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WHERE CAN YOU AFFORD TO RETIRE TAX FREE?           WHY ARE SO MANY OF THE MIDDLE CLASS LEAVING THE US & EUROPE?

Our October 2005 Newsletter:
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Deflation, Inflation - Who Can Keep Track Anymore?   Real Estate Markets Outside the US & Europe Look Better Every Day. . . .
John Schroder - Author of The Ascot Advisory News Letter Bulletin and Numerous Expatriate  Articles
EDITORS ECONOMIC REVIEW UPDATE:
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During the period 2001 - 2003, many noted economists and the US Federal Reserve were very, very, very (did I mention very) concerned about the risk of DEFLATION in the US economy.  See the following article links here, which I urge you to read to understand what the US Central Bank (Federal Reserve) has been doing over the last few years (why interest rates were artificially low in the US, in part causing the current real estate bubble - and why interest rates are now going back up).  Note that these articles were written back in this time period:
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Noted Economist Paul Krugman Said Back Then (From The Articles Mentioned):
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This week's cover story in The Economist makes it more or less official. Deflation, not inflation, is now the greatest concern for the world economy. Over the past year, producer prices have fallen throughout the advanced world; consumer prices have been falling for the last 6 months in France and Germany; in Japan wages have actually fallen 4 percent over the past year. Until the recent crisis prices were falling in Brazil; they continue to fall in China and Hong Kong; they will probably soon be falling in a number of other developing countries.  So far, none of these price declines looks anything like the massive deflation that accompanied the Great Depression. But the appearance of deflation as a widespread problem is disturbing, not only because of its immediate economic implications, but because until recently most economists - myself included - regarded sustained deflation as a fundamentally implausible prospect, something that should not be a concern.  The point is that deflation should - or so we thought - be easy to prevent: just print more money. And printing money is normally a pleasant experience for governments. In fact, the idea that governments have a hard time keeping their hands off the printing press has long been a staple of political economy; dozens of theoretical papers have argued that the temptation to engage in excessive money creation causes an inherent inflationary bias in fiat-money economies.
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http://web.mit.edu/krugman/www/deflator.html
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BACK IN JULY OF 2003 - WILLIAM GREIDER SAID:
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At the risk of sounding like Chicken Little, I am going to describe the economic situation in plain English. The United States is flirting with a low-grade depression, one that may last for years unless the government takes decisive action to overcome it. This would most likely be depression with a small d, not the financial collapse and grapes of wrath devastation Americans experienced during the Great Depression of the 1930s. But the potential consequences, especially for the less affluent and the young, would be severe enough--a long interlude of sputtering stagnation, years of tepid growth and stubbornly high unemployment, punctuated occasionally with a renewed recession. Depression means an economy that is stuck in a ditch and cannot get out, unable to regain its normal energies for expansion. Japan, second-largest economy in the world, has been in this condition for roughly twelve years, following the collapse of its own financial bubble. If the same fate has befallen the United States, the globalized economy is imperiled, too, since America's market for imports and its huge trade deficits keep the global trading system afloat.
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The good news, so to speak, is that the Federal Reserve is on the case. At least Fed Chairman Alan Greenspan and colleagues now acknowledge that the gravest danger lurking in this situation is a general deflation of prices, and they promise to make sure that doesn't happen
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Though Greenspan doesn't say so in plain English, Fed governors recognize the corrective action that may be required of monetary policy: Pump up the money supply and deliberately induce rising prices--that is, foster a renewal of inflation, their old scourge. Rising prices provide an essential lubricant for any sustained recovery because a dose of inflation helps businesses get well and takes some of the depressive pressures off wages and debtors of every kind. The central bankers, however, are facing a very awkward moment. After twenty years of relentlessly reducing the inflation rate to near zero and winning great praise for their triumph, the governors are naturally reluctant to announce that the disease they conquered has become the cure.
