#952 – The Expat Files: Navigating Economic Instability and Financial Planning in Latin America

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 that 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 All right back in the saddle again. Let's start with an email from Calvin in Argentina He says dear Johnny. My country is economically very unstable now We're heading towards another default in May the average monthly wage here is around 300 US dollars

[00:46] And I've saved some money and I'm wondering what to do with it as it continuously loses value in my bank account I do have some Bitcoin, although not as much as you might imagine I'm wondering what to do with my savings However, how to organize myself to make the most out of it as with everyone who's got a little money during the coronavirus thing I've been buying food lots of it, but I'm not sure how much I should store how long the lockdown will last Unfortunately, my money is saved in the local peso currency not dollars from the looks of things here We're heading towards an even worse disaster What most people who don't live in Argentina will never understand is why we are only allowed to take out or buy? 200 US dollars a month through our banks and to switch pesos to dollars at the official bank and government rate is a very big

[01:37] Losing proposition because on the street you can switch dollars for twice the bank and government rate So for example, if you go to your bank online and decide to switch a hundred pesos into dollars At least you can do that within your own bank account You can have a dollar and a peso account linked, but you get screwed if you do it that way You're infinitely better off pulling pesos out in cash Walking outside turning the corner and heading over to one of the currency exchanges on the street doing it that way You'll get twice as many dollars for your pesos or vice versa and another thing the dollars you buy through the bank Can be kept there but cannot be withdrawn. You can only sell them back to the bank for pesos Then you get screwed again here in Argentina. We're used to the government screwing with us here You grow up learning to trust no one but yourself and the ones who are close to you

[02:26] Government will always try to gain your trust and then backstab you later Also, please note that the street price of Bitcoin is not the eight thousand dollars You see on the international exchanges right now But in fact more like twelve thousand dollars a third more than the rest of the world pays for one And that's at the most common crypto exchange here called local bitcoins Obviously our government hates Bitcoin and so do the banks. They're trying to keep us from it Definitely a signal that Bitcoin is the place to be All of us who live here can see that the government is completely broken are trying to control every aspect of our lives Alright Calvin me Johnny here So you say the government's trying to control every aspect of your life. Nothing that sound familiar By the way Cal your English is really good only a couple of typos in your letter

[03:15] You must have gone to a helicopter school. I imagine you know how I like to make fun of entitled rich kids That go to a helicopter school as well Obviously Cal you get it good for you spread the word All right moving on but on the same theme then there's this email from Juanito in Brazil He says Johnny. I'm a 53 year old Brazilian guy, and I've been through two Hyperinflation periods in my country. I'm old enough to have seen six zeros being cut from our cruise zero It happened like this first our country defaulted on international loans It went bankrupt though They didn't admit it then in a panic the government went from the cruise zero to the Crusado and dropped three zeros So if you had any money in the bank at all you got wiped out Then a few years went by and our government defaulted again on its international loans and in the panic our government

[04:07] Switched from the Crusado to the real and dropped another three zeros again Anyone with money in the bank got creamed that all happened within a 10-year period between 1985 and 95 and for the last 20 Years or so that kind of worked the real was sort of successful and did bring inflation down from 80% a month To about 5% a year, but now once again as you might have figured we're in the same boat Inflation is well into the double digits again, so then what have I been doing well? I sold a piece of land just recently I put half into Bitcoin the rest into golden US dollars And got all of my reals out of the bank. I've got some silver too and man is that stuff heavy now You could call it luck, but I see it's good planning because here in Brazil now our currency lost more than 40% of its value

[04:55] It's purchasing power in just the last year But the people on the street that it's about 90% of the population are just somehow dealing with it But as for me and some of the smarter people I hang around with we don't hold any of that paper garbage anymore And never in a bank except just about enough reals in US dollars to last two or three months In case they do shut down the banks which they've done more times than I care to count and you know Johnny as much as I Love holding physical gold and silver it glitters so nicely and feels so substantial when you hold it in your hands Problem is you can never really transport it especially not over borders in fact just two months ago right before the Corona shutdown a Friend of mine traveled from here in Brazil to Uruguay with two ounces of gold in his pocket and the border and custom guys

