#942 – The Expat Files: Government Inefficiency, Currency Crises, and Post-Pandemic Hollywood

Automatically transcribed from the original recording; names and wording may contain errors.

[00:00] South of the border down Mexico way That's where I fell in love when the stars above came out to play and now I wonder Hello there all you ex-pat wannabes. I'm Johnny Mueller and you're listening to the expat files living in Latin America The show that tells you just what it's like to live work play and or retire down here in Latin America It's a mix of the good the bad the ugly and the great and it's all right here. So let's get started So the question is and it's probably a rhetorical question Are you addicted to the news cycle like pretty much the rest of the world is these days with the corona virus? Are you glued to the internet in your smartphone? Just sucking in all those conflicting bits of information man, you know these days you can't tell what's bullshit. What's not good example wearing masks

[00:51] You know, I was just at the grocery store And you know, it seemed like I was the only one there without a mask Why because just recently in fact just this morning I listened to another one of those viral Epidemiology experts this guy wrote a couple of books on the subject and he said 95% of the masks you see out there Suck in air from the side. So they're not protecting themselves from others with that mask They're protecting others in case they start coughing or launch a loogie both of which will end up in the mask And of course, we're supposed to believe what the government says in all their press releases, etc When in reality all the government has done in the past 50 years is perfect the art of making bad things worse Take masks. For example, did you know the country's stockpile of n95 masks according to the US National Health Service is only enough to meet

[01:40] 1% of the estimated 3 billion masks needed by our health care workers during a country-wide pandemic such as this Because you know, you got to keep changing those things. You can't wear them day after day just like gloves, you know routinely Physicians and dentists change their gloves between patients or if they touch a counter or a doorknob yet You see millions of civilians walking around with gloves that they never change until they rip puncture a break So again, the estimate is 3 billion masks are needed in the US and there's only 1% available right now And that number is just for US health care workers. So then why is that? Why isn't the market responding as it should and pick up the slack and why then haven't other companies with similar machines retool?

[02:26] Just a little bit that should take about a half a day, you know, mask making is 1950s technology It's not rocket science Plus we have all those CNC robotic machines now that can be programmed in an instant to produce all kinds of cloth and paper products So then why after what a month into this virus thing now, are they projecting an extreme shortage of mass? Well, wouldn't you know it you can put the finger on large-ass government slugs and they're idiotic red tape and regulations It's because the feds are still requiring new manufacturers to get FDA approval first which takes from 45 to 90 days and that's the reason so many companies are pivoting to make hand sanitizer rather than masks

[03:13] Why less red tape turns out the amount of hurdles you have to jump through in order to get approval for mass is beyond absurd Meaning it's impossible to make enough masks in time to help during this pandemic without breaking the law Actually a number of laws and this friends is your benevolent government We're shit on top of all of that stifling bureaucracy We've got this new breed of so-called democratic socialists or social Democrats who are so Insistent on having the government run a national health care system as if government is so good at what they do Like for example, the US Department of Education It's good In fact great at spitting out seniors who can read right at the fourth grade level then there's the Department of Veteran Affairs

[03:59] And the VA they're so good at what they do. There are only 17 veteran suicides per day I tell you the counselors and psychologists at the VA must be proud then you've got the US Defense Department They're so good at what they do They've got the price of toilet seats down to a rock bottom 600 bucks apiece and hammers They've managed to whittle down to only 200 bucks a pop You gotta hand it to those geniuses in the purchasing and procurement department, huh? Oh and to get your GI laundry done only 200 bucks a bag by the way I was just talking to one of my engineering buddies who works for BMW You know the premium German carmaker. He tells me that there are around 30,000 individual parts from screws to bolts to washers in every regular BMW sedan

[04:46] You know the typical one that costs maybe 50 grand they outsource a lot of those other parts to other manufacturers like Bosch Things like glass paint grommets screws lights trim wiring harnesses, etc From approximately 1,100 companies in the supply chain. That's normal Nothing unusual about that except to say that he and some of his engineering buddies over there in Stuttgart Germany That's where the plant is He said he and his engineering buddies got into a thought experiment around the water cooler He said they tried to estimate what it would cost for the government in that case the German government But it applies to the American government to to produce a car like that not to design it from scratch and then assemble it But having all the blueprints then giving those plans to a government agency like the Defense Department

