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Ecuador & Economic Collapse


Ecuador may be a great place to be if there is a global economic collapse.

A theme in our messages is that there are four ways to beat inflation… investing in commodities… real estate… stocks and your own small business.
This is one reason I like Ecuador real estate. First it is a good value now.  Second it is a great place to be any time and third it is an especially good place to be during a global crisis.
The people are by nature, friendly and easy going.  There is plenty of food and never severe temperature problems.
Ecuador is a small agricultural country and as such, a huge national distribution system is not required.  The food is fresher.  Preservatives are not as required.

Ecuador’s land for producing food is rich.

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Food is produced in every nook and cranny.

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and available in markets and every village.

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Corn, beans and potatoes are the basics in the Andes.

Excerpts from my latest multi currency portfolio lesson explains why this is extra important at this time. The lesson says:

This message is about risk and the chances of economic collapse.

Every investment adviser I work with is nervous… due to the massive debt that has been created in the last recession…  without a lot to show for the spending.

For example… an article in the telegraph entitled “Société Générale tells clients how to prepare for potential ‘global collapse” provides a big warning.

Société Générale is one of the oldest banks in France and is one of the main European financial services companies and is active all over the world.

The Telegraph article about this bank says:

Société Générale has advised clients to be ready for a possible “global economic collapse” over the next two years, mapping a strategy of defensive investments to avoid wealth destruction.

Explosion of debt: Japan’s public debt could reach as much as 270pc of GDP in the next two years.  In a report entitled “Worst-case debt scenario”, the bank’s asset team said state rescue packages over the last year have merely transferred private liabilities onto sagging sovereign shoulders, creating a fresh set of problems.

Overall debt is still far too high in almost all rich economies as a share of GDP (350pc in the US), whether public or private. It must be reduced by the hard slog of “deleveraging”, for years.

Under the French bank’s “Bear Case” scenario (the gloomiest of three possible outcomes), the dollar would slide further and global equities would retest the March lows. Property prices would tumble again. Oil would fall back to $50 in 2010.

Governments have already shot their fiscal bolts. Even without fresh spending, public debt would explode within two years to 105pc of GDP in the UK, 125pc in the US and the eurozone, and 270pc in Japan. Worldwide state debt would reach $45 trillion, up two-and-a-half times in a decade.

The underlying debt burden is greater than it was after the Second World War, when nominal levels looked similar. Ageing populations will make it harder to erode debt through growth. “High public debt looks entirely unsustainable in the long run.

We have almost reached a point of no return for government debt,” it said.

Inflating debt away might be seen by some governments as a lesser of evils.

If so, gold would go “up, and up, and up” as the only safe haven from fiat paper money.

SocGen advises bears to sell the dollar and to “short” cyclical equities such as technology, auto, and travel to avoid being caught in the “inherent deflationary spiral”.  Emerging markets would not be spared. Paradoxically, they are more leveraged to the US growth than Wall Street itself. Farm commodities would hold up well, led by sugar.

Mr Fermon said junk bonds would lose 31pc of their value in 2010 alone. However, sovereign bonds would “generate turbo-charged returns.”

There are several ways for governments to solve debt problems.

Excerpts from an article last week in USA Today by John Waggoner entitled “Depression, WWII lessons for economic recovery? Sacrifice” explains:

Even during the Great Depression, federal spending was never more than 11% of GDP.   The last time the nation’s debt was this big compared with gross domestic product — 70.4% of GDP — was immediately following World War II.

How did the Greatest Generation pare it down? It didn’t.

It grew the economy faster than the debt, pushing down the debt-to-GDP ratio and making debt payments easier to manage. But that generation also did some things that U.S. citizens and politicians don’t seem willing to do today. It paid higher taxes, and it had a smaller government — and, at least until the 1980s, it kept annual budget deficits small.

The citizens of the U.S. owe $12.3 trillion in Treasury debt to banks, individuals and foreigners. That’s about $40,000 per person living in the U.S., and it’s not counting the amount our states owe — or, for that matter, what we owe to our individual creditors.

Although the U.S. is currently handling its debt comfortably and pays remarkably low interest rates on it, there’s mounting recognition that sooner or later, we must move the debt-to-GDP ratio in the other direction. And that will involve hard decisions on taxes, spending and sacrifice — something the World War II generation knew much about.

Even during the Great Depression, federal spending was never more than 11% of GDP, according to the Economic Report to the President, an annual government publication by the Council of Economic Advisers.