[05:42] Confiscated it he instantly lost around $2,800 not so with crypto currencies which can pass any border no matter where you are in the world All you need is your 12 or 24 keywords or your hardware wallet like a nano ledger or treasure With crypto your money is yours wherever you travel in the world And you don't have to get permission from any bank or government to use it And as long as you've got a smartphone or computer on hand you can do practically any kind of transaction in a matter of minutes But still like you do Johnny. I always advise my friends and relatives to have some gold and silver That's only if you're staying put because you shouldn't expect to travel with it And then he says in big capital letters go Bitcoin, you know, he mentioned it's difficult to travel with gold and silver

[06:29] Well, it's really gonna get difficult when gold spikes up to five or ten thousand bucks an ounce And it will shortly it has to with all this money printing. You know what that means Don't you you won't even be able to carry one or two maple leaves or American Eagles over the border with you You know the customs rules it says right on the forms You can't carry more than ten thousand dollars in cash or cash equivalents over the border Unless you check the box and tell them and then realistically you're screwed and they're gonna pull you into a room and give you The third degree and you'll probably miss your flight. You also might get nailed with an import tax or worse have it confiscated Alright one last email on the subject from Franco in Mexico. He says hey Johnny I was in Mexico 20 years ago when their president and his cabinet took all the cash reserves and when the new president came

[07:17] And he found the Treasury completely empty stuff like that happens all the time in Mexico That's why people don't trust the government and people with money don't trust banks Most of the people I know in Mexico who do have money hold the majority of their capital and cash and banks outside the Mexican banking System as for me I'm not a rich guy But I do have some resources and when Bitcoin came around a few years back I knew immediately it had to be a good thing. I also remember 2008 I watched the US banking system get bailed out But not the people and now if you look closely you'll see that this current planned economic collapse is following the same patterns Same thing happened in Ecuador their government ran the printing presses off the rails, too I remember I was there when they forced the exchange rate from five thousand suckers to

[08:06] 25,000 suckers for every dollar then they suddenly dollarized the economy my wife's from Ecuador and her family knows people who committed suicide at that time and The lucky ones who didn't have money in the bank the ones with some gold and silver jewelry to barter They left that's how my wife ended up in Mexico and how I met and eventually married her So in the end the only good thing in Ecuador's case about a corrupt government Devaluing the currency and taking advantage of it was that without the panic and crisis they caused I never would have met my lovely wife. Thanks for all the great shows Johnny and special Thanks for talking about Bitcoin all those years ago. I owe you a steak dinner for that make it ten steak dinners Signed longtime listener Franco PS

[08:53] I know you don't recommend Mexico for a plan B But being that I'm Mexican and I live here when you're born and raised here You know the angles and you know how to survive by the way I'm one of the few native-born Mexicans who does not want to live up in the United States It's a nice place to visit, but I wouldn't want to live there I have my own little company here in Mexico City and make a nice living if I move to the states I'd be lowering my standard of living. It's just way too expensive Alright Franco, you know what? I can tell by your email that you too must have gone to one of those high-end bilingual helicopter schools Unless of course you have a gringa secretary. Oh and Franco, you're a married man and you still love your wife Congratulations, do they give awards out for that? All right speaking of crypto and Bitcoin

[09:38] Since I've been mentioning it here and there going back seven or eight years now as you might imagine I get a steady trickle of emails on the subject like this one from Kenneth He says Johnny. I have an expat files and Bitcoin addiction ever since you introduced me to Bitcoin about five years ago I went out and bought five of them for fifteen hundred bucks three hundred bucks apiece I'm still holding but every time it goes up five hundred bucks. My wife tries to get me to sell them We've even gotten into a few fights about it She's also on my case about having an abnormal addiction to price watching and tracking on the coin Market cap.com site. I'm sure you know that site Johnny It shows the up-to-the-minute price on bitcoins and shit coins, and I can't stop looking at it Is there some kind of rehab for that disorder? My wife wants to know

[10:26] Then he says it's even worse now that I'm not working because of this quarantine lockdown I know I know I need to focus on other things something that's productive, right? Even when I try to do something else listen to a podcast read a book check a YouTube I still sneak over to my phone or computer and check that coin market cap site However on the positive side I've had over a two thousand percent return since I bought the stuff The other very positive secondary effect is I finally learned what a scam our monetary system is When you get into crypto, you can't help but learn how the system is rigged Eventually you do the required reading like number one the creature from Jekyll Island the sordid tale of the Federal Reserve system Number two the confessions of an economic hitman number three liars poker

