Sunday, April 22, 2012

Time to Bug Out of America?

7100035467 5e6c86ab79 Time to Bug Out of America?George Ure and Gaye Levy, Contributors
Activist Post

We seem to get a more or less, constant stream of mail from people who go “one step beyond prepping” and go so far as to actually leave and bug out of America.

George, for example, has plenty of readers, it turns out, in places like Ecuador and Chile, where lots of Americans are moving to extend their retirement incomes. But in some places, like Panama, where George’s brother-in-law is back from, it seems like the overseas boom in real estate has come to a screeching halt.

So we ask ourselves: does it make sense to leave America and move elsewhere for the long term?

Depends....

What Your Money Buys
For people on fixed incomes, one starting point is to consider what things cost in the country that you are thinking of retiring to . . . or just moving to in order to escape the rat race of North America. The problem is sorting out truth from fiction about what things cost.

Fortunately, there is a widely recognized method of balancing things out using a system called "Purchasing Power Parity." Wikipedia sums up the concept this way:

In economics, purchasing power parity (PPP) asks how much money would be needed to purchase the same goods and services in two countries, and uses that to calculate an implicit foreign exchange rate.
Using that PPP rate, an amount of money thus has the same purchasing power in different countries. Among other uses, PPP rates facilitate international comparisons of income, as market exchange rates are often volatile, are affected by political and financial factors that do not lead to immediate changes in income and tend to systematically understate the standard of living in poor countries, due to the Balassa–Samuelson effect.
A bit more research and we find that there are other, less formal, ways to find out how the actual cost of living would feel in different countries if you were to stick to American products. One example is the often-cited Big Mac Index:

The Big Mac PPP exchange rate between two countries is obtained by dividing the price of a Big Mac in one country (in its currency) by the price of a Big Mac in another country (in its currency). This value is then compared with the actual exchange rate; if it is lower, then the first currency is under-valued (according to PPP theory) compared with the second, and conversely, if it is higher, then the first currency is over-valued.

Using this index in 2008 would have priced a Big Mac at an average of $3.57 in the USA, while it was ₤2.29 in the UK. Since the exchange rate at the time was $2 equaled ₤1 pound, the equivalent price was estimated at $4.58 (in US dollars), so buying the same burger in the UK would cost about 28.3% more than in the US. No savings there.

On the other hand, in other places around the world, burger prices vary, but it’s hard to keep track of such things in our spare time. Unless, of course, you happen to know that The Economist, a British paper focused on care-to-guess-what? It has just such an index and you can look at it periodically to see what’s going on with Big Mac prices worldwide.

Based on the January report available here, while the average Big Mac was running $4.20 (on average) in the USA, it was a (pardon our bad burger pun here) running a Whopper of a price in Switzerland, fetching $6.81. . .before fries and sides. On the other hand, the same burger was only costing what would be in Rupees, the equivalent of $1.60 in India, and only slightly more expensive ($2.11) in Ukraine.

Other American equivalence indices can be found, as well, such as the Starbucks latte index, which compared the price of a tall latte in various places globally, but the index hasn’t been much talked about lately.

But returning to our focus, Purchasing Power Parity, or simply PPP as it’s called, can be found annually update as the Organization for Economic Development and Co-operation website and it reveals some interesting things. Mainly that in terms of purchasing power, only three countries on Earth are more expensive than the USA: Luxembourg, Norway, and Switzerland (which we suspected after the burger index research) while on the cheap end of things, the bottom expense-wise may be found in places like Chile, Mexico, Turkey, Poland, Hungary, Estonia, the Slovak Republic, and Portugal.

Of course, these countries have their own sets of issues which Americans may wish to ponder before pulling up stakes.

What Makes a "Livable" Country?
Most of the reader’s we’ve corresponded with fall into one of two camps: Those that do not wish to learn Spanish, or some other global language, and those who do take the time to learn “something else.”

To be sure, climate and natural resources figure prominently in any equation as well, and along with this, as long as we’ve got the thinking caps on, we may also wish to consider other factors, such as population density per square mile.

Depending on how you rank these, there are plenty of different answers that could be best – but it would only be “best for you” since anyone else would likely have a different weighting model from such a decision.

