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The world is in turmoil. Governments worldwide are ruling against the will of the majority and things are coming to a head.

Richard Maybury tells us:

“There is simply no end in sight to the big Ukraine and Israeli bloodbaths, plus a high likelihood that the power junkies in DC and Beijing will slug it out in order to frighten their populations into staying loyal to them.”

Henry Hazlett adds, “Inflation makes the extension of socialism possible by providing the financial chaos in which it flourishes.”

Newly elected Argentine president Javier Milei is pushing back:

“We’re here to tell you that collectivist solutions are never the answer to the real problems that have afflicted the world. Free market capitalism is not only the only system to relieve poverty it is also the only moral system.

Desperate governments are spending money they don’t have creating wars to rally the population and maintain their power. Javier Milei is correct, the state is the problem, governing against the will of the people. The elite do not want to relinquish power and will create wars, if necessary, to maintain control.

What happened to the Peace Dividend?

Wikipedia explains the term:

“Peace dividend was a political slogan popularized by US President George H. W. Bush and UK Prime Minister Margaret Thatcher in the light of the 1988–1991 dissolution of the Soviet Union, that described the economic benefit of a decrease in defense spending. ….

In theory….

A “peace dividend” refers to a potential long-term benefit as budgets for defense spending are assumed to be at least partially redirected to social programs and/or a decrease in taxation rates.

…. Although United States military spending rapidly fell between 1985 and 1993, and remained flat between 1993 and 1999, it increased strongly after the September 11 attacks, funding conflicts including the War on Terror, the War in Afghanistan and the War in Iraq.”

Macrotrends runs the numbers:

US defense spending leads the world, topping $800 billion, and is growing by the day. Since 2010, China has tripled its defense spending to over $300 billion, while Russia and the rest of Europe hover around $75 billion.

Reality is, the peace dividend is gone, inflation is rampant, while desperate governments make war.

I contacted Urs Vrijhof-Droese the Managing Partner of WHVP, international asset managers. Urs, an expert in international banking is based in Zurich. I’m a WHVP client.

Let’s start with some historical international education. How has Switzerland managed to not only stay neutral, but also help much of the world protect their financial assets in times of turmoil?

DENNIS: Urs, thank you for taking the time for the benefit of our readers. While the world may have had a decade of “peace dividend”, the green agenda and social spending has gone through the roof. Much of the world is broke.

Has the “peace dividend” run its course, both in the US and elsewhere? I’m feeling this is not just a US problem.

URS: Thank you, Dennis. Absolutely, the peace dividend has run its course.

We have many hotspots around the globe that have the potential to escalate into broader wars. Discussions of a World War III are on the rise. While the US is not as geographically close to most of these hotspots than for example Switzerland, it’s likely the US will get involved, either directly or indirectly.

After the Cold War ended, governments were reallocating funds away from the military to infrastructure, education, and health. Since the war in Ukraine began, governments are looking to restrengthen their armed forces. How do they finance it? Many governments are already overspending and cutting social programs in a time of high inflation.

We must prepare for a future shaped by tensions that have the potential to challenge the status quo, something that we have been experiencing several times in the last few years.

DENNIS: Historically, Switzerland has managed to arm and train their population, yet manage to stay out of other nations’ wars. How do you pull that off?

URS: Our neutrality was decided by our ancestors back in 1515, and has become a cornerstone of our culture and geopolitical position.

Neutrality must not be mistaken for complacency. Every Swiss man must go through a military basic training, learning how to use a weapon and understand how our defense works. We do have an opinion and do also enjoy our sovereignty to act on them.

During the centuries, Switzerland’s armed neutrality has become widely accepted. This allowed us to become the chosen jurisdiction for influential organizations such as the World Trade Organization or the International Committee of the Red Cross. The combination of Switzerland’s global positioning coupled with the willingness to train our people to defend our country gives us the credibility we need to keep our neutrality.

DENNIS: In 2022, didn’t Switzerland give up some neutrality by taking on some sanctions?

URS: That is a misconception. For decades, Switzerland used sanctions to either protect their own interest or to safeguard human rights – all part of our federal constitution.

Switzerland has more than twenty sanctions in place, most dating back well before 2022; sanctions were imposed on North Korea back in 2006. Switzerland is independent with their decisions regarding imposing sanctions. While the Swiss government decided on sanctions imposed against Russia, it didn’t change anything in Switzerland’s stand as a neutral jurisdiction.

DENNIS: In times of turmoil, we have heard the term, “flight to safety”. Can you explain the role Switzerland has historically played in that regard?

URS: My wife and business partner, Jamie Vrijhof-Droese, co-authored a book called “Swiss Money Secrets,” that covers the history of Switzerland, politics and why it has been considered a safe haven for wealthy individuals for centuries. Click HERE to request your free copy.

