RPF0122-Rawles_on_GeoArbitrage
00:00:00.000 | Back by popular demand, today we welcome Jim Rawls to the show. He is the founder and editor
00:00:07.000 | of survivalblog.com, which is the largest and most popular survivalism-focused blog
00:00:13.120 | on the internet. He's been running that for many years. He came on the show previously
00:00:17.280 | and discussed survivalism as an economic plan. Today we talk about moving as an economic
00:00:23.400 | plan and how you can improve your life and your lifestyle and lower your cost by moving.
00:00:30.400 | Welcome to the Radical Personal Finance Podcast. My name is Joshua Sheets. I thank you for
00:00:50.400 | being here. Today is Thursday, December 18, 2014. Today we're going to dip our toe over
00:00:57.400 | into the survivalist waters a little bit. Fairly popular in our culture right now. Just
00:01:02.200 | look at any magazine rack or TV listing and you'll see that survivalism is a great focus.
00:01:09.200 | Today we've got one of the leaders in that industry with us. I thought it was really
00:01:19.960 | fun on the last show. I had a lot of feedback from many of you that really enjoyed the way
00:01:25.240 | of talking with Jim about economic planning through the lens of survivalism. He offered
00:01:30.840 | to come back on if I wanted to have him and I asked him to do so. I hope you enjoy. You
00:01:37.280 | might want to go back and listen to the previous episode before listening to today's show.
00:01:43.360 | That previous episode was episode 102. If you haven't heard that, go to radicalpersonalfinance.com/102
00:01:47.960 | and that will give you a bit of an introduction to Jim. Today's show we just kind of jumped
00:01:53.400 | right in without a lot of preamble, without a lot of introduction. Go back and check out
00:01:57.720 | that episode for some back story. This interview is all about moving. Moving to improve your
00:02:03.520 | life and your lifestyle. At the beginning of it we talk a little bit about moving within
00:02:07.200 | the United States. Jim is a proponent of an idea that he calls the American Redoubt. This
00:02:13.760 | is a concept. He explains it in the interview. He's also an expert on international expatriation.
00:02:19.520 | He wrote an entire book called Expatriates as one of his novels. He digs pretty deep
00:02:23.800 | into ideas and ways of researching essentially different international contexts. The international
00:02:33.040 | ideas are in the second half of the show. Here's Jim.
00:02:37.920 | Jim, welcome back to the Radical Personal Finance Podcast. I appreciate you're coming
00:02:42.440 | on again.
00:02:43.440 | Thank you for having me on Joshua.
00:02:44.880 | Our last show was really popular. I got a lot of good feedback from I think both of
00:02:49.360 | our audiences. There was some cross proliferation of our listenership and readership and I got
00:02:54.340 | a lot of great feedback from our last conversation. I think today is going to be really fun as
00:02:58.760 | well. I brought you back to talk about the topic of strategic relocation. I want to talk
00:03:06.280 | about this both from the US centric perspective but also from the international perspective.
00:03:13.760 | I think about this mostly from lifestyle, from tax cost, from those kinds of things.
00:03:19.040 | I know you think about it from that perspective as well and also from safety, potential future
00:03:25.580 | economic basically bulwark. Where is the best place to be for the long term? Let's start
00:03:32.780 | with the US focus and then move international. You've invented a concept called the American
00:03:40.800 | Redoubt. What is that concept all about and why did you come up with it?
00:03:46.200 | The American Redoubt is a relocation concept that's geared toward Christians and Jews and
00:03:55.480 | Messianic Jews encouraging people to relocate to an inland portion of the northwestern United
00:04:04.240 | States with the aim of consolidating what is already a very conservative area and making
00:04:12.120 | it even more conservative. Essentially turning red states into a deeper shade of red. I chose
00:04:22.240 | a particular region in part because of the existing demographics and in part because
00:04:29.080 | of climate and population density as the ideal area for this American Redoubt. That includes
00:04:38.280 | Idaho, Montana, Wyoming, and then the eastern half of Oregon and the eastern half of Washington
00:04:46.000 | states. I consider that pretty much the safest place to be in the event of any major societal
00:04:55.040 | disruption because it's well isolated from any major population centers and it's a fairly
00:05:04.920 | diverse economy and it also is a hydroelectric power exporting region. In the event of most
00:05:14.760 | situations that could drop the three American power grids, the American Redoubt area will
00:05:23.360 | probably be immune from power failures.
00:05:27.720 | Why did you not, so you mentioned, there's almost two different things. You first talked
00:05:31.240 | about the people groups and then also the, what's the term, the resilience I guess of
00:05:37.960 | the region. But from that perspective, why not jump onto for example the Free State Project
00:05:43.840 | in New Hampshire? That's a political movement for freedom. Why not combine what you're interested
00:05:50.280 | in promoting with what some other people are already promoting?
00:05:53.960 | Well I think that New Hampshire unfortunately in the long term will not be viable either
00:06:02.160 | politically or economically in terms of safety just because of the general high population
00:06:13.440 | density of the entire region that New Hampshire sits in. It's just far too close to New York
00:06:21.520 | and its teeming masses to be truly safe in the event of societal disruption, whether
00:06:29.440 | it's economic collapse or whatever. I commend the Free State Movement and also the Free
00:06:37.160 | State Wyoming Project as being very worthy goals, but I just don't consider the Free
00:06:45.440 | State New Hampshire Project to be particularly viable.