In 2008, Forbes Magazine did a really thorough look at the question of where’s the best place to be an American Expat (expatriate) and topping their list was Singapore. That’s not likely to be the case today, since prices in Singapore have risen, and, remember, the Forbes article was directed at a different market than retirees – they were talking about expat job postings in the main.

George’s long-time friend, Bernard Grover, who serves as the slightly tongue-n-cheek Bureau Chief for UrbanSurvival in Jakarta, moved there several years ago and has thrived. Not only has he gotten married and been able to pursue many business interests, but he’s learned the odd mix of languages common to that part of Indonesia where, last we checked, he was working on introducing comedy clubs to the country. One drawback: many people smoke in Asia . . . tobacco smoke is far more prevalent where profits can be had from uninformed consumers.

Another of UrbanSurvival’s readers is Don DuBosque who publishes regular comments on his adventures of being an expat in Uruguay. We find “My day in Uruguay” to be a pretty insightful look at restarting somewhere else, but with the big asterisk that says “*MUST LEARN SPANISH” before such a move is attempted.

To be sure, another reader, who packed up his family after selling his home in Chicago near the height of real estate prices (tsk tsk George’s doings in part) has found success and happiness in New Zealand. While his first job was as a high-end IT manager for the government upon arrival for the first year and a half, the inevitable cutbacks in spending took their toll and he and his family were forced to do something different. Last we heard, he was still doing IT work, but also teaching baking to locals and doing classes in his local community.

Some of the little things that some from living in a foreign country are hard to put into words. George’s Kiwi reader, for example, took great delight in being able to ride a motorized skateboard, something which is verboten in most American cities.

It’s also hard to put the adventure of moving out of one’s mind for long. In 1983, George resigned from a successful broadcasting career to move his then-wife and three kids to the Cayman Islands where he lived for two years as senior vice president of the country’s national airline. While it was a “now for something completely different” kind of life, it was extremely broadening, and once in the airline business the number of cities he was able to visit skyrocketed, along with jungle adventure in Equitos, climbing Machu Picchu, lunching in Panama City, diving in the Turks and Caicos, and so forth.

But there is a downside – and this is something that people who go on about being an expat don’t talk about too much. It’s the matter of becoming, in the case of living on Grand Cayman, a bit “island happy” after a while. Because he flew into the US quite frequently, George didn’t come down with it much, but it was hard on the family living on an island with just 25-miles or road populated by a few thousand cars and, English-speaking or not, it was still a very British place.

On the other hand, Gaye lives on a small island only accessible by ferry (or pricey float plane service) and does not seem to suffer any of the symptoms of island living.  Perhaps age and maturity – and no kids – are the solution to this malady.

Then There’s the Tax Angle
As exotic and romantic as the adventure in “fleeing America” might sound, the reality is that there are tax consequences both for off-shore income, especially if that income happens to be tax-free in the country where paid, as it was in George’s case, or whether the income arrived from the US but still had taxes owing on in, such as from investment income.

George’s solution was pretty simple: hire a big-eight accounting firm (there were 8 at the time) to prepare his returns for him, or take a risk not being able to document everything just-so for IRS. George made the conservative choice and it served him well.

On the other hand, in his travels, as you might expect living in a tax-haven, he did run across people who were skirting the law. A typical example was someone in Texas (and this was going into the S&L crisis, remember) who would refinance a major apartment complex for some high-dollar value, and take the proceeds of the re-fi as cash.

Then, the person would get on a plane, fly off to one of the several tax havens in the Caribbean, and deposit the money there. Naturally, at the time under existing tax laws (and it may still be the case today – we offer no advice) because the money which went offshore was “loan proceeds” (*subject to repayment at the time of exit) there was no “income tax due” or, at least that was the argument.

Naturally, when the excessively appraised apartment building was later repossessed for non-payment, the cash was out of country and, practically speaking at the time, out of reach of US authorities. It was made even more complicated by depositing such funds in the names of local nominees, who acted as “trustees” for offshore trust accounts, also beyond the reach of US regulators, although some of that is still changing, as there was a critical tax decision aimed at drug dealer income, which is still evolving today with threatened action by the US against those Swiss banks that don’t turn over confidential information about US citizen offshore accounts.

