Dr. Erik Hofmeister, a columnist for the White Coat Investor, has been pondering the decline of nations for a while, a concern that comes from his upbringing in the ’80s. His mother, who taught at Beverly Hills High School, had many Iranian students who had fled following the Ayatollah’s rise to power. Her interest in history enabled him to understand the plight of Cubans escaping Castro and the grim takeover of Nazi Germany. Living in California, he also learned about the unfortunate internment of Japanese-American citizens. These experiences ingrained an invaluable lesson in him: "If your country is about to fall, get out before it does."
In personal finance, we often hear about shallow risks, like market volatility, and deep risks like inflation. One peril that’s less frequently aired is confiscation, a topic Dr. Hofmeister is keen to explore given his own history. He sets out to define what confiscation is, when it has happened before, and how you can safeguard yourself against it.
Confiscation, in essence, is the loss of your assets to others. Dr. Hofmeister envisions three potential scenarios: 1) Legal seizure by the government, like tax payments or court settlements. 2) Unlawful government seizures, possibly disguised as legal actions, against individuals or groups. 3) Theft by private individuals.
Let’s delve into some historical instances of government confiscation during the 20th century. The Iranian Revolution of 1979 saw a significant economic downturn – a GDP drop to -20% by 1980 – as the new regime seized assets from anyone even remotely associated with the former Shah, effectively taking control of more than 80% of the economy. Similarly, Cuba’s revolution in 1959 saw Castro nationalize properties, prompting a US embargo and leaving Cuba’s GDP growth floundering at around 0.92% from 1959 to 2006.
Then there’s the infamous Nazi Aryanization, which began with shadowy legal proceedings in 1933 before spiraling into blatant confiscation, robbing Jewish communities across Europe of between $230 billion and $330 billion. Another US-centric example includes the grim reality of Japanese-American internment in the 1940s, stripping over 80,000 citizens of assets and opportunities, resulting in an estimated $77 million loss.
Unfortunately, these cases often coincide with severe restrictions on personal freedoms and can incite violence. While it’s tough to predict if this could happen in your current country, there are definitely steps you can take to fortify your assets against such risks.
Here’s how you can protect yourself:
#1 Education
Stay informed about your country’s fiscal policies and political dynamics. Engage by voting, contributing, or volunteering to support the democratic process. Although this isn’t an all-encompassing solution, knowledge is undeniably powerful.
#2 Cryptocurrency
Cryptocurrency presents an innovative hedge; it allows you to relocate while maintaining access to your assets. However, the volatile nature of crypto means there’s no guarantee its value will remain consistent.
#3 Treasure
Although crossing borders with cash can be risky, securing portable valuables like jewels might offer a safety net. Small stashes of tangible property like Krugerrand coins could be a lifeline in the face of sudden asset freezes.
#4 Have a Skill
Global demand for medical and veterinary professionals is significant, and while there might be hurdles like licensing, these skills can help you land a stable job abroad. This can be a major advantage if you find yourself having to rebuild your financial base.
#5 Learn a Language
Multilingual capability can be invaluable, making it easier to transition to a professional role in countries where you’re proficient in the language spoken.
#6 Leave
Expatriating proactively, rather than fleeing as a refugee, enables more control. While there are sacrifices, such as potential loss of relationships and lifestyle changes, this preemptive move might be more manageable than living under threat.
In pondering whether to concern oneself with confiscation, Dr. Hofmeister emphasizes optimism. Despite the challenges democracy faces, he believes in its durability and finds solace in his own marketable skills and readiness to adapt. He also underscores maintaining focus on one’s sphere of control, avoiding undue stress over what can’t be directly managed.
Discussing the potential for government confiscation inevitably ties into historical and political contexts, which can make the topic contentious in financial discussions. Nevertheless, it’s crucial to acknowledge confiscation as a significant, albeit less conspicuous, financial risk. So, what about you? Have you thought about this? What measures have you considered to shield yourself from confiscation? Let’s talk in the comments below!