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http://www.thenation.com/doc/20030630/greider   
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In short, the FED has been priming the inflation pump, but now we have another problem.  The price of oil, natural disasters in the southern United States and the resulting inflated real estate market (which the Federal Reserve actually helped create) is pushing things to the other extreme.  Which is to explain that certain events out of the control of the Central Bankers, namely oil, has now pushed inflation as a new problem into the picture once again.  Why are we concerned?  Well, it would seem we now have the economic equivalent of the perfect storm brewing - and recent numbers of delinquencies regarding credit card payments and mortgage payments in arrears are one telling symptom.
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A LOOK AT MORTGAGE STATISTICS - By Kenneth R. Harney, September 26, 2005
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Are homeowners in some parts of the country more likely than others to pay their mortgages on time? If you had to guess where the scrupulously on-time borrowers live, would you pick states with traditionally thrift, conservative financial stereotypes like New Hampshire, Vermont or the Midwest?  Would you perhaps also guess that some of the states with the highest prices, highest housing appreciation rates and highest uses of interest-only and option ARM loan programs might have the highest incidences of late and missed payments? After all, aren't home buyers in such markets -- think California, for example -- stretched to the limit to purchase their high priced homes in the first place?
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Well guess again. California homeowners may have to deal with sky-high prices and monstrous mortgage bills, but they pay their loans on time more reliably than homeowners in all other states but one -- high-cost, high inflation Hawaii. New Englanders tend to be relatively dependable with on-time mortgage payments, but they are not among the leaders. And the heartland Midwest actually has several states with some of the highest delinquency rates on home loans and exceptionally high rates of foreclosures.
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All these home mortgage performance factoids can be gleaned from the latest national delinquency and foreclosure survey by the Mortgage Bankers Association of America. The quarterly study covers almost 40 million active mortgage loans and is considered authoritative on the subject.  At the end of the second quarter of 2005, Hawaii, where housing appreciation soared by almost 26 percent last year, just 1.56 percent of all homeowners with mortgages were even slightly in arrears. That compares with a national average of 4.3 percent. California, where median home prices are stratospheric and rose by another 25.2 percent last year, had a late payment rate of just 1.88 percent. New Hampshire and Vermont, by contrast, had late payment rates of 2.95 percent and 2.5 percent respectively.
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Where are homeowners most likely to fall behind? The highest rates of late payments and foreclosures are in states that have relatively slow-rising home prices, and slow-growing economies with above-average unemployment. Among the slowest payers: Mississippi borrowers, whose delinquency rate at mid-year stood at 8.5 percent. Louisiana was next at 6.9 percent, followed by Indiana (6.7 percent), Tennessee (6.32 percent), Texas (6.31 percent) and Ohio (6.13 percent).
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The two big hurricanes this season, Katrina and Rita, undoubtedly will increase delinquencies in the Gulf Coast states sharply, despite the fact that many lenders have announced that they will forbear -- allow delinquencies -- for up to three months on properties in storm-savaged areas.  Foreclosures generally are the highest in the Rust Belt states where factory layoffs have been extensive and unemployment rates intractably high. Though the national average rate of foreclosure was 1 percent as of mid-year, Ohio homeowners had a 3.3 percent rate, followed by Indiana (2.8 percent), Kentucky (1.9 percent) and Mississippi (1.7 percent).
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http://realtytimes.com/rtcpages/20050926_mortgages.htm
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CREDIT CARD DELINQUENCIES RISE - By Pamela Gaynor, Pittsburgh Post-Gazette
October 2, 2005
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Driven by skyrocketing energy prices, consumers fell into arrears on all kinds of debt in the second quarter, with credit card delinquencies hitting a record of 4.81 percent of accounts in the second quarter.  The American Bankers Association, citing the run-up in gas prices to record levels in the past month, said third-quarter results likely will be even worse than the second quarter's, which hit the highest level since the ABA began tracking the number in 1973.  The last two quarters have not been pretty, said James Chessen, the ABA's chief economist.  Gas prices are taking huge chunks out of wallets, leaving some individuals with little left to meet their financial obligations.