00:06:50.760 | So one of the challenges I think is, so I'm a young man and when I look at okay where
00:06:57.200 | am I going to set up my lifestyle and my family, one of my challenges with the survivalist
00:07:02.160 | line of reasoning is the certainty of an impending economic collapse. Is this idea that it's
00:07:11.880 | going to happen and so because I know that it's going to happen, therefore I need to
00:07:16.400 | make all of my provision for that. I think in terms of, I can't feel comfortable betting
00:07:24.040 | my future on something that in my mind may or may not happen or it may or may not look
00:07:29.280 | like what we think it looks like. The upper inland northwest or whatever the western states
00:07:37.200 | that you described, they're not generally known as being a hotbed of economic activity,
00:07:42.480 | a hotbed of innovation, a hotbed of entrepreneurialism. So then when I'm thinking about where should
00:07:47.900 | I establish my lifestyle as a young person, which I think is one of the most important
00:07:51.840 | decisions that we as young people make, it just doesn't stand out to me from the perspective,
00:07:58.160 | it just doesn't stand out as a place that I'm going to plant my flag. What say you?
00:08:04.520 | Well in terms of economic collapse, I do think it is inevitable because of our government's
00:08:10.200 | addiction to debt and their wholesale destruction of the U.S. dollar as a currency unit. At
00:08:17.080 | some point the piper must be paid and I think it's just about inevitable that we're going
00:08:22.200 | to see a collapse in confidence in the U.S. dollar and along with it a collapse in the
00:08:30.200 | Treasuries market and in the stock market and just a general economic breakdown is pretty
00:08:41.080 | much a certainty. The huge question is how soon will that happen? How much longer can
00:08:46.800 | they keep up this charade of this so-called economic recovery? How much longer will they
00:08:55.800 | be able to keep interest rates at an artificially low and in fact absurd zero interest rate?
00:09:05.540 | At some point things are going to have to turn around and they're going to turn around
00:09:09.720 | for the worse and I just assume already be living in an area that I know for a fact is
00:09:17.680 | going to have a, from an actuarial standpoint, a better chance of survival in the event of
00:09:22.800 | an economic collapse. Now in terms of lifestyle and economic vibrancy, yes there are parts
00:09:32.720 | of the American redoubt that I would consider economically pitiful because of mainly the
00:09:42.160 | decline of the timber industry in the past 20 years. A lot of the sawmills have shut
00:09:49.920 | down. The federal government is no longer issuing timber cutting permits in a lot of
00:09:56.000 | the national forests and it's pretty well destroyed the economies of some of those towns.
00:10:01.280 | But there are some definite bright spots, mainly in the college towns in those states
00:10:09.720 | and also in the Bakken region of eastern Montana. Now that's a, eastern Montana and the adjoining
00:10:18.800 | portion of North Dakota are in a tremendous economic boom right now. In that Bakken region
00:10:26.240 | where they're extracting oil shale, it is very difficult to find a house to buy or an
00:10:32.760 | apartment to rent. A lot of people are living in fifth wheel trailers simply because they
00:10:36.720 | can't build houses fast enough to house the workers for the oil fields. So there are definitely
00:10:44.080 | some economic bright spots in the American redoubt and granted it's not for everyone.
00:10:50.520 | The climate is not South Florida. I would say not. But it does have a lot of things
00:10:58.000 | going for it and I genuinely enjoy the lifestyle here. I live on a remote ranch that's a 25
00:11:09.120 | mile drive from the nearest small town and it's an hour and a half drive to the nearest
00:11:13.960 | decent shopping. But we're surrounded by national forest. We have a wonderful lifestyle here.
00:11:23.000 | We're largely self-sufficient. We raise cattle and lots of other livestock, including a lot
00:11:29.120 | of small livestock. We have a huge garden. Again, we're surrounded by national forest.
00:11:34.320 | We have a river running through the back end of our property that's just full of trout
00:11:40.440 | and we love it here. It's a lifestyle that I would never trade in. We love homeschooling
00:11:48.680 | our kids. We love really knowing our neighbors. Even though we live in a lightly populated
00:11:56.960 | area, we literally know all of our neighbors within a five mile radius by name. Most people
00:12:06.160 | in the suburbs can't say that. I think that it's important that people seriously consider
00:12:16.000 | relocating and they have to make a relocation choice, however, that matches their own life,
00:12:23.840 | their own lifestyle, their religious background, their stage of life. If someone is elderly
00:12:31.800 | or has a chronic health condition, their choice of locales may be quite a bit different than
00:12:37.480 | mine, for example. They may need to be near a major medical center and that's going to
00:12:43.320 | make their relocation choice substantially different.
00:12:49.240 | One of my motivations, previously I was running a financial planning firm. The financial planning
00:12:52.920 | firm was largely local. I had been working hard to transition that into a virtual business
00:13:00.380 | in the sense of I tried to work with many of my clients with virtual meetings instead
00:13:04.800 | of in person to give myself the options of traveling or moving if I ever choose to. One
00:13:11.800 | of my lower priority motivations, but it is still a motivation of building the Radical
00:13:17.120 | Personal Finance, is to allow myself that location independence so that if I want to
00:13:22.160 | go to Montana for the summer, I'm not sure my wife's going to go for the winter. But
00:13:25.480 | if I want to and if I need to have a cabin and if somehow I need to be out there because
00:13:30.200 | the South Florida economy changes, then it's a long trek out there, but at least I would
00:13:35.800 | have the ability to go there and not have my business fall apart.
00:13:38.400 | I think that we have these opportunities, especially where I want to focus on primarily
00:13:42.920 | is economic arbitrage. There's a real important concept that probably the one who popularized
00:13:50.140 | it was Tim Ferriss in the four-hour work week when he was talking about taking advantage
00:13:54.740 | of geo-arbitrage, location arbitrage. If you can earn money in a strong currency and spend
00:14:01.260 | money in a weak currency, that helps you. Or if you can live in a place, if you are
00:14:06.800 | working online like I am, I'm living a consciously higher cost lifestyle living in South Florida
00:14:12.380 | right now than I would be if I moved to rural Mississippi. So I could gain immediately a
00:14:18.000 | several thousand dollar a month decrease in my living costs without affecting my income.
