* International Investments – Who Says the US
* Natural Health Tip – Cool DeBuggin Again
* Ecuador Real Estate – Rock and a Hard Spot
Recent messages have looked at the consequences of America’s
fiscal policy and what might happen if the US dollar collapses.
Can this create serious inflation? If so, what can we do to
gain from these facts?
Various rallies of greenback strength suggest that many investors
question whether the US really has a debt problem. This poses
the question, is the US really in bad economic shape?
So I read the note below from an astute reader with interest:
“Dear Gary, What is most surprising about this article
is that it has been published in the St. Louis Fed July/August
Review. As you know, this branch of the Fed is one of the most
esteemed. Warm regards, Craig”
This article by the Fed begins:
“Is the United States Bankrupt? Laurence J. Kotlikoff
“Is the U.S. bankrupt? Or to paraphrase the Oxford English
Dictionary, is the United States at the end of its resources,
exhausted, stripped bare, destitute, bereft, wanting in property,
or wrecked in consequence of failure to pay its creditors?
“Many would scoff at this notion. They’d point
out that the country has never defaulted on its debt; that
its debt-to-GDP (gross domestic product) ratio is substantially
lower than that of Japan and other developed countries; that
its long-term nominal interest rates are historically low;
that the dollar is the world’s reserve currency; and
that China, Japan, and other countries have an insatiable demand
for U.S. Treasuries.
“Others would argue that the official debt reflects
nomenclature, not fiscal fundamentals; that the sum total of
official and unofficial liabilities is massive; that federal
discretionary spending and medical expenditures are exploding;
that the United States has a history of defaulting on its official
debt via inflation; that the government has cut taxes well
below the bone; that countries holding U.S. bonds can sell
them in a nanosecond; that the financial markets have a long
and impressive record of mispricing securities; and that financial
implosion is just around the corner.
“This paper explores these views from both partial and
general equilibrium perspectives. The second section begins
with a simple two-period life-cycle model to explicate the
economic meaning of national bankruptcy and to clarify why
government debt per se bears no connection to a country’s
fiscal condition. The third section turns to economic measures
of national insolvency, namely, measures of the fiscal gap
and generational imbalance. This partial-equilibrium analysis
strongly suggests that the U.S. government is, indeed, bankrupt,
insofar as it will be unable to pay its creditors, who, in
this context, are current and future generations to whom it
has explicitly or implicitly promised future net payments of
This article though it contains some nasty mathematic formulas
(guaranteed brain scramblers for me), is a must read considering
its source. You can read it at http://research.stlouisfed.org/publications/review/06/07/Kotlikoff.pdf
So what can we do? Yesterday’s message shows five ways
to survive and prosper from a falling dollar.
These five steps are Inflation Fighting
Option #1: Start now
buying real estate and living where the cost baseline is lower.
Inflation Fighting Option #2: Another way to fight inflation
is to invest in equities on countries of high growth (ie emerging
markets). See spottingtrends.com/stock_markets/stock_markets_24.htm
Inflation Fighting Option #3: Buy real estate now with as
much debt as you can manage to afford.
Inflation Fighting Option #4: Invest in non leveraged commodities
or leverage such investments as much as you can afford to protect.
Inflation Fighting Option #5: Start your own global business
now. Be economically able to leave your homeland business wise
at least and still earn income. See http://www.garyascott.com/catalog/ibez.html
Regarding Option #1 and #3, you do not have to leave the
US to do this. There are areas where real estate offers good value.
I live in one of those areas, Ashe County. See why at successguidelines.com/retirement/retirement_7.htm
The listings from our friend, Trey Morrison, below suggest
that there are still great values here.
This first listing is a 2 bed 1 bath Condo is in excellent
condition-just recently renovated & has practically new
appliances throughout. The Unit has one of the best views of
Ashe Lake. It would make a great weekend getaway or rental.
Furnishings can be purchased if anyone is interested. $69,425.
Merri and I looked at a property on this lake and though we
did not buy I feel that this area is one of North Carolina’s
best kept secrets. This is a beautiful little lake near us
and we did not even know it exited for seven years!
$69,425 is certainly a low baseline to begin with!
This next property is just a couple miles from our farm. The
47 acres has old home place on it that looks pretty rough.
However the mountain & pastoral views plus two small creeks
and 150' of road frontage makes the $369,749 a not too bad
price to start negotiating from.
Ditto for this 17 plus acres on Big Horse Creek with 2 bed
1 bath house. This has about 1/8 mile frontage on the creek
which makes the $138,500 a good place to start negotiations.
These prices seem in range because the area has a lot of confusion
and conflicting pricing right now. Some prices seem too low
(the Ashe Lake property above) and yet others are quite high
like this 10+ acre tract of land with views of the New River.
It has no home at all and yet the acreage price at $169,000
is much higher.
Such confusion shows that the market is rising but bargains
are still available.
Until next message, may all the bargains you find be good!
Join Merri, Thomas Fischer of Jyske Bank and me at
our last International Business and Investing Made EZ course
in North Carolina this year. Review where to invest and do
business now and learn which markets and currencies may be
strong in the year ahead. Meet Steve Marchant, our man in
Ecuador, and learn about products to export. Go to http://www.garyascott.com/catalog/ibeznc.html
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