If you’re sick of the stock market, or if you haven’t bought the black sheep in your family a Christmas present yet, this is the book for you: The Right Way to Do Wrong by Harry Houdini is about picking locks, dodges and other money making tricks. Here’s a section to get you warmed up to the idea:
‘One of the many fertile dodges by which a pickpocket escapes detection is known as the horse-dodge. The thief so arranges as to meet his victim by the side of a horse standing by the curbstone.
‘He has previously located the watch or purse he wishes to lift, and with a quick blow he knocks his victim’s hat over his eyes, grabs the pocketbook or watch or whatever else he is after, and immediately darts under the horse, and hides himself in the traffic on the other side. By the time the victim has got the use of his eyes, and is able to look around, the thief has entirely disappeared, and he would not be apt to look in the right direction, at any rate.’
(Just to be clear, we don’t recommend trying this.) The horse-dodge is not the most brilliant ‘dodge’ though. Here’s the real cracker:
‘In the outskirts of London, among the small shops, a rather unusual trick has been played frequently upon unsuspecting shopkeepers.
‘Two men in earnest argument over some matter enter a small grocery store and approach the proprietor who is behind his till. One man says to the proprietor, “My friend and I have gotten into an argument over a peculiar matter which we believe you can settle for us. I have bet him that my hat,” taking off an old-fashioned stove-pipe hat, “will hold more than four quarts of molasses, while he contends that it will hold hardly three quarts. We are willing to buy the molasses if you will fill this hat and prove the question to decide the bet.”
‘The shopkeeper good-humoredly agrees, and brings the hat brimful with sticky molasses, at which one of the thieves slaps it over the shopkeeper’s head, and before he can extricate himself and call for help they have robbed the till and disappeared.’
That’s capital! But don’t try it.
These days, there aren’t many horses to hide behind. And not many shopkeepers stock molasses. There are plenty of thieves though. They’ve just moved up in the world. Small print has taken the place of hats and exit fees are the new molasses.
But those aren’t even the real kind of thieves. You see, you have a choice when you do business with questionable people and institutions. It’s the thugs who don’t give you a choice that are the real problem. Believe it or not, those thugs steal about a third of Australia’s GDP each year.
We’re talking about the government of course. Just like the Mafia, our politicians expect us to pay protection money. And if we don’t, we’re off to prison.
In an economy where it’s the norm to steal like this, and then deal in stolen goods by handing them out to political supporters, you shouldn’t be surprised that people are willing to get in on the act. If politicians can rob Peter to pay Paul, why not be Paul? Why not apply for subsidies, implicit bailouts and industry controls to prevent competition?
But every now and again, the victims fight back against the government and its cronies.
A couple of months ago, a hedge fund which owned Argentine bonds that had been defaulted on decided to get their own back. They impounded the Argentine warship, the Libertad, while it was docked in Ghana. They offered to release it for a small fraction of the money the Argentine government owed them.
This was just the latest episode for poor old Argentina. Other assets impounded by bondholders include the presidential aircraft and a satellite.
Anyway, the International Tribunal on the Law of the Sea in Hamburg recently decided ‘Ghana shall forthwith and unconditionally release the frigate ARA Libertad’. The problem is, Ghanaian authorities aren’t convinced the court has authority. And so the story continues.
The interesting thing about government thieves is that they have a monopoly on ‘wrong’. If they decide it’s wrong to cross the road within 20 meters of a traffic light, they can. Just call it jaywalking and randomly select the extent of the fine. Their heavies will gleefully enforce whatever is on the books.
You might not want to do ‘wrong’ by your fellow citizens like Houdini chronicled. But what about doing some ‘wrongs’ to government? What are some ‘right ways to do wrong’ to the real thieves?
Don’t worry, we’re not suggesting you become Robin Hood. Here’s a real world example of what we mean that’s playing out right now. Within days of the school shooting in Connecticut, Walmart had sold out of guns.
People knew the government was about to do something about the shooting, so they stocked up. It’s not likely they’ll want to use the guns. They’re just front running the upcoming government policy which will make it ‘wrong’ to buy those guns. Front running is a great way to commit a future ‘wrong’ that is still ‘right’ for now. More on other ideas in a moment.