By 1942, spending climbed to $35 billion, or the inflation-adjusted equivalent of $465 billion. Annual spending peaked at $92.7 billion in 1945, or $1.1 trillion in today’s dollars. By 1945, the U.S. debt was 121.7% of GDP, vs. an estimated 70% today, according to the Economic Report to the President.

Then and now:

How did the government repay the war debt? It didn’t, really. Much of it was rolled over when it matured, but new borrowing was limited. “During the early postwar years, the federal government ran either small surpluses or small deficits,” says Anthony O’Brien, professor of economics at Lehigh University. The federal debt was $260.1 billion in 1945 and $274.4 billion 10 years later in 1955.

But the economy grew faster than the deficit did. GDP was $221.4 billion in 1945, and $394.6 billion in 1955 — despite high tax rates, which persisted. Because of economic growth, the ratio of debt to GDP fell nearly every year from 1947 to 1981. As the nation’s debt became a smaller part of GDP, the debt became much less burdensome, much as a fixed mortgage payment becomes more affordable as your income grows.

What’s different between then and now? Plenty.

World War II was a finite event, and it’s pretty easy to stop war spending and bring the budget back into balance — or close to it — when the war is over.

“Government spending went down by a dramatic amount,” after WWII, says Steven Hess, lead U.S. debt analyst for Moody’s. And government was far more limited: In 1945, there was no Department of Education, no Environmental Protection Agency, no National Security Agency, for that matter.

Today, the U.S. is involved in two wars: Both have lasted longer than WWII, but they have been far less expensive — about $1 trillion so far. So there’s no one dramatic event that will reduce the debt-to-GDP ratio, Hess says. “It’s going to be much more difficult.” The problems:

•Recession. When the economy falters, so does the government’s income — that is to say, the taxes it collects from corporations and individuals. The government collected $2.5 trillion in 2008, and it collected $2.1 trillion in 2009, a $400 billion shortfall.

•Spending. Federal spending has jumped from $1.8 trillion in 2008 to an estimated $3.1 trillion in 2009. Unlike World War II spending, however, there’s no quick end in sight to current spending. Much of the growth in spending since the end of the war came from entitlement programs, such as Social Security, and military spending. In 1963, for example, Social Security and Medicare were 14.8% of all federal tax receipts, and defense was 50.1%. In 2009, Social Security and Medicare are an estimated 40% of federal tax receipts, and defense is 25.7%.

•Taxes. The maximum federal income tax rate in 2009 is 35%, down from 39.6%in 2000.

Lower taxes stimulate the economy, and raising taxes in a recession is a nearly sure-fire way of deepening the recession. Nevertheless, tax cuts add to the deficit if the government doesn’t rein in spending. “You can’t raise spending and cut taxes,” and get a balanced budget, says David Wyss, chief economist for Standard & Poor’s. Estimates of how much the tax cuts have added to the deficit range from about $1.8 trillion to $1.35 trillion.

•War. Fighting a war is one of the most reliable ways to create a big debt. The British, for example, finished repaying their World War II debt to the U.S. in 2007. Germany will finish repaying its World War I reparations in 2010. Every Allied nation except Finland defaulted on its World War I debt to the U.S.

The article goes on to point out that there are three ways to solve the problem… Raise taxes, cut spending, or grow the economy fast enough — and grow the deficit slowly enough — that debt becomes a smaller portion of GDP.

Currently, the nation’s debt-to-GDP ratio is in line with most other developed countries and well below Japan’s.

This does not mean the US debt is good. This means that the global debt is bad!

And the US debt is headed higher towards the 100%, level where it is difficult to grow out of.

The way to cut the deficit is a combination of tax increases and budget cuts. Yet because neither of these options are politically popular…. expect inflation… the loss of the purchasing power… around the world.

There is a warning signal in the markets now… the rising US dollar.

The chart below shows how the euro recovered after the past panic shift to the greenback and how the dollar is now rising again.

euro-dollar chart

End of excerpt.

My latest Multi Currency Lesson explains more about why there is extra risk now. Learn how to obtain this lesson here.

There is little we can do about the global economy.  That fate is beyond our control.  Yet there is a lot we can do for ourselves.  The common refrain among good investment managers is “do not waste the recession”.

These economic worries and concerns, pressures and tensions in countries everywhere are problems and problems create opportunity. Whether you live in Ecuador… full time or part… you can gain extra opportunity investing in commodities… real estate… stocks and your own small business.

