The Elephant in the room: How should we prepare for the collapse of the US?

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Re: The Elephant in the room: How should we prepare for the collapse of the US?

Post by D1984 » Wed Jul 08, 2020 12:50 pm

Hal wrote:
Wed Jul 08, 2020 11:31 am
bitcoininthevp wrote:
Wed Jul 08, 2020 10:28 am
I think that guns, passport, bitcoin, increased physical gold allocation, increasing your digital privacy, land, upping self sufficiency skills (gardening, etc) and overall vigilance are good "variable portfolio" ideas here.

I think trying to invest international or changing %s of the PP is a really bad idea. The PP is made for the different conditions a (single) economy could be in. If you start investing in other countries, you could be exposed to their potentially differing economic conditions for part of the portfolio and exposed domestically for others. Could be double right or double wrong. Or in PP land, quadruple wrong since there are 4 assets.

Side note: I remember Harry saying to do the PP in your home currency. I do NOT remember anything about only/primarily investing in the world reserve currency. Please send any sources of that.
Hi Bitcoininthevp,

With regards to the reserve currency, he alluded to that in his radio show.

He stated that gold was the most popular "money" after the USD, and if people lost faith in the USD, the funds would flow into gold.
The resultant increase in gold price would cover any losses in the rest of the PP.

Marc DeMessel(?) covered what happened to the PP in Iceland during the GFC. Gold did not increase in value to cover the losses in the rest of the PP.
The permanent portfolio in Iceland in 2008 DID rise enough in total value to protect an Icelander's savings (and gold was indeed the asset that carried the portfolio). IIRC the total Icelandic PP was up about 45.5% or 46% for the year 2008 in Icelandic Krona terms whereas inflation in Iceland for the year 2008 was at around 18%. Mr. Demesel then went deep into "inflation truther" territory and said that the Icelandic PP did not protect the value of an Icelander's savings during the GFC because the Icelandic government was lying about/understating inflation. If you accept that the Icelandic's governments inflation numbers are more or less correct then the PP in Iceland did pretty well in 2008; even if inflation in 2008 was TWICE what the official Icelandic government numbers claimed it was the PP still returned almost 9% or 10% over inflation.

With that said I would definitely agree that in a country as small and economically un-diversified as Iceland one should hold at LEAST half of one's stock allocation in non-Icelandic stocks (i.e. in a world index fund or something of that nature); doing so would've chipped a few performance points off the portfolio in 2002 to 2007 but would've made up for that several times over in 2008!
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Re: The Elephant in the room: How should we prepare for the collapse of the US?

Post by blue_ruin17 » Wed Jul 08, 2020 1:26 pm

D1984 wrote:
Wed Jul 08, 2020 12:50 pm
With that said I would definitely agree that in a country as small and economically un-diversified as Iceland one should hold at LEAST half of one's stock allocation in non-Icelandic stocks (i.e. in a world index fund or something of that nature); doing so would've chipped a few performance points off the portfolio in 2002 to 2007 but would've made up for that several times over in 2008!
I think that is entirely reasonable.

In fact, sometimes I have even considered doing so for the Canadian PP, just because the Canadian economy is not that well diversified, and (IMO) is massively over exposed to the financial sector.

But ultimately I don't bother because of certain tax considerations, and more over because I always opt for sheer simplicity whenever possible.
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Re: The Elephant in the room: How should we prepare for the collapse of the US?

Post by Smith1776 » Wed Jul 08, 2020 6:42 pm

I am personally extremely partial to further diversifying the PP into international assets as well as factors. My big fear for a vanilla domestic PP? Japan. The following is the drawdown chart for a traditional PP in Japan.

japan.png
japan.png (58.71 KiB) Viewed 8318 times

When we diversify the equity portion of the portfolio with half global cap weighted stocks and half global SCV stocks we gain a lot of benefit.

japan2.png
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Re: The Elephant in the room: How should we prepare for the collapse of the US?