00:14:24.020 | I think that we've got some opportunities from an economic perspective both within the
00:14:28.780 | U.S. and outside of the U.S. to maybe enhance our lifestyle. So within the U.S. context,
00:14:36.300 | what would you say, how would you advise people looking to increase their lifestyle and the
00:14:41.740 | benefits of it and decrease the cost, how to think through that and look for opportunities
00:14:45.980 | within the U.S. and then we'll go to outside the U.S.?
00:14:48.660 | Sure. Well, here within the United States, a key issue is not just local economic development
00:14:57.300 | or local or state inducements to move companies or even individuals into states. But beyond
00:15:10.220 | that, you have to look just at basic numbers of taxes. Taxes are a crucial issue in the
00:15:18.900 | United States. And for your listeners overseas, they may not be familiar with just how different
00:15:24.660 | things can be moving from state to state. In most countries, the tax codes are fairly
00:15:31.820 | uniform. And no matter, you know, whether you live in Pretoria or Johannesburg or Cape
00:15:39.980 | Town, South Africa, your taxes are basically going to be the same. But here in the United
00:15:44.020 | States, state laws vary widely and levels of taxation in particular segments vary widely.
00:15:54.180 | And by simply moving for geolocational arbitrage, as you call it, people can vote with their
00:16:02.980 | feet for lower taxes. And I'm a big believer in that. There are some states where there's
00:16:12.420 | no personal income tax, like Washington state, for example. And, you know, there's advantages
00:16:20.140 | to Texas, to Florida. A lot of different states have income tax advantages. Other states have
00:16:28.180 | sales tax advantages. States like Oregon and Montana, for example, have no sales tax. Other
00:16:34.380 | states have particularly low real estate property taxes. And for someone who wants to have a
00:16:42.020 | lot of land, that might be the key consideration rather than income taxes, because if someone
00:16:48.380 | is structuring their life where they want to be a cattle rancher and they can basically
00:16:53.420 | fine-tune their income each year based on how many cattle they sell, but the key factor
00:16:59.900 | for them might be property taxes. They want to have a low property tax rate. So I would
00:17:05.100 | recommend that people do a lot of research and look into car registration, property taxes,
00:17:14.420 | homeschooling laws, home birth laws, the cost of doing business for a company. Of course,
00:17:24.100 | personal income taxes has got to be right near the top of the list for most people.
00:17:29.260 | But look at all those different taxes, all those different factors. Even things like
00:17:34.980 | fuel taxes are getting to be a big issue. And, in fact, it's something that's just been
00:17:39.900 | highlighted by the plummeting fuel prices right now, 'cause there's basically an oil
00:17:44.180 | price war going on as we speak. The price of fuel is not going to come down substantially
00:17:51.980 | in states like California, where they have these huge taxes on gasoline and diesel. They
00:17:58.900 | can't come down, because every time the price of fuel drops, these states raise their state
00:18:06.100 | fuel taxes. It's an almost intolerable situation for a lot of people. So all I can say is be
00:18:12.600 | prepared to vote with your feet, but do so intelligently. Do your research, figure out
00:18:19.180 | what is the most important factor for you, and plan and make your move accordingly.
00:18:25.780 | I'll give you two pieces of data. I mentioned these on recent shows, but I think you'll
00:18:29.620 | like them, and also it'll benefit the audience as well. There was a neat example. Tony Robbins
00:18:37.780 | just released a book on money, and I reviewed it in detail on the show a couple weeks ago.
00:18:42.220 | But one anecdote that he had in there is that when a few years ago California increased
00:18:47.580 | its state income tax, and they increased it retroactively and made it retroactively applicable,
00:18:53.860 | so even some of the planning ideas couldn't be done, 'cause they made it go back. Tony
00:18:59.500 | Robbins finally, after being a lifelong Southern California resident and a fairly liberal,
00:19:04.460 | liberal progressive guy, finally said that enough is enough. So he went on this, and
00:19:09.420 | he tells a story in his book of how he went on this massive national hunt of looking at
00:19:15.460 | all of these properties. Well, he wound up in Palm Beach, and he found the only brand
00:19:20.180 | new home that was available on Palm Beach at the time, 200 feet of oceanfront, intercoastal
00:19:26.100 | front access, which is basically the primo part of Palm Beach where you've got water
00:19:30.820 | on both sides. And he said the best thing about it is he's paying for the cost of his
00:19:37.980 | new Palm Beach house, mansion, with the tax savings alone in six years. Wow. And that's
00:19:46.860 | amazing. Isn't that amazing? Yeah. And I don't think his story is unique. A lot of people
00:19:53.400 | are finding some really big benefits in relocating. But again, you have to do so intelligently.