Gary

Join Merri and me this February  at a seminar or tour and share ways to invest, do business and live that protect wealth as they bring joy, satisfaction and better health.

Join us with our investment advisors and tax attorney February 11-14  at Quantum Wealth -International Investing & Business Made EZ, Mt. Dora, Fl.

You can also come on with us to Ecuador.

February 15-16 Travel to Quito and tour Quito

February 17     Travel Quito to Manta

February 18-19  Manta & Mid Coast Real Estate Tour

February 20 Travel Manta to Cotacachi

February 21-22 North Andes, Imbabura & Cotacachi Real Estate Tour

February 23-24  Quito & Mindo Real Estate Tour

February 25 Travel Quito Cuenca

February 26-27  Cuenca Real Estate Tour

Or join us in March 2010

March 11-14     Super Thinking + Spanish Course, Mt. Dora, Fl.

March 15    Travel to Quito

March 16 Travel Quito Cotacachi

March 17-18  North Andes, Imbabura & Cotacachi Real Estate Tour

March 19-20    Cotacachi Shamanic Tour

March 21  Travel Cotacachi to Manta

March 22-23   Manta & Mid Coast Real Estate Tour

March 24 Travel Manta to Cuenca

March 25-26 Cuenca Real Estate Tour

March 27  Travel Cuenca to Salinas

Mar. 28-29   Salinas & South Coast Real Estate Tour

There are five days left to gain the largest savings on our Ecuador tours.

The Ecuador airfare war makes it cheaper to get to Ecuador than ever before… and there is still time to enjoy great Ecuador tour savings.

You enjoy discounts by attending multiple seminars and tours. Here are our multi tour adventure discounts.

Two Pack… 2 seminar courses & tours $998 Couple  $1,349 Save $149 on couple

Three Pack… 3 seminar courses & tours   $1399 Couple  $1,899 Save $98 single or $348 on a couple or more

Four Pack… 4 seminar courses & tours   $1,699 Couple $2,299 Save $98 single or $697 on a couple or more

Five Pack… 5 seminar courses & tours  $1,999 Couple $2,699 Save $496 single or $1,046 on a couple or more

Six Pack… 6 seminars courses & tours  $2,199 Couple $3,099 Save $795 single or $1,395 on a couple or more

Even Better.  Greater Savings. Our 2010 International Club membership allows you and a guest to attend as many of the 51 courses and tours we’ll sponsor and conduct in 2010  (fees would be $40,947 for all these courses individually) is only $2,999.

The International club fee rises to $3,500 January 25 2010. Enroll in the International Club now at the original fee of $2,999. Save $501 extra before January 25, 2010.

Because holiday expenses often tighten the winter cash flow, you can enroll with three monthly payments… $1,025 in January… $1,025 in February and $1,025 in March 2010.

If you join the International Club, the entrance fee for 2010 is $2,999 (until January 2010).  Your attendance fees at all courses will be waived. You and a guest of you choice can attend courses worth $40,947.You can calculate the savings as our schedule of all 2010 courses here.
International Club 2010 Membership $2,999 Enroll here

Ecuador Beats Inflation


Living in Ecuador is one way to beat inflation.

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Ecuadorians now how to live well on less.  They even farm steep land like this.

See two other ways to beat inflation below.

Beating inflation is absolutely vital now… especially for those about to retire… because Social Security is fading.

Lalla was a 14th century poetess who lived in Kashmir.  She described herself as a somewhat… something… moving dreamlike… on a fading road.

This is a perfect description for Social Security now… somewhat… something… moving dreamlike… on a fading road.

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Almost every plot of spare Ecuador land is rich and growing food.

Picture this.

Excerpts from a recent AOL.Money article by Jim Kuhnhenn entitled “White House Projects $9 Trillion Deficit”: In a chilling forecast, the White House is predicting a 10-year federal deficit of $9 trillion — more than the sum of all previous deficits since America’s founding. And it says by the next decade’s end the national debt will equal three-quarters of the entire U.S. economy.  But before President Barack Obama can do much about it, he’ll have to weather recession aftershocks including unemployment that his advisers said Tuesday is still heading for 10 percent.  Overall, White House and congressional budget analysts said in a brace of new estimates that the economy will shrink by 2.5 to 2.8 percent this year even as it begins to climb out of the recession. Those estimates reflect this year’s deeper-than-expected economic plunge.