Post by jalanlong » Wed Jul 08, 2020 8:08 pm

blue_ruin17 wrote:
Wed Jul 08, 2020 12:43 pm
Hal wrote:
Wed Jul 08, 2020 11:31 am
Marc DeMessel(?) covered what happened to the PP in Iceland during the GFC. Gold did not increase in value to cover the losses in the rest of the PP.
Image

From the article "Permanent Portfolio Rescues Iceland From Total Collapse"
The Permanent Portfolio also got a serious beating. Expressed in euros, 50% of your purchasing power is lost. Also painful, but you still have 146 krona instead of 110 krona like the saver, meaning you have 30% more purchasing power than a savings account. You have 146 krona instead of 72,5 krona for a traditional ‘defensive’ portfolio investor, meaning you now have more than double his purchasing power.

You quadrupled your purchasing power versus a neutral investor with 50% stocks and 50% bonds and fifteen folded your purchasing power versus a traditional aggressive investor with 100% stocks.

The experience in Iceland shows that the Permanent Portfolio is unable to perform miracles. It remains a fact that an Icelander, even with the Permanent Portfolio, can buy a lot less imported goods. However, its relative purchasing power compared to other savers and investors went up considerably.
I guess my question would be, what was the alternative for the Icelander who desired a conservative, defensive investment portfolio? Considering the economic collapse that occurred, I think the Permanent Portfolio preformed quite well. In particular, its ability to preserve domestic purchasing power is highly significant because -- at least for me -- that is the most important factor. You can always do without foreign imports as long as you can still afford food, supplies, and can pay the rent.

Could or should the Icelander have simply invested in a Euro PP? Maybe, but then they'd have to deal with the constant problem of unpredictable foreign exchange fluctuations. Since most people spend most of their money in their home country, this introduces a volatility factor that doesn't actually enhance portfolio performance or enhance risk adjust performance.
So a gold/cash portfolio would have been the best choice then if choosing more than one asset? Tech would like that portfolio!
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Re: The Elephant in the room: How should we prepare for the collapse of the US?

Post by blue_ruin17 » Wed Jul 08, 2020 8:25 pm

jalanlong wrote:
Wed Jul 08, 2020 8:08 pm
So a gold/cash portfolio would have been the best choice then if choosing more than one asset? Tech would like that portfolio!
A gold/cash portfolio sure would have been tough to live with in the early 2000s when stocks were on a rampage year after year. And remember, during this time the Permanent Portfolio would have been systematically harvesting those crazy stock gains through the rebalancing mechanism.

Investing would be easy if we all had save states so that we could go back and get into the "right" allocation for a particular period of time. But the reality is we're all locked in iron man mode and the fog of war is thick.
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Re: The Elephant in the room: How should we prepare for the collapse of the US?

Post by Xan » Wed Jul 08, 2020 8:50 pm

Smith1776 wrote:
Wed Jul 08, 2020 6:42 pm
I am personally extremely partial to further diversifying the PP into international assets as well as factors. My big fear for a vanilla domestic PP? Japan. The following is the drawdown chart for a traditional PP in Japan.


japan.png


When we diversify the equity portion of the portfolio with half global cap weighted stocks and half global SCV stocks we gain a lot of benefit.


japan2.png
It would be interesting to see those charts superimposed against inflation/buying-power. I believe Japan was in deflation at the time and the PP actually did more-or-less its normal thing in real terms.
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Re: The Elephant in the room: How should we prepare for the collapse of the US?

Post by Mark Leavy » Wed Jul 08, 2020 9:05 pm

Xan wrote:
Wed Jul 08, 2020 8:50 pm
Smith1776 wrote:
Wed Jul 08, 2020 6:42 pm
I am personally extremely partial to further diversifying the PP into international assets as well as factors. My big fear for a vanilla domestic PP? Japan. The following is the drawdown chart for a traditional PP in Japan.


japan.png


When we diversify the equity portion of the portfolio with half global cap weighted stocks and half global SCV stocks we gain a lot of benefit.


japan2.png
It would be interesting to see those charts superimposed against inflation/buying-power. I believe Japan was in deflation at the time and the PP actually did more-or-less its normal thing in real terms.
I thought all of Tyler's charts were inflation adjusted.
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Re: The Elephant in the room: How should we prepare for the collapse of the US?

