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How to Survive the Impact of Bankrupt Nations

Guest post by: Michael Farrell

Article Overview: Debt is slavery and influences life’s major decisions, suggests Mike Farrell with aspenIbiz. Read this short post is it will reveal that debt is affecting not only individuals and families but entire nations and it has the power to make entire nations subservient the whims of their creditors.

How to Survive the Impact of Bankrupt Nations

Debt is slavery ... or at least indentured servitude of the worst kind. That looming mortgage, the high interest credit card debt, the short-term car loan ... these are the forces that keep people from breaking free and taking action.

Ironically, debt begets more debt. According to FinAid, the average US student loan debt for a four-year private university graduate is nearly $36,000, and $24,000 for public. Throw in that first car loan and maybe a mortgage, and suddenly you're staring at hundreds of thousands of dollars in demoralizing claims on your future income.

Debt is an enormous psychological burden that influences life's major decisions. It's why so many people stay committed to jobs that are unfulfilling in cities they detest under conditions they find disheartening. Nobody wants to rock the boat too much... take too many risks and you could lose your job, and hence the ability to make those monthly payments.

This familiar story has been playing out across the developed world for years. This is not an ill, however, that exclusively affects individuals and families. Even at the macro level, debt has the power to subjugate entire nations to the whims of their creditors.

In July 1944, world leaders gathered in Bretton Woods, New Hampshire to be dictated terms of the new global financial system. The US dollar was set as the global reserve currency, and the International Monetary Fund was established to shower the world's nations with the dollars they needed to participate in this system.

Like most governmental and non-governmental organizations, however, the IMF eventually took on a life of its own.

Over the years, the IMF became the roving economic police force of the ruling class, coercing developing nations to take enormous loan packages they had no hope of paying off.

As a result, the local IMF (or World Bank) representative in developing countries became extremely powerful figures. Leaders in poor countries were so terrified of loan default, the IMF was able to shape policy and allocate national resources as the west saw fit.

By 2011, the IMF's biggest customers have become 'developed'. Countries like Greece which are relying more and more on the generosity of China. Now (circa May 2011) with the IMF's former chief locked up in disgrace for the foreseeable future, the race is on to see who will replace him.

The new order of things is very clear ... the tables have turned.

The western hierarchy of the past is insolvent and its capital has migrated south and east. Western leaders refuse to acknowledge this reality and are clinging desperately to antiquated institutions like the IMF in order to retain control of a now defunct financial system.

China, the world's second largest economy, is routinely relied upon to bail out the west... yet it has a paltry 3.65% of the IMF's voting power. Europe, however, is arguably the most insolvent region on the planet, though it insists on remaining at the helm. Ultimately, the market doesn't care and has been orienting itself towards the developed world for years.

Little by little we are seeing signs of a revolution in the financial system. There are grumblings from Zimbabwe (who recently experienced a bout of hyperflation) about establishing an asset-backed currency, new exchange-traded gold contracts in Asia, more bank wiring routes that bypass New York City, and corporations in the developing world issuing debt on the international market in local currency with ease.

China's renminbi is being increasingly considered a reserve currency to compete with the dollar and euro. Other developing countries have already entered into swap agreements to accumulate renminbi reserves, and even western companies are issuing renminbi-denominated debt.

There are signs of more liberalized exchange controls all the time; it's possible for individuals and corporations to hold savings in renminbi through a variety of ways ... you can even walk into the New York City Bank of China branch and open an account.

The latest move is American Express's new renminbi-denominated Travelers Cheques. It is a 'cash equivalent' issued by a non-Chinese financial institution. This is a major step and its implications are far, far more important than whichever white person is positioning to head an irrelevant organization of the past.

Western leaders simply don't want to accept their loss of primacy; they've become enslaved themselves, not only by the insurmountable sovereign debts they've accumulated, but by their stubborn refusal to acknowledge the simple reality of a new system they can't stop and don't control.

What to do? Obtain more financial education and learn how to protect yourself during these trying times and purchase precious metals including gold to hedge or protect your net worth against the decreasing value of the US Dollar, which is just paper money.

I favor a quote from Steve Forbes ... Forbes says that pursuing additional financial education and the resulting increase in our financial literacy will open our eyes to being savvy with our money and using alternative wealth creating strategies; this will be they key to resolving our financial crisis.

To gain the necessary financial education, it is best to pursue association with, access to, and membership in, a wealth creation community. As a result, you will learn about alternative wealth creating strategies and consider investments in non-dollar denominated assets ... perhaps emerging markets ... perhaps energy assets that are inherently useful like oil rigs, hydropower, or methanol plants ... perhaps precious metals, rare earths, water rights, oil, natural gas, potash mines, or gold mines ... things hard to build, difficult to replace, and costly to substitute ... definitely not financial stocks, definitely not retail stocks, definitely not commercial property.

For those wanting protection of their purchasing power in gold, there are several ways that may be appropriate to obtain this protection. These include direct ownership in minted coins, use of gold exchange traded funds, gold mutual funds, and junior gold stocks. Many are investigating having part of their IRAs in gold, silver, precious metals, and non-dollar denominated currencies.

In addition, for those that truly believe default of sovereign debt is the greatest risk we all face, it is wise to learn how to implement a multiple flag strategy to diversify this risk or provide protection against higher taxes, capital controls, hyperinflation, civil unrest, erosion of personal liberty, and the rise of a police state. With a multiple flag system, you consider taking preparations like, but not limited to, establishing a foreign bank account, purchasing some real estate overseas, seeking alternate sources of income, dual citizenship, and carrying multiple passports.

I will continue to provide examples of things we need to learn, the secrets of the insiders, as part of being savvy with our money, and introduce alternative wealth creating strategies, in future articles and updates at my blog over the next few weeks.

In addition, a good book to read would be "Bad Money" by Kevin Phillips; it describes Reckless Finance, Failed Politics, and the Global Crisis of American Capitalism.

Finally, I want to thank Simon Black of Sovereign Man as he was the source of some of the material mentioned in this post.

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Article Tags: Alternative Wealth Creation, Credit Card Debt, Financial Education, Global Reserve Currency, Hyperinflation, International Monetary Fund, Mike Farrell aspenIbiz



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