00:19:59.580 | And you also have to plan ahead in terms of what your life is not to be like not just
00:20:04.360 | next year, but in the next couple of decades, the stage of life that you'll be in and what
00:20:10.780 | your requirements will be. And things like property subdivision laws may make a big difference
00:20:18.220 | for someone who has some wealth and plans to pass it on to their children. But if you
00:20:23.780 | move to a place where you can't subdivide a property smaller than 10 acres, then you
00:20:31.100 | may be very limited in terms of, you know, if you want to have your own kind of bunk
00:20:35.580 | port or whatever and have a family compound with contiguous parcels of land, you have
00:20:42.100 | to plan ahead in terms of picking a county in a state that has favorable subdivision
00:20:47.660 | laws. Right. Another anecdote on the tax thing that I thought was interesting is just last
00:20:54.900 | Friday on my show, I reviewed a Maryland physician, resident physician who was just in residency,
00:21:03.100 | sent me a note and he's earning $125,000 and taking home about $75,000 after tax. And I
00:21:10.420 | looked up the Pennsylvania income taxes and they're about 5%, 5% marginal bracket. But
00:21:15.740 | what that meant for him, there's a great new website that I also discovered from Tony Robbins
00:21:19.980 | book called save taxes by moving.com. And somebody has gone on there and just made a
00:21:25.820 | very simple scenario. I'm moving from this state to this state. My filing status is married,
00:21:31.420 | filing jointly. I'm this year, this I'm 30 years old and I earned this amount. And I
00:21:36.020 | put on there $125,000 income. This resident physician, after he's finished with his residency,
00:21:42.380 | could easily move to another state and just moving from a state like Pennsylvania to Texas
00:21:47.380 | or to Florida or to Washington where he could save that five and the other states, the three
00:21:52.020 | or four, he could save that $5,000. Theoretically over the course of his career, if he just
00:21:57.460 | invested that $5,000 at a reasonable rate of return, he would have an extra million
00:22:02.620 | dollars of net worth at retirement age. And those taxes compound every year. That $5,000
00:22:09.620 | invested at a reasonable rate of return, that's a million bucks. And so your decision is not
00:22:15.340 | $5,000 because I'm living in Pennsylvania, New Jersey or whatever. The decision is $5,000
00:22:22.340 | compounded every year. New physician jobs in South Florida or Texas or Washington state
00:22:30.260 | or wherever at $125,000 a year, they're a dime a dozen. But the $5,000 of taxes that
00:22:35.500 | makes him make a major difference in your lifestyle.
00:22:37.780 | In the long term it does, yes. And I think people need to have a broad horizon in all
00:22:44.780 | of their investment planning. They need to think not just in terms of the next year,
00:22:50.620 | the next decade, but multi-generationally. And if you look at family empires, they've
00:22:58.380 | always had that perspective, that long term view. And of course if you look at the basic
00:23:05.380 | doubling rule for investments, it really is multi-generational when you come right down
00:23:10.700 | to it.
00:23:12.900 | I want to move international with the time we have left, but before we do, I do just
00:23:18.140 | want to mention how in the United States, you're familiar I'm sure with the concept
00:23:21.880 | of the multiple flags theory on an international basis. And I think that can be applied both
00:23:27.300 | internationally and in the United States. And so there are some interesting arbitrage
00:23:32.340 | opportunities.
00:23:32.980 | Right. I would refer to that as the state line jumping game. And my favorite here in
00:23:39.980 | the American Redoubt is to take advantages of states, contiguous states where you have
00:23:47.780 | one state with no personal income tax and a contiguous state with no sales tax. That's
00:23:55.940 | the ideal situation. And for example, Washington state has no personal income tax and a very
00:24:02.940 | low corporate tax. And adjoining Oregon, just across the Columbia River, has no sales tax.
00:24:12.340 | Talk about a huge advantage.
00:24:16.700 | Right. And considering that sales taxes probably average out to 5 to 7 percent depending on
00:24:21.940 | the state, that's essentially 5 percent of everything that you're buying if you can buy
00:24:26.180 | it in a no sales tax state. And then if state taxes average 3 to 5 percent probably across
00:24:31.820 | the nation maybe, that's another saving. So there we just save 8 or 9 percent of your
00:24:36.940 | income expenses. It's a big, that can be a big deal.
00:24:40.940 | Right. You know, you're probably familiar with the television series The Sopranos. And
00:24:47.700 | Tony Soprano is as famous as having been quoted as talking about avoiding this and that entanglement
00:24:54.700 | with the law. But then talking about federal taxes, he was famous as saying, "Them you
00:25:03.060 | gotta pay." Well, you know, federal taxes are basically inescapable. But you could avoid
00:25:11.780 | a lot of state taxes by voting with your feet and very wisely choosing your location.
00:25:17.780 | So let's flip to escaping the federal taxes. I'm not quite to the point of being a tax
00:25:24.220 | protester to the point of not sending in payments and telling them I'm not doing it out of protest
00:25:30.680 | of what they're doing with the money and the violence inflicted on others around the world.
00:25:34.260 | But I'm sympathetic to that. I'm not there yet myself. But I do think a lot...
00:25:38.340 | What's that?
00:25:40.300 | As public figures, we'd probably be some of the last two to be tax protesters, per se,
00:25:47.020 | because the old Japanese proverb is, "The nail that sticks up gets hammered down."
00:25:52.100 | Exactly. But I do think about expatriation. And in today's world, it seems easier in many
00:25:59.100 | ways to do than it has ever been before. In years past, if you were going to move to the
00:26:03.020 | other side of the world or to another country, that basically meant losing all connection
00:26:07.460 | and contact with your local community. But in today's world, it's easier and easier.
00:26:12.340 | Have you ever thought about expatriating yourself to another country?
00:26:15.780 | Yes, I have, but more or less as a contingency plan in case things were to deteriorate substantially
00:26:21.960 | politically here, and especially in terms of First Amendment freedom. As a blogger and
00:26:28.800 | as a novelist, I value my First Amendment rights very highly. And if we ever reached
00:26:35.980 | a point in the United States where I wasn't able to freely speak my mind, I would already
00:26:41.980 | be gone at that point. That's the key decision point for me, is the First Amendment.
00:26:48.980 | But for a lot of other people, there's other things that'll push them offshore, primarily
00:26:55.980 | taxation. And people have to think very seriously about that. I don't think that people should
00:27:02.140 | discount expatriation, but it isn't for everyone. And as I mentioned in our last conversation,
00:27:09.140 | it's important that you move to a country that is going to be friendly to foreigners,
00:27:16.820 | not just now, but also in the event of a global economic downturn. Because just as I was saying
00:27:22.940 | before, I see the U.S. economic downturn as inevitable. And because we have inextricably
00:27:29.620 | linked economies, I think when the U.S. economy crashes, it's going to throw the entire world
00:27:34.820 | into a global depression that'll probably last ten years or more, maybe even twenty.