[05:34] NASA Navy Air Force Army Corps of Engineers then tasked them with the job of building a BMW Exactly like one that would roll off an assembly line in Stuttgart and they estimated the way government works and the way the Appropriation systems work it would cost by their estimates a hundred million dollars and take five years to produce one car In other words every one of these engineers at BMW knew the last thing you want to do if you want to produce an excellent product They're at a reasonable price in a short period of time is to test that job to a government agency That's the kiss of death Because I repeat the government and it doesn't matter which government we're talking about Has perfected the art of inefficiency of making easy things hard bad things worse and

[06:24] Ostensibly cheap things ridiculously expensive it perfected the art of going over budget and they invented the term cost plus You probably know what that means when a contractor for example for NASA when they need landing gear for a moonshot They go to their usual suspect contractors like General Dynamics or McDonald Douglas the low bid Let's say is 30 million bucks with a finished date of 10 months and when 10 months rolls around and it's not done And that's usually the case they revert to the cost plus mode. That's why practically everything government contracts out Especially with NASA and the Defense Department go routinely two three and four times over budget because you see that cost plus thing is written Right into the contracts. Everybody knows it's part of the game

[07:11] That's why defense contractors attach themselves to generals and such like leeches. That's why retired generals Congressmen and cabinet members end up on corporate boards and companies like General Dynamics So cost-plus even though it kills the taxpayer is a government contractors bread and butter meanwhile defense contractor CEOs and board members Continuously pay themselves million dollar bonuses year over year Even though their contracts run two three even four times over budget. In fact, that's one of the main reasons They can pay themselves million dollar bonuses They absolutely count on that cost plus language being written into those contracts though. They'll never admit it Except amongst themselves behind closed doors now as for me I believe almost nothing the government tells me and many times I believe just the opposite for example

[08:01] Just yesterday the head of the FDIC, you know, that's the federal deposit insurance corporation That's the one that's supposed to guarantee your deposits at the bank up to 250,000 bucks Now the FDIC was created during the Great Depression when there was a huge run on the banks and banks went broke So millions of little guys on the street lost all their dough with no recourse So anyway yesterday the head of the FDIC put out a YouTube a video public service announcement That's already been viewed by 10 million plus people with a nice lady Standing at a podium next to the American flag and the great big seal of the president of the good old US of a Saying stay calm. This is not the time to panic. We got you covered. The FDIC is here for you

[08:46] She even said don't put your money under your mattress. Yep. She even mentioned the old cliche mattress thing It's not good. She said to have a lot of money on you or in your house Don't worry. She said the banks are completely safe. We got them covered then she said since the FDIC was founded in 1933 not a single American with a bank account has lost a cent Sure sounded good sounded nice, but it was a complete Lie, and I can prove it if you take the value of the US dollar in 1933 The dollar today has only five percent of the purchasing power of that dollar So your money compared to then is worth five cents on the dollar So in effect under the watchful caring eyes of the Fed and the FDIC

[09:34] Every dollar you have in the banker in your wallet has lost 95% of his value meanwhile the Fed and the FDIC Keep telling us over and over the reason why they were created The only reason they exist is to keep your money sound strong and safe and thus attenuate the natural boom and bust cycle to keep the financial markets healthy and they Brag about it every time you stick a mic in front of their faces when in fact They're the ones that created this huge financial bubble that just got pricked and this has been going on for 80 something years And yet none of them are wearing orange jumpsuits Worse yet you got 99% of the people on the street looking to the Fed for answers like they can solve the problem The ones that got us into this huge

[10:20] unprecedented debt bubble in the first place They blew up the bubble and the coronavirus was just the pin that popped it And by the way that six billion dollar bailout program that's in Congress I noticed I mentioned something about a fed crypto coin on page 1006 now, I don't care a bit about a fed coin and I have zero confidence in government I'm just bringing this up. So you realize that bills got over a thousand pages That means for sure. Nobody's read the whole thing and naturally it's just packed with pork That's why the government can never do anything right and they screw up everything They touch just imagine when they get to the national health care bill and they will that thing's gonna be tens of thousands of pages What a disastrous pork sausage. That's gonna be oh and just one more thing about the Federal Reserve before

