Is International Diversification for You?
International diversification is an interesting subject, mostly because it doesn’t mean much to the majority of the population. Most people are very comfortable living their lives entirely in one jurisdiction. Take the United States, as an example, where only 39% of the population actually holds a passport. Needless to say, the vast majority of Americans are comfortable sticking within the borders of their own country. There’s nothing wrong with this, but generally speaking, you should keep in mind that you’re completely vulnerable to the whims of the voting majority and its elected government.
As the demographics change and a new generation becomes the voting majority, countries will change. For the most part, this will be a good thing, but for a select few, it can have devastating outcomes. You need to look at the country in which you live quite closely, and ask yourself these questions: How are the demographics changing? How do I fit in with the new majority? Am I okay with their new direction? These are questions that should be asked multiple times throughout your life, because as your needs change, others’ needs are changing, too. How will that affect you?
Before getting to the review, I’ll leave you with some wise words from one of the world’s most successful International Men, Doug Casey:
“The day is coming when your local government may stop seeing you as a milk cow and start seeing you as a beef cow, and you want to have options before that day.”
Disclaimer: The following is not a financial product recommendation, it is only a financial product idea. I have not been compensated to write this review. Please perform your own due diligence to decide whether it is a product best suited for your needs. If you are an American looking to internationally diversify your assets, this is not the product for you because the Euro Pacific Bank does not accept American clients.
Euro Pacific Bank
Euro Pacific Bank was created by Peter Schiff in 2011. The bank was formed in St. Vincent and the Grenadines and approved for a class A International Banking License. Their business is predicated on bank transactions, and so the seriousness with which they take customer experiences is evident in their assigning a private banker to each client, and their commitment to customer privacy – two of the hallmarks of off-shore banking.
A Discussion with the Head of Business Development
I had the chance to speak to Euro Pacific’s Head of Business Development, Ashe Whitener, a conversation in which he answered a couple of questions regarding the bank and its competition, and provided me with some of the background for St. Vincent and the Grenadines.
Brian – “What separates Euro Pacific Bank from its off-shore competitors?”
Ashe – “There are a few things: Firstly, it is a full reserve bank, meaning it has 100% liquidity. Secondly, all profits are transaction based, so the bank derives all of its profits from fees and commissions, not lending out deposits, substantially reducing your counter-party risk. Lastly, Euro Pacific offers the only government backed precious metals storage program by an off-shore bank, as the Perth Mint is backed by the Australian government.”
Brian – “What makes St. Vincent and the Grenadines a good place to open an off-shore account?”
Ashe – “There are three reasons why St. Vincent is a good place to open up an account. First, with privacy …St. Vincent banking law protects clients’ privacy, making it a requirement to keep clients’ personal information confidential. It is a tax neutral jurisdiction…St. Vincent has no income or capital gains tax. Finally, St. Vincent’s is an independent nation, with a democratic governing system.”
A Couple of Euro Pacific’s Most Appealing Products
In my opinion, Euro Pacific Bank (EPB) is a great option for those looking to internationally diversify their assets. Over the last five years, they have expanded their business and the products and services that they offer to suit the needs of anyone looking to diversify themselves internationally. Let’s take a closer look at those products/services:
Euro Pacific Bank Online Brokerage – Global TradeStation
After having formed the bank in early 2011, EPB proceeded to purchase Global Trading, which enabled EPB to offer a full service online brokerage. EPB uses Global TradeStation to power their online brokerage, with access to 20+ stock exchanges around the world. For those who are particularly interested in the resource sector, you can buy stocks on the London Stock Exchange (LSE), New York Stock Exchange (NYSE) and, finally, the biggest resource markets of all, TSE and TSX.
Also, I tried out the Global TradeStation simulation and found it to be very easy to navigate, with a ton of information at your finger tips. Check out the simulation for yourself, here.