00:27:40.420 | So plan ahead in that regard as well. So that means moving to a country that has a lot of
00:27:46.860 | English speakers, unless someone is quite fluent in a foreign language, and also moving
00:27:54.020 | to a country with a very sound economy and a country that has a low crime rate. And if
00:28:01.020 | you take all three of those factors together, there's actually precious few countries that
00:28:09.180 | are worthy of relocation. And then, of course, you know, beyond that there's climate and
00:28:15.980 | lifestyle and so on. For a lot of people, homeschooling laws might make a difference,
00:28:23.140 | gun control laws may make a difference. And in that last regard, that narrows the number
00:28:29.580 | of countries down tremendously, because very few countries have the same level of firearms
00:28:35.180 | freedom that we have here in the United States.
00:28:38.860 | Do you have any, like, countries that are at the top of your list? I know that would
00:28:45.460 | vary depending on which metric you're considering.
00:28:47.820 | Yeah, there's a few. In terms of firearms freedom, two countries that are probably near
00:28:54.820 | the top of my list would be Finland and the Philippines.
00:28:59.060 | Really?
00:29:00.060 | Yeah.
00:29:01.060 | Finland?
00:29:02.060 | Finland. Finland has surprisingly lax gun laws compared to most of Europe.
00:29:07.980 | Had no idea.
00:29:09.220 | In Finland, you can walk into a gun shop, buy a silencer with cash, and walk out with
00:29:14.220 | no paperwork whatsoever. It's just considered a safety accessory.
00:29:18.500 | They're just murdering each other in the streets, though, every day, I assume.
00:29:20.860 | Oh, yeah, blood in the streets every day. No, Finland is actually a very peaceable country.
00:29:27.860 | It does have, you know, a major threat, though, with Russia right next door. And a couple
00:29:34.420 | times in the last century, they had some problems with Russia. And it's not beyond the realm
00:29:41.420 | of imagination that that might reoccur in this century. So that's something to consider.
00:29:48.420 | In terms of firearms freedom, I think Finland is right near the top of the list. Switzerland
00:29:54.580 | is also quite gun-friendly, but unfortunately, they don't extend firearms freedom to resident
00:30:00.900 | aliens as well as Finland does. So Switzerland is great. All your neighbors will be well-armed,
00:30:09.460 | but you won't be until you have full Swiss citizenship, and that takes years.
00:30:16.460 | Interesting. What about on the other metrics, other countries, whether it's economic strength
00:30:21.980 | or crime or English speakers, those other metrics?
00:30:27.180 | New Zealand is probably right near the top of the list in terms of economic freedom and
00:30:34.340 | low crime, and it is indeed, of course, English-speaking. I think New Zealand definitely has some attributes,
00:30:41.340 | but unfortunately it also has now a full heritage of socialism behind it, which is difficult
00:30:49.980 | to break from and which has a long-term debt burden associated with it. So I'm not a great
00:30:57.380 | fan of New Zealand. And of course, New Zealand's gun laws are pitiful. So if you're looking
00:31:03.900 | for firearms freedom, New Zealand is not the place to go. But if you own a small business
00:31:09.220 | that can be relocated, I would look very seriously at New Zealand.
00:31:13.020 | Do they have favorable tax rates?
00:31:15.860 | They're moderate. It depends. I haven't researched the most recent changes in New Zealand law,
00:31:22.860 | but the problem with New Zealand is not so much taxes as the high cost of living. Where
00:31:30.220 | gasoline costs $8 a gallon, it's not a particularly friendly place to live in terms of cost of
00:31:37.220 | living.
00:31:41.820 | What about Latin America? I spent some time in Costa Rica when I was in college, and it
00:31:47.700 | seemed as though there were more gringos walking around sometimes than, especially the central
00:31:52.220 | cities, and that's well known as the surfer destination and the retired pensioner destination
00:31:57.900 | to go down and spend their money in Latin America. Do you have any opinions on that
00:32:01.620 | region of the world?
00:32:02.780 | In Central America, I do like Belize, I like Costa Rica, I like Panama. But the level of
00:32:09.780 | banking privacy in those countries has definitely dropped in recent years. I hate to use an
00:32:18.500 | overused slang expression, but they're going to narc on you just as well as an American
00:32:24.000 | banker will. There's not a lot of banking privacy left in any of those countries. In
00:32:30.220 | South America, there are some definite possibilities in Chile, Argentina, Paraguay, Uruguay. They're
00:32:37.220 | all worthy of a good look, but I would say that would be primarily for people who are
00:32:50.220 | excellent Spanish speakers and preferably people who have close familial ties to someone
00:32:56.620 | already in the country. Essentially, the best way to expatriate to one of those countries
00:33:02.180 | is to marry into one of those countries.
00:33:06.740 | Come with a built-in family if you can marry in. I enjoy spending time in Latin America,
00:33:13.660 | but if you want to get anything done, you need some connections.
00:33:17.620 | Exactly. You need some really deep connections, both politically in the banking world and
00:33:24.620 | with local policia. You need to really be on the inside track. Unless you marry into
00:33:32.180 | a family, it would take many years to develop those kind of relationships, and you'd still
00:33:38.540 | be known as the gringo. But if you marry into a family, at least not necessarily for you,
00:33:45.180 | but for your children, you'd be seen more or less as a local.
00:33:50.300 | Back to banking privacy. This is a research project. I haven't been able to get it done,
00:33:54.980 | but it's a subject of interest. As some of the traditional private abilities to bank
00:34:01.980 | privately as the U.S. government has eroded those laws, if someone is interested and focused
00:34:09.360 | on banking privacy and the ability to do business internationally and to mind their own business,
00:34:15.360 | are there regions that are up and coming or that should be considered to serve that purpose
00:34:19.640 | for U.S. citizens?