[11:11] 1913 the US dollar was a hundred percent gold back then in 1913 when the Fed was created They pulled some real sleight of hand They changed the rule so that the currency of the United States only had to be backed by 40 percent gold In other words at that moment, they were able to inflate the currency by 60 percent By the way that and the instituting of the brand-new federal income tax in 1913 was how they paid for World War one wars are expensive and you know when people hear that for the first 135 years of the United States existence. There was no income tax. They look at you funny They don't believe it. How could the government function or pay its bills without an income tax? Well, they did just fine through tariffs and liquor taxes

[11:59] licensing fees import taxes so in effect 1913 marked the beginning of the end the Treasury instantly inflated the US dollar by 60% and then came the roaring 20s in the Great Depression and then World War two and in 1944 was the Bretton Woods conference That's where all the allied countries got together trying to decide what they were gonna do with the monetary system After the war was over and that's when the world went on the US dollar standard by then all the allied countries and their banks Were loaded with US dollars a lot of it because millions of US troops were stationed in allied countries spent in those dollars Not only that all the allied countries had big US loans and debts to pay back That's when the US dollar became the reserve currency of the world to all the other world powers

[12:46] It was as good as gold because it was backed by 40 percent gold But in 1944 at the Bretton Woods conference the US changed the rules for gold reserves again at that point They would not specify a gold reserve number anymore in other words It could fluctuate always as you may have figured to the downside and as the printing presses were cranked up The gold reserves got smaller and smaller and then in 1971 Nixon took the US completely off the gold standard Why do you think he did that well because at that time it was estimated that we only had 10% of our money backed by gold and that meant if everyone in the world turned in their dollars for gold Only the first 10% that got to the gold window would get it and at that time a lot of smart European bankers

[13:34] Figured that out and they did start cashing in their dollars for gold back Then you could do that You know at some big US banks and the Federal Reserve to make it more understandable realize that in 1970 The United States had 14 and a half billion dollars worth of gold reserves with 45.7 billion dollars in paper currency floating around the world And if Nixon hasn't closed what they call the gold window within a couple of years the US would have no gold left Whatsoever and that was the moment we went completely to a US funny money system So with no gold reserve necessary the printing presses were cranked up even higher and that's what's brought us to this gigantic Debt crisis we're in right now And that's why I just in the past few years Russia and China have been buying up gold like crazy

[14:21] Not so much because they believe gold is gonna skyrocket in price though It will because they know that the US dollar as the international reserve currency is about to end So even if China or Russia back their currency with just 10% gold the smart money big corporate money Banks and institutions will rush out at dollars into a currency. That's backed by something Now to show you just how much governments can screw up and distort things in 1970 the price of gold was 35 bucks an ounce a year or so later when Nixon closed the gold window gold shot up to its real price 125 bucks an ounce about four times its 1971 value reflecting almost exactly the same inflated increase in the US dollar supply over the previous 50-something years

[15:07] So gold or I should say the market automatically adjusted itself to reflect the excess funny money rolling off the presses a direct cause of inflation So if you think that this week's announcement that the US Fed is gonna inject eight trillion dollars into the system And that's gonna solve or even cure some of the grave Financial problems we're in right now. Well, we'll get a dead cat bounce. Alright, it's too much money Not to now to make this more clear shine a brighter light on it Note that as of February 12th 2020 there was one point seventy five Trillion dollars worth of Federal Reserve notes in circulation actual physical paper money one point seventy five or one and three-quarter trillion dollars With another twelve trillion dollars spread out across the world in bank balances and computer ledgers not physical paper

[15:59] US dollars, but computer ledger entries in banks businesses and financial institutions and the Fed said it's gonna inject eight Trillion dollars into that system with fully two trillion of that being actual paper money printed money That means in a couple of weeks or months There'll be more than double the physical money supply floating around the world do the numbers that my friends is what you call Venezuelan style monetary policy. I repeat There's just slightly less than two trillion dollars floating around the world as paper money right now and very soon There's gonna be at least another two trillion floating around and the other six trillion They promised those bank and financial institution computer ledger entries that'll pump the markets for a while It's like handing everyone on the deck of the Titanic an extra bucket makes you feel good for a while and relieves the panic