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In addition to gasoline prices, rising interest rates are beginning to take their toll on consumers, pushing payments up on the estimated 60 percent of credit cards that carry variable rates as well as on other debt payments that are pegged to the prime rate.  Delinquencies also rose for most of the eight kinds of consumer loans the ABA monitors, including home-equity loans, on which missed payments rose to 2.75 percent of accounts in the second quarter, up from 2.61 percent in the previous quarter.
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http://www.seacoastonline.com/news/10022005/biz_nati/66015.htm
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CONSUMER PROTECTION? DON'T BANK ON IT - By Jonathan P. Baird, Concord Monitor Newspaper, October 2, 2005
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On Oct. 17, a new bankruptcy law goes into effect. Known by the Orwellian heading Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, this law makes a contribution to the well-established American political tradition of false labeling. Substance is utterly contrary to title.  The last thing this law is about is protecting consumers. It is the baby of the credit card companies, banks and other corporate interests. They drafted this one-sided legislation eight years ago, nursed it along and ultimately shepherded it through Congress.  Under the new law, more people will be forced into five-year repayment plans to creditors. The fresh start, previously considered the great plus for financially strapped consumers, will be more elusive.  A new and different means test will be the vehicle for these changes. The means test will apply to debtors with income over the state's median - $50,411 for a single earner in New Hampshire. The new law will require the court to use predetermined government figures for expense items based on IRS guidelines for tax cheats. It will base a debtor's income on an average of the previous six months, even if the debtor has been laid off or his or her circumstances have otherwise changed for the worse.
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There are many other objectionable aspects to this legislation, the scope of which is massive. Debtors will face increased costs and filing requirements. Even if they cannot afford it, they must obtain pre-bankruptcy credit counseling. They also must complete a personal financial management course. More debts will be classified non-dischargeable, and the ability of debtors to discharge credit card debt will be significantly reduced. It will be harder for tenants to use the bankruptcy law to protect themselves from eviction.
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When the bill passed last spring, Congress voted down virtually every effort to afford some consumer protection. Amendments to discourage predatory lending, to protect the homes of the elderly and the medically infirm and to protect servicemen and women were all defeated.  Even the plight of hurricane victims was ignored. Your loan debt will continue to exist even if your house, car and all personal possessions are located somewhere in the Gulf of Mexico. On Sept. 8, Rep. John Conyers introduced further legislation to protect the hundreds of thousands of families devastated by Hurricane Katrina who will suffer under the anti-debtor provisions of the new bankruptcy law.
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The corporate interests who sponsored the original legislation portrayed bankruptcy as a system where deadbeats totally escaped paying their debts. The consumer recklessly using credit cards for frivolous purpose was their image of choice. Think mall shopping spree, with no intent to repay.  Behind the stereotype lies a complex set of reasons why consumers file bankruptcy. I would estimate that for every person gaming the system, there are at least 20 who file bankruptcy due to a personal tragedy like illness, job loss or divorce.  While federal statistics do not indicate why people file, we now have good academic data about who turns to the bankruptcy system. Professor Elizabeth Warren of Harvard Law School, a bankruptcy law expert, argues that the amount of medical debt is substantial. Warren has stated that more than one-quarter of all filers cite illness or injury as a specific reason for bankruptcy. Another quarter cite uncovered medical bills of over $1,000.
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http://www.concordmonitor.com/
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EDITORS NOTES: While 2003 was a record year for US bankruptcy filings (so far it would seem that 2005 will turn out to be a new record year for bankruptcy filings as people rush to beat the October 17 deadline for the new changes), it would seem that the banks and credit card companies see the writing on the wall, and do not want to be the last man standing when the music stops (in terms of getting paid).  Who can blame them, but on the other hand, why and how is it possible that the wealthiest nation on earth has a consumer bankruptcy problem?  The politicians might be playing the - Don't Worry be Happy - theme music in the background when giving speeches about the economy, but what really is the reality?
