Perhaps a Warning

 People who do not trust their government to refrain from confiscating their wealth often want to keep some of their money in a foreign country where it would be impossible or at least more difficult for their home country’s larcenous officials to get ahold of it. People who only fear their government might react to its future economic difficulties by blocking its residents from or limiting their ability to move or spend money outside of the country often want to do the same thing. Most financial experts and people in  the financial media have dismissed such worries  by people in the United States and most of the rest of the world’s “developed economies” as misplaced or even paranoid. They have argued that democratic governments can be trusted since they do not expropriate, and it has been a long time since the postwar currency controls in western  Europe ended with no one planning to bring them back. The skeptics among them – some cryptocurrency enthusiasts, some gold bugs, and  a few libertarian financial writers here and there -  are a small minority arguing that expropriation or currency controls are possibilities to take seriously enough to justify precautions, because politicians and bureaucrats just about everywhere are vicious, avaricious, and untrustworthy. At least they have been a small minority.

 Justin Trudeau may be changing that, both for some experts and writers and for some ordinary investors. According to reports in the news, his government in Canada is blocking activity on bank and other financial accounts of protesters and people who donated money to support  the protesters and perhaps expropriating the money in those accounts.  (He is also stealing people’s trucks, threatening to murder their dogs, holding protesters without bail, and sending in thuggish cops to beat up peaceful protesters and their supporters, including women. Fidel would be proud of the boy.) Now people not only have arguments for the untrustworthiness  of even democratic govenrments, but also an important example of it to consider.

After considering that example many people may decide they would like to have some of their assets in places where it would be harder for their civil masters to steal or interfere with them. They may find such places hard to find. Americans with investment income have to report their foreign bank accounts, brokerage accounts,  and trusts to the IRS on their income tax returns.  The difficulty  in  American officials  getting their hands on those accounts would vary from place to place, but I would guess  the feds usually could do it if they really wanted to. They have certainly been able to bully the Swiss into abandoning their principles in regard to privacy.

Some people think cryptocurrencies are a solution to the problem. Cryptocurrency balances probably are harder  to find and grab than bank accounts, and transactions are more nearly private.  However,  people should note that every American who files an income tax return has to tell the feds under penalty of perjury whether he uses cryptocurrencies, and flocks of potential regulators are circling.  Cash is hard to trace and easy to hide, but it is not always easy to store safely. There are limits on how much cash an American can take out of the country at one time without telling the feds, and a person moving cash out of the country might have trouble finding a safe place to keep it if he did not want to use a foreign bank or brokerage house. Jewels and precious metals have the same drawbacks for storage as cash. Some people have suggested buying real estate in a foreign country. As far as I know, foreign property that does not generate income does not have to be reported to the IRS. However real estate is usually expensive and sometimes illiquid, and rules for foreigners owning real property vary by country.

If the remarkable events in Canada lead to many more  people in North America making  financial privacy and keeping some assets out of officials’ reach an important goal, it will be interesting to see what they can work out to accomplish it, if anything. The deck is stacked against them, and the house rules change in the middle of the game whenever the house decides to change them.

A Few Hints on Privacy

It is commonplace that in the last decade or so privacy has gotten harder to obtain or preserve for most of us. There are many well known reasons for this. The apparent increase  in surveillance and spying on ordinary Americans by the government since 2001 is the most obvious one, but we also have hacking against and theft from networks and databases of all sorts, the tracking and monitoring of people’s activity and even physical movements by providers of network and mobile phone services, the widespread use of surveillance cameras by both governments and private organizations, the general lessening of respect for civil rights in the name of homeland security, and various other factors.

I think this trend is already dangerous and has the potential to become far more so. I also think people who care about their rights and liberty should do what they can to resist it and protect themselves , both for their own good and the good of the country.