ScotiaMcLeod’s newsletter Exchange offers some discussion of how tax rule changes by the US – and other countries– is changing the nature of offshore financial, which for a good number of years was largely interested in preserving individual income.

We note that with the rise of corporate uses of offshore banking (in many cases to cost-load expenses on to high tax-rate countries to effectively minimize total global tax burdens) that the offshore interests seem to be moving more to become corporate service bureaus, and of course, privately owned corporations . . . well, let’s let it go at that.

Can You Ever Stop being a Citizen?
Well, partly yes, and mostly no, since there are a number of problems that come with such an act. Many of George’s acquaintances who lived in Tax Haven countries simply applied for, and received, citizenship in the offshore tax haven countries.

The way this process is done – and this is important to those people seeking to permanently avoid US income tax reporting liability in perpetuity – is to first get citizenship in some foreign country.

After this is done – and with both citizenship papers and a valid passport from the new country in pocket, the next step is laid out on the State Department website this way:
B. ELEMENTS OF RENUNCIATION
“A person wishing to renounce his or her U.S. citizenship must voluntarily and with intent to relinquish U.S. citizenship:
1. appear in person before a U.S. consular or diplomatic officer,
2. in a foreign country (normally at a U.S. Embassy or Consulate); and
3. sign an oath of renunciation

Renunciations that do not meet the conditions described above have no legal effect. Because of the provisions of section 349(a)(5), Americans cannot effectively renounce their citizenship by mail, through an agent, or while in the United States. In fact, U.S. courts have held certain attempts to renounce U.S. citizenship to be ineffective on a variety of grounds, as discussed below.
After going through the warnings about the dangers of being a “stateless” person, the US then lays out their claim of ongoing taxing authority this way:
E. TAX & MILITARY OBLIGATIONS /NO ESCAPE FROM PROSECUTION
Also, persons who wish to renounce U.S. citizenship should also be aware that the fact that a person has renounced U.S. citizenship may have no effect whatsoever on his or her U.S. tax or military service obligations (contact the Internal Revenue Service or U.S. Selective Service for more information). In addition, the act of renouncing U.S. citizenship will not allow persons to avoid possible prosecution for crimes which they may have committed in the United States, or escape the repayment of financial obligations previously incurred in the United States or incurred as United States citizens abroad.
Which may be true, or may not be, and this is where it gets to be dicey. If a person pays taxes right up to the point of renunciation, and then – thereafter in the future fails to file and report future income, well that’s where we end out little discussion and direct you to competent tax counsel.

But just how broadly can such claims be made, and, in the case of real estate which was used to secure property, but which has subsequently declined in value and the difference in loan proceeds offshored? Well, that’s the stuff which keeps law firms and tax agents busy.

But What About Simply Bugging Out?
In terms of a “quick bug out”,  unless you can time your exit perfectly to the collapse of the global computer infrastructure/grid, it seems to us to be a pretty risky business to try a “shot at a brass ring” on the way out.

On the other hand, on Social Security could you live happily on a cheap beach in Mexico or Chile, or in a gorgeous mountain town in Ecuador? You bet.

And the articles found in the “Escape from America Magazine” make for really interesting continued research in answer to the question:  is it time to bug out of America?

Introducing Strategic-Living: a practical and useful online magazine providing inspiration and guidance as we make our way through the maze of changes that are coming our way. In collaboration with my friend and colleague, George Ure, Strategic-Living will offer a synthesis of Urban Survival and Backdoor Survival with much more detailed tips, tools and strategies for creating a vibrant and sustainable lifestyle wherever your path may take you. Think of Urban Survival and Backdoor Survival as your roadmap and Strategic-Living as your detailed guidebook. Here you will find articles and photos, diagrams and how-to’s, and a healthy dose get-out-there and do it with kick-in-the-ass inspiration.

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20 comments:

Ed Hurst said...

Island Fever really depends on a number of factors. So long as you maintain the standard American materialistic approach to things, you will suffer a great deal from it. Those who have already begun shedding that materialistic orientation will feel rather alien inside America to begin with, so Island Fever is much less likely to happen. It's the same with boredom; shallow people are more easily bored than those who always have something driving them from within.