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We tend to think the perfect storm is brewing.  The US Federal Reserve will increase interest rates, albeit slowly so as to not repeat the fiasco that took place when Volker was Fed Chairman during the Jimmy Carter years.  However, we believe higher interest rates in the US are now inevitable for two reasons:  Number one, the Fed is going to try and slow down the now higher inflation rate that has resulted in the unexpected variable of higher oil prices (not really unexpected, but that is a matter for another day) and Number Two, the foreigners loaning all the money to the US will demand a devaluation premium for keeping US Dollar denominated Treasury Bonds (and other debt instruments).  To explain the second idea, which involves much more than we have space for here, in a nutshell, inflation results in devaluation of the currency (and we also believe the Fed will allow further devaluation of the US Dollar as a policy going forward).  If you loan someone US$1 today, and you know that same dollar will probably be worth 90 cents one year from now, in the least you are going to want to see a 10-percent interest rate to compensate.  The US is now in the precarious position of being  a net debtor nation - China, Japan and South Korea own roughly 40 percent of all the outstanding US government debt.  Not only that, most notably South Korea and China, have started to slowly ease out of US Dollar investment BECAUSE of recent currency devaluations.  If the Dollar starts to tank again, they might bail altogether, unless they are compensated via higher interest rates.  President Hugo Chavez of Venezuela (who many think is crazy, but he is not so crazy as you might think) has just announced that Venezuela has finally dumped almost all of that nations US Dollar foreign reserves and US Government Securities holdings.  This was hardly noticed by domestic US news services, but it was highly reported in Latin America.
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However, higher interest rates do not bode well for the housing market: whereby a very large portion of homes in recent years have been purchased with no money down - adjustable rate mortgages or interest only mortgages.  If many of the people buying these homes are just barely making it with the current low rates of today, what are they going to do when rates go back up?   Think about it.  Also, if the mortgage rates are still low today and people are missing both credit card payments and mortgage payments now due to higher gasoline prices (at least this is what we are told) - what are these same consumers going to do when they are faced with BOTH higher gasoline costs and higher monthly mortgage payments?
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If you think about nothing else, NOW is the time to examine taking real estate profits or a fixed interest equity loan with the idea of diversifying those funds into another non US real estate market (a second or retirement home in the Dominican Republic, Argentina, Panama, etc.) or other assets not correlated or dependent upon the US economy (gold, Euros, etc.).  Also, the idea of residency or a second passport will allow you to gain access to investments you might be shut out of at the moment as a US citizen (and for tax reasons, if you are an EU resident as well).
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Will things be that bad?  No, but it really all depends upon your own situation and how well you prepare.  We do agree with the comments made by William Greider in the article above when he said: This would most likely be depression with a small d, not the financial collapse and grapes of wrath devastation Americans experienced during the Great Depression of the 1930s.  However, this does not mean that you should ignore the problem.  In addition, there are a number of factors converging now and over the next 10 years that warrant your attention - and that also include problems regarding foreign influences that are not under control of the local economy or the Central Bankers (price of oil, foreigners lending money that demand higher interest rates, etc.).
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ALSO IN THE NEWS:
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GDP GROWTH - VENEZUELA IS BEST:  Venezuela and Argentina will post the strongest GDP growth in Latin America this year, while Haiti will post the weakest results. Overall Latin America will see lower growth this year compared with 2004.
