Beware Chinese phones!

I recently bought a "Quad core 1 GB" "Huawei" "Mate Mini" phone from Ali Express. I use quotes because none of that is actually true. I have to say that it was extremely cheap so in the end I have paid for what I got, but still I was scammed. I have to say that this goes for fake chinese phones (even faking their own brands now), not for well-established manufacturers such as Meizu, Xiaomi, Jiayu, TCL, THL, ZTE, Zopo.......

First of all, the phone looks good in the seller's pictures (just as in real life)

(Notice that there is no logo on the front. This is a pattern that I have observed in fake chinese phones, and leads me to believe there is some kind of law in China regarding front labeling and falsifications, so that fake phone manufacturers can use any logo as long as it is on the back).

While waiting, I noticed that Huawei didn't even have that model... that is OK as long as I get 1 GB RAM and 4 cores for the price I paid.

First thing I do, as a man and as a technical person, is to download Antutu and check my phone. Everything seems to check, graphics run smoothly, and I get a superb score. Almost Nexus 4 for a quarter of the price.

So I sleep well for somedays, until I require the phone to work as promised, and it does not deliver. So I get uneasy, and download a pretty toy called Android Terminal (yes a Linux terminal for android, never forget there is a Linux underneath). The is what I get:

Two cores, and 512 MB RAM. The processor is not even an MTK as the seller promised, but a Spreadtrum sc8825, which checks with my previous efforts trying to install MTK drivers to read the phone from my laptop, not being able, looking at what the device manager was showing me and then installing Spreadtrum drivers to solve the issue. What we have here is a completely tuned Android that lies to programs such as Antutu when they use an API call, retrieving false memory. The operating system, on the contrary, knows what the real deal is, so it is wise querying it.

I did not pay much for this phone (and I have to say that it fell from a considerable high and did not get a scratch), but some are selling it for much more, which is a robbery. Nobody notices the scam, just that it is a fake Huawei, but everybody is happy with their "1GB 4 core", so the reviews are always 5 star.

When buying a Chinese phone, check the logo on the front. If it is too good to be true, simply get away. There are a lot of reliable manufacturers such as those I mentioned that give the best quality for an already low price, and you will not get scammed in any way.

Bitcoin, altcoins and the virtual economy

I've been closely following the Bitcoin phenomenon for some months, loosely for some years now. Disclaimer: I am no fan of Bitcoin, for one reason only, that I will disclose at the end of the post.

First of all, despite the previous disclaimer, let me clarify that Bitcoin is a hughe phenomenon, a true technical breaktrhough that could have only been invented by a true mastermind. One only needs to read Satoshi Nakamoto's paper to see that (and I am not going to deal with the origin or what the intentions of this Bourbaki of the cryptoeconomy might be).

Having said that, I see important flaws in using Bitcoin as a means of online payment (this does not apply to hand-to-hand business): It's reversability. Bitcoin is non-reversible by design, so that if you receive goods that are broken, are not as described, or any other usual (really, really common) problems that you may encounter when buying goods online, you are left all alone. Granted we would have the opposite problem if it was freely reversible: rogue buyers would reverse payments once goods left sellers' facilities. This leaves nothing but the classical third party arbitrage, some kind of escrow system. In case of the current Bitcoin system, imagine that you buy something on AliExpress. People who have will know what I mean. AliExpress is kind of a Chinese ebay, but only direct selling, no auctions. Chinese vendors sell their product, the same (crappy or not) that you can find in your large retailer chain, but for much less. Buy something cheap, receive it at home within 15-60 days. This sounds great, but you need to account for a lot of problems inherent to that scheme: Firstly, you need to know that AliExpress escrow system is worried only about products reaching their destination. Once you get your item, AliExpress urges you to verify that you received it. If you get something broken, they do not automatically honor their returns policy, but involve you in an extenuating, long, and in most cases, infructiferous process of getting your money back. In that case, you totally depend on the seller. Even if the seller has a good reputation, you need to deal with China post (or your local post office for that matter):

Imagine, for a moment, that you buy a nice Xiaomi Red Rice, customized, banded Android, quad core cell phone from a Chinese seller for about USD 200 in Bitcoin.  It was maybe the seller, or maybe China Post, but the cellphone is broken. You depend on the seller's good will more than buying in AliExpress (and that is a lot to say) since he has to send you the funds willingly. You cannot revert the transaction. If you do this operation with a VISA credit card, it takes a call to your bank or to VISA to have it cancelled. And when you get your package from the mailman with all the illustion only to find out that you got a brick, having the possibility of reverting the transaction is, as Mastercard says, priceless.