[16:50] But doesn't solve the fundamental problem that the ship's got a fatally big hole in it Which brings us back to our initial question for the day. Are you addicted to the coronavirus news? Are you glued to your screens and devices does every little news flash message and pop-up report steal you away from whatever? You were doing at the time. Well, here's something we might expect You know Hollywood movies have always reflected the spirit and the feeling of the times For example, if you see a black-and-white movie, that's not an artsy movie. It's probably pre 1960 Factor are lots of telltale science in every movie that perfectly reflect the time period they were filmed in just look at the telephones They use in movies you can spot a 60s or 70s movie easily by what the people look like and the phones

[17:36] They use in the 80s and 90s suddenly people were using pagers Remember those then there was the flip phone period in the late 90s the blackberry phone period from 2000 to 2010 and in the last few years the iPhone and the Android and of course clothes and hairdos are movie time capsule giveaways, too Then it seems like every third or fourth movie there's a scene in New York City and everybody knows before 9-11 a New York shot always had the Twin Towers in it and before 1970 when the towers were built there was always the skyline shot of the Empire State Building or the Chrysler Building and Now post 9-11. We're back to skyline shots of the Chrysler Building and the Empire State So why am I bringing this up because I guarantee you now since the coronavirus thing Hollywood's depiction of life on the big screen

[18:26] Will change drastically, too It's certain that in the future when we see a movie will instantly know if it was filmed in the post virus era I predict now on you'll see social distancing masks popping up everywhere No more handshakes or cheek rubbing a lot of gloves and fist bumping Oh, and I foresee designer masks and designer label disinfectant shells and a lot less facial hair Except for maybe ZZ top and my aunt Louise and her gin rummy buddies Why is it that old ladies get hairier in all the wrong places? Ain't nature cruel. Oh and another thing I'm sure there's gonna be an explosion in online schools and universities. I predict most brick-and-mortar schools will just fade away They probably should have done so a long time ago. I think those changes will be permanent

[19:14] Oh, and there'll be a boom in hands-free technology, too. You watch regular houses will start having automatic doors Badaise will start popping up in bathrooms Speaking of bidets. What else did the French contribute to society? Hmm. Let's see the croissant French toast smelly cheese the guillotine and women with hairy armpits. Hmm the guillotine Yeah, that one deserves a comeback. Don't you think but where were we? Oh, yeah Talking about the effect the virus will have on water faucets shopping carts doorknobs handrails So I'll be redesigned for minimum cross contamination and I predict in bathrooms There'll be no more power hand dryers as soon as you hit the button. You're circulating. Everyone's contaminated air Including stirring up bacteria and viruses that are best left in their rightful place on the toilet

[20:02] You know, I never use those things I just rush on out grabbing the handle of the door with a Kleenex or paper towel Meanwhile back in Latin America this side of the Costa Rican paper called the star it says as of today March 23rd 2020 the Costa Rican government implemented several new sanitary measures to try and control the spread of the corona virus in the country one of these measures has Caused much alarm amongst foreigners who live in the country and have legal status as residents So now it doesn't matter if you're a permanent resident with a sedula or national ID the new measure states as of Tuesday March 24th all foreigners who have legal residency in Costa Rica or Regular status with a working visa if they choose to leave the country for any reason will automatically lose their residency status

[20:53] Did you get that after all the crap you have to go through and the year waiting to get that temporary or permanent residency? Not to mention the money you had to fork over in the endless lines you had to stand in They're saying if you leave the country your residency will be revoked Now you have to wonder what this has to do with the spread of the virus Look if someone's leaving the country that should be a good thing, right one less carrier one less burden on the health care system Well, some gringos and expats in the know living in Costa Rica right now are saying the real reason is Costa Rica's economy is almost entirely Dependent on tourism and gringos and expats living in the country So you've got the tens of thousands of gringos and expats living there who've established businesses and bought land and houses

[21:39] With a huge proportion of them receiving pensions and Social Security monthly from the states And since nearly all gringos and expats living in Costa Rica have relatives back up in the states where they're worried about right now That's why in this time of crisis They want to be with them and thus tens of thousands have left or have made plans to go back home to the states To tough out the crisis with them up there. Well, the Costa Rican government knows when gringos leave their cash pensions Investments and businesses leave too and that makes Costa Rican officials Extremely nervous because they depend almost completely on the gringo dollar So then can we expect this new revolt and development to spread to other Latin countries will Colombia, Chile, Bolivia Guatemala, Nicaragua, etc