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The rise in oil prices have benefited some countries (most notably Venezuela), while hurting others, leading to a slowdown in Latin American economic growth compared with last year. In Latin America, growth has moderated to a more sustainable pace after a sharp rebound in 2004, the fund says in its outlook. Strong commodity and raw material exports and--in most large economies-- broad terms-of-trade gains continue to support the growth momentum, although manufacturing exports have weakened somewhat in tandem with the slowdown in global manufacturing. Venezuela will likely end the year with an economic expansion of 7.8 percent, the IMF forecasts. ECLAC's forecast is 7.0 percent.  Uruguay, Chile, the Dominican Republic and Peru round out the top six growth economies this year. But except for the Dominican Republic, the other countries are actually seeing slower growth this year compared with last year.
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http://www.latinbusinesschronicle.com/reports/reports/1005/gdp.htm
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EDITORS NOTES:  Celebrated economist Marc Faber has made the case for a new rally in commodities going forward, and the arguments are very compelling.  Faber claims that we are finally going to see the flip side once again whereby developing markets rich in commodities to export will probably do well over the next decade, as inflationary pressures help push prices up accordingly.  The bottom line is that the so-called industrialized nations, which really are not making anything any more (except trouble) nor are exporting anything anymore, will have a rough time of things.  Countries that do have commodities to sell (oil, copper, gold, other metals, even cattle such as the case with Argentina) will be in the drivers seat going forward.  So, this may be an interesting aspect to consider when thinking about where to buy real estate.  As some of our clients have said:  The so-called Third World or Emerging Market Countries are looking better and better every day - and nations such as the US are looking more and more like the Third World.
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CHAVEZ SAYS OIL GIVES VENEZUELA STRONG CARD TO PLAY AGAINST US - Forbes Magazine - October 2, 2005
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Last month, Chavez agreed deals to provide oil on preferential terms to most Caribbean nations after a meeting of regional energy ministers in Caracas. Bilateral agreements were signed with the Dominican Republic, Dominica, Grenada, Suriname, Belize, St Vincent and the Grenadines, Saint Kitts and Nevis, and Antigua and Barbuda.  He earlier signed similar agreements with Cuba and Jamaica. The arrangement allows participating governments to pay market price for Venezuelan oil, for just a small portion of customary up-front costs, and allows them to finance the rest of the payments over 25 years at one percent interest if oil prices exceed 40 USD a barrel.  Governments could also pay for part of the cost with services or goods such as rice, bananas or sugar. Venezuela has also agreed to provide assistance in expanding shipping and refining facilities.
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http://www.forbes.com/markets/feeds/afx/2005/10/03/afx2255354.html
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OFFSHORE CENTERS UNDER ATTACK - September 28, 2005
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Can The Bahamas retain its current offshore banking status? Since the terrorist events of September 11, 2001, concerns over financial transparency and bank secrecy have re-surfaced and the guarantee of secrecy, which at one time made many offshore jurisdictions such as The Bahamas, Bermuda, the Cayman Islands, and the British Virgin Islands attractive destinations in which to do business, is evaporating.  The efforts of organizations such as the Financial Action Task Force (FATF) and its parent organization, the Organization for Economic Co-operation and Development (OECD), are becoming more aggressive in their attacks on bank secrecy laws.  The FATF, created in 1989, consists of several member nations with the specific purpose of coordinating international anti-money laundering efforts.
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The organization is responsible for the establishment of the Financial Intelligence Unit (FIU) in several countries, including The Bahamas, to share financial information without resorting to the courts.  As recent as 1998, the OECD published a report accusing no-tax and low-tax undeveloped countries of 'harmful' tax competition.  The report basically condemned tax havens, such as the Bahamas, for engaging in tax practices, which attracted capital from high taxed, more developed countries. It encouraged tax haven countries to tax foreign investments and to eliminate bank secrecy. 
