold. But now this Gold is in crisis. These Gold crisis are linked with economic, financial, debt and currency crisis. Anyhow, too much dependence on one instrument always brings down fall. This video is showing What the Gold and Debt Crisis...

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The adverse effects of monetary stimulation

By Alasdair Macleod There are two indisputable economic facts to bear in mind. The first is that GDP is simply a money-total of economic transactions, and a central bank fosters an increase in GDP by making available more money and therefore bank credit to inflate this number. This is not the same as genuine economic progress, which is what consumers desire and entrepreneurs provide in an unfettered market with reliable money. The second fact is that newly issued money is not absorbed into an economy evenly: it has to be handed to someone first, like a bank or government department, who in turn passes it on to someone else through their dealings and so on, step by step until it is finally dispersed. As new money enters the economy, it naturally drives up the prices of goods bought with it. This means that someone seeking to buy a similar product without the benefit of new money finds it is more expensive, or put more correctly the purchasing power of his wages and savings has fallen relative to that product. Therefore, the new money benefits those that first obtain it at the expense of everyone else. Obviously, if large amounts of new money are being mobilised by a central bank, as is the case today, the transfer of wealth from those who receive the money later to those who get it early will be correspondingly greater. Now let’s look at today’s monetary environment in the United States. The wealth-transfer effect is not being adequately recorded, because official inflation statistics do not capture the real increase in consumer prices. The difference between official figures and a truer estimate of US inflation is illustrated by John Williams of Shadowstats.com, who estimates it to be 7% higher than the official rate at roughly 9%, using the government’s computation methodology prior to 1980. Simplistically and assuming no wage inflation, this approximates to the current rate of wealth transfer from the majority of people to those that first receive the new money from the central bank. The Fed is busy financing most of the Government’s borrowing. The newly-issued money in Government’s hands is distributed widely, and maintains prices of most basic goods and services at a higher level than they would otherwise be. However, in providing this funding, the Fed creates excess reserves on its own balance sheet, and it is this money we are considering.The reserves on the Fed’s balance sheet are actually deposits, the assets of commercial banks and other domestic and foreign depository institutions that use the Fed as a bank, in the same way the rest of us have bank deposits...

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Simon Black – This one chart shows you who’s really in control

November 7, 2013 Bangkok, Thailand Check out this chart below. It’s a graph of total US tax revenue as a percentage of the money supply, since 1900. For example, in 1928, at the peak of the Roaring 20s, US money supply (M2) was $ 46.4 billion. That same year, the US government took in $ 3.9 billion in tax revenue. So in 1928, tax revenue was 8.4% of the money supply. In contrast, at the height of World War II in 1944, US tax revenue had increased to $ 42.4 billion. But money supply had also grown substantially, to $ 106.8 billion. So in 1944, tax revenue was 39.74% of money supply. You can see from this chart that over the last 113 years, tax revenue as a percentage of the nation’s money supply has swung wildly, from as little as 3.65% to over 40%. But something interesting happened in the 1970s. 1971 was a bifurcation point, and this model went from chaotic to stable. Since 1971, in fact, US tax revenue as a percentage of money supply has been almost a constant, steady 20%. You can see this graphically below as we zoom in on the period from 1971 through 2013– the trend line is very flat. What does this mean? Remember– 1971 was the year that Richard Nixon severed the dollar’s convertibility to gold once and for all. And in doing so, he handed unchecked, unrestrained, total control of the money supply to the Federal Reserve. That’s what makes this data so interesting. Prior to 1971, there was ZERO correlation between US tax revenue and money supply. Yet almost immediately after they handed the last bit of monetary control to the Federal Reserve, suddenly a very tight correlation emerged. Furthermore, since 1971, marginal tax rates and tax brackets have been all over the board. In the 70s, for example, the highest marginal tax was a whopping 70%. In the 80s it dropped to 28%. And yet, the entire time, total US tax revenue has remained very tightly correlated to the money supply. The conclusion is simple: People think they’re living in some kind of democratic republic. But the politicians they elect have zero control. It doesn’t matter who you elect, what the politicians do, or how high/low they set tax rates. They could tax the rich. They could destroy the middle class. It doesn’t matter. The fiscal revenues in the Land of the Free rest exclusively in the hands of a tiny banking elite. Everything else is just an illusion to conceal the truth… and make people think that they’re in control. This one chart shows you...