This is a major problem for transactions in Bitcoin. But it is not the main problem to become a de facto payment system (de iure, governments could outright forbid its use). The main problem is its duplicability. In fact, Litecoin is already an accepted system, as much as Bitcoin is. There is a large number of so-called altcoins (even scam-coins). They are all (except some details such as encryption used) equivalent. So we have a problem of unicity. In case of gold, it is only the 79-th element in the periodic table, it is the only element that provides desirable properties of money. None other is gold. Bitcoin can be duplicated to give the exact service or better. The fact that it was the first coin with this system does not give it more desirable monetary properties. They can be collectionism properties, or something else, and it has certainly value, but they are not monetary at all.

If I have made such an attack on Bitcoin (and altcoin), then why do I say that it is a revolutionary idea? Because this can be the money of the future provided: an escrow system (banks that might charge for that, it is a service after all) and laws designating any of the altcoins as the one to use, grating one system unicity and yielding all properties of money. Absent that, Bitcoin, or any other alt-coin, is a tulip, with only the people's desire to have this or that coin as the only driver of value (or is it prive in USD?).

The truth about Jack Andraka

The truth about Jack Andraka is... that I don't know it, obviously, I am a normal citizent with my mundane whereabouts and I am geographically far away from that character.

But what I can do is using my analytical-logical mind to check his story. In my analysis I will use some insights from this interesting blog entry where some good points are made.

The first thing that catched my eye was his sotry. He is able to outthink the pharmaceutical industry with Wikipedia and some books. He is able to produce a device that is super cheap and is much more accurate than the industry's standard, single-handed. Yet he didn't knew [sic] that we had a pancreas before his uncle died.

This in itself is very fishy. Before delving into the story, let me say something: I know brilliant guys, like 150-160 IC (Intellectual Coefficient) or much more, I don't know exactly, but I know a guy who belongs to the 0.01% of most intelligent people on Earth (he holds several full professorships). This guy, being a genious, got several PhDs and several international recognized awards, and he truly speaks about what he does (dealing with quantum mechanics, Banach spaces, number theory...), his conversations are high standard, and he is respected by equally-brilliant people. This does not happen with Andraka, nobody in medical biochemistry/medicine is seen chatting with him, nor are companies that could potentially produce his gadget.

Let's research a little more about this character. There is a ton of videos, newstories, TED talks, and other material such as an official page and a Wikipedia page.

Let's see his wikipedia page: It looks really professional, with references put where they belong. Yet, if one is so careful about checking them, they turn out to be inconclusive about what they are takin about. There is one that speaks about a patent supposedly filed by Intel (who allegedly was backing him) and the reference is a piece of news by the BBC (the people who live ahead in time and were able to report on bulding 7 collapse before it happened) with no mention of the patent whatsoever.

Now, let's analyze the invention itself: It claims to do a much better job costing about three dollars. Now, first logical problem: if it is so cheap and effective, how come that it is not being used already in all hospitals in the world? Either you are a very bad person for not sharing right away (people could be saved if tested TODAY, after all) or the invention just does not exist. Assuming it exists (and therefore he is evil for not sharing), how did this character build it from his garage? I don't see any "Carbon nanotube integrator" on Ebay, nor I see "Pancreatic cancer pacient blood - 100 milliliters".

There is no research paper. So much for being in the Johns Hopkins working surrounded by researchers. When something is revolutionary it spreads like wind, and this alleged invention has not been replicated up to today. He was awarded a prize for this, yet this invention is kept private. A prize that offers no public access to the product if was awarded is no prize (ohh, let's remember that he is preaching open access now). Some sources claim the guy has ALREADY invented the thing (yet it is not available and almost a couple of years have passed) and they justify the prizes with it, while others say that it is not available and still in development (in which case the prizes are non-sense because it is a promise instead of a product).

TED Talks: A ton of them. He never discloses any technical details, he never speaks about science. Somebody who has invented something cannot stop talking about the inners of his creation. He just does not do that. He rants about how modern medicine is wrong (even though our life expectation as steadily increased in part thanks to it), and how adults are just obtuse (yeah wonderboy). The rant is complemented with shots of people nodding and smiling, as if they were part of something bigger, a happy community, a religious event. They are not offered a technical explanation, not even scientific proof, and they smile. Like sheep to the slaughterhouse.

Johns Hopkins: He was allegedgly turned down from 199 universities and at the round number 200 he was granted... I don't know, being there. It looks like even the Johns Hopkins university does not know what he does in the The Sidney Kimmel Comprehensive Cancer Center, where there is no evidence of his presence, apart from the same press releases you can find in Google. Were and when institutions are proud of having a genious, they would grant him an offical place, within an official group. This are done that way, look for Terence Tao in UCLA, a true genious.