[11:15] Once you've read those three books your idea of economics in the financial system will never be the same as for me I never knew how insane it was that the US government has so much power over currency However by living in the USA and using the US dollar we agree to it all That's why having a plan B makes so much sense if you don't want to be part of the system You have to move to another country and slowly divest yourself out of paper funny money If not, your financial well-being or lack thereof will always be controlled by those pompous asses in Washington And though I admit I'm a little slow. It took me a while to see that there were not any alternatives except gold silver Bitcoin for in real estate and having a plan B

[12:01] Oh and another thing Johnny, I have a business degree Minoring in economics and what I've discovered my own journey through the monetary system is that almost no one Understands money creation and the bank's role in it that the current system is beyond corrupt The first thing you learn and find so hard to believe is that banks and the central bank the Fed Reserve Create money out of thin air and they have to keep creating it or the system will collapse worse yet the Fed Changes the rules as they go along Example just a month ago. They changed the rules. So now the amount required in reserves at banks is now zero Previously for decades and decades. It was 10% In other words when you deposit a hundred bucks in a bank They only had to keep 10 of it in reserve and could lend out 90 now as of a month ago

[12:50] There's zero required so they can create an infinite amount of money That means there's a tremendous amount of inflation coming down the pike So whether or not you'll survive nicely in this mega financial Reset or end up clinging to a lesser lifestyle by your broken fingernails will depend on your understanding of economics monetary history governance Technology the Keynesian monetary policy we all live under and the philosophy of debt and credit and even me with a business and econ Degree I had really no good grasp of those things I like all my fellow classmates just went to university to get that degree Because then you could get a job in finance and what did every one of my classmates want to do once they got out of University, they wanted to work on Wall Street because that's where the big money is and to get your foot in the door

[13:41] You needed a business or econ degree frosting on the cake and MBA You want to know the most surprising thing I've learned? It's almost always the case in the long run if you do exactly opposite what your broker tells you You'll make money. Isn't that sad? Anyway, Johnny at the risk of rambling on way too much I have to admit until you started talking about Bitcoin which at first all my brokerage and Wall Street buddies thought was a Ponzi Scheme or at best a tiny niche for nerds even with my business and econ degrees I was pretty much clueless about the dismal fate of all fiat currencies including the US dollar which I thought like most everyone does It's the gold standard Anyway, thanks a million for the show the Bitcoin advice and the needed shove that got me thinking and reading about

[14:29] Alternative news sources even if you had a lot to do with me becoming an addict of sorts I guess that old cliche is true when you're ahead of your time. You're bound to take some shit Oh and one final thing Johnny you hear a lot about the fact that Bitcoin miners and crypto miners use up tons of energy A friend of mines got a small mining farm in his garage He's got 20 ant miners I think and that garage also doubles as his man cave for one thing His wife said his miners were ugly and she didn't want to look at him Plus they make some noise with the fans spinning away and all that so the only place he was permitted to have him Was in his man cave. He's in Minneapolis where the winners are harsh and to his surprise last winter He found out he did not have to turn on his space heater at all

[15:16] Those little miners heated up his man cave nicely. I thought there's an idea repackage miners into stylish space heaters could be a great market if the ladies suddenly thought they were cute and Functional while we're at it Why not add a HEPA filter like you spoke about Johnny on a recent show that way you could kill three birds with one stone Earn Bitcoin and shit coins heat the room and filter particulates bacteria and viruses out of the air The trick is to do it in a way that will muffle or eliminate the noise of the fans Which shouldn't be such a big problem because HEPA filters themselves have a fan. That's pretty quiet Problem is today miners are ugly little black white and gray boxes with all kinds of vents and holes everywhere lights flashing and wires Trick is they've got to be pretty something like that a three-for-one could be super popular in cold climates

[16:08] All right me Johnny here Kenneth great idea. Why didn't I think of that by the way? I've got all three of those books he mentioned if you want to copy send me an email the expert files at gmail.com Now before we leave the Bitcoin subject I'd like to remind you our very own captain mango a seven-year veteran of the Bitcoin world Located smack dab in the altiplano coffee fields of Guatemala has put together a crypto course Seminar and hand-holding session to get you started. He'll walk you through everything you need to know and more if you're interested Just send me an email the expert files at gmail.com and I'll send you his info All right. Meanwhile, remember a couple of shows ago I was talking about the plight of Airbnb's and how the whole industry is collapsing a Very good thing for travelers a very bad thing for Airbnb owners now after that show