00:34:20.860 | I haven't done any really recent research. Unfortunately, banking law is very fluid.
00:34:27.860 | There are international agreements made. For example, we mentioned South America. In South
00:34:33.820 | America they have a group of countries that's called the Mericorsur countries. They keep
00:34:40.440 | changing their banking law so quickly it's hard to keep track of it, and it applies to
00:34:45.200 | five or six different countries overnight. So there I would say I would claim ignorance
00:34:52.200 | and say that I'm not up to date on all the latest changes in banking laws, and someone
00:34:59.320 | really should get involved with a group like the Sovereign Society, for example, or get
00:35:06.320 | a subscription to International Living magazine. If you want to keep track of the changes in
00:35:14.440 | the banking laws, you really need to have your finger on the pulse and be prepared for
00:35:20.640 | changes, because primarily because of the pursuit of narco-trafficking, which is a very
00:35:28.240 | large group of narco-traffickers, banking laws pretty much around the world have clamped
00:35:35.240 | down on banking privacy, and even the long-term bastions of banking privacy like Switzerland
00:35:41.680 | and Luxembourg have now essentially rolled over and played dead. They're now fairly willingly
00:35:48.680 | handing over banking records to governments, and not just their own governments, to international
00:35:55.360 | taxing authorities. We live in unfortunately a very rapidly changing world, and the windows
00:36:02.360 | of opportunity for things like banking privacy unfortunately are closing as we speak.
00:36:11.320 | Are you sensing, as we kind of wrap up here, are you seeing an increase in the number of
00:36:18.640 | people that are looking into things like renouncing their citizenship? I guess I could just ask
00:36:25.640 | the question, are you seeing that, and why do you think that's happening?
00:36:30.120 | Well I think people have a recognition that although people still say it's a freak country,
00:36:37.120 | nobody really thinks that anymore. Nobody really believes it, and for good reason. We
00:36:44.920 | have a country that has a very nosy government. It's getting increasingly nosy. It's tying
00:36:51.920 | more and more databases together. It's getting to the point where it scans your license plate
00:36:56.840 | when you're driving down the road. There's basically no more private travel left in the
00:37:01.800 | United States. Then we have a whole of TSA debacle where people are being forced to consent
00:37:09.080 | to a gross violation of their Fourth Amendment rights just for the so-called privilege to
00:37:16.080 | travel by air. It is no longer really a free country, and people are increasingly telling
00:37:25.640 | me that they're looking at offshore options just out of rational self-interest. It's not
00:37:33.980 | so much a lifestyle change, and it's not even just the opportunity to have the first 100
00:37:40.980 | K or so be tax-free. It's the freedom thing. I increasingly am hearing from my readers
00:37:48.840 | and from my consulting clients that they're looking very carefully at at least getting
00:37:54.800 | a second passport and having that as a reserve, just as an escape hatch, or preemptively relocating
00:38:03.560 | now. It's happening in increasing numbers, and it's not just the super wealthy. One of
00:38:10.560 | the nice things about expatriating to places like Central America or the Philippines is
00:38:17.080 | you really don't have to be rich. You can take a middle-class income or middle-class
00:38:21.520 | retirement and retire practically in splendor in South America, Central America, or the
00:38:28.720 | Philippines, where here hardly anyone can afford to have a maid and a cook. You move
00:38:35.720 | to a place like the Philippines or Panama, almost anyone can afford to have both a maid
00:38:42.680 | and a cook. There's definitely some advantages in that regard.
00:38:47.680 | I'm hoping. I've thought it through. There's a lot of interest in the community of this
00:38:52.800 | show. There are a lot of people on this show who are early retirees, and part of their
00:38:57.440 | early retirement plan is perpetual travel or extended travel. That allows them some
00:39:03.200 | options to arbitrage their money and to earn it in the U.S. and spend it in less expensive
00:39:10.200 | regions of the world. What I'm hoping is in the same way that I think it's starting to
00:39:17.640 | show up that people are starting to move because of taxation among the states in the United
00:39:23.960 | States. It's so easy to pick up and go to another state. Yes, it's tough to change your
00:39:30.600 | family circumstances, but it's not that big a deal. You don't have to get a new citizenship.
00:39:35.280 | All you've got to do is just move. What I'm hoping is in the world where more and more
00:39:40.000 | knowledge work can be delivered virtually, I'm hoping that more of that international
00:39:45.240 | competition will come to mind. When I actually sit down and look and say, "What are the benefits
00:39:51.400 | of a U.S. citizenship versus a cost?" That scale is weighted at the moment in favor of
00:39:57.760 | benefits, but if you can disconnect your economic earning power from one location and as some
00:40:04.560 | other countries and regions of the world start to change and offer additional benefits, my
00:40:09.200 | hope is that there's already a move of money. That's usually reserved for the ultra-wealthy,
00:40:16.560 | but as far as the move of people, my hope is that competition can keep everybody more
00:40:21.040 | honest.
00:40:24.000 | I agree with you, Joshua. I'm a big believer in that. In terms of second passports for
00:40:31.000 | someone who wants to be a perpetual traveler, say someone who's a musician, an artist, a
00:40:36.800 | consultant, a writer, who can live just about anywhere, my favorite second passport would
00:40:42.960 | probably be from the island nation of St. Kitts and Nevis. There they have a really
00:40:48.360 | neat program for second passports that is not very expensive. It was all developed to
00:40:55.360 | fund the transition of their national economy away from a sugarcane economy into an international
00:41:02.020 | banking economy.