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How to Legally “Opt Out” of Federal Income Taxes

If you’re a retiree… or if you’re simply looking to earn safe interest on your money… you have two enemies: 1. Federal income tax rates that can take a 20%-30% bite out of your earnings. In some cases, that number is as high as 40%. 2. Interest rates that are near record lows. Right now, you’re lucky if you can make even 1% on your bank savings… And that’s before taxes. Fortunately, you can fix this situation quickly. You just need to know how to legally “opt out” of federal income taxes on your savings… and where to find much higher (but still safe) rates of income… Let me show you what I mean… Right now, the highest-yielding one-year Certificate of Deposits (CDs) pay about 1%. Most banks offer a little less… But for this example, we’ll use the banks offering the highest yields. The federal government will tax the income you collect from CDs just like ordinary income. For most folks, this means they must pay Uncle Sam 25%-28% of any interest earned. For high earners, the tax rate is 39.6%. Keep these figures in mind… We’ll come back to them in a moment. But first, you need to know you have the option of placing your money into another safe investment. This investment pays 6.5%… and the interest is free from federal taxes. If you live in a state with zero income tax (like Florida or Texas), you pay no tax at all. So… a saver has the option of parking his money in the bank… We’ll call that “option A” – or in this investment… “option B.” Here’s how the numbers stack up after you factor in taxes: Option A Option B Initial capital $ 10,000 $ 10,000 Annual yield 1% 6.5% Interest income after one year $ 100 $ 650 After federal income tax (28%) $ 72 $ 650 As you can see, it’s no contest. By owning this safe, alternative investment, you can earn nine times more interest on your savings. For a $ 10,000 investment, that’s an extra $ 573 after just one year. If you’re in a higher income bracket and put in a larger chunk of savings, the numbers get ridiculous. For example, on a $ 100,000 chunk of savings, you’ll earn nearly $ 6,000 more a year with this tax-free strategy versus a high-yield CD. And you can start earning this income RIGHT NOW. It will take you just five minutes. All you need is a regular brokerage account. And all you need to do is buy one of my recommended “muni bond” funds. As regular readers know, municipal bonds are...

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The United States: A Third World Economy in 20 Years

According to the Bureau of Labor Statistics (BLS), September brought 148,000 new jobs, enough to keep up with population growth but not reduce the unemployment rate. Moreover, John Williams (shadowstats.com) says that one-third of these jobs, or 50,000 per month on average, are phantom jobs produced by the birth-death model that during difficult economic times overestimates the number of new jobs from business startups and underestimates job losses from business failures. The BLS reports that 22,000 of September’s jobs were new hires by state governments, which seems odd in view of the ongoing state budgetary difficulties. In the private sector, wholesale and retail trade produced 36,900 new jobs, which seems odd in light of the absence of growth in real median family income and real retail sales. Transportation and warehousing produced 23,400 new jobs, concentrated in transit and ground passenger transportation. This also seems odd unless the price of gasoline and pinched budgets are forcing people onto public transportation. Professional and business services accounted for 32,000 jobs of which 63% are temporary help jobs. So here you have the job picture that the presstitutes, hyping “the jobs gain,” don’t tell you. The scary part of the September job report is that the usual standby, the category of waitresses and bartenders, which has accounted for a large part of every reported jobs gain since I began reporting the monthly statistics, shows job loss. Seven thousand one hundred waitresses and bartenders lost their jobs in September. If this figure is not a fluke, it is bad news. It signals that fewer Americans can afford to eat and drink out. The unemployment rate that is reported is the rate that does not count as unemployed discouraged workers who are unable to find jobs and cease to look. This favored rate, the darling of the regime in power, the presstitutes, and Wall Street, also is not adjusted for the category of “involuntary part-time workers,” those whose hours have been cut back or because they are unable to find a full-time job. Obamacare, as is widely reported, is causing employers to shift their work forces from full time to part time in order to avoid costs associated with Obamacare. The BLS places the number of involuntary part-time workers at 7,900,000. The announced 7.2% unemployment rate is a meaningless number. The rate can decline for no other reason than people unable to find jobs drop out of the work force. You are not counted in the work force if you are discouraged about finding a job and no longer look for a job. The phenomena of discouraged workers shows up in the measure of the...

