The greatest threat to your savings is not the market forces, but the government (political risk). More governments are sinking deeper into insolvency and adopting helpless measures only used in history. Because of this, the song of bail-ins, taxes on deposits, nationalization of retirement savings, and capital controls in Cyprus, Spain, Iceland, Hungary, Portugal, and Argentina are expected to become the norm.
The political risk is everywhere
You think this is happening too far away from home? Think again. The reality is, political risk is everywhere. Most of the western banking systems are under attack from stringent laws as they look for extra money. In his view, Judge Napolitano Andrew argues that if you have more than $100,000 in your bank, it is the direct target by the government to cushion poor fiscal managements.
Think of the Fed intervention in markets that has brought two key impacts that affect you directly; (1) decreasing wealth through market distortion and poor decisions on investment, (2) taking money from hard working citizens through a lot of taxes including worldwide income. If you had not thought about it, check your tax filing for the last two years and the need to protect your hard earned cash will become imminent
Once your cash is in the bank, there is no assurance of having it back. Most of the banks in the west keep very little cash to service daily turnovers. However, if you want to withdraw more, they simply cannot guarantee it is possible. Most of the money has been lent to people, and the banks are highly insolvent even when hit by a simple crisis. To make the matter worse, the FDIC has very little money which puts your money at an even greater risk.
The solution: Dilute the political risk
The best solution to political risk is reducing them by placing some of the savings outside the reach of the government that is causing the same risks. Selecting and setting up a bank account in an appropriate jurisdiction is the best option. How does an offshore bank account protect you from political risks?
- Your local government does not have jurisdiction to freeze your account in a foreign account using targeted legislations.
- Because the money you keep is not subjected to unnecessary taxes such as capital deposits tax and capital gains taxes, you have the assurance of better protection at all times.
- In an offshore account, the money you save is readily available on demand. Whether for emergency or investment, you can directly access cash without worrying that the bank of choice will run dry and insurance cannot hold.
- Unlike back at home, the interest rates on your savings are generally higher, and you have the assurance of growing your capital portfolio.
The political risks and their direct implications on the banking systems make it very difficult for clients to have the assurance of their savings safety let alone accessing them.
By diversifying your banking options with an offshore account, you become a less target because some of the money is not under the jurisdiction of the threatening banking system.