Let's see his Facebook page. It is a Zen-temple where all the incautious pancreating cancer patients or relatives crawl around (and I say this with no disrespect for them), along with his I-dunno-understand-nothing fanboys. He is blogging everyday, posting stuff like a community manager, avoiding science questions. He posts pictures of him traveling around the world, meeting dignataries, visiting places... Ohh my God, Jack, you are so popular, when do you have time to get your research done?

Lastly, upon closing this post, I sumbled upon this shit page, where everything goes crazy and they evey say he conducted the research at the Johns Hopkins. They even say the kid won a math pize????? Everything goes now.

I'll finish off by quoting the blog I mentioned:

But the strongest evidence of my suspicions came from when I actually got to talk to him over Facebook.  I tried to discuss science with him, but all he would do was redirect me to some science news website and conveniently avoid discussing anything original.  All he did was mention his friends' ideas.  Also, he got into an argument about global warming with me and a couple of other people, and it showed how narrow minded he was, that he would insist that "global warming is scientifically proven"

If you laugh at people who believe in this

 

 

...in this...

 

... or this ...

  

Why do you believe in everything on the Internet without a logic check before?

 

Let him be judged by his actions, not by his words

Everybody knows his words
His actions:
60% of Venezuelan oil securely delivered to the US
Rewriting the history by removing each town's coat of arms historical Spanish details
Making Venezuelan people claim their independent indigenous roots while opening the country to every US company (and expelling Spanish businesses)

Oyster card potential arbitrage opportunity

I got an Oyster card last October and I noticed there was a deposit for the card. Mine was 5 pounds. My sister had got a card the previous year or even in 2010, and her deposit was 3 pounds.

Imagine this arbitrage opportunity:
Get 100 Oyster before year end/February/whenever they rise the deposit. Assume they raise it by one pound. Return the Oysters and get the new deposit for a gain of 100 pounds.

XD

British go home... XD

This was at Barajas airport

Contextual update later today...

Update: Last year Iberia was merged/sold to British Airways. Workers were promised no harm will come to them. Today they are facing the fire of 3000 employees

Message from the Spanish people to the German people

Join us against politicians and bankers or die with them

Brace for impact! Technocrat coming to Spain!

Something's moving in Spain.

The party in power has been accused of illegal financing, with all kind of documents, bills and balance settlements. Important politicians in the PP (Partido Popular) have been reported to have received "envelopes full of cash" during almost 2 decades.

The head of the operation is Luis Bárcenas-Gutiérrez, former accountant within the PP

The fact that he controlled an account in Switzerland with €22 million EUR (something he celebrated with Champagne) was uncovered by the Spanish mainstream media, and then a regular stream of document images, allegations and even admissions to have received cash from the infamous accountant flowed into the media. Even traditional press allies of the PP published these documents.

Now, the question of why this information is being uncovered now remains most suspicious. In a country in which local barons make what they wish, including but not limiting to

• building airports with no flights (such as Castellon and Ciudad Real). Speaking of Castellon airport, the local government opened the unused airport for somebody to test his brand-new racing car on the ways that were built for airplanes. Someone had a cool day indeed.
• giving contracts and public jobs to friends and family and publicly saying that it is not only legal but moral
• dismissing accusations saying that news refer to something from long ago (OK now I'm gonna kill somebody, hide for a day and then say that it's yesterday news and that everything should be forgotten)
• accusing citizens (and voters!!!!!) to be corrupt and immoral and thus inducing the political class they deserve

No wonder that the Prime Minister is frightened to death

and he decided to calm down everybody and explain himself to remove any shadow of doubt in the most Orwellian visualization

No wonder that many are losing their faith in this "democratic system"

Now, who is behind all this? There is only room for speculation, but most likely it is the Euro-American powers who are dissatisfied with Rajoy's evolution and lack of a plan to ask for a European bank bailout.

Who will be the technocrat? Well, he/she has to be trusted by TPTB, and my take is that it will be either Joaquin Almunia (an economist who lost to Jose M Aznar and has been in Brussels for 13 years) or Esperanza Aguirre (an aristocrat with supreme international connections).

By the way, she is the only one of the leaders within the PP that has not been accused in the scandal.

Gold follow up

If any of you is holding EUR, dump them and buy gold. Gold is at 1 year lows, this year France will fall, we can easily retest 1.20 in EURUSD and probably 1.10, remember that the Fed to ECB balance sheet ratio fell since Dec '11 because of Draghi's infamous LTROs.

