How to Make Money in Your Sleep

Currency Analyst Sean Hyman explains how to take advantage of a Forex pastime…

“Let me give you a quick example of how this works. This past Sunday night, I wanted to short the EUR/GBP (euro/pound pair) if the price reached a certain level.”

“Unfortunately it was late, and I had to go to sleep. So I put in a limit order at my entry price even though I thought it was unlikely that the exchange rate would hit my desired price.”

“The limit order to enter a trade on your trading station is commonly called an ‘entry order’.” That was what I placed. However, you can add in a limit to your present order and that tells it how to exit out of the trade.”

“But lo and behold, I woke up to find out that the exchange rate did hit my limit (entry in this case)! I was up US$1,000 on my three lots. What a way to wake up!”

“As it turns out, an ECB official had mentioned there could be more rate cuts coming (in his opinion) for the Eurozone. That crushed the EUR/GBP pair for a quick 300 pip drop. If I hadn’t had the limit order ready, then I would have missed a US$1,000 trade. I literally made money while I slept because of it.”

Trade Deficit = Freedom Deficit

As you probably saw from Warren Buffet’s lengthy example in our “Squanderville” A-Letter from a few weeks ago, the trade deficit can be a difficult thing to grasp. Fortunately, Sovereign Society Chairman John Pugsley has a talent for making sense out of complicated economics…

“Consider what happens when individuals barter with each other,” he said. “A baker trades a loaf of bread with the farmer for a dozen eggs. A tailor trades a suit of clothes for a cow. A migrant worker trades an afternoon’s labor for a meal and a place to sleep. Is a ‘trade deficit’ possible in any of these cases? Could there be a deficit if, say, a shirt maker in China trades 1,000 shirts for 100 barrels of oil from, say, some producer in Texas?”

“Obviously, no. A gives something to B in exchange for something else and both get what they bargained for. No deficit is possible.”

“So how is it that when the farmer, or the migrant worker, or the Chinese shirt maker trade their goods and services for money, that suddenly the deficit problem pops up?”

“Because when individuals trade real goods, the exchange is complete. But when one half of an exchange is for money, the government enters the picture. Individuals create real goods and services with labor and capital, while governments create the money by “fiat” (i.e., by law), simply pushing computer keys and running printing presses. The newly created money, which cost next to zero to print, buys up real goods and services. And as the money percolates through the economy, it leaves a swath of destructive imbalances, including such things as inflation and trade deficits. Governments then step in with more laws and restrictions that purport to solve the economic problems that their fiat money policies spawned.”

“Money creation is a form of theft (and, as my friend Richard Maybury once said, theft is just a nice word for taxation), albeit so subtle that the public never seems to catch on. In a world where individuals and not governments were sovereign, the marketplace couldn’t have trade deficits or inflation, as the marketplace has feedback mechanisms to deal with anyone who creates irredeemable money. But when governments usurp the freedom of individuals by passing laws defining legal money as the money printed by the government, all manner of economic evils follow.”

“What can a sovereign individual do? Forget futile efforts to influence the politicians, and assume everything they do to ‘solve’ the trade deficit will reduce your freedoms even more. Go to the root of the problem, which is fiat money. Historically, gold and silver have been the free-market’s choice for trade, and the ultimate refuge from fiat monies. You can regain some sovereignty in the monetary arena by holding and dealing in real money whenever possible. Gold and silver, whether held as assets to defend against depreciating currencies, or as mechanisms for trade through free-market exchanges like GoldMoney.com, or LibertyDollar.org, are real money. Hold and use real, free-market money whenever you can.”

Yours in Personal Sovereignty,

MATTHEW COLLINS, A-Letter Editor

P.S. It’s not too late to get your January forecast issue of The Sovereign Individual. Join now and you’ll have online access to every back-issue we’ve ever published. Click here for more …TSI

The one thing you must have when Obama takes office…

It saved Albert Einstein’s life when the Nazis came to power. Government officials and industry leaders around the world use these documents to protect themselves in times of crisis.

Click here to discover the Ultimate Escape Plan…

An End to “Your papers, please!”

One of my all time favorite movies is Casablanca (1942) in which a struggle to obtain visas for free transit out of the Nazi-occupied North African colony of French Morocco is a central theme.

In any 1940’s Hollywood European war/intrigue/spy movie there’s usually a scene in which national police board the train at the border to inspect passports. “Your papers, please,” demands a stern faced police officer.

That has happened to me occasionally, as when I took the train from Prague to Budapest and Bucharest a few years back, or the express from Paris to Frankfurt. There was a moment’s hesitation as the French, German, Czech, Hungarian or Romanian immigration officer came through the railway car checking passports. He took my passport, then glanced at me to make sure my face matched the picture. As the inspector thinks to himself: “Not another American tourist!,” you think to yourself, “Am I in trouble?” (Usually not).

Passport Power

Until a century ago, almost everywhere in the world passports were generally not required for international travel. Such documents were mainly used to insure passage by diplomatic emissaries sent to negotiate peace treaties or carry official papers.

But in more recent times, governments use passports to control (and watch) the movements of their citizens. That official control was especially prevalent in Europe during the Cold War years, and it has returned with a bureaucratic vengeance, especially in the U.S. since the 9-11, 2001 terrorist attacks.

Borderless Europe

But now, at least in Europe, official border checks are largely a thing of the past, at least for the residents of 25 of the 27 nations of the European Union, plus non-EU member Switzerland, as of last month.

From December 12, 2008 Switzerland is part of the “Schengen Area,” a zone covering 4,268,633 sq km (1,648,128 sq mi) offering unrestricted travel to 450 million Europeans. (The Schengen agreement also allows closer cooperation with the EU on cross-border police and asylum matters. The agreements were named after the small town of Schengen in Luxembourg where they were signed).

Switzerland Too

Switzerland’s joining of the Schengen Area, a 25-member European block, allows it to enjoy passport-free travel within and between these 25 member states. Switzerland is not an EU member, but it has several treaties with the EU. (Swiss voters have repeatedly, and wisely, rejected full Swiss EU membership, preferring their historic independence and neutrality).

Switzerland is not the first large non-EU country to join the passport-free zone. Norway and Iceland are also members, although as members of the European Economic Area (EEA) they are associate EU members. And two EU members, Britain and Ireland, by choice, are not members of the Schengen Area in an effort to control their immigration from outside.

Schengen = Freedom of Movement

The term “Schengen Agreement” describes two international treaties (1985, 1990) dealing with cross-border legal arrangements and the abolition of border controls that are now part of the EU code of laws. The main Schengen purpose is the abolition of physical barriers to cross border movement among European countries.

This borderless, Schengen free travel zone greatly enhances the usefulness of a passport issued by any EU member nation. That EU citizenship status allows the passport holder not only to travel, but to live, work, or establish a business in any of the EU nations, a major potential commercial and investor plus.

For non-EU residences, a common Schengen visa allows travel for tourism, business visits or temporary transit for employment. Non-EU citizens who hold standard EU residence permits from a Schengen state enjoy freedom of travel to other Schengen states for a period of up to 90 days.

You can learn all about dual citizenship and second passports, including those from EU countries, in one of my most popular books, The Passport Book, now in its sixth edition. Click here to learn more.

BOB BAUMAN, Legal Counsel

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