00:41:05.480 | People should look very carefully at St. Kitts and Nevis and take full advantage of that
00:41:10.440 | opportunity. I have a feeling it may go away in five or ten years, because second passport
00:41:17.440 | programs may be looked on in disfavor by international tax authorities just the same way as international
00:41:24.720 | banking accounts. Take full advantage of the second passport programs while they're still
00:41:32.840 | available and while they're still affordable. And again, St. Kitts and Nevis is at the top
00:41:38.400 | of my list.
00:41:40.280 | And my final comment, and I'll give you the last word, is a lot of times people, if they're
00:41:46.520 | not consistent in thinking about these type of topics, I think it can feel a little bit
00:41:50.240 | odd. But we have a time-honored tradition in the United States of tax protesting. And
00:41:55.840 | I think that sometimes some people need to put their money where their mouth is. And
00:42:00.960 | in today's world, the rhetoric is becoming increasingly harsh and unpatriotic. It's unpatriotic
00:42:08.840 | to consider things. But my favorite example, think about Sir John Templeton. He was another
00:42:14.400 | thing that came out of last year. He saved, at least according to Wikipedia, $100 million
00:42:20.320 | of tax by renouncing his US citizenship and becoming a naturalized British citizen living
00:42:25.440 | in the Bahamas. And that's $100 million that he put toward philanthropic, charitable causes.
00:42:32.400 | And I would much rather have my extra $100 million not go to fund the excesses of these
00:42:38.820 | things. I would rather have my tax money go to the US government if I can choose to invest
00:42:43.880 | that into something that may have some potential benefit for good. So Jim, I'll give you the
00:42:47.880 | last word.
00:42:48.880 | Sure. Well, Joshua, I just want to say that the ultimate form of protest is voting with
00:42:54.880 | your feet. And people ought to seriously consider that, both domestically and internationally.
00:43:00.880 | One of my novels focuses on expatriation. In fact, the novel is called Expatriates.
00:43:07.880 | Now, that came out a year ago. I think people might want to take a look at that novel. And
00:43:12.880 | I'm also in the process of drafting a new series of novels that's also set in the future
00:43:17.880 | but a different scenario that's going to feature perpetual travel, second passport, and even
00:43:25.600 | the establishment of new nation states for the purpose of expatriation that will essentially
00:43:32.600 | be almost virtual citizenship. That'll be featured in that new novel series.
00:43:39.640 | People need to think very seriously about relocation. And as a Christian, I think I've
00:43:47.640 | always approached things from a position of prayer first. And for any of your listeners
00:43:54.920 | who are of deep religious faith, I recommend you start with prayer. Pray first, and if
00:44:01.480 | you feel strongly convicted to make a move, then don't hesitate. At that point, you need
00:44:06.960 | to dig in, do your research, and then if you feel convicted to move, go ahead and make
00:44:13.160 | the move. And from a survival standpoint, that's crucial because it takes a long time
00:44:18.800 | to get established in a new locale and to do things like build up livestock, build up
00:44:25.280 | orchards, and that sort of thing for self-sufficiency no matter where you move. So don't hesitate,
00:44:31.840 | make the move soon.
00:44:33.040 | Jim, I thank you for coming back on the show. This has been really fun, and I appreciate
00:44:37.080 | your making time.
00:44:38.400 | Well, thank you for having me on, Joshua, and I pray the 91st Psalm for you and all
00:44:43.160 | your listeners.
00:44:44.040 | As we go today, I'd like to give you just a couple of additional ideas of how maybe
00:44:50.560 | you can take some of the ideas that Jim shared and apply them to your own life. I want to
00:44:55.160 | encourage you, look around you, look around yourself, where you live, to see if there
00:45:00.800 | are any very simple and easy ways of improving your lifestyle with geographic arbitrage.
00:45:07.800 | For example, and it doesn't have to be moving across the country, it doesn't have to be
00:45:12.800 | moving to the other side of the world. I think those things are fun to talk about, but these
00:45:18.320 | little ideas exist in many parts of our various countries if you just look for them.
00:45:25.320 | One example for me, where my wife and I considered, is we live in Palm Beach County, Florida,
00:45:34.160 | and in simple terms, the Palm Beach County, Florida tax rate is about 2%--real estate
00:45:38.880 | tax rate is about 2% of the property values. Just north of us, in Martin County, Florida,
00:45:44.960 | the real estate tax values are about 1%. So there would be a 50% decrease in annual real
00:45:51.960 | estate tax cost if we lived in Martin County instead of Palm Beach County, and these are
00:45:59.280 | very close.
00:46:00.360 | Interestingly, there are a couple of little fingers of Martin County that extend down
00:46:04.520 | into Palm Beach County, and so there are ways that we could actually be right in, basically
00:46:08.880 | near in Palm Beach County, but just by being across that county line, we could cut our
00:46:12.680 | real estate tax bill in half.
00:46:14.800 | Now ultimately we decided not to do that, and the reason was when we bought the house
00:46:18.520 | where we live, even though the property taxes were higher, I was at that time, I was planning
00:46:24.960 | on maintaining my financial planning practice, and to be able to continue my financial planning
00:46:29.960 | practice, I wanted to be close to my office. So this house that we live in is actually
00:46:34.140 | under half a mile from my office, so I would be able to walk to work every day. And in
00:46:39.000 | that scenario, I decided and we decided that it would be far better for us to pay a little
00:46:46.000 | bit more in property tax than to live farther away and commute for multiple reasons. Number
00:46:52.800 | one, there's just the time and the lifestyle component of being able to walk to work, walk
00:46:56.880 | home, I could come home for lunch every day, that was important to me. And I valued that
00:47:02.040 | more than necessarily just the economic savings. There was also the cost of commuting, and
00:47:06.880 | the cost of commuting is a non-deductible expense. So I would have to operate a vehicle
00:47:12.000 | with extensive cost every day by living 15 or 20 miles away, and that is a non-deductible
00:47:18.080 | expense. However, by buying a house right next to my office, I could go ahead and deduct
00:47:23.760 | those higher real estate taxes, and so I turned that expense, which was actually cheaper than
00:47:29.640 | the cost of commuting, and I turned it into a cheaper deductible expense. So that was
00:47:35.440 | another aspect. So look for yourself, look to see if there's something like that right
00:47:41.800 | in your town. Is there a county right next door or a city that you can move into that
00:47:46.360 | has a lower tax bill? These things make a big difference over time. It's important to
00:47:51.920 | get to think in terms of compounding things. If you think always in terms of compounding
00:47:56.920 | money, you can see what a big difference savings will make in your life over time.