[16:55] I've got some emails from Airbnb owners and one of them sent me this it's from Gwendolyn. She says Johnny I met my wits in my husband and I are Airbnb owners and within two months We'll either have to borrow and get a huge loan or we'll be defaulting Then she says has been determined that a third of Airbnb owners have one property another third of Airbnb owners have between two and 24 properties and get this another third of Airbnb owners have more than 24 units that means it's mostly not the mom-and-pop business that you thought it was the stats show Huge corporations are in on the act and before the virus struck She says management companies and multiple property owners were expecting to buy more now

[17:43] They can't even make the payments on the mortgages. They have rental income and reservations have completely collapsed The question is will banks lend to the big management agencies or even lend to the mom-and-pop ones because you know The vast majority are not owner occupied properties their income producing businesses Note this typical example that just came to light last week comes from the land rooms Airbnb owners in Atlanta, Georgia turns out starting in 2016 they got into the Airbnb business and saw it was so lucrative. They ended up leasing 18 apartments Remodeling them for Airbnb's as well as managing 21 others by the way the reason why we're talking about Airbnb's here is because so many expats and gringos are

[18:28] Buying or looking to buy properties in Latin America to rent out as Airbnb's In fact expat gonna be it's and wannabe's ask me that same question all the time Johnny should I buy something and rent it out as an Airbnb? Well, I guess you have the answer now So anyway, our Atlanta, Georgia couple at least 18 apartments and managed 21 others and to get them in the Airbnb pool They spent approximately 14 G's per apartment to outfit them with new rugs pillows art chandeliers The whole works with yearly expenses around 50 grand for cleaning services 25 grand for inspections 30 grand on maintenance landscapers, etc Then came the virus and when Airbnb promised to refund guests starting March 14th

[19:14] the land rooms had nearly $40,000 in cancellations and were only able to pay a small portion of the April rent and they say it's impossible to pay the next months or any subsequent months until bookings resume and the booking projections after people go back to work Experts are saying it could take a year to a year and a half to get back to pre lockdown levels On top of that Airbnb owners in Georgia and other states were hit with a double whammy Some states like Georgia have banned because of the coronavirus Short-term rentals through April and May like the vast majority of Airbnb owners The land rooms are running scared to try to drum up reservations They have discounted their units three times since mid-march and they're in the process of negotiating

[20:01] Leniency from some of the apartment owners on their leases land room said if they weren't able to do that They'd have to sell their own house Which would probably be impossible because the real estate market is dead in the water to to make matters worse And this is exactly what I talked about when I mentioned on last week's show that the real estate bubble has popped Well, it turns out a large percentage of so-called Airbnb super hosts Those that own or manage more than 25 units are now in the process of panic selling their properties In fact, the broker named Greg hag who runs a Phoenix real estate firm said Airbnb hosts are now Desperate to sell their properties. He said there's been a flood of Airbnb people coming through his doors They're saying you've got to help me. I'm a month or two away from foreclosure

[20:48] So then what effect has this had on real estate brokers? They believe this is the next big tipping point that will devastate real estate Namely Airbnb owners who have to liquidate now go bankrupt or lose their properties. All right. Thanks for that update Gwendolyn my take on it Well, you probably remember me saying last time we touched on the Airbnb thing I have no sympathy for these owners slash managers if they couldn't see they were on a runaway freight train Snapping up more properties taking on more debt. Don't people know that every investment has a boom and bust cycle It seems like no one learned a thing from the 2008 blowout compared to now. That was a trial run We're in the deep end of the dumpster Speaking of the deep end of the dumpster even before this corona thing the quarantine and the financial meltdown

[21:35] We've heard over and over again of various US states that are completely and utterly bankrupt with the usual suspects always popping up Illinois, California, New York and of course, Michigan Yet life in those bankrupt states keeps going on and on as usual Yep, government workers keep getting their pay and their pension checks. People keep getting their welfare checks food stamps and rent subsidies Oops, I'm sorry EBC cards But of course, you know in the next couple of months every state in the Union will be asking the feds for a bailout And they'll get it the Fed will comply. It's a real and genuine helicopter money world The question is why are these states so in debt? Well, let me fill you in on why this is happening in, Illinois It's a great example, but the same thing goes for the other states, too