Post by Hal » Thu Jul 09, 2020 2:41 am

Here is Marcs YouTube channel, so there may be more info in here.
I notice there are some PP talks.
https://www.youtube.com/user/Marcdemesel/videos

And for Canadians reading, 25% MSCI World vs 25% Canadian TSM Permanent Portfolios
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Re: The Elephant in the room: How should we prepare for the collapse of the US?

Post by Smith1776 » Thu Jul 09, 2020 5:40 am

Yeah you're correct, Mark. Tyler's charts are inflation adjusted. In defence of the PP, while that first chart in my previous post doesn't look too pleasant, it's much better than alternative portfolio's like 60/40. O_O

Still, I think diversifying the PP internationally and amongst factors makes eminent sense. The thing about the PP is that it was conceived of during a time in which international investing was not as accessible as it is today. Factor ETFs were a nothing more than a gleam the eye of some academics. Now, this extra diversification is easy and cheap to access. And if you implement allocations such as the Goldsmith PP it actually simplifies the strategy (from 4 funds down to 2).

I'd imagine if Browne were alive today there's a good chance he'd embrace this increased diversification.

To be clear, I think the international diversification benefit can be extended to bonds. Having exposure to multiple yield curves simultaneously can deliver additional benefit. I was going to include global bonds in the charts included in my previous post regarding Japan, but I can't be sure if they're currency hedged on Tyler's site or not.
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Re: The Elephant in the room: How should we prepare for the collapse of the US?

Post by Hal » Thu Jul 09, 2020 7:47 am

Smith1776 wrote:
Thu Jul 09, 2020 5:40 am
Yeah you're correct, Mark. Tyler's charts are inflation adjusted. In defence of the PP, while that first chart in my previous post doesn't look too pleasant, it's much better than alternative portfolio's like 60/40. O_O

Still, I think diversifying the PP internationally and amongst factors makes eminent sense. The thing about the PP is that it was conceived of during a time in which international investing was not as accessible as it is today. Factor ETFs were a nothing more than a gleam the eye of some academics. Now, this extra diversification is easy and cheap to access. And if you implement allocations such as the Goldsmith PP it actually simplifies the strategy (from 4 funds down to 2).

I'd imagine if Browne were alive today there's a good chance he'd embrace this increased diversification.

To be clear, I think the international diversification benefit can be extended to bonds. Having exposure to multiple yield curves simultaneously can deliver additional benefit. I was going to include global bonds in the charts included in my previous post regarding Japan, but I can't be sure if they're currency hedged on Tyler's site or not.
There you go ;)
<snip>
While the data does not explicitly contain corporate bonds, most high-grade corporate bonds will have very similar returns to government bonds of the same average maturity. This also applies to popular total bond market funds.

While Europe stocks include the UK and Switzerland, Europe bonds represent the common currency Euro area only. The numbers use all credit ratings and changing EU composition as defined by the European Union. Numbers prior to the Euro are measured in ECU.

All bond funds on Portfolio Charts are unhedged.
<snip>
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Re: The Elephant in the room: How should we prepare for the collapse of the US?

Post by mathjak107 » Thu Jul 09, 2020 4:41 pm

Total bond funds were down or hardly up in 2008 ...they behaved nothing like treasuries
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Re: The Elephant in the room: How should we prepare for the collapse of the US?

Post by Smith1776 » Thu Jul 09, 2020 5:21 pm

Hal wrote:
Thu Jul 09, 2020 7:47 am

There you go ;)
<snip>
While the data does not explicitly contain corporate bonds, most high-grade corporate bonds will have very similar returns to government bonds of the same average maturity. This also applies to popular total bond market funds.

While Europe stocks include the UK and Switzerland, Europe bonds represent the common currency Euro area only. The numbers use all credit ratings and changing EU composition as defined by the European Union. Numbers prior to the Euro are measured in ECU.