Anonymous said...

I bugged out of the US mentally decades ago. I guess if I'm going to be a stranger in a strange land I might as well do it at home. Besides, someone has to fight for the revolution when it comes.

Grace said...

Fukushima makes bugging out impossible. Where can people run to escape the Pacific and Atlantic oceans on this planet?

The waters all merge into one. The winds ensure that ultimately we'll breathe the same air.

Why does everyone advocate running away and leaving others with the mess they've created?

Stay home and solve your social, economic, and political issues already.

Anonymous said...

I would say that the most important part of the equation would be getting a place where you (perhaps with employed help) could produce your own food, and earn money by selling extra.
"Flee" the US, yet depend on Social Security? Pensions?
I left the US nine years ago. I can only say that I've been able to make good on many opportunities. In the US, "they" said I had a problem... now I only have opportunities.

Oh yeah... WAIT for revolution? Laughable. When the SHTF, it's on, and you're WAITING for it to end.

5th Estate said...

Should you be contemplating leaving America, we can assist - pro bono - :

http://www.freepeoples5thestate.com/

It may be done with little money if you are determined to leave.

Robert S. Finnegan
Free Peoples 5th Estate
rsfinnegan@gmail.com
Jakarta, Indonesia
62-21-812-98-177936

howardtlewisiiiffy said...

The West coast is being bathed in radiation because an Israeli security company nuked the Fukushima reactor facility. The WTCs were nuked by the Bush41 cabal and Israelis. The Deepwater Horizon oil well was intentionally blown up by Bush's Halliburton and queen lizard's BP. Three places I can see worth bugging out to. The City of London, Israel, and Crawford Texas. Right after we arrest Bush41, wherever he is.

Ted said...

I'm studying Brazilian Portuguese in preparation for my exodus to the Southern Hemisphere. Fukushima radiation will tend to remain in the Northern Hemisphere because of current and wind paterns. Brazil's economic growth is second only to China's. They need English teachers. Southern Brazil has a larger percentage of citizens of European descent than does the U.S.

Like that of the Beetles rock band, my perception has evolved from 'Live and let live' to Live and let die'. I've performed all the Special Education I can to wake up my fellow Americans. I have concluded that psychometric scientists who claim only two percent of adult Americans are biologically capable of intelligent human thought are correct. Let the laws of natural selection commence.

On the other hand, I hate to waste all the ammo I invested in.

Anonymous said...

"On the other hand, on Social Security could you live happily on a cheap beach in Mexico or Chile, or in a gorgeous mountain town in Ecuador? You bet." Yeah, I'm sure social security will be there in the event of a collapse--not likely.

Anonymous said...

More than deciding to leave, my three generation family of six focused first the qualities that would be most important to us were we to move. We decided that a temperate climate with sufficient water, political stability, and a well educated progressive citizenry were at the top of our list. We then added a subjective requirement...a country that we thought was likely in a long-term uptrend.

That was almost six years ago. All six of us would readily agree that we made a good positive decision. We have all made every effort to fit in and conform to the ways and customs of our new country. The transition was not easy nor was success immediate, but succeed we have.

Leaving the US, with roots dating back 352 years, leaving good friends, leaving successful careers was painful to say the least. Ultimately, we left to give our grandchildren different values and opportunities, but we have ended up with a quality of life that exceeded our hopes and expections. Quantitatively, we have somewhat less.

Expatriation is not to be taken lightly and in our opinion, should not be based on lower cost of living expectations because there is every reason to believe that the US dollar is not on solid footing.

Dr. Goldstein said...

I bugged out to the wilds of Western Canada 20 years ago. Smartest thing I ever did. Smoke a bud every day to keep Cancer away.

Up here "just in time supply chain" means another moose just walked into my cross-hairs.

Anonymous said...

This article is written for the slugs of America. Most of us have some common sense when thinking about 'bugging out'.

I left the US in 1995 and lived in a few non English speaking countries before settling in Russia in 1999.

Most Russians can speak English a little and speaking Russian is usually not necessary. I live where there are very few foreigners from the west and not many from the east either. I have clean chemical free food, safe environment (very low crime), more civil and personal freedom here, and the exchange rate is great for my dollars.