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http://www.bahamasb2b.com/news/wmview.php?ArtID=6044
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EDITORS NOTES:  The advertisement used to say that it is better in the Bahamas.  Maybe that is not the case today.  We pulled out of the Bahamas many years ago when we noticed some very disturbing things going on in the legal system as it pertained to the invasion of Bahamian Trusts and lawsuits from the US courts. Since that time, one of very recent former Prime Ministers of the country enacted some sweeping changes that put the final nail in the coffin.  The sweet heart deal that he made with the US was, if the Bahamas agreed to certain things (banking privacy and IBC legislation matters) then the US would allow US corporations to get a tax credit for holding board meetings in the Bahamas.  This was supposed to replace all the lost revenue when investors starting pulling their money out of the country.  Yeah, right.  Since that time, after seeing 40 percent of the countries banking deposit fly away within 6 months, many Bahamians said: Umm - Maybe this was not such a great idea.  They elected a new Prime Minister who promised to reverse the previous changes, but to date nothing has been done.  As Gomer Pyle would say: surprise, surprise.  Anyway, the author of this recent article asks, more or less, whether any investor would trust the Bahamas again.  You have to ask??
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IF HOUSING SLUMPS, HOW SAFE ARE YOU ? - By Arney Stone, October 3, 2005 - Business week Magazine
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Although most experts think home prices wouldn't drop more than 20% or 30% over a couple of years if the much-discussed bubble bursts, even a small drop in prices could do serious damage to equity and fixed-income portfolios, they warn.  If real estate cools dramatically, there goes half our economic growth, says Barry Ritholtz, chief market strategist at Maxim Group.  There is danger of recession -- and you know what recessions do to the stock market.
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http://www.businessweek.com/bwdaily/dnflash/oct2005/nf2005103_2711_db035.htm
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THE ECONOMY - IS IT 2005 OR 1965?  HOW CAN YOU TELL?
By Andrew Cassel - Philadelphia Inquirer - Sept. 21, 2005
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Certainly for historians of American fiscal policy, it's starting to feel like deja-vu all over again.  In the mid-1960s, we had a steadily escalating war in Vietnam. Then a series of deadly riots broke out in cities from Newark to Los Angeles.  President Lyndon Johnson, declaring his famous War on Poverty, pledged an open federal checkbook for a range of housing, education, and economic-development programs in the afflicted areas.  A few economic worrywarts fretted about whether we could afford it all - guns and butter, as the saying went back then. What would all these new programs cost?  The President dismissed his critics.  It's going to cost whatever it costs - he shrugged.  No, wait, I'm time-tripping again. Johnson didn't say that. It was President Bush, speaking just the other day about rebuilding New Orleans and the Gulf Coast after Hurricane Katrina.  Whatever it costs might be $200 billion, or it might be more. We still have little idea about the extent of the damage, the cost of repairs or even how many people will want to live in the areas ravaged by the hurricane.  No matter. Congress shows no interest in limiting the size of the federal tab, and even less in adjusting other taxes or spending to offset the cost of Katrina.  That means that whatever progress we were making on whittling down the federal budget deficit - which Bush earlier promised to cut in half before he left office in 2009 - is likely out the window.  With no new taxes on the table, and nobody in Congress willing to divert other spending - postponing new bridges to sparsely inhabited Alaskan islands, say - there's only one option left: Borrow the money - And why not? We're a rich country; our credit is triple-A around the world. Everyone, from South American industrialists to the Chinese central bank, wants to lend us money.  Yep, that's what we thought in the 1960s, too.  The 1970s were payback time. Inflation ravaged savings, slowed the economy, and kept us lurching from crisis to crisis for almost a decade.  Things are different today - but also the same. For one thing, the Europeans don't tie their currencies to the dollar - but the Asians do.  For another, today's deficits aren't just in Washington. American households, as a group, are also awash in debt via mortgages and credit cards.