All bond funds on Portfolio Charts are unhedged.
<snip>
Thanks! Mystery solved.

Instead of "can't be sure" I should have said "too lazy to check." ;D
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Re: The Elephant in the room: How should we prepare for the collapse of the US?

Post by Hal » Fri Jul 10, 2020 6:28 am

Considering the OP's questions a bit more.....

A little thought experiment about a typical retirement account :)

From the ERE page about the PP https://wiki.earlyretirementextreme.com ... o#Variants

1. PP can be replicated by 25% Shares/25% Gold/50% Intermediate Bonds

401(k) lemonade
In such cases the lemonade modification to the PP could be used (as in "turn lemons into lemonade"). In theory, the cash and bond allocations, which are short- and long-term treasury bonds respectively, behave equivalently to intermediate term treasury bonds. So the cash and bond allocations could be merged into one large intermediate term treasury allocation:

25% stock
25% gold
50% intermediate Treasury bonds


2. OK, so now we have 25/25/50 allocation, but HB said the economy refers to "whatever economy the investor participates in"

Outside the US
The original books describing the PP were written by US authors for US audiences, so they described the PP assets in terms of US securities.

However, in a radio show (TODO: add reference), Browne explained that the economy referenced in the four-condition analysis is a variable which refers to whatever economy the investor participates in. For an American, economy means the US economy, while for a German, economy means the German economy, and so on.


3. What if we want to participate in "the developed world" economy? We get the Portfolio Charts screenshot

4. Interesting enough, the worst Ulcer Index of all the countries is about 10. Try plotting Ulcer Index against average return and change the country

5. Hals thought to himself... "I wonder if Hedged International Bonds would improve things?"
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Re: The Elephant in the room: How should we prepare for the collapse of the US?

Post by StinkyToes » Tue Jul 14, 2020 12:26 pm

sophie wrote:
Wed Jul 08, 2020 11:46 am
I think we will have plenty of warning if a wealth tax that could capture middle to upper middle class US citizens becomes a real danger. They'll start with ultra-high wealth individuals, then they will gradually ratchet down the threshold, just as happened with the AMT. I imagine that a low threshold e.g. $2M would be exceedingly difficult to get passed, so they won't start there. A number like $10M is about the minimum I'd expect.

I also don't think the U.S. will "collapse". If you define "collapse" you'll likely come up with a hyperinflation or severe deflation/depression scenario. The PP can handle both of those well enough - and certainly better than your standard stock/bond portfolio.
Respectfully, I doubt we will have much warning. My understanding is that the US already imposes a hefty tax on those who renounce their citizenship. Expect this tax to increase dramatically in the near future. By the time we see the train coming, it will likely be too late to get off the tracks.

When I say "collapse" I mean that the USA as we know it will probably cease to exist, like the Indus Valley civilization in 1300 BC, the Olmec civilization in 400 BC, the western Roman Empire in the Fifth Century AD, and the USSR in the late 1980s (and dozens of others). What will follow I have no idea. Perhaps some US territory will be annexed by other countries (e.g. Russia, Mexico, Canada). What remains will likely be governed more like a tin pot dictatorship than a liberal democracy.

I agree with you that the PP is far better than the standard stock/bond portfolio in such scenarios.
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Re: The Elephant in the room: How should we prepare for the collapse of the US?

Post by Hal » Tue Jul 14, 2020 1:42 pm

StinkyToes wrote:
Tue Jul 14, 2020 12:26 pm
When I say "collapse" I mean that the USA as we know it will probably cease to exist, like the Indus Valley civilization in 1300 BC, the Olmec civilization in 400 BC, the western Roman Empire in the Fifth Century AD, and the USSR in the late 1980s (and dozens of others). What will follow I have no idea. Perhaps some US territory will be annexed by other countries (e.g. Russia, Mexico, Canada). What remains will likely be governed more like a tin pot dictatorship than a liberal democracy.

I agree with you that the PP is far better than the standard stock/bond portfolio in such scenarios.
S/Toes,

A few things to consider if you think things are that dire...