Spain is zombified like Greece. La France will feel the bait of ferocious hedge funds for the first time. You don't want to be caught in the middle.

There are some good deals. Check German shops such as Anlage Gold and Coin Invest Direct, they have very competitive prices. Silver is a buy too, Anlage Gold has the most competitive prices in this case. Check whether your country has exceeded the VAT allowance with Germany for the year (it depletes soon into the year for countries such as Spain, Italy and Greece, a trend that started two years ago).

Agriculture blog

Last summer I found out about an agriculture

http://www.bigpictureagriculture.com


In that blog, you can see the reasons why the prices of both basic agricultural commodities were skyrocketing.

[...] the price of wheat rose more than 50 percent from mid-June until its peak in mid-July. By now everyone knows that the global corn and soybean market was greatly affected by our Midwestern drought. The spring wheat crop was good, however, and even though the U.S. produces only 10 percent of the world’s wheat, it is the largest wheat exporter. It was reassuring that throughout this drought season, we knew that global wheat and rice stocks were very ample and much above the levels of the food crisis year 2007/08. So, why did the price of wheat go up so much even though global wheat stocks were 42 percent higher than in 2007/08? In part, it looks like it over-reacted.

One reason was poor weather in some of the other wheat exporting nations. There was too much rain in some of Europe and a lack of rain in Russia, the Ukraine, and Kazakhstan. Russia is the world’s third largest wheat exporter and its yields fell 31 percent from last year, according to CME group. (Why hasn’t Paul Krugman chimed in this time, or has he noticed? Fact is, there are frequent droughts in this region.) Some expect Russia’s available wheat for export will be gone by the end of the year, as producers there have been exporting rapidly in case export restrictions are instated. Spain’s production was down 30 percent due to drought. There is some worry about the next growing season, too. There are dry conditions in Western Australia, the world’s second largest wheat exporter after North America. There are also dry soil conditions in the hard red winter wheat growing region in the U.S., lessened, however, by very recent rains.

Gold: healthy correction, huge opportunity for EUR buyers

Recalling the EUR/Gold divergences that we spoke about some months ago, we had a nice one on Friday. It has kept the ratio over the first two days of this week so my take is that it might diverge a little bit more, but it would be wise to start a spread long Gold and short EUR. For those with spare EUR to buy gold or any precious metal (which includes a potentially better buy such as silver), this is a nice entry point.

We are in a correction that has lasted more than a year now. Given the deflationary period we are in, markets might get really funny, but it would be good for inflation to raise over 3-5 percent this year. Otherwise we might enter a hard deflation, where cash is kept within financial institutions, and forced out all at once by central bank printing. That is the case where we get hyperinflation. I don't believe it's coming within the next two years. My take is that in 2013 we will see high inflation, in 2014 will be a turning point in which there will be a deflation and, depending on how hard it is, there will either be another cycle of the same (high inflation for 2015 after central bank printing) or we will enter the final hyperinflationary stage.

Well, there are some people that still rely on their governments. After all, they will always be able to resort to their (tungsten) reserves or, in this case, to something you can really eat

The Middle East: Somebody still thinks it is incidental?

Everybody knows that selling oil in any currency other than the USD is very dangerous, let it be EUR (Saddam Hussein) or gold (Muhammar Al-Gadhafi).

Let's look at this Middle East map:

From Zerohedge, the Iranian currency, the rial, has crumbled a 70% since the EU and the USA imposed sanctions on the country.

When President Obama signed the Comprehensive Iran Sanctions, Accountability, and Divestment Act, in July 2010, the official Iranian rial-U.S. dollar exchange rate was very close to the black-market rate. But, as the accompanying chart shows, the official and black-market rates have increasingly diverged since July 2010. This decline began to accelerate last month, when Iranians witnessed a dramatic 9.65% drop in the value of the rial, over the course of a single weekend (8-10 September 2012). The free-fall has continued since then. On 2 October 2012, the black-market exchange rate reached 35,000 IRR/USD – a rate which reflects a 65% decline in the rial, relative to the U.S. dollar.

In my opinion, the end game is in sight. Energy resources will be controlled by a small elite, and most of us will perish or will be become defacto slaves. A very nasty future lies ahead.

Orwell

Anarcho-Capitalism is something unknown and very contradicting to the ears of an European.