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http://www.philly.com/mld/philly/12698326.htm
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LIES, DAMNED LIES, POVERTY STATISTICS - The U.S. is the richest country in the world, but has the most poverty of any industrialized democracy, By David Brady - August 28, 2005
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Durham, N.C. -- Each August, we Americans tell ourselves a lie. On Aug. 30, the Census Bureau will release the official poverty rates for 2004. Pundits, politicians, the press and the president will almost certainly rehearse empty remarks on why poverty is higher or lower than last year, and attribute this failure or success to things that really have nothing to do with poverty's true causes. This entire episode is profoundly dishonest.  This dishonesty is not because U.S. poverty is insignificant. Twelve and a half percent of the U.S., or nearly 36 million people, are officially poor.  But better estimates put those numbers closer to 18 percent, or 48 million people. U.S. poverty is nearly twice as high as that of Canada and the U.K and about three times as high as that of many European countries. The U.S. is the richest country in the world, but has the most poverty of any industrialized democracy.
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http://www.dukenews.duke.edu/2005/09/povertyoped.html
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EDITORS NOTE:  According to some very recent (June 2005) statistics for the US, about 28 Million Americans earn between Zero and US$13,000 per year in income.  Another 30 Million earn between US$13,000 and US$25,000.  All told, the chart calculated out income distributions for about 145 million people supposedly working or earning income (which assumes about half of the US population are adult aged wage earners and the rest under the age of eighteen, or retired).  There is roughly about 300 Million People living in the US right now, supposedly.  So, it is hard to say if the previously mentioned above-mentioned figure of those so-called really poor (36 Million or the higher number of 48 Million) is somehow included in this working poor statistical figure or not. Regardless, I will say this.  Pick a number, 40 million, 60 million or even 80 million.  Give or take a few million here or there - that is a whole lot of folks who have nothing, and who have nothing to loose if things are not going so well.  If the way poor Americans living in New Orleans behaved after hurricane Katrina is any indication of the American Experience when the going gets tough, I for one would not want to be around to find out. 
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READERS WRITE IN:
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In Reply To Our Last News Bulletin - Re: Newsletter Bulletin - September 20, paragraph copied below - The following person writes:
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A postage stamp in the 1950s cost 3 cents; today's cost is 37 cents - 1,233% inflation. A gallon of full-service gasoline cost 18 cents before; today it is $2.28 for self-service - 1,267 % inflation. Monthly Medicare insurance premiums paid by seniors was $5.30 in 1970; its now $78.20 - 1,475% inflation.  This information is wrong and very misleading as to the inflation numbers.  Example: the 1,233% inflation for postage stamp - that is 12.33 times more.  Gas...12.67 times more.  Medicare insurance- 14.75 times more.  Then a very important fact is missing...wages.  The average hourly wage in 1950s was $1.00/1.25.  What is it today...$12/15 per hour?  So wages have also increased around 12 to 13 times more.  I agree as often heard wages are not keeping up with price increases - Reason why more workers are falling in to the poverty level each year.  These mentioned 1950s prices only cause people to daydream and wish for those prices again.  But how many would be willing to work for $1.00 per hour.  I would like to add my example to the list.  I purchased a new 1956 Ford for $1,800...today it would cost 12 times more at $21,600.  I too do not believe the inflation numbers that the USA Government puts out.  In fact I find it difficult to believe anything they say.  One only needs to look back to the time with the American Indian and our government.  The Indians learned quickly not to believe or trust our government - white man who speaks with forked tongue?  I just recently subscribed to your newsletter and enjoy your articles.  You write some powerful stuff.
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EDITORS REPLY:  Thank you for your letter.  Well, the interesting thing is that the politicians can say whatever they want, but you know better, or better said - your wallet knows better.  Also, many of the government touted inflation statistics do not include food costs, education and medical care.  How convenient.  So, if you never eat, never send your kids to college and never get sick, yeah - maybe the numbers are true.
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ANOTHER READER WRITES:
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John - As always, I enjoyed your recent newsletter.  There is one thing however, that I cannot agree with you on - it is Colombia not Columbia (they tend to get upset with this error).  Looking forward to the next edition.  Richard (living in Colombia and liking it just fine)
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EDITORS REPLY:  Well, sorry for the typo and no offence to the nice folks in Colombia.  On the other hand, there are many people that like to spell America as Amerika, but what can you do?
