First off—opening an offshore bank account is 100% legal.
These days even the mere hint of the word ‘offshore’ conjures images of criminal activity, money laundering, and tax evasion.
[box size=”large”]“Offshore” is just another way of saying ‘international’ or ‘overseas’.[/box]
And the reality is that diversifying your bank accounts internationally is a completely rational, legitimate, and intelligent idea.
Consider the following: 1) A foreign bank account can protect your assets.
If you hold 100% of your funds in the same country that you live and work, you’re taking on some significant legal risk by holding all of your eggs in one basket.
This goes especially if you are living in the United States—the most litigious country that has ever existed in the history of the world.
In the Land of the Free, you can be sued for absolutely nothing… and suddenly all of your assets and all of your savings are up for grabs by frivolous plaintiffs.
Any court or government agency can freeze you out of your bank account with a single phone call without any due process or giving you the chance to make your case.
It’s truly a “guilty until proven innocent” system.
Holding some funds overseas in an international bank account can help provide a little bit of insurance against this risk.
Banking overseas is essentially a zero-cost way of ensuring that, no matter what happens, you’ll always have access to emergency funds.
2) A foreign bank may be MUCH safer.
The unfortunate reality is that a number of banks in the West are in precarious condition.
Of course, few people ever give a thought to bank safety. Most people spend more time thinking about what they’re going to have for dinner than whether or not their bank is safe.
And why should they? We’ve been told our entire lives that banks are safe. After all, the government says so!
Once again, this has turned out to be an outdated fantasy.
The world learned the hard way in 2008 that banks aren’t as safe as they want us to believe.
Suddenly, OVERNIGHT, some of the largest banks in the world collapsed. Wachovia. Lehman Brothers. Washington Mutual. Dozens of banks vanished in an instant.
And very little has changed since 2008.
In Europe we can see a number of major banks, and even entire national banking systems, that are on the ropes.
The Spanish and Italian banking systems have required multiple bailouts. The Greek banking system is in a state of perpetual crisis.
In 2013, the banking system in Cyprus became completely insolvent to the point that they had to freeze everyone’s account and confiscate funds from the largest depositors.
In the United States, banks typically maintain extremely low levels of ‘liquidity’, meaning the amount of cash (or cash equivalents) they have on hand as a percentage of customer deposits is dangerously low.
Many banks overseas still follow traditional, conservative banking practices.
They don’t gamble and make crazy loans with their depositors’ hard earned savings.
They hold strong, conservative levels of capital and liquidity, and they’re EXTREMELY careful with their customers’ money.
And unlike Europe and the United States, they’re located in jurisdictions where governments have ZERO debt and their insurance funds are well-capitalized and solvent.
We’re living in the 21st century. Our technology is instant and it spans the globe.
Geography is an irrelevant anachronism, especially in finance.
Don’t choose your bank because of its convenient location to your home or office.
Choose your bank because it’s the BEST, most CONSERVATIVE custodian of your savings…. whether that’s across the street, or across the planet.
3) A foreign bank might even pay you MUCH higher interest
Since the beginning of the Global Financial Crisis in 2008, major central banks slashed interest rates to historic lows.
Literally, interest rates were at their lowest levels in 5,000 years of recorded human history. In some parts of Europe, interest rates were even negative.
Rates have started to climb– but they’re still FAR below their historic averages.
In most developed countries, in fact, bank interest rates are well BELOW the rate of inflation.
For example, if your bank pays 1%, but the inflation rate is 3%, your savings is effectively losing 2% of its purchasing power each year.
You need to earn AT LEAST 3% each year just to keep up with inflation and ensure your savings doesn’t lose out.
In the United States and Europe, this has become almost an impossibility.
Interest rates are well below the rate of inflation, which guarantees you will lose purchasing power year after year.
But there are a number of jurisdictions around the world where safe, conservative, well-capitalized banks pay MUCH higher interest rates.
Think about it—
On one hand, you could hold all of your savings at the bank across the street from your house.
The bank is extremely illiquid, questionably solvent, and is gambling your savings away on the latest investment fad in the banking business.
Your account pays a tiny amount of interest that fails to keep up with inflation.
And in the event that you find yourself on the wrong side of some government agency’s list, even by mistake, you can be frozen out of your account in an instant, depriving you of the funds you need to put food on the table for your family.
On the other hand, you could move a portion of your savings to a safe, conservative bank overseas in a jurisdiction with zero debt and a strong, well-capitalized deposit insurance fund.
Your assets a MUCH more protected, and the account pays a solid interest rate that actually puts money in your pocket year after year.
The choice between the two seems like a complete no-brainer.
PS-
Members of our premium service Sovereign Man: Confidential routinely receive in-depth research reports on some of the world’s most stable, conservative banks.
To see what I’m talking about, click here to download a complimentary preview of a recent worldwide banking review that we sent to our premium members.
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Until tomorrow,
Simon Black
Founder, SovereignMan.com
Photo credit: 3B’s via Visual Hunt / CC BY
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