Gold/Silver Backed Account
In 2013, they became an approved dealer for the Perth Mint, based out of Australia. Their gold/silver backed account uses the Perth Mint Depository Program to hold your metal. You can buy or sell your metal at any time, 24/7. Also, the account can be accessed through a debit card which can be used on major cards’ networks around the world. Click herefor further details and pricing information.
Bank Reserve Ratios and Investment Behaviour
Their reserve ratio, investment behaviour and the list of products and services that they offer are top notch. Read on to discover why this bank, in my opinion, is a safe place to put some cash.
What is the Bank’s Reserve Ratio?
First off, you need to understand what a reserve ratio is, and to know that, you need some background on the Fractional Reserve Banking System (FRBS). In my opinion, the best place to learn about the basics of this system is by watching the videos created by Mike Maloney, author of, Guide to Investing in Gold and Silver, and creator of, The Hidden Secrets of Money. I strongly recommend you check out the video.
From the video, you will learn that the term ‘Reserve Ratio’ is basically the amount of outstanding liabilities to the amount of deposits that the bank actually holds. These ratios can be very skewed, as some western banks hold as little as 2% of their deposits, leaving them susceptible to the downside of the loans and investments that they have made. Lehman Brothers’ crash in 2008 is a great example of exposure to the over-leveraged housing sector, which proceeded to crash the stock market and send both the American and world economy into a tail spin.
• Euro Pacific Bank’s policy is to keep 100% of deposits on reserve. For me, this is one of the most appealing things about Euro Pacific. The bank and your deposits are protected from the downsides of both local and global economies.
• How do they make money? Euro Pacific’s profits are solely based off of the transaction fees it collects from its clients. Their website is chock full of all the transaction information for each of their products and services. You can check it out here. It should be noted, because they are a 100% reserve bank, no interest is paid on deposits.
What is the Bank’s Investment Behaviour?
After asking about the bank’s reserve ratio, it’s a good idea to look at what the bank is invested in. What percentage is in bonds, stocks, housing loans, etc.? The answer to this question should give you a good picture of the bank’s solvency. A bank is referred to as ‘solvent’ typically if it can withstand downward swings in their investments and still remain on the positive side of its liabilities to assets ratio.
• Euro Pacific Bank is in a terrific position, holding 100% of their deposits on reserve. As stated earlier, this insulates them from the volatility in the markets and, ultimately, keeps your money in safe hands.
When it Comes to the Currency in Which You Hold Your Deposits, Do You Have Options?
Most national banks only offer accounts that are denominated in the currency of the given country. However, in countries such as Canada, you can open a U.S. dollar denominated account, if you choose, but the ability to hold your savings in multiple currencies is not very common. Multiple currency holdings act in the same way as diversifying your stock portfolio; you spread risk out across a basket instead of concentrating it in one place.
A great recent example for Canadians: The Canadian dollar has dropped like a lead balloon over the course of the last two years, due to a loose monetary policy and a hit to the resource sector (most evident with oil). Holding solely Canadian dollars throughout this period has meant that a lot of goods – such as food, international travel and imports in general – are costing Canadians much more than they once did.
• Euro Pacific Bank allows you to hold your cash in a number of different currencies: American Dollars, Canadian Dollars, Euros, Swiss Franc, Japanese Yen, British Pounds, Australian Dollars, Polish Zolity, and finally, New Zealand Dollars. This is tremendous choice when it comes to diversifying your currency holdings. Each has their own pluses and minuses, depending on your perspective of the market.
• Euro Pacific Bank offers a Gold/Silver Backed Account: This, in fact, could act as your 10th currency diversification. Hold your cash in gold/silver, the world’s oldest form of money, and have it hold its value against inflation. These metals can be liquidated at any point, giving you quick access to your funds. The precious metals are purchased through the Perth Mint, to which EPB is an authorized dealer.
In highly politicized economies around the world, it’s becoming more and more important, in my opinion, for people to internationalize themselves. If you’re not willing to physically move to another country, transferring some of your assets is a viable second option. To me, Euro Pacific Bank offers some pretty significant upsides, if internationally diversifying your assets is your goal.
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Until next time,
Brian