From an extended family member who survived WW2 in Europe

1. You get your funds out before trouble. Gold is best for restarting your life after the war. Try to spend only local currency during the war where-ever you decide to go to. Have at least 2 locations to wait it out.

2. While waiting to leave, make sure you have heaps of stockpiled food. Many didn't and paid the ultimate price.

3. Get out early - he did not see his brothers/sisters again until the Berlin Wall came down, yes 45 years later. They hesitated and ended up trapped.

I sincerely hope your prediction is wrong.....

PS: 75th Anniversary of Wilhelm Gustloff - he lived on the Baltic Sea
https://www.youtube.com/watch?v=JIlcP1fW5I4
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Re: The Elephant in the room: How should we prepare for the collapse of the US?

Post by Xan » Tue Jul 14, 2020 1:55 pm

Hal, can you explain what the heaps of food while waiting to leave are for? Are you in hiding in your own house before you leave?
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Re: The Elephant in the room: How should we prepare for the collapse of the US?

Post by Hal » Tue Jul 14, 2020 2:06 pm

Xan wrote:
Tue Jul 14, 2020 1:55 pm
Hal, can you explain what the heaps of food while waiting to leave are for? Are you in hiding in your own house before you leave?
Hi Xan,
He was only 15 at the time, but his parents had stockpiled food illegaly while waiting for a chance to escape. He was in his parents house, and once the Soviets overrun the area decided to make an escape attempt to the allied occupied zone before they put the wall up.
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Re: The Elephant in the room: How should we prepare for the collapse of the US?

Post by bitcoininthevp » Tue Jul 14, 2020 2:13 pm

For what its worth, from Craigs PP book:

Image
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Re: The Elephant in the room: How should we prepare for the collapse of the US?

Post by Xan » Tue Jul 14, 2020 2:31 pm

Hal wrote:
Tue Jul 14, 2020 2:06 pm
Xan wrote:
Tue Jul 14, 2020 1:55 pm
Hal, can you explain what the heaps of food while waiting to leave are for? Are you in hiding in your own house before you leave?
Hi Xan,
He was only 15 at the time, but his parents had stockpiled food illegaly while waiting for a chance to escape. He was in his parents house, and once the Soviets overrun the area decided to make an escape attempt to the allied occupied zone before they put the wall up.
Wow. It's hard to imagine what that must have been like. Turned out they played everything perfectly, but how dangerous must all that have been.
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Re: The Elephant in the room: How should we prepare for the collapse of the US?

Post by pp4me » Tue Jul 14, 2020 2:49 pm

StinkyToes wrote:
Tue Jul 14, 2020 12:26 pm
sophie wrote:
Wed Jul 08, 2020 11:46 am
I think we will have plenty of warning if a wealth tax that could capture middle to upper middle class US citizens becomes a real danger. They'll start with ultra-high wealth individuals, then they will gradually ratchet down the threshold, just as happened with the AMT. I imagine that a low threshold e.g. $2M would be exceedingly difficult to get passed, so they won't start there. A number like $10M is about the minimum I'd expect.

I also don't think the U.S. will "collapse". If you define "collapse" you'll likely come up with a hyperinflation or severe deflation/depression scenario. The PP can handle both of those well enough - and certainly better than your standard stock/bond portfolio.
Respectfully, I doubt we will have much warning. My understanding is that the US already imposes a hefty tax on those who renounce their citizenship. Expect this tax to increase dramatically in the near future. By the time we see the train coming, it will likely be too late to get off the tracks.

When I say "collapse" I mean that the USA as we know it will probably cease to exist, like the Indus Valley civilization in 1300 BC, the Olmec civilization in 400 BC, the western Roman Empire in the Fifth Century AD, and the USSR in the late 1980s (and dozens of others). What will follow I have no idea. Perhaps some US territory will be annexed by other countries (e.g. Russia, Mexico, Canada). What remains will likely be governed more like a tin pot dictatorship than a liberal democracy.