Anyhow, here's something interesting that I came across at their forums

Spanish government pardons a man conviced of running over a 23 years-old male

The Spanish government, who by a God-granted law has the right to pardon convicted felons, has commanded that a man who killed another while he was driving in opposite direction. It is known that the son of the Justice Minister works at the law firm that represents the felon. Here is the complete "royal" law

Real Decreto 1668/2012, de 7 de diciembre, por el que se indulta a don
RAMÓN JORGE RÍOS SALGADO
Visto el expediente de indulto de don Ramón Jorge Ríos Salgado, condenado por la
Audiencia Provincial de Valencia, sección cuarta, en sentencia de 17 de enero de 2011,
como autor de un delito de conducción con grave desprecio para la vida de los demás en
concurso ideal con un delito de homicidio, un delito de lesiones, una falta de lesiones y
una falta de daños, a la pena de trece años de prisión e inhabilitación especial para el
derecho de sufragio pasivo durante el tiempo de la condena, por hechos cometidos en el
año 2003, en el que se han considerado los informes del Tribunal sentenciador y del
Ministerio Fiscal, a propuesta del Ministro de Justicia y previa deliberación del Consejo de
Ministros en su reunión del día 7 de diciembre de 2012,
Vengo en conmutar a don Ramón Jorge Ríos Salgado la pena privativa de libertad
pendiente de cumplimiento por otra de dos años de multa, que se satisfará en cuotas
diarias de seis euros cuyo inicio y forma de cumplimiento serán determinados por el
Tribunal sentenciador, a condición de que abone las responsabilidades civiles fijadas en
la sentencia en el plazo que determine el Tribunal sentenciador y no vuelva a cometer
delito doloso en el plazo de cinco años desde la publicación del real decreto.
Dado en Madrid, el 7 de diciembre de 2012.
JUAN CARLOS R.
El Ministro de Justicia,
ALBERTO RUIZ-GALLARDÓN JIMÉNEZ

 It is rumored that the killer, whose surname is Salgado, is a relative of the former socialist Finance Minister.

This case, along with the final "royal" decree signed by former socialist government, pardoning the banker Alfredo Saez, Botín's deputy director at Santander Bank, offers a rather crappy view of the state of things in Spain.

If you have an account in Santander UK (former Abbey), or Santander anywhere else, or hold Spanish debt (doubtful), you better close it up or sell into the market now that the market offers you a chance by relaxing the pressure over Spanish sovereign debt.

In this orwelian world, democracies are dictatorships

I think we are well past over the Huxley world we lived up until 11-Sep-2001, and we are deep into the Orwelian world of today.

I recently saw much evidence of this in the latest Spanish demonstrations asking to surround the Parliament. There is a law in Spain that makes it mandatory for police officers to clearly display their ID when they are working. Well, the Government issued a order for them to hide it in these demonstrations. There are two orwelian laws that they are about to pass:

• It will be banned to film police officers in the course of their work, which includes demonstrations.
• Publicly insulting or harming a government official will be punishable by jail and by the State taking over private assets.

Another example of no-law in Spain is the following: 4 years later, the Spanish government decides to create a bad bank, taking bad Spanish brick (it would still be good if German credit still flowed into it to turn the lives of mortgage takers and their children into collateral). The name of the new bank is Sareb, God know what that means. The point is, a savvy speculator notes down the name of the bank as soon as he knows it, and registers the Internet domains sareb.com and sareb.es to force the authorities to negotiate. It turns out that they are free and legal ownership is granted. A few weeks ago, the people in charge realize they need a domain, and that sareb is taken. What do they do? They forcibly take ownership with no compensation, in the name of the common good!

So there you have it, we have mindless people who can't make the simplest plan and they have to circumvent law, or evoke "the common good" to steal from somebody, instead of registering the domain before releasing the name to the public.

This attacks on the law are not free. They constitute a toll to high to bear for a civilized country. This state of lawless, or alegality, of legal insecurity, harms businesses and trade, and brings poverty.

Meanwhile, Spanish people are still distracted, they still buy the congenial optimism their politicians sell them, the little drop of subjective hope that their brains need to go on and prevents them from picking up a shovel and hit some politician on the head, which is what they a really need. The ad, depicting the usual suspects of the poorly artistic TV soaps, realities and the rest of wave-populating garbage, have them recite some puny facts which are supposed to be a basis of pride for a Spaniard, such as 7 Nobel laureates (!!), 1st place in organ donation (!!) and a lot of airports (like Ciudad Real and Castellon, which host no flights and had to be closed, not even Ryanair wanted to leave their passengers in the middle of nothing, just for the glory of the politicians and constructors, who took public money to build something nobody needed and nobody wanted).