If you think we’re being overly critical of the government, ask yourself, ‘is it wrong to kill children?’ Kris Sayce pointed out in his free newsletter The Pursuit of Happiness that the government has a monopoly on this ‘wrong’ too:
‘Now, I’ll agree that a madman killing two dozen school kids is horrific. US President Obama even appeared on TV, shedding tears of sorrow.
‘However, I can’t help thinking there’s at least a dot of hypocrisy in Obama’s tears. For instance, I wonder how many tears Obama sheds when US drones in Pakistan and Afghanistan blow up entire families just to get at one alleged terrorist.
‘And the key word is ‘alleged’. There’s no due process when a drone takes someone out. There’s no opportunity to plead innocent or even plead guilty and accept their punishment. The CIA is effectively the accuser, prosecutor, judge, jury, and executioner.
‘And sometimes the strike takes out more than the accused. As a report in the UK Daily Telegraph notes:
‘As many as 168 children have been killed in drone strikes in Pakistan during the past seven years as the CIA has intensified its secret programme against militants along the Afghan border…
‘In just a single attack on a madrassah in 2006 up to 69 children lost their lives.’
‘That report was from 2011. US drone attacks have probably now killed more than 168 kids in Afghanistan.
A recent story in Der Spiegel recorded how a drone pilot saw a child walk into his line of fire after having fired a missile. After the explosion he asked his superiors if he had just killed a child. They told him it was a dog. A two legged dog…
Apart from the drone strikes, it’s also worth remembering that the American government was involved in gun running itself recently. As part of the operation nicknamed ‘Fast and Furious’, it sold 2000 guns to Mexican cartels and, as of 2011, recovered less than half.
If governments can commit true ‘wrongs’ like these without backlash, that shows they have complete control over the definition of right and wrong. Dealing with your wealth is obviously a less meaningful issue, but that’s our point.
If they can dish out guns and kill children without recourse while the entire country is in uproar about someone doing the very same thing, they can do whatever they want to your wealth.
The mining and carbon tax, and Wayne Swan’s budget surplus scramble is just the beginning of this for Australians. We’ve got a supposedly strong economy and the budget is still under pressure. At some point, your wealth will be in the government’s firing line. That means you need to act to secure your wealth from the government. So here are some principles on the ‘right way to do wrong’ by the government:
1. Front running
Like the Americans buying the guns they expect to be banned, or the drinkers who stocked up on alcohol before prohibition, committing a future ‘wrong’ while it is still legal can save you a lot of money. The best example of this right now is to carry out the second suggestion below before capital controls make it too hard.
2. Go international
The story of the Libertad is interesting because it shows how one government’s laws can be exposed by another government’s claim on what is right and wrong. Ghanaian authorities are probably just as ridiculous as Argentina’s. But you can play governments against each other. And wealth is more welcome in some countries than others. Owning property overseas is a great place to start. International diversification gives you important flexibility for your wealth. Wealthy Frenchmen are currently taking advantage of this by moving to Belgium to avoid new French taxes.
3. Don’t get caught
My libertarian friend Ben Marks of www.economics.org.au signs off his emails with ‘don’t get caught’. It’s a brilliant motto. There are many strategies you can use every day to avoid getting caught when you commit the little meaningless acts the government has defined as a ‘wrong’. Look out for police cars when you cross the road close to traffic lights. Be careful what you say to customs officers, airport security, and work colleagues – a sense of humour is the first thing governments ban.
You might think that you have nothing to hide if you’ve done nothing wrong. But when the definition of wrong is at the government’s behest, you might have something to hide at some point. Find out what legal steps can you take to protect your privacy, especially online.
5. Wealth off the grid
What can you own, produce, provide and receive income from that the government doesn’t need to know about? There are perfectly legal opportunities like hobbies, DIY efforts and other unregistered activities. These might become disproportionately important if the government clamps down on what it does know about.
6. Take control
Governments in countries hit by the financial crisis raided pension funds without blinking. Here in Australia, the rules for taking your unclaimed Super have been relaxed. This trend is going to continue. Only by taking personal control of as much of your wealth as possible will you ensure all of that wealth is invested in the best way possible.
Those are just some ideas. You probably have your own. The point you need to keep in mind is that government may well be the biggest threat to your wealth in coming years. It’s time to act like it.
Until next week,
Markets and Money Weekend Edition
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