I agree with you that the PP is far better than the standard stock/bond portfolio in such scenarios.
My understanding of the exit tax if you want to renounce your citizenship is that you have to liquidate your entire portfolio and pay normal capital gains on your taxable assets and the normal individual rates on your IRA. Things may have changed since I looked into it but I'm not aware of any additional taxes for a private individual. That could be a pretty hefty tax any way, especially withdrawing your entire IRA. The taxable part, at least for me, is all all long-term so only 15% right now.

And then, pray tell, what do you do with all of that money to create a PP in foreign investments?

I'm considering living overseas but I doubt that I will ever renounce my citizenship. Seems like too much of a hassle and I need to keep all my options open. Dual citizenship is a possibility.
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Re: The Elephant in the room: How should we prepare for the collapse of the US?

Post by StinkyToes » Tue Jul 14, 2020 5:18 pm

pp4me wrote:
Tue Jul 14, 2020 2:49 pm
StinkyToes wrote:
Tue Jul 14, 2020 12:26 pm
sophie wrote:
Wed Jul 08, 2020 11:46 am
I think we will have plenty of warning if a wealth tax that could capture middle to upper middle class US citizens becomes a real danger. They'll start with ultra-high wealth individuals, then they will gradually ratchet down the threshold, just as happened with the AMT. I imagine that a low threshold e.g. $2M would be exceedingly difficult to get passed, so they won't start there. A number like $10M is about the minimum I'd expect.

I also don't think the U.S. will "collapse". If you define "collapse" you'll likely come up with a hyperinflation or severe deflation/depression scenario. The PP can handle both of those well enough - and certainly better than your standard stock/bond portfolio.
Respectfully, I doubt we will have much warning. My understanding is that the US already imposes a hefty tax on those who renounce their citizenship. Expect this tax to increase dramatically in the near future. By the time we see the train coming, it will likely be too late to get off the tracks.

When I say "collapse" I mean that the USA as we know it will probably cease to exist, like the Indus Valley civilization in 1300 BC, the Olmec civilization in 400 BC, the western Roman Empire in the Fifth Century AD, and the USSR in the late 1980s (and dozens of others). What will follow I have no idea. Perhaps some US territory will be annexed by other countries (e.g. Russia, Mexico, Canada). What remains will likely be governed more like a tin pot dictatorship than a liberal democracy.

I agree with you that the PP is far better than the standard stock/bond portfolio in such scenarios.
My understanding of the exit tax if you want to renounce your citizenship is that you have to liquidate your entire portfolio and pay normal capital gains on your taxable assets and the normal individual rates on your IRA. Things may have changed since I looked into it but I'm not aware of any additional taxes for a private individual. That could be a pretty hefty tax any way, especially withdrawing your entire IRA. The taxable part, at least for me, is all all long-term so only 15% right now.

And then, pray tell, what do you do with all of that money to create a PP in foreign investments?

I'm considering living overseas but I doubt that I will ever renounce my citizenship. Seems like too much of a hassle and I need to keep all my options open. Dual citizenship is a possibility.

Any idea what are the tax implications of dual citizenship? Would you still be subject to U.S. income taxes?
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Re: The Elephant in the room: How should we prepare for the collapse of the US?

Post by StinkyToes » Tue Jul 14, 2020 6:36 pm

Study finds reparations plan could cost $6.2 quadrillion
https://news.yahoo.com/study-finds-repa ... 37453.html

I believe that's $6,200,000,000,000,000, or $151 million per descendant.
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Re: The Elephant in the room: How should we prepare for the collapse of the US?

Post by Mark Leavy » Tue Jul 14, 2020 7:39 pm

StinkyToes wrote:
Tue Jul 14, 2020 5:18 pm
Any idea what are the tax implications of dual citizenship? Would you still be subject to U.S. income taxes?
Yes, still subject to US income taxes.

There are some subtle exceptions, though. If you are out of country for more than X months, then Y% of your income, which is earned out of country, is not subject to Federal tax.