[22:23] Have you ever heard of the, Illinois six-figure club? It's the club of Illinois government workers that make over a hundred thousand bucks a year Let me give you the highlights here. Did you know that in, Illinois, there are thirty five thousand three hundred Retired teachers that make over a hundred thousand dollars a year in pension Thirty three thousand. Did you know there are fifteen thousand nine hundred ninety seven, Illinois State University retired Administrators making over a hundred thousand dollars a year in pension and there are fifteen thousand four hundred and twenty three city of Chicago Administrators making over a hundred grand the list goes on and on including get this One thousand two hundred and forty four Chicago water department workers making over a hundred thousand bucks a year that only works out to

[23:13] 156 million in salaries just for the water workers making over a hundred grand Are you sick yet, but get this a total of one hundred nine thousand eight hundred and eighty eight, Illinois workers That's one hundred nine thousand eight hundred eighty eight workers make over One hundred thousand bucks a year total fourteen billion dollars a year in government salaries And we're just talking about the lazy ass government slugs making over a hundred grand a year There's three times as many making slightly less than that get this last year 22,000 Illinois teachers earned over a hundred grand a year yet We hear all the time about teachers being underpaid bitching about their salaries Twenty two thousand making over a hundred grand a year in, Illinois alone

[24:01] Oh and get this last year Chicago police officers on the top of the pay scale made 275,000 bucks while Chicago City EMTs at the top of the pay scale made 270,000 while last year some Chicago Transit Authority regular line workers made 300 grand a year with Chicago government telephone line workers making up to 280,000 a year. Oh, and did you know if you're a Chicago City escalator or elevator mechanic you make $203,855 a year this same study found that last year Chicago tree trimmers made a hundred and six thousand six hundred dollars Chicago State Corrections nurses earn $277,000 a year with some Chicago doctorate university professors earning up to two

[24:54] Million dollars a year now because this is such an outrage Some astute and very pissed off software programmers put together an interactive mapping tool that allows you to quickly review the 110,000 public employees and retirees across, Illinois that make more than a hundred grand a year I just looked it up myself. It's by zip code You just click on a pin scroll down to see the results in your own neighborhood now the group that put this together Linked up with Google Maps. It's called open the books at least now You can find the nearest lard ass government scumbag near you meanwhile, Illinois governor JB Pritzker Certainly soon to be fitted with an orange jumpsuit himself like so many former, Illinois mayors and governors

[25:39] He's proposing a large hike in the income tax and then last week Illinois State Senate president Don Harmon wrote a letter that Congress asking for a 40 billion dollar bailout Saying if they don't get it, Illinois would have to go in the way of Detroit and file bankruptcy I say let them and then fire them all food for thought, huh? That kind of food will make you vomit Well after hearing all that aren't you glad you've got your plan B underway what you say you don't but you've been thinking about it Well, you're in luck because you know, this just might be your last chance to get that fledgling plan turbocharged But you have to make the right friends and connections so that your transition to get out of Dodge is easy and comfortable Not stressful and in a panic now my next seminar, which very well could be my last depending on travel restrictions and

[26:27] Upcoming vaccine and chipping requirements. They're sure to come, you know. Yeah, that's right Roll up your sleeves America get ready to be chipped and vexed. I know it's sad revolting, but it is coming That's why you've got to get your plan B going You need to make that move out of Dodge and the best fastest and easiest way to get started on that is come down To my expat insider seminar. It starts Friday, August 21st through Thursday, August 27 We'll be hitting two countries Guatemala and El Salvador with my early bird sign-up sheet coming in a couple of days now So look for it on expat plan B comm by the way certain Latin American countries are opening up now In fact Costa Rica and a few others will be open by the time you hear this show So don't worry by the time August comes and the seminar kicks off. There should be no or minimal travel restrictions

[27:15] So just go to expat plan B comm and click on the seminar link and get in on those early bird discounts And if you're looking for a roommate to save an extra 500 bucks, we can usually arrange that just shoot me an email Let me know your situation the expat files at gmail.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