Introduction: Ron Holland is an author, financial expert, Austrian economist, entrepreneur and international business strategist who believes in a return to limited decentralized government like the Swiss Confederation and the former US Articles of Confederation. He has provided strategic business consulting and advisory services to numerous private and publicly traded companies over the past 42 years in diverse areas of finance and marketing including banking, trust department leadership and real estate, as well as in the investment industry, from broker and retirement consultant to president of a national investment firm. Selections of his essays can be found in the archives of LewRockwell.com and TheDailyBell.com.
Daily Bell: Thanks for sitting down with us today. Thousands of Americans have discovered you as the "go-to guy" for expertise on Switzerland and Swiss investments. What attracted you so strongly to Switzerland?
Ron Holland: Well, after the skiing, the fondue and the rosti, it's the Swiss people's success in resisting the tide that's been pulling the U.S. and many other countries toward ever-bigger government. In Switzerland, the people still control the politicians, instead of the other way around. That's good in itself, and almost as a byproduct it has made Switzerland a world center for financial security.
Daily Bell: How much time do you spend in Switzerland?
Ron Holland: I spend about four months per year here, and I try to spend most of it during ski season. I enjoy traveling between the US and Switzerland, but the differences between our two sister republics are widening, and that really concerns me.
Daily Bell: What is it that troubles you?
Ron Holland: The experience of re-entering the U.S. smacks you in the face with how much America has lost over the last three decades. First, there are all the forms you're required to fill out, as though you were a stranger. And then the Americans are herded to customs, where the interrogator may be threatening and intruding or may be polite and intruding. We're not yet forced to endure the picture-taking and fingerprinting that make foreigners entering the U.S. feel they've stepped into a criminal lineup. But still, there's nothing about the process that tells you you're in a free country.
And it's really just for show. Any serious trouble-maker knows how easy it would be to join the thousands of no-passport visitors who hike into the US from Mexico every day. In today's America, only criminals have any privacy.
Take a walk down the street of an American city after you've been to Switzerland and you'll see the difference… and you won't like it. Swiss cities are peaceful – even at night. During the day it's common to see young children traveling to or from school or having fun with friends. By night it's safe to walk anywhere – even alone. There is very little crime. Law enforcement is there, normally in civilian clothing, but they don't make an intimidating presence.
Many of our US cities, by comparison, have turned into armed camps. But don't think all those uniformed, battle-ready police officers accomplish much. The biggest deterrent to crime in the U.S. is now the prevalence of cell phone cameras, not official law enforcement. The main function of the police has become writing tickets to generate revenue for desperate towns and cities. Protecting the law-abiding has become a sideline, useful mainly for public relations.
Daily Bell: You've spent much of your career with Swiss investments that offer an alternative to the paper dollar. How did you get into that area of financial planning and product development?
Ron Holland: I was working in a very conventional bank as a trust officer, but after hours I would study the writings of Murray Rothbard, Ludwig von Mises and others from the Austrian School of Economics. This became my wake up call, and the economics of gold and hard currencies became my passion.
In my work as a trust officer − my day job − I noticed that no one had developed a legal way to put gold into an IRA, so I researched and created the first hard-asset IRA program. Soon afterwards I attended the annual conference in New Orleans put on by Jim Blanchard's National Committee for Monetary Reform, rented a booth and officially launched the gold IRA program.
I enjoyed the conference, but unfortunately I wasn't an instant hit. My brochure and product explanation were pretty weak. However, by a stroke of good luck, one of the conference speakers I had never heard of handed me his business card. When I got home I sent him a follow-up note. A week later, Howard Ruff published the note in Ruff Times, and that resulted in over 6,000 inquiries. Needless to say, the gold IRA took off from there and later the Swiss annuity IRA followed.
Daily Bell: What do you see for the US over the next decade?
Ron Holland: First, let's start with how we got here. The real surprise to me wasn't that the US credit bubble burst but that it took so long to do so. Greenspan and the Federal Reserve (at the urging of Washington and the U.S. financial establishment) manufactured the credit that fueled the real estate bubble. They did this through easy money policies that allowed the Treasury and almost everyone else to borrow at low interest rates. But it was a game that couldn't go on forever.