In my case, my legal residence is in a USA state with no income tax. But virtually all of my income is from US companies or interest, dividends or capital gains from US companies. So... I suck it up and pay US taxes no matter where I live. Because, honestly, a US passport is the bomb. I can't imagine giving it up.
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Re: The Elephant in the room: How should we prepare for the collapse of the US?

Post by pp4me » Wed Jul 15, 2020 10:42 am

StinkyToes wrote:
Tue Jul 14, 2020 5:18 pm
pp4me wrote:
Tue Jul 14, 2020 2:49 pm
StinkyToes wrote:
Tue Jul 14, 2020 12:26 pm
sophie wrote:
Wed Jul 08, 2020 11:46 am
I think we will have plenty of warning if a wealth tax that could capture middle to upper middle class US citizens becomes a real danger. They'll start with ultra-high wealth individuals, then they will gradually ratchet down the threshold, just as happened with the AMT. I imagine that a low threshold e.g. $2M would be exceedingly difficult to get passed, so they won't start there. A number like $10M is about the minimum I'd expect.

I also don't think the U.S. will "collapse". If you define "collapse" you'll likely come up with a hyperinflation or severe deflation/depression scenario. The PP can handle both of those well enough - and certainly better than your standard stock/bond portfolio.
Respectfully, I doubt we will have much warning. My understanding is that the US already imposes a hefty tax on those who renounce their citizenship. Expect this tax to increase dramatically in the near future. By the time we see the train coming, it will likely be too late to get off the tracks.

When I say "collapse" I mean that the USA as we know it will probably cease to exist, like the Indus Valley civilization in 1300 BC, the Olmec civilization in 400 BC, the western Roman Empire in the Fifth Century AD, and the USSR in the late 1980s (and dozens of others). What will follow I have no idea. Perhaps some US territory will be annexed by other countries (e.g. Russia, Mexico, Canada). What remains will likely be governed more like a tin pot dictatorship than a liberal democracy.

I agree with you that the PP is far better than the standard stock/bond portfolio in such scenarios.
My understanding of the exit tax if you want to renounce your citizenship is that you have to liquidate your entire portfolio and pay normal capital gains on your taxable assets and the normal individual rates on your IRA. Things may have changed since I looked into it but I'm not aware of any additional taxes for a private individual. That could be a pretty hefty tax any way, especially withdrawing your entire IRA. The taxable part, at least for me, is all all long-term so only 15% right now.

And then, pray tell, what do you do with all of that money to create a PP in foreign investments?

I'm considering living overseas but I doubt that I will ever renounce my citizenship. Seems like too much of a hassle and I need to keep all my options open. Dual citizenship is a possibility.

Any idea what are the tax implications of dual citizenship? Would you still be subject to U.S. income taxes?
Yes, if you retain your U.S. citizenship you are subject to taxation on ALL income no matter where it is earned. A lot of countries have reciprocal agreements with the U.S. to avoid double taxation so obviously you want to pick out one of those.

In my case all my income is from SS and U.S. investments so it is going to be reported to the IRS no matter what I do. Hiding other income overseas isn't that hard to do however. I have a brother in law who has been living in the Philippines for over 10 years, earning money from buying and selling property and he has never even filed with the IRS in all that time. Probably not a good idea if you plan on returning.
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sophie
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Re: The Elephant in the room: How should we prepare for the collapse of the US?

Post by sophie » Thu Jul 16, 2020 11:34 am

Actually for my post I was thinking of less drastic ways to avoid the tax than renouncing US citizenship. Keep in mind that you don't need to hide ALL your money, just enough of it to get you below threshold.

There are plenty of options. One available to us PP'ers is easy: buy physical gold and make sure the transactions aren't reportable.

If your primary residence is excluded from the wealth tax then you can simply pay down the mortgage. i.e. the same tactic that seniors use to avoid missing out on Medicaid benefits. There are also options like putting money or assets into a trust.

The biggest problem is going to be small business owners, whose ownership stake will count as wealth. I'm no accountant, but I would think that problem could be solved by incorporating the business.

All these maneuvers will cost money and provide lots of work for accountants, but at least be aware that the wealth tax isn't necessarily going to be a doomsday scenario.
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