Buy Gold, Be Smart, Diversify

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					Buy Gold, Be Smart, Diversify
How the government tries to fleece you and what you can do about it
By David Galland, Managing Director, Casey Research

After a relaxing Thanksgiving break, I anticipated to return to work in a lighter frame of mind.
However, the following item from FOX News crushed that hope right away:

       Lawmakers Propose 'War Surtax' to Pay for Troop Increase in Afghanistan

       Two top Democrats say they want to impose a new tax on the wealthy to finance any
       increase in U.S. troops for the Afghanistan war.

       Rep. David Obey, D-Wis., chairman of the purse string-controlling House Appropriations
       Committee, is calling the idea a "war surtax." He said that just as the federal government
       is expected to pay for its proposed intervention in the health care sector with new taxes,
       any escalated involvement in Afghanistan should come with a payment plan.

       "If we have to pay for the health care bill, we should pay for the war as well ... by having
       a war surtax," Obey told ABC News in an interview that aired Monday. "The problem in
       this country with this issue is that the only people that has to sacrifice are military
       families and they've had to go to the well again and again and again and again, and
       everybody else is blithely unaffected by the war."

Readers of my free missive, Casey’s Daily Dispatch, know I’m vehemently opposed to the
doomed adventure in Afghanistan. On that front alone, the idea of a war tax is like a shard of
glass in my eye.

But it’s even worse than that. It shows just how degraded this country has become – picking the
pockets of the productive is now pretty much the only remaining source of funding the
administration and its allies can imagine.

Just to be sure we keep this in perspective: At this moment, if you earn more than $250,000 a
year (which isn’t what it used to be, given the steady erosion of inflation over the last 30 years),
you will pay federal income taxes of about 35%, no estate taxes, and a 15% capital gains tax
should the money you put at risk in the market return a profit.

As soon as next year – if the government moves up the expiration of the Bush tax cuts, as I very
much expect them to – the top tax bracket will go to 39%. On top of that, the current healthcare
legislation will add a 5.4% surcharge. Then, add in the Democrats’ proposed 5% war tax. So
straight up we’re talking 49%.

Then there’s a near doubling of capital gains taxes, from 15% to as high as 28%. And, of course,
the return of the estate tax.
But that’s just for starters, because everywhere you look states and municipalities are raising
taxes and fees, and attorney generals, taking a page out of Caligula’s playbook, are casting about
for their next deep-pocketed victim.

At the end of the day, the top tax rate in the U.S., starting as early as next year, will soar way
over 50% of income. While further number crunching is required, it is a very safe assumption
that top income earners will soon be paying over 65% of their income in taxes.

Which is to say, if you are in a top tax bracket, every penny you earn between January 1 and
August 25 will go straight into the coffers of one layer of government or another.

And this while more than 40% of Americans pay no income taxes at all.

This is just another symptom of the single biggest problem now facing the U.S. (and for that
matter, the world): the ballooning size and cost of government. And there are no speed bumps in

Even so, endless complaining won’t really do anything other than raise the blood pressure. So,
what can we actually do about it? Some ideas:

1. Buy gold. Unless and until there is an angry upwelling of popular discontent at the growing
size of government – and it has to be far more substantive than just a few vocal talk radio jocks,
or even 100,000 or so people peacefully gathering on the Mall in Washington DC – the
government will continue to grow, or even just keep running at current levels, which means the
destruction of the dollar. Many tangible assets will do well, but their intrinsic value as money
means gold (and silver) will do best.

As I write, gold has again broken to a new, non-inflation-adjusted high. As with all markets, it
will fall back now and again, but the trend is very much up.

2. Buy gold shares. The leverage in the high-quality gold shares can boost your returns by a
factor of 2X to 10X, and more. Again, there will be setbacks, but shares in the right companies
with the right projects will trend higher and higher until the Mania phase kicks in, and then
things will get really interesting.

3. Be smart about taxes. Keep an eye on Pelosi’s tax trap – if you have appreciated assets that
qualify for long-term capital gains, consider selling them before year-end to lock in the lower
capital gains tax. Likewise, if you run a business and you can pull any income into this year,
versus next, consider doing so.

4. Diversify globally. Why do it? The short version is that it’s a big world out there, and there
are a lot of places that are incredibly beautiful, safe, and unbelievably inexpensive. For many
non-U.S. citizens, expatriating means you’ll pay no income tax, but even if you are a U.S.
citizen, there are substantial tax benefits in moving offshore. And what you can save in cheaper
everyday living allows you to live like royalty, for a fraction of the cost. Which means you can
save more.
Personally, I favor Argentina. Some years ago I went on a three-year quest to find paradise on
earth, and Argentina was ultimately the hands-down winner.

5. Recognize the bureaucracy for what it is. These are not “public servants” but rather an
entrenched interest group that is actively engaged in a systematic effort to look after itself, with
no regard for the damage it’s doing to your family finances and to the country.

Now, there are two schools of thought as to how you deal with the bureaucrats. My dear friend
and partner, Doug Casey, would tell you to take every opportunity to let the bureaucrats know
you hold them in low esteem. For example, by asking airport security personnel how old they
were before they realized they wanted to make a career out of pawing through people’s

The second approach is to accept that the bureaucrats, backed by the voting masses, hold most of
the cards at this point. Poking at them with a stick risks unnecessary aggravation and worse. So,
keeping a low profile and going about your business is certainly a rational choice.

Of course, there’s no better way of maintaining a low profile than moving to another country
where you’ll be welcomed as a visitor and not viewed as a serf.

Is there no hope? One obvious scenario is for the Democrats to lose control of either the House
or the Senate come next November’s elections, thereby returning the nation to some form of
political gridlock. The best of all worlds, in my view. And the way things are heading, this is
now a certainty.

But before you get overly excited about the prospects of a political solution, don’t forget the role
the Republicrats have played in bringing the nation to this sorry state over the past several
decades. If you’re holding out for an outbreak of capitalism or other signs of fiscal sanity once
Republicans regain some modicum of political power, you are delusional. They may package
their programs in different-colored paper, but when you rip away the wrappings, you’ll find the
same statism and the same promises of a chicken in every pot.

Look after yourself – no one else is going to do it for you.

Gold has just hit a new record-high… and the small-cap Canadian explorers with good-sized
deposits are sure to be dragged along into the stratosphere. In the current issue of Casey’s
International Speculator, Editor Louis James names eight junior gold miners that – due to their
top-quality assets – are destined to become takeover targets for the big players in the gold

Get in today and watch your investment double or triple tomorrow, completely risk-free with our
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