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ANOTHER READER WRITES:
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Do you know of any lenders (local or overseas) that offer mortgages to foreign nationals in the DR? If so, I would appreciate some information.
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EDITORS REPLY:  This is an excellent and very, very common question.  Many people ask me about the idea of getting a local bank loan or mortgage in the Dominican Republic, and the answer is yes you can, although you probably do not want to.  Banks in the Dominican Republic are very strict and in addition, interest rates are now a bargain at anywhere from 12 percent to 18 percent for a mortgage (this is an adjustable rate, by the way).  The rates used to be as high as 30 percent or so, and now they have come down, but not far enough for me to be tempted.  In addition, you can expect that the bank might require at least a 20 or 25 percent down payment - and most mortgages are for 10 years, although they are started to give 15 year mortgages these days.  The local banks will loan money to foreigners to buy real estate, but just as is the case with a local Dominican resident or citizen that wants to borrow money, you will also need a flush cosigner (with local assets to grab) in the case you default.  Do not think this is being asked of you because you are a foreigner - it is the same situation for locals also.
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On the surface, you may think these rates and policies are terrible, but I do not and I will tell you why.  The Dominican Republic does not have a housing or credit bubble, most people cannot even afford or can become tempted to get into trouble with these kind of rates and terms.  So, while there are some people that obviously do borrow money at these rates, MOST middle-class and working class people pay cash.  How do they do that?  Just like your grandfather or grandmother did, they save it a coffee can.  So, people first get the money together and buy them-selves a building lot or plot of land.  Sometimes they pay cash, or they might pay it off with installment payments over 5 years (albeit at 20 percent interest).  After the land is paid off, then they save some more money so they can start building, bit by bit - for cash.  This is why, by the way, you often see a large number of houses half way constructed in many areas, and the foreigner thinks - Oh my God, there must be a crisis here, look at all these abandoned houses.  They are NOT abandoned.  People do what they can when they can.  Often enough they run out of money and then they wait to save some more so they can keep going with the construction.  It may take them some time, but they end up with a house they own outright - no mortgage, no bank liens, and no monkey on their back.
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All in all, Americans think they own their own homes, but they do not.  The bank owns it and they give you the privilege of living there, providing you keep paying the mortgage.  If you do not believe that, just try telling the bank it is YOUR house and you are not going to pay them anymore (see what happens).  In any event, in countries such as the Dominican Republic the percentage of people that own their own homes outright is much, much higher than in the US.  For this reason, Dominicans are not living under the same kinds of credit pressure Americans are.  And if they do borrow money, regardless to buy property or finance a television set, the lender will insist that your brother, mother, whoever cosign and be legally placed on the hook with their assets if you fly the coop.  For this reason, you do not have these same kinds of problems and this is a very important point to understand.  Even in Argentina and Uruguay, almost all property purchases are made with cash (no bank loans).  This is the case because of the previous financial crisis, but it is a good thing.  People cannot get into trouble mortgaging their lives away to the bankers and maybe losing their home later on as a result.  Some people will support the argument that low interest rates and cheap, easy credit is the sign of an advanced and modern economy.  I think it is insanity and why so many people are in trouble in the US especially.    
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In any event, getting back to the topic at hand.  I would say the best thing to do if you need to borrow money is to consider a home equity loan on your existing residence.  Current interest rates in the US and even Europe and much lower than what they are in the Dominican Republic, and using this same money, buy your Dominican property for cash.  If you live in the US at the moment, 15 year fixed mortgage rates are about 5.75 percent, so this is a huge difference.  You can of course try and approach a bank in your home country, but the problem is that no bank I am aware of would even consider the idea of loaning money for property or an asset in another country.  The risk is too great and the legal process to reclaim the property should you default too expensive. 
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