Here's how they kept the bubble growing. Easy money pumped the DJIA up to 14,000 and did even more for real estate prices by making mortgage borrowing irresistibly cheap. Growing stock portfolios made Americans feel rich, so they borrowed to buy cars, electronics and other products the Asian countries were exporting. Asian exporters recycled the dollars they were earning into US Treasury bills. This helped keep interest rates low − which supported the high investment prices that invited Americans to continue being big spenders. Compared with this scam, Bernie Madoff's operation was a cookie sale.
Meanwhile, Wall Street firms were repackaging billions in questionable real estate loans – the kind that can only be produced by a bubble economy − as "safe" investments for gullible Americans and also for sale to foreign investors, foreign commercial banks and even foreign central banks. When the bubble burst, the attitudes of banks and other lenders flipped from careless to terrified. The credit markets seized up and depression began spreading around the globe.
Many people have already been hurt, but there could be even worse pain ahead waiting for investors who are still unprepared. The massive debt the US government has taken on for its would-be "stimulus" programs could glut the market for Treasury securities and crush the dollar's foreign exchange value. The disruption would trap the American economy in simultaneous depression and inflation for years to come.
Everything else in the news today − Middle East turmoil, terrorism, health care and even Iran and Afghanistan are just sideshows that hide the real threat to America and our future prosperity.
When the dollar loses its status as the world's reserve currency, Americans will no longer be able to entice foreign governments, central banks and private investors to buy their IOUs. The game will be over. It will mean massive selling of dollar-denominated paper and a possible collapse of the Treasury bond market and the dollar.
Short of the government mending its ways and learning to live within its means, there's only one way for it to defuse the ticking debt time bomb. The government still has the power to inflate most of the debt away − in effect, a default in slow motion. But that's a tricky process to control and would risk pulling the U.S. into South American style price inflation − 20%, 30% or more per yea.I know that sounds terrible. It is terrible. But at this point, because of all the expensive mistakes the U.S. government has made and keeps making, it could turn out to be the least bad thing to happen. And it would allow the U.S. to shake off much of its debt burden. But it's really gotten out of the hands of Washington and Wall Street. From here on, how the dollar goes is up to a short list of foreign central banks, with China at the top of the list.
The government in Washington is bankrupt, and if you hold dollars, it won't be long before you become a very unhappy investor.
Daily Bell: So what is the solution for Americans and others who want protection from the ticking Washington debt time bomb?
Ron Holland: Any American with his eyes open needs to remove a portion of his liquid wealth, savings and retirement funds from the US investment markets, to escape dependence on the American dollar. Things aren't going to collapse over night, so there is no reason to rush. But I would feel some urgency about getting started on an orderly plan to liquidate a good chunk of your assets and transfer the proceeds out of the United States.
When the Washington debt bubble bursts, the politicians will have a full economic crisis on their hands. They'll be as desperate then as they are confused now. Count on it. They'll do anything to assure the survival of the elected. The bursting of the Washington debt bubble could come when the last T-bill buyer says "Enough!" Or it could be triggered by a military or terror incident. You can only guess at the timing. But if you wait until the crisis hits, you won't like how little you get for your dollars, and by then it may be impossible to transfer funds to a safe haven.
In this situation the US markets could be closed, as they were for days following 9/11, but for much longer. Emergency taxes and exchange controls could keep your assets (all of them) locked up in the US. It would be like a financial iron curtain descending around the country.
You might think that Americans wouldn't put up with anything like that. But when people are frightened enough, they'll say yes to any control labeled "emergency." And the politicians know how to use a crisis as moral cover for targeting wealthy individuals.
Daily Bell: Ron, this is quite a scary scenario. How does Switzerland fit into all of this?
Ron Holland: Switzerland has always been the safe haven of choice for wealthy individuals around the world. This has little or nothing to do with taxes. It's because the Swiss legal, political and financial systems are respected above those of all other nations.
Daily Bell: What investments do you favor for a secure Swiss safe haven strategy?
Ron Holland: I don't have a clue what the dollar or Treasuries will do in the near term, but I do think that world stock markets may continue to rise for a while as investors look for alternatives to Treasury obligations. But anyone taking a long-term position in the dollar is asking for trouble – just like buying the stock of Lehman or AIG at the top of the market. Who in his right mind would want to go through something like the collapse of those two stocks again but this time with your own government?
