But not where you live, right? Poland is far, far away from where you are, in a different country. In a different continent perhaps. Why bother, right? It won’t happen to you, because you live in a civilized, first world country. Well, wake up friend! The Poles also thought so, but then Poland nationalized private pension funds in the middle of the night. We are here to give you a taste for what’s yet to come.
The article from Reuters “Poland reduces public debt through pension funds overhaul” paints an old and retold story. The steps go more or less like this:
- New Political System comes into power
- Government creates private pension funds
- Government still wants votes, so government borrows to spend
- Government debt is too high
- Government can’t borrow more nor pay interests
- Government steals private funds
- Magically, government is now in better financial position
- Go up to step 3 and repeat until country defaults on debt
This is a very old story and we know how it ends. We have seen it play out many, many times. We know this because it has happened before, the explanation is in our article Argentina is the future.
In Argentina, this cycle repeats itself every time there is a new government style. It couldn’t be otherwise. New politicians exploit the horrific economic conditions that the previous system created. So they come into power and introduce some sort of economic shock therapy (read borrow and plunder). The economy stabilizes. Then, the new government feels the need to stay in power, so they borrow, and spend, and borrow, and spend… until they can borrow no more. Then, they plunder, and borrow, and spend, and… you know how it goes… until the new horrific economic conditions force the people to elect a new-and-improved government… which will borrow and plunder to stabilize the economy… and on and on to a new cycle that will look exactly as the old cycle.
When does this cycle end? It ends with the dissolution of the country. We have not yet reached this stage and it may be decades away, but it will come. What form of dissolution may it be? That’s arguable, but in our next lesson, we will provide you with a few hints.
Meanwhile, what’s in it for you? Simple, know where you are going and know what will happen. Typically these plundering steps and consequences:
- Inflation (5% to 15% yearly)
- Private pension funds = your Retirement Monthly earnings will become meaningless
- Social Security funds = no more Unemployment insurance, no more Welfare
- Health Care = no more free Health Care
- Military = massive layouts in military bases
- Large inflation (15% to 30% yearly)
- Selling public hard assets = no more public buildings or land, parks or leisure locations
- Privatization of essential services & infrastructure = large rises in the cost of Water, Electricity, Phone, Broadcasting, Transportation, Natural Gas, Gasoline, Food, Roads, Public Lighting, Security and eveything else
- Hyperinflation (over 30% yearly)
- Private contingency funds from companies = Companies go bankrupt
This will eventually happen to all countries, it is inescapable
What you should be keeping in mind and doing is:
- You must be prepared. Don’t look at the next year, look at the next 20 or 30 years
- Some countries will do better, some will do really badly
- Get some gold, stash it away, never look at it. Eventually, when the dust settles, you will need it.
- You must think in becoming independent. Think multiple sources of income. Think future and debacle-proofing sources of income.
- Enjoy your life but save as much as you possibly can.
- If you are good at market timing and you can move money fast, then it may work for you, but most of us are not that good and governments will erect transfer barriers. You will be stuck with fast-depreciating local currency in a local environment.
- Diversify your investments; whenever possible buy hard assets. things that won’t lose value after each cycle, such as apartments in densely populated areas. Preferably in Capital cities.
- Build a business that can be moved into another country at a moment’s notice (digital is ideal).
- Get a skill that everybody needs (electrician, plumber, undertaker, painter) or buy a stake in such local business.
- Get a second or a third passport, from a different geographic area (for example: if you are in North America, get something Latin American)
- Be prepared to emigrate, don’t get too attached to your location, however comfortable you may feel. When things start to change, they will change fast.
And that’s it! At the end of the day it’s a survival game. An urban survival game. Forget going native, just look for better pastures. Keep it as simple as possible and be flexible with your options. Remember, you should not be looking at what’s best but at what’s possible.
It’s your choice, survive or not. You have been warned.
Note: please see the Glossary if you are unfamiliar with certain words.