[22:26] Pull the same stunt. Well, it's my opinion that it only can happen in a country like Costa Rica that depends almost exclusively on tourism It's a desperate measure that's gonna piss off a lot of people and I'm positive in the end when things normalize Americans Canadians and Europeans who had plans to move to Costa Rica Will remember that idiotic move and be gun-shy. Of course. Oh you longtime listeners No, I never recommended Costa Rica for gringos and expats Anyway, except for a nice package vacation deal for a week or two. I would never recommend the place for anything else Remember I lived there for a couple years myself. I had two houses in a business I saw the science back then some 25 or so years ago I sold everything and got the hell out because I knew it was only going downhill from there and I was 100% correct

[23:13] So as far as this latest thing losing your residency if you happen to leave the country go back home or whatever If it happens to you I've got no sympathy for you I've been telling you over and over for almost ten years. Now, Costa Rica is not the paradise You think it is no matter what those retirement rags on the NAS traveler and international living tell you it's not a good place To have your plan be it's first world expensive The locals are jaded by the US dollar and all the gringos and there's a con artist on every corner In fact, there are two con artists one Costa Rican and one a gringo matter of fact There isn't a single gringo or expat I know living in Costa Rica who has not been royally ripped off by someone in most cases by another gringo and or his own Personal lawyer. So again, I repeat you've had more than fair warning

[24:02] Alright enough said about that in other Latin American news This coronavirus thing is devastating the economies of a lot of Latin American countries who even before the virus hit We're insolvent and on the road to bankruptcy For example, we've got this article that just came out yesterday. It starts Ecuador's Congress called on the government to suspend debt payments to free up cash to deal with the virus pandemic Prompting JP Morgan and Chase Company to warn of a general sovereign default as soon as next Tuesday Why all of a sudden? Well, it wasn't all a sudden turns out the South American nation of Ecuador has three billion dollars in bonds Do in 2028 they fell to three point five cents to a record low of thirty one cents on the dollar

[24:50] Talk about haircuts, huh pushing their yield into extreme junk bond territory at thirty three percent Wow, wouldn't you just love to get thirty three percent annual return on your money, of course But not with these Ecuador bonds whose face value has dropped to thirty one cents on the dollar and it says Ecuador has about 320 million dollars of debt due Tuesday as well as coupon payments due later next week Problem is it says to halt those payments will prove costly to Ecuador preventing them from receiving 5.5 billion in financing from other lenders They have lined up including the IMF the International Monetary Fund and surprise surprise the Chinese

[25:37] Again with the Chinese lenders, huh? Oh, this is bad It says Ecuador is the country that's got the most distressed sovereign credit rating. That's not currently in default Well, I bet that'll change next week Then it says head of research at emzo asset management in New York who is researching the problem says what's the point of Ecuador? Paying back those loans. They've only got 800 million on hand and the principal and interest payments do this week are 600 million and with the COVID-19 virus spreading like wildfire and a depleted treasury. They'll have little room to maneuver Oh, and here's the capper. It says because Ecuador uses the US dollar as its currency It can't print money like it could if it had its own currency to provide liquidity

[26:25] Obviously Ecuador can't print US dollars now doesn't that make you wonder Ecuador uses the US dollar and can't print them Meanwhile the US has their printing presses going at warp speed Alright, we're getting near the end of the show now and I'd like to remind you once again that my next expat insider seminar Will it be moved up a couple of months to Friday? August 21st through Thursday? August 27 once again We'll be putting boots on the ground in the Alti Plano in Guatemala Central America as well as hitting the lowlands in El Salvador And the beaches too this could be your last chance to get a two to five year head start on your plan B So if you're ready to drink from the fire hose and want to get your plan B on steroids Before uncle Sam makes it impossible to get you and your assets out of the country

[27:11] Just send me an email the expat files at gmail.com and I'll put you on my early bird list Oh and don't forget wherever you are on your plan B You'll definitely need a copy of my hundred plus page Latin American health care report It's new and revised for 2020 and beyond to get your copy go to expat plan B.com You've been listening to the expat files living in Latin America If you need some help with your own plan B We can schedule a one-on-one phone or Skype consult Just send me an email the expat files at gmail.com And if you want to get on the waiting list for my next week long expat insider seminar in Central America Where you're guaranteed to get a two to five year head start on your plan B Send me an email the expat files at gmail.com

[27:57] Nos vamos