The internet boards are full of supporters of this ad. They claim they need fresh air in the middle of all this negativity. This class of optimism doesn't help. This promotes inmovilism, invokes national pride on a bunch of facts that either have nothing to do with the situation or are a direct cause of it, like the construction of useless airports with the money of everybody. But if you tell them this ad is following a dictatorial guideline to prevent the masses from acting, you will be confronted. The human brain is like that, and mass sentiment scales it. You cannot have a negative mass sentiment, people would suicide, you can only have positive mass sentiments, such as what this evokes, or Hitler filling Nurenberg. This is a direct consequence of societal evolution. Society has evolved a lot in 5000 years, but the human brain is essentially the same. They react to somebody shooting, but they can't react the same way to somebody stealing billions, even though the consequences are far more reaching.

Crisis Trivia

I am back, sorry for the long delay, I have been really busy.

One of the things that I have been up to is a trivia game engine, which as a first example features a financial, economic and political trivia game called Crisis Trivia, featuring questions that all of us would love, such as types of gold coins, the hunt brothers, our beloved Ben Bernanke, the Rothschilds, and many more!

I have set up a separate blog to talk about it and the follow-up games I may come up with.

Please check out
androidtrivia.blogspot.com

PD: I will be commenting on the recent events with normality, I hope

The exit out of the crisis is hyper-inflationary and (possibly) a full-scale war

Following the BCE's decision to purchase eurozone bonds in the open market, Zerohedge posted the following thougts some days ago:

We will mince no words: Mr. Draghi has opened the door to hyperinflation. There will probably not be hyperinflation because Germany would leave the Euro zone first, but the door is open and we will explain why. To avoid this outcome, assuming that in this context the Eurozone will continue to show fiscal deficits, we will also show that it is critical that the Fed does not raise interest rates. This can only be extremely bullish of precious metals and commodities in the long run. In the short-run, we will have to face the usual manipulations in the precious metals markets and everyone will seek to front run the European Central Bank, playing the sovereign yield curve and being long banks’ stocks. If in the short-run, the ECB is the lender of last resort, in the long run, it may become the borrower of first resort!

Argentina prohibited the hoarding of foreign currencies, are trading is done under heavily government surveillance and even Paypal has canceled operations with Argentinian customers. Their currency is in free fall and the government's stance is to preserve the status quo of the elite in the country by stealing wealth from their citizens via a constant monetization of their corruption. Now the Iranian rial is failing too.

Here's what you need to do to avoid the trap that some very intelligent guys who feed on well-passed history (by Charles Hugh Smith from Of Two Minds)