The grim deficit news presents Obama with both immediate and longer-term challenges. The still fragile economy cannot afford deficit-fighting cures such as spending cuts or tax increases. But nervous holders of U.S. debt, particularly foreign bondholders, could demand interest rate increases that would quickly be felt in the pocketbooks of American consumers.

The amount of  this debt just an astounding and will almost certainly lead to inflation and a falling US dollar.

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A lot of the food grown is organic so…

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the local markets, like this one in Cotacachi have low cost organic “Productos Organicos.”  This makes it easier and less expensive to eat well in Ecuador.

The article above about the deficit is bad enough news but a recent USA Today article Social Security checks set to shrink in 2010 that shows how for those who are retiring, matters are getting even worse. Here is an excerpt:  Millions of older people face shrinking Social Security checks next year, the first time in a generation that payments would not rise.

The trustees who oversee Social Security are projecting there won’t be a cost-of-living adjustment (COLA) for the next two years. That hasn’t happened since automatic increases were adopted in 1975.

By law, Social Security benefits cannot go down. Nevertheless, monthly payments would drop for millions of people in the Medicare prescription-drug program because the premiums, which often are deducted from Social Security payments, are scheduled to go up slightly.

Cost-of-living adjustments are pegged to inflation, which has been negative this year, largely because energy prices are below 2008 levels.

Seniors “count on that COLA,” said Barbara Kennelly, a former Democratic congresswoman from Connecticut who heads the National Committee to Preserve Social Security and Medicare. “To some people, it might not be a big deal. But to seniors, especially with their health care costs, it is a big deal.”

Even the Cathedral next to our hotel grows organic corn in the church yard.

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There are numerous ways to beat this inflation crunch.

Inflation beater #1: Move to a low cost of living location like Ecuador. Inflation will hit Ecuador as well… but the starting baseline is lower.  In addition people in Ecuador know how to live well… on less.

Inflation beater #2: Own real estate or other commodities. The price of property and commodities, properly purchased will rise with inflation.  Property in Smalltown USA especially offers value now.

Inflation beater #3: Have your own business.  This is the greatest inflation beating asset of all, the ability to earn wherever you live.

This is why we offer our course Tangled Web… How to Have an Internet Business.

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With so much sun and plenty of rain, the grass is rich, even in Cotacachi at 7,500 feet altitude for…

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these organic cows.  Plus raw milk can be purchased directly… and at a low cost from the dairy keeping the cost of good living down.

A clear mind and healthy body are also a vital assets… plus a second language is a powerful diversification tool.

This is why I am willing to pay you $300 to attend either our Ecuador Super Thinking plus Spanish seminar in September or our North Carolina International Business & Investing seminar in October.  Sign up for either seminar and I will email you our Tangled Web… How to Have an Internet Business Course (offered at $299) free plus I’ll knock an extra dollar off your seminar fee…. to round up the $300 savings.

Gary

Here are comments from one seminar delegate about the way we help: I really enjoy your Ecuador e-mail every day, especially because of the eclectic nature of the subjects. The recent postings on Loja were great, as my wife and I visited Loja for two nights and a day when were were in Ecuador last March. It is a beautiful town, and we met some very nice people there.

At our hotel the staff makes our own butter, marmalade and ice cream. Plus they love serving in beautiful ways. Here is how they set out the cutlery!  How can anyone not be charmed by such care.

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Sept. 17-21 Ecuador Super Thinking + Spanish Course

Sept. 23-24 Imbabura Real Estate Tour

Sept. 25-28 Ecuador Coastal Real Estate Tour

Learn more about global investing, how to have an international business and diversification in Ecuador at the seminar.

Oct. 9-11 IBEZ North Carolina with our webmaster  David Cross & Thomas Fischer of JGAM

October 16-18 Ecuador Southern coastal tour (early sign up before Sept. 1, $499 per person).

Oct. 21-24 Ecuador Import Export Tour

Oct. 25-26 Imbabura Real Estate Tour

Nov. 6-8 IBEZ Ecuador Seminar

Nov. 9-10 Imbabura Real Estate Tour

Nov. 11-14 Ecuador Coastal Real Estate Tour

Attend any two Ecuador seminar or tours in a calendar month…$949 for one.  $1,349 for two.

Read the entire articles below:

White House Projects $9 Trillion Deficit

Social Security checks set to shrink in 2010