I can think of a few obvious things to do. While there may be safe and secure networks and devices connected to them (though on the evidence that is not the way to bet), a person has no way of knowing if the venders and  services he is using provide them.  So he should keep and view the detailed spreadsheet of his  assets and investments, the indiscrete photos and videos of him and his spouse, the inventory of his firearms and ammunition,  the compendia of rude jokes about members of currently favored racial or other groups, his written musings on his unpleasant in-laws or worthless son-in-law, journals detailing his private, unpopular political activities and beliefs,  notes on the abilities and character of his co-workers and bosses, and other things he does not want to share with either the general public or nosey civil servants on devices which are never connected to any network.  This obviously precludes backing up sensitive data  with any of the commercial external backup services. A person has no way of knowing how secure a company’s servers  and encryption are or what potential snoopers have what sort of access through mandated back doors.

People who watch detective shows  or the local news know telecom companies keep records of phone calls, and government agencies can get them.  At least some bureaucrats  also seem to be empowered to listen in on the content of phone calls  with far less oversight or requirement to show cause  than people once thought.  Records of emails and other activity on the internet seem to be even less protected and more open to  government snooping than phone calls. They are also vulnerable to hackers.  So people should be cautious about what they say and what they type, and all the more so on office computers and other devices they do not control. In particular so-called social media sites are actual or potential wide open windows for Peeping Toms from coast to coast and should be used carefully if at all.

Since records of transactions using credit or debit cards are  apparently secure from neither officials nor hackers,  I would suggest the radical step of going back to old, anonymous cash for as many of a person’s transactions as can be done conveniently.  Using cash has other benefits too. A person can’t spend more of it than he has for one thing.  Some things such as ammunition and really unpopular anti-government publications probably should be bought only with cash, irrespective of any inconvenience.

I also think people should join  the political struggle to regain citizens’ lost privacy, forming coalitions with people who share that goal, irrespective of their other political opinions.  However benign one may think our present officials are, there is always the chance the next bunch or the one after that may have other ideas and goals.   

Pay Cash

In 2005 and 2006 Debby and I worked at a large university in the Rio Grande valley of Texas, a densely populated, semi-tropical region  at the far southern end of the state. The RGV, as it is called, is separated from the rest of Texas  by large expanses of fairly empty country. The main cities in the valley are over two hundred miles south of San Antonio, a city many  people think of  as  being in “south Texas”, and over a hundred miles from Corpus Christi or Laredo.  It is officially a poverty stricken area, and there are some very poor people there as in most places, but it is not the  poor place the official statistics would have one believe. There is a whole lot of commerce going on there on a cash basis, unreported to and unmeasured by the government. Some of it is in the illegal drug trade along the border of course, but a good deal of it is in honest, ordinary, mutually beneficial transactions between  individuals who prefer to do their business in cash and away from the eyes of the government.The RGV is an extreme example, but the same thing goes on most places in the country. It is called the cash economy. It is probably more prevalent in rural and inner city areas than in suburbs, but you can see it all over.

I think people should pay cash  when they can.  They should do it out of benevolence toward their fellow citizens, concern for their own privacy, and  in the general interest of keeping the government from getting even bigger and more intrusive. (The argument that the captive taxpayers pay more taxes because some of those in the cash economy pay less than the government wants is specious. If the politicians ever did get their hands on the money “owed” on activities in the off the books portion of the cash economy, they probably would spend it, not grant anyone a tax cut.)  

Besides, paying with cash is just good business. A generation or so ago, people did it all the time.  A person can’t overspend the cash in his billfold, and no one will charge him interest or fees on the purchases he makes with it. It is sometimes possible to get a discount on purchases by paying in cash.  Cash is fully anonymous, and using it allows a person to keep at least a part of his private personal business private.  (There are already some legal items such as ammunition  which probably should be bought only with cash. If recent trends were to continue, the list of those things would get longer.)

Debby and I are making it a habit to use cash instead of checks or cards for most of our transactions with local small businesses and independent operations. At a minimum that saves them the percentage they would have had to pay the credit card company. I urge others to do the same and pay the babysitter, the kid who mows the lawn, the repairman, the local restaurant,  or the woman in the antique shop in cash. It’s easy, once you get used to it.