Hedging Against Capital Controls: Opening an Account Overseas 
As financial insecurity and instability rise, hedging becomes increasingly important as a means of capital preservation. One potential hedge is diversifying one's liquid capital by holding some cash in a "safe haven" foreign bank account.
Two signs that fear and instability have reached critical mass are capital flight and capital controls. Capital flight is people and enterprises moving their capital (cash and liquid assets) to an overseas "safe haven" to avoid devaluation of the currency or confiscation of their capital/assets. (Devaluation can be seen as one method of confiscation; high taxes are another.)
Capital controls are the Central State's way of stemming the flood of cash leaving the country. Why do they want to stop money leaving? If we think of each Central State as a neofeudal fiefdom, we understand the motivation: citizens are in effect serfs who serve the State and its financial nobility. If the serfs move their capital out of the fiefdom, it is no longer available as collateral for the banks and a source of revenue for the State.
Once capital has drained away, borrowing and lending shrink, cutting off the revenue source of the banks (financial nobility). Since financial activity also declines as cash is withdrawn from the system, the State's "skim"--transaction fees, sales taxes, VAT taxes, income taxes, wealth taxes, etc.--also declines. Both the State and its financial nobility are at increasing risk of decline and eventual implosion as capital flees the fiefdom.
The Central State imposes capital controls as a means of Elite self-preservation. Sudden devaluations are a way of impoverishing the citizens that also happen to enrich those who transferred their wealth into another currency, a mechanism described here three years ago in The Royal Scam (August 3, 2009).
Those in the know transfer their wealth into another currency before it's illegal, and once the devaluation makes everything in the country much cheaper, they transfer their wealth back into the new currency and buy up all the assets on the cheap.
History shows that the State will "change the rules" overnight to protect itself and its Elites. Capital controls include such measures as limiting the amount of funds that can be transferred out of the country; limiting the amount of gold that can be taken out of the country; barring all transfers of funds overseas; limiting all IRA, 401K and retirement funds to owning government Treasury bonds, and so on.
The U.S. banned private ownership of gold above a few ounces in 1933 as a form of capital control, forcing citizens to keep their capital in cash that could circulate and (supposedly) boost economic activity. (Did it work? Obviously not.)
Central State bureaucracies and Elites can become very creative at expropriating citizens' cash and assets once they feel threatened by a loss of faith in their legitimacy and competence, i.e. capital flight.
For many decades, a Swiss bank account was the standard way that the wealthy hedged the risks of capital controls. As a result of the Federal government's efforts to catch tax cheaters and money laundering, Swiss bank accounts are no longer easily available to Americans.
The most basic hedges against capital controls and devaluation are owning physical gold/silver and diversified holdings of other currencies held in overseas "safe havens." We can see these hedges against instability and insecurity in action around the globe: wealthy Chinese are transferring capital overseas at a furious pace and buying gold, and Spanish citizens have been flying to London to open bank accounts so they can transfer their money out of Spain and Spanish banks. Should Spain leave the euro, the transfer into their traditional currency would amount to a forced devaluation of their cash.
The massive flight of capital out of Spain has been widely reported in the financial media, and it raises an important question for anyone with cash to safeguard: what happens if capital controls become possibilities in the U.S. or Canada?
The idea that the amount of money that could be withdrawn or transferred from your private accounts might be strictly limited may seem farfetched at the moment, but if history teaches us anything about financial crises, it is that the rules are changed overnight to protect the Central State and vested interests.
We cannot control economic, financial and political instability; all we can do is hedge the risks by diversifying our assets and taking control of what we can control.
Readers of my book An Unconventional Guide to Investing in Troubled Times(print edition) (Kindle version) know that I consider hedging and local control to be essential strategies going forward, and I invite you to check out the book if you want to read more about hedging strategies.
I have explained why I think that What Will Be Scarce: Liquidity and Reliable Income Streams (August 30, 2012). Having capital that is liquid (easily converted into legal tender or moved to safety) and income streams that are reliable, i.e. that are not speculative or dependent on the Central State and are under your own control, are key assets that cannot be replaced.
Over the course of the past few months, New Zealand correspondent Michael Reps and I have been discussing the issue of foreign bank accounts providing a hedge against capital controls, and he has established a way for Americans to open an account in New Zealand with Westpac, a bank with a verifiable history and reputation. (The service is not free to set up, but very little of financial value is free.)
In the spirit of discussing possible hedges that are available to “the rest of us,” i.e. the bottom 99.5%, I have asked Michael to explain the service in a Q&A format. As is my policy, I receive no commission from Michael’s service or any other service mentioned on the site except a no-cost-to-you commission on Amazon purchases and BullionVault investments made via links in the sidebar.
I present this discussion not as a recommendation to take any particular action, but as an invitation to pursue your own research into overseas accounts and hedging in general.
As with any financial decision or transaction, do your own due diligence. This means understanding all the risks and all the potential benefits. Read financial statements, obtain regulatory filings, ask questions, verify what you are told, and so on. Each nation's banking laws and legal system are different. Assume nothing.
There is no perfect hedge. Every hedge has risks. Physical gold can be stolen, expropriated at the border, etc. Any currency can be devalued. Property held overseas can be expropriated by a "new" government. The list is endless.
A hedge is not the same as a speculation, though each has risk. All hedges are imperfect, and so diversification is a key strategy in hedging. The purpose of a hedge is to preserve capital, not score gains as in speculation. An overseas account is a utility, not a means of wealth creation.
I am not an expert in international banking or tax laws, but it is common knowledge that U.S. citizens are required to disclose foreign accounts and report all income regardless of its origin, i.e. all income earned anywhere on the planet must be reported to the IRS. The purpose of an overseas account is not tax evasion, it is capital preservation/hedging, and so having accounts in nations that have tax treaties with the U.S., transparent reporting and rule of law is a definite plus in terms of compliance.
Holding cash in an overseas account in another currency exposes you to the risks of foreign exchange (FX) fluctuations. It is possible to hold other currencies in the U.S., and U.S. dollars in a foreign account. (I use "overseas" and "foreign" interchangably, but obviously an account opened in North America may be foreign but not overseas.) The point is that having a foreign account offers a different sort of hedge than owning a foreign currency.

Impressions from a Spaniard in Greece

The following is a first person account from a Spanish citizen who was in Greece and that I found on an Internet board (here it is Google-translated):