I like gold bullion stored outside the United States. A portfolio of mining and natural resource stocks is also important. Most of your safe-haven wealth should be in assets denominated in the euro and the Swiss franc, and I believe every large portfolio should have a portion in Asian equities. Investors wanting asset protection should consider an asset protection trust and/or Swiss life insurance. These are changes that can dramatically increase your security and asset protection.
Daily Bell: What do you think about the stirring of freedom forces in the U.S.– such as the Ron Paul campaign, the Tea Party movement and the campaign to audit the Federal Reserve?
Ron Holland: Lew Rockwell, the Ludwig von Mises Institute and Ron Paul have gone a long way toward galvanizing the freedom forces in the United States. And the social networking sites enable politically aware individuals to organize as never before. The number of young people getting involved is amazing, which gives me great hope for the future. But we still have to survive the next decade with enough wealth to rebuild after the collapse of the dollar and Treasury debt have washed through the system.
Our first priority should be to stop playing the enemy's game. Stop believing everything can be made right by America's closed, two-party system. If you enjoy getting out on a crisp fall day, then go ahead and vote. But if you have any confidence in what the establishment politicians of either party promise, you should think again.
Daily Bell: Why are you so down on conventional politics?
Ron Holland: The trend for my entire lifetime has been for government to get bigger and bossier and for the politicians to get bolder and more dishonest. Expecting things to be different next time with any establishment candidate is crazy. It's like getting married and divorced every four years, every time marrying a spouse with big debts, no assets and no job and then having 50% of your future earnings stolen in the divorce. And somehow thinking it will be different next time.
The sad truth is that, regardless of the rhetoric, neither political party wants to safeguard your assets. They want to take your assets. So it's up to you, acting as an individual and outside the political process, to protect your wealth for yourself and your family. Writing for Swiss Confidential is one way I help people get the job done.
Daily Bell: On that note, Ron, thank you for joining us. It's been a pleasure hearing a straight talker such as yourself explain what's really going on in the world.
There are so many things we could comment on in this thought-provoking interview but we will confine ourselves to just two for the sake of brevity. The first is negative and the second positive.
The negative one has to do with Ron Holland's perspective that many in top roles in government and business understood the ramifications of easy money quite well but actively pressured Alan Greenspan to pursue the policy anyway.
Of course, here at the Bell, we understand this to be the case anyhow, and Holland's perspective only confirms our own. People are the same all over the world. They want to take care of themselves, their families and a close circle of friends and colleagues. Those are their priorities. Anything else may be lip service (though certainly not always).
It is the invisible hand – via competition – that can provide one with both context and insights as to what people really think. The trouble comes when that invisible hand is removed and people are asked to take their leaders at their word. Power corrupts, and absolute power corrupts absolutely. Today, in America, and in most of the world, leaders are not constrained by the invisible hand. Their motives are not subject to the scrutiny of the market and therefore it is impossible to know whether they are telling the truth or not – and thus there is no accountability.
The more optimistic point that Ron Holland makes in this interview is that times are changing. Sooner or later, he seems to indicate, the invisible hand of the market will re-assert its discipline and that there is a growing tide of people young and old that understand this phenomenon and are actively championing it.
One of the main points of the Daly Bell is that the Internet is a galvanizer of profound education and social action. Yes, governments around the world are using the Internet more and more as a way to keep track of their citizens' thoughts and actions. But it is the educational property of the Internet that is even more important than government abrogation of civil liberties.
The power of good ideas, if spread, will tend to win out over tyranny because tyranny benefits a few while good ideas benefit many. That's what is happening today. Those who constantly proclaim that global tyranny is inevitable and that all one can do is "live free" in a backwoods hovel somewhere are certainly not providing a pre-ordained scenario, not matter how vehement they are.
What will happen will be somewhere in between. Governments and the monetary elites that run them behind the scenes will use technology to try to become more repressive, but the Internet is building a powerful army of informed citizens throughout the West that want the invisible hand of the market to reassert itself.
When government shrinks and the money engine of central banking is dismantled or severely constrained, then Western leadership's actions and statements may well be seen in the context of the market itself. Accountability will expand dramatically. There is no need for negativity and pessimism. This is an exciting era and the inevitable clash of ideas will light up the sky for years to come.