I am on the western slopes of the Ural Mountains in the capital city of the autonomous Republic of Bashkortostan. And I do not plan to return to the US!

Anonymous said...

2008 I seriously looked into a move to Costa Rica. What I found was they required 250K to remain in their banks for two years. I suppose they want to keep those who might be a financial burden at bay. Goes without saying I did not move. I sincerely hope I am present to watch this corrupt parasitical system implode. Never have they been more blatant with their criminal hijackings.

Anonymous said...

The country of BELIZE is an alternative spot for ex-pats I have meet several alimony dodgers from Calif. living on homestead lands some growing coffee ect, ALSO met a LOT of NAM vets in Thailand and they ALL SAY they will NEVER AGAIN set foot in the USA.

NobodysaysBOO!

Anonymous said...

Time to bug out of Amerikkka, yes! But where to? In case y'all haven't noticed, the rest of the world is in the same mess and not taking anybody from abroad either. So, where to go? Perhaps that colony in the Moon the Newt[ered] has been talking about?

Anonymous said...

Anyone with half a brain can see the writing on the wall in the US. There are loads of opportunities outside the country, just head out there and look around. If you're stuck in the employee 9-5 mentality maybe you're too conditioned to be complacent.

If you know how to create value, and identify opportunity it's everywhere but the US. People who are asking "where to go" clearly havent been anywhere. There is no way to fix a governement that's run by corporations, the best thing you can do is leave the country. Intellectual capital will disappear, tax revenue will dry up, and the machine will collapse. Or stay and go down with it, with some mis-placed sense of patriotism.

If you want to do the best thing for you and your family, take them to a country that still has a chance. Singapore, Chile, Uruguay, Panama, Hong Kong, Thailand, Ecuador, just to name a few....

Anonymous said...

I moved out of the US 4 years ago after figuring out some of the many lies we have been told by the government and media. I lived in Australia where it wasn't too hard to find a technical job. After 3 years, the work ran out, and I was given a month to find a new job, so I decided to give New Zealand a try. Getting work permits in NZ was much more difficult, so after 9 months, headed to Thailand with my girlfriend from there. Have gotten a job here but much government paperwork can take time to process and pay is low. I have researched other places to live. Belize charges $750 a year for a work permit and English is the official language. Costa Rica requires a large deposit and the locals speak Spanish but otherwise the country is very green and no military as they spend money on education and health care instead. Palau is a small island in the Pacific that allows Americans to live for a year or longer without a permit and they speak English too.

Wally Perry Taylor the fourth said...

If you want to bug out central Europe should be nice. But Argentina has nicer weather and Argentina is like other European cities, but a lot cheaper. You got to consider very cold weather, very hot weather and that means Uruquay or Argentina for nice weather. Poland and Russia is cold. Southern Ukraine is nice on the Black Sea. I've been to St. Petersburg and it's cold there in October.
But the problem with the Slavic countries they dumped so much nuclear waste in the rivers and lakes. My guess it would be better to settle in South America. The exchange rate in Russia, Belarus and Ukraine is in your favor.

Anonymous said...

If you want to live where food is cheap and the clothes are cheap you might want to consider Mexico. In places like Mexico there are plenty of strip joints and if you like hot weather you might consider this, especially if you want to be able to go to the USA without having to fly. Flying is going to be something you won't like.

Anonymous said...

I'm not sure why this article references Chile as "cheap". Just the opposite! It is extremely expensive. But for us, well worth it. Gorgeous, modern, great people, etc.
To those who say "there's no where to go". Wrong!!! Southern South America is fabulous. Lots of Europeans, Aussies, NZ's... but most Americans are stuck in denial and think their crumbling country is still the best. No thanks. I'll take a peaceful, beautiful, tranquil life, with good fresh radiation free food anytime over that hell hole.

Anonymous said...

The burger analogy is a lousy one. The disparity comes about by you paying taxes to subsidize McD's in the form of the Workers Investment Tax Credit and that those companies churn their workers to max the credits and lower tax liability that is passed on to you at tax time. HATE CORPORATIONS TAXING ME!

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