Walls full of graffiti and political posters, tiles and marbles busted by the unrest, police in every corner of the city, swaths of people sleeping on the streets, people in Syntagma asking for money to pay for medical treatment, dark and empty streets at nine of the night, as there is no open local. All have closed. Groups of 30 people near the University drugging entire families searching containers, roller shutters banks protected, fully burnt buildings, fire barricades Eksarheia, immigrants escaping from the police ...These are just some of the things I have seen in just 11 days by Athens. I will not roll up because literature is not my strong point, but I've been traveling the country steadily for Anno and a half, and although by then Greece was already in crisis and had always been a troubled country, the transformation that is leaving the country is something brutal.Citizen picks up food parcels from the NGO Doctors of the World
The feeling I have is like this is a failed state, a project that has failed, I come to mind videos of the 60's propagandists, showed that the ideal of family within the capitalist system, happy, going to work, enslaved ... We take a walk through Athens and although still a western town with its colorful lights, their McDonalds ... the feeling you get is to be living in a different reality, one can see the ravages of the crisis and how poverty and misery left in each of the corners.Luckily, the image I have is that the Greeks are at all times resisting to have their head down and always try to keep going, but the situation is very hard, and any time something could explode spontaneously. Regarding speed and indefinite strikes, one of the people with whom I could talk these days I see happening in the near future, because there is still work, involving more sectors of society, etc.. but is working on it and everyone is convinced that they will win.Just do not say you can do it alone and will need our help because everyone sees the crisis as an international thing, only has primed them first and more brutal.

En général, l’art du gouvernement consiste à prendre le plus d’argent qu’on peut à une grande partie des citoyens, pour le donner à une autre partie. 

In general, the art of government consists in taking as much money as possible from one party of the citizens to give to the other. 

Voltaire

Remember, remember the 25th of September…

Mehr als ein ganzes Jahr seit den ersten griechischen Demonstrationen musste aber vergehen, damit die spanische Bevölkerung nicht nur ein flüchtiges Mitgefühl für sie entwickeln, sondern auch etwas Ähnliches dessen, was sie duldeten, erleben konnte, d.h. Angst, Gefahr... Seit geraumer Zeit war es ja vorauszusehen, dass diese Situation vor den Türen der Spanier bevorstehen würde (genauso wie vor anderen), da sie sich aus schon mal hier besprochenen ökonomischen Gründen nicht mehr behalten kann.

Spanien ist gröβer als Italien bzw. Griechenland und ihre Banken und Politiker hatten seit der Regierung, auf deren Spitze José María Aznar stand, und ihrer Nachfolger das rechtliche Zugeständnis des Volks daran, das Bauwesen unabzählbar unendlich zu viel mittels vom fraktionalen Reservesystem unterstützter Hypothekendarlehen und billiger illegaler Arbeitskräfte, deren Zuschüsse sich eben von der verzinslichen Staat- bzw. Spanienverschuldung in Abhängigkeit befanden, Ansporn zu geben. Deswegen ergab es bereits seit Jahren eine Überlastung der gesetzlichen spanischen Krankenversicherung (heutzutage steht sie aus dem Aus und verweigert die Betreuung den spanischen Staatsbürgern ab 26 Jahre alt, die früher nicht in der Lage waren, die Sozialversicherungsbeiträge zu entrichten) und 2009 natürlich unangemessen teuere auf der Spitze Wohnungspreise, und zwar eine Blase, deren Bezahlung die Spanier ab jetzt durch das von bloβ Politiker abgesprochene Rettungspaket in Kauf genommen haben, um den Banken statt den Staatsbürgern Hilfe zu leisten. Sie hätten vielleicht die Isländer imitieren können, aber nein. Einige sind bereit, diese Kosten und diejenigen, mit denen die Staatsausgaben und die Politiker bzw. die königliche Familie zu ihrem Wohlstand das spanische Konto absichtlich belastet haben, zu übernehmen.

Angesichts dieser genannten Tatsachen wird es allerdings schwierig, sich die Sonderrechten der Oberschicht der Politiker und gespenstiger Bankenführer anzueignen, was ihr leider unglücklicherweise am 25. Oktober versuchtet, auszuführen. Infolgedessen sollte man bei der sehr gewalttätigen Polizeiprügelei nicht schockiert werden, mit der die Fortdauer solcher Sonderrechten eindeutig gewährleistet ist. Kein Wunder, dass es so passiert ist! Darüber hinaus wurden mit Schiβpulver geladene Luftgewehre schon seit der 15M-Demonstration am Mai eingesetzt.

Daraus könnte man folgern, dass ein Kampf ohne Schutzschild zu keinem Gewinn gehört, denn man wird zuerst der Polizei unterliegen. Aber das Wichtigste ist es, zur Kenntnis zu nehmen, dass unsere versprochenen Rechte so schnell aufgelöst werden können, indem sie auf die Oberschicht übergehen.

Du kommst aufgrund der Existenz 7.000 Millionen Menschen auf der Erde nicht in Betracht.

A warm welcome to Evey Hammond

I would like to extend the warmest welcome to Evey Hammond, a very special person to me.

She kindly agreed to co-author the blog, so she will be reporting sentiment and opinions from Germany, primarily in the German language.