Those astute investors who want to protect their assets from a possible collapse in the value of the dollar – who are nowadays looking to invest in foreign multi currency accounts, foreign residency and second passport programs – have a new name: “Financial Preppers.” In a recent article, “Rise of the Preppers,” Newsweek describes them as, “…regular people with homes and families. But like the survivalists that came before them, they are preparing for the worst.” They are not, however, holing up with canned food and gas masks in their basements. Modern financial Preppersare sophisticated international financial planners who are learning the secrets of offshore asset protection.
One website, The American Preppers Network, receives 5000 visitors a day. Its founder, Tom Martin, observes that, “There are so many variables and potential disasters out there, being a Prepper is just a reaction to that potential.” For a Prepper, these “variables and potential disasters” include the collapse in the commercial real estate market, government nationalization or appropriation of 401ks and IRAs (something Obama is already dropping hints about), the unfunded and off-balance-sheet liabilities of Social Security, Medicare and other US Government programs, and trillions in new debt for more and more bailouts.
All this has only one logical conclusion for financial preppers: devaluation of the US dollar against hard currencies such as gold. Many more people are joining this financial prepper movement, following obvious questions raised about the competence of leadership due to the healthcare bill and the controversial HIRE Act. As one prepper puts it rather sarcastically, “in times of crisis, the only sure thing is that you can count on your government.”
When residential real estate and the stock market crashed in 2008, unemployment doubled. Yet when the US Government, i.e. the taxpayer, came to the rescue with trillions borrowed from the Chinese or Arabs, unemployment continued to rise along with the big bonuses on Wall Street. The natural result of unemployment so high is record home foreclosures predicted: 7 million for 2010, twice those of 2009. In view of all this, I believe the article in Newsweek should not have been about why more and more are being becoming Preppers, but why anyone would not!
With the fall in housing prices in the US as a result of so many homes going unsold, it is indeed ironic that many Preppers, along with others, are turning to acquisitions of international real estate. It is unsurprising, however, when one considers the advantages of international real estate as a primary residence, vacation home or investment property. Why live in OECD countries and pay high taxes, when you can legally live abroad and take adevantage of $90,000 a year tax free earned income?
Most buyers in tax-free offshore havens like Panama and Belize are overtaxed Europeans and Americans looking for a milder climate, lower taxes and a higher quality of life. As international real estate is becoming more popular, two factors have evolved that make it a shrewd investment. The first is that, despite the crisis, foreign banks are increasingly willing to finance these properties. The second is that with more buyers and easier financing, prices in countries with business-friendly regimes and financial systems like Panama and Belize are continuing to rise from basic “supply and demand.”
While buying international real estate is a relatively new Prepper strategy, Preppers are also turning to the time-honored hedge of buying and storing gold bullion and other precious metals stored in offshore vaults – often located in Switzerland, Austria or Singapore. Gold is, and always has been, not just accepted, but preferred as payment for goods and services around the world when currencies tank. It is the best asset protection there is against the threat of currency devaluation. This is evidenced by the way the price of gold has soared recently, while the purchasing power of the dollar has plunged.
Storing gold bullion and other physical precious metals offshore, like investing in international real estate, offers prepper investors the security and peace of mind that comes with traditional financial privacy. With Swiss-style bank secrecy under attack around the world, and the US Foreign Bank Account Reporting (FBAR) form now requiring individual Americans to list bank names and account numbers, holding physical bullion and real estate have both become increasingly attractive. Neither ownership of foreign real estate nor foreign physical bullion need be reported on tax returns or FBAR forms.
The bottom line? Preppers have been growing in ranks since Hurricane Katrina. Preppers are responsible adults making rational decisions to protect their families’ assets and wealth by buying international real estate and gold bullion stored offshore to protect their investments.