Switzerland’s geography, culture of hard work and discretion, became the preferred place for royal families’ wealth. It’s no longer just royalty. With centuries of neutrality and safety, people feel comfortable storing some of their wealth in Switzerland; particularly when governments and currencies of their own country are failing.

DENNIS: All fiat currencies eventually fail, and gold stands tall. Currently, I’m unaware of any gold-backed currency. How do investors, not wanting to put all their eggs in one currency basket, protect themselves?

URS: The issue with fiat currencies is they depend on governments and central banks. How much do you trust them?

It starts with a government living within its means.

We recently reported:

“For the long-term success of a currency investment, the credibility of a country’s fiscal and monetary policy is essential. In Switzerland, we see this credibility being in good order. Switzerland has a debt-to-GDP ratio of about 40%. Compared to other developed countries, especially the G7 Average (128%).”

Note the US and other large nations ballooning debt as a percentage of Gross Domestic Product. Interest on current US debt is currently over $1 trillion annually, and is being paid by borrowing even more money. Economists vary, but most feel that a debt/GDP ratio over 100% is the point of no return. The downward spiral accelerates rapidly.

The Swiss National Bank has a different structure – one task which is to ensure price stability (contrary to the FED who also aims for full employment). This set-up is a success factor that led to the Swiss Franc’s strength and its reputation as a safe haven.

Even though the possibility exists that all currencies eventually fail, they will not do so at the same time. You see the meltdown of the currencies in Argentina or Turkey. These people can protect themselves by moving their wealth into other currencies. Governments often impose limitations on whether you can exchange your local fiat currency into another to slow down depreciation.

Investors see what is looming and diversification before the event is a major factor in protecting their wealth.

DENNIS: One final question. I’m still trying to stay optimistic, hoping we don’t end up in a major war. We are seeing political pushback in Argentina, Europe and some in the US.

Precautions are in order. What are you advising your clients to do, not just US but worldwide?

URS: The peace dividend is gone. The concern is where do you get the highest level of safety and stability.

Switzerland is one of the safe havens and will continue so if an all-out war becomes reality. As we see with the wars started within the last two years, the US is always part of it.

We focus our clients’ investments in countries where we feel they’re not overly exposed to risks costing them long-term economic growth. E.g., rule of Law, democracy, and reluctance when it comes to new regulation is key. They provide safe haven in times of insecurity.

We advise clients to not only have diversified investments but also fortify their diversification by having a bank account in a safe jurisdiction giving them stability and peace of mind.

Dennis here. I had a client in Brazil when their currency collapsed and strict controls were implemented. They lamented, “We saw it coming and should have taken steps to protect ourselves.” Hopefully, it won’t happen, better safe than sorry.
 

On The Lighter Side

Jo had her knee replaced a month ago and is progressing well in her therapy. They have moved up the date for her other knee so she will soon start the process once again.

The day after she came home from the hospital in late January, we were both hit with horrible colds and upper respiratory issues. While our lungs were clear and we had no Covid issues, it really flattened us. Antibiotics and an inhaler have helped. I’d just finished 25 rounds of radiation in my lung, and coughing still persists along with fatigue. We’ve learned this can last for weeks.

I started coughing in Circle K recently. The clerk, who I joke with regularly, grinned, looked around to be sure no one was nearby and said, “Please don’t die in the store!” Once the cycle starts, it has to run the course….maddening!

The positive side is my naps are getting shorter and I have more energy.

We’re hoping all of Jo’s therapy will be finished in time for us to head to Indiana in May.
 

Quote of the Week…

“However (political parties) may now and then answer popular ends, they are likely in the course of time and things, to become potent engines, by which cunning, ambitious, and unprincipled men will be enabled to subvert the power of the people and to usurp for themselves the reins of government, destroying afterwards the very engines which have lifted them to unjust dominion.”

— George Washington (Farewell Address, Sep. 17, 1796)
 

And Finally…

Jo sends along some clever thoughts for our entertainment:

• A skeleton walked into a bar and asked for a beer and a mop.
• A fine is a tax for doing wrong. A tax is a fine for doing well.
• All those who believe in psychokinesis, raise my hand.
• There are 3 kinds of people: those who can count and those who can’t.
• If a deaf person swears, does his mother wash his hands with soap?
• If a turtle doesn’t have a shell, is he homeless or naked?
• If a parsley farmer is sued, can they garnish his wages?
• If the police arrest a mime, do they tell him he has the right to remain silent?
• Veni, Vidi, Velcro’ – I came, I saw, I stuck around.
• If you try to fail, and succeed, which have you done?
• 9 out of 10 doctors say the 10th doctor should mellow out.
• 99% of lawyers give the rest a bad name.
• A pessimist counting his blessings: 10 … 9 … 8 … 7 …

And my favorite…

• Age and knowledge don’t always come together. Sometimes you just get the age…

Until next time…

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