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12 Reasons Why Gold Price Will Rebound and Make New Highs in 2014

Investor sentiment towards precious metals is at the lowest level in over a decade. Many analysts believe the bull market is over and are calling for sub-$ 1,000 gold in 2014. Even diehard gold bugs are losing faith, as the correction has been longer and more severe than most had anticipated. So, is it time to throw in the towel? Is the bull market in precious metals really over? In order to answer this question, I thought it would be constructive to re-visit the fundamental drivers of the gold price and determine if anything changed over the past two years to weaken the bullish case. My conclusion is that nearly all of the fundamental factors that have been driving the gold price higher in the past decade have only strengthened in the past two years. Now that the correction has most likely run its course, I expect gold to rebound into the close of the year and bounce sharply higher in 2014. Here are the 12 reasons why… #1 – Rapidly Growing Debt Just one day after President Barack Obama signed into law a bipartisan deal to end the government shutdown and avoid default, the US debt surged a record $ 328 billion, the first day the government was able to borrow money. The U.S. national debt has increased by more than a trillion dollars in the past 12 months. This pushed the total debt above $ 17 trillion for the first time in history. As the debt increases and GDP growth slows, the debt-to-GDP ratio will continue to rise at an accelerating pace. This is simple math and it dictates an ongoing slide in the purchasing power of the dollar and rise in the purchasing power of real assets and particularly monetary metals such as gold and silver. The following charts show the steepening rise in total public debt and the debt-to-GDP ratio of the United States. Many economists view a debt-to-GDP ratio of 100% as the point of no return. It is a slippery slope that is certain to push higher at an accelerated rate in the coming years. Note that alternate calculations of the total debt including unfunded liabilities and off-balance sheet items, puts the number somewhere closer to $ 100 trillion or more than 5 times the official figure. This equates to a debt-to-GDP ratio of over 500%, not the 100% charted below. Takeaway: The total level of debt and the debt-to-GDP ratio have both increased substantially in the past two years. This is bullish for gold, as precious metals have a positive correlation to total debt levels. #2 – Inept Government and Partisan Bickering...

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Anglo Far East – Flying by Sight Versus Instruments

Flying by Sight Versus Instruments “VFR”Visual Flight rules “IFR” Instrument Flight Rules As sponsor of a GATA presentation in Auckland by the chairman- Chris Powell over the weekend, I had the pleasure of spending time and picking his brain on many subjects. High on the list was the current correction in gold and its seeming long and sustained period of flat or lower prices. There are many measures to gauge the market but one of the best is outright sentiment and he said that for every 100 people that would have had contact with him in times past, the number is more like 20 now. If I take that same sentiment gauge and cross it over to the exploration/ junior mining sector and even the mid-tier and senior one you get a really sad story. Here is what a professional capitulation looks like from a seasoned mining writer that makes his living selling information 1/ convince me that the resource sector recovery expected this fall is no longer valid. Even the strongest companies are now weakening again and I think this is a strong indica­tion that our market troubles will continue well into next year. This unfortunate chain of events leads me to believe that we should not be buying any junior mining stocks right now. 2/ Many of us, including myself, beefed up positions in companies like “%$” thinking this would be the start of getting our portfolios back on track. It hasn’t happened and I have never felt more discouraged about anything I have dealt with in my entire life. It has felt like an emotional earthquake to my soul. 3/ Even during the 2008 meltdown situation, I felt more composed and confident because I knew we would rebound, which we did within a relatively short-period of time. But this current market situa­tion has gone from bad, to worse, to intolerable with further downside very likely. 4/ I even wrote many times in the last several years that before the screaming, parabolic market in our favour would happen we may have to deal with downside volatility that would shake us to the core. But what we are experiencing now is beyond even what I thought could happen. This is a wipe-out that will basically eliminate at least another 35% of the junior mining companies that are currently still in business. This is after those who have already shut their doors. Many more are hanging by their fingernails right now. I thought by moving towards those companies with the best assets or near-term production stories that we would protect ourselves until the dust you spoke about settled. I...

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