00:48:03.400 | If you only look at the cost today, many costs will seem fairly small. So $1,000 a year of
00:48:08.920 | extra property tax by choosing to live in one county versus another county, that seems
00:48:14.600 | like a fairly small number. But if you extend that out, so let's say as an example that
00:48:20.820 | you save that money instead of spending it. So we put $1,000 per year, and we put this
00:48:27.820 | into an investment account. Let's say we do it for 30 years. Let's use 10% interest starting
00:48:35.940 | with nothing. At the end of 30 years, $1,000 per year savings can be $181,000. At the end
00:48:42.220 | of 40 years, that can be $486,000. At the end of 50 years, that can be $1.2 million.
00:48:50.000 | So a small and seemingly small decision, such as which county am I going to choose to set
00:48:57.000 | up my life in, if you were to buy a house at the age of 30, live in it until the age
00:49:04.960 | of 80, and then die and leave the money to your kids, if you just took that savings and
00:49:11.800 | set it aside, that could result in you leaving behind an extra $1.3 million for your kids
00:49:16.560 | over the course of 50 years. That might be a very major impact. And that's one of those
00:49:23.120 | structural costs I like to talk about, where you're setting in place a cost that's not
00:49:28.140 | easy to change. Once you've set up your household, it's not easy to change. At this point in
00:49:32.840 | time, my wife and I, we don't have any plans to move, but frankly, we both like the house,
00:49:37.120 | and my wife loves it. So it was easier before buying the house to say, "Well, where do we
00:49:44.520 | want to live?" Now it's not so easy, because we like it here, and she really loves it.
00:49:51.520 | So it's not to say that we won't at some point in time consider moving, but a simple small
00:49:57.480 | decision like this could make a big difference for you. So look for one of those inefficiencies
00:50:02.900 | in your own life. Consider, if you're the kind of person who's running a large firm,
00:50:08.080 | at this moment I don't have any reason or need to expatriate from the United States
00:50:13.120 | from the perspective of tax savings. But if you're running a large company, or you expect
00:50:17.400 | to be running a large company, think in advance about how to do that. And if you can get out
00:50:21.200 | from under the US tax law, that may be advantageous to you. If you can set up your company in
00:50:25.800 | a way that's outside of the United States, that may be advantageous to you. So consider
00:50:30.240 | these ideas. You have to apply them to your personal situation, but consider them and
00:50:34.480 | see if they might be helpful for you. That's it for today's show. I thank you so much for
00:50:38.400 | listening. I really enjoyed this interview. Tomorrow I'll be doing Q&A, so a Friday Q&A
00:50:43.040 | show. I've got some really great questions lined up that should be really fun to talk
00:50:46.120 | through. So I'll be releasing that show tomorrow. Next week I will be releasing some interviews
00:50:51.160 | while I am away. I've got an interview with a permaculture designer named Ben Falk, and
00:50:55.880 | we're going to talk about how to essentially organize and design your life from a comprehensive
00:51:04.240 | perspective. Also an interview with Dr. Vern Poythress. He is a professor and he has done
00:51:09.720 | something very interesting with his two boys about transitioning them from children to
00:51:16.240 | adults at the age of 12. I think you'll enjoy that. On Friday I plan to release an interview
00:51:21.040 | with Jeff from the Sustainable Life blog about investing in sustainability instead of investing
00:51:27.440 | in, investing in, my brain is going blank, other asset classes and things like that.
00:51:34.440 | So I think you'll enjoy that. Also then the following week I have an interview with Eva
00:51:39.000 | from Teens Got Sense blog, and she's a really dynamite young lady. Paul Merriman will be
00:51:44.040 | on Tuesday, December 30th, and then Tim Stobbs, an early Canadian retiree, will be released
00:51:49.600 | on Friday, January 2. If you'd like to get in touch with me, email me joshua@radicalpersonalfinance.com.
00:51:55.120 | Thank you guys so much for listening. I appreciate each and every one of you. Have a lovely day.
00:52:02.120 | [music]
00:52:09.120 | [music]
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00:52:25.120 | [music]
00:52:32.120 | [music]
00:52:39.120 | [music]
00:52:47.120 | [music]
00:52:58.000 | Thank you for listening to today's show. This show is intended to provide entertainment,
00:53:04.000 | education, and financial enlightenment. Your situation is unique and I cannot deliver any
00:53:11.000 | actionable advice without knowing anything about you. This show is not, and is not intended
00:53:18.780 | to be any form of financial advice. Please, develop a team of professional advisors who
00:53:27.980 | you find to be caring, competent, and trustworthy, and consult them because they are the ones
00:53:34.980 | who can understand your specific needs, your specific goals, and provide specific answers
00:53:42.780 | to your questions. Hold them accountable for your results.
00:53:47.720 | I've done my absolute best to be clear and accurate in today's show, but I'm one person
00:53:52.740 | and I make mistakes. If you spot a mistake in something I've said, please come by the
00:53:56.780 | show page and comment so we can all learn together. Until tomorrow, thanks for being
00:54:03.180 | here.
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