The Story of Dirty Rice:
An American Recipe for Failure By Jeff Opdyke, Editor, Emerging Market Strategist Dear Sovereign Investor, The prize at my wife’s family’s Thanksgiving feast every year is something called “dirty rice,” a South Louisiana holiday staple made with rice, spices and the turkey’s scary bits - the gizzards and liver, ground up and sautéed. It’s the tastiest rice in the world, as far as I’m concerned. But here’s the thing: There’s only so much to go around, and my wife’s family’s is large... stuffed with brothers, sister, aunts, uncles, nieces, nephews and cousins - and they all want their share. The more I take - and if it’s up to me, I’d secret the rice into plastic bowls and take them home - the less there is for everyone else. It’s a concept economists know as “crowding out,” and it’s a primary reason the U.S. economy is flawed. It’s the reason why an estimated 20% to 25% of Americans are jobless or underemployed. It’s why America’s economic growth is slowing. It’s part of the reason inflation will return to this country.
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And it’s why investors who own foreign assets will be the ones who have best preserved their assets in the years ahead. A Growing Appetite that Undermines
the Rest of America Think of the U.S. economy as a big pan of dirty rice that weighs 15.4 trillion pounds - one pound for every dollar of expected U.S. GDP for 2012. Now along comes government at the local, state and federal level and it scoops out nearly 6.2 trillion pounds (the dollar amount that all governments in America are expected to spend this year) because government is the obese, crazy uncle who shows up every year and grabs whatever he wants, damn the rest of the family. The dirty rice that remains... that’s what you and I and the rest of the private American economy get to share. But there’s a problem. Because Uncle Sam is a glutton, his appetite increases annually... so he takes a bigger scoop of dirty rice each Thanksgiving, leaving less for the rest of the family - even as the family grows larger. Now, you might think, “Just make more dirty rice.” And we do, in fact, make a little more dirty rice each year as the GDP grows. But we don’t have the fixings for a separate batch. We don’t have a pan of dirty rice for Uncle Sam and a pan for everyone else. There is, after all, only one economy - only one pan. And the fat bastard’s appetite is growing faster than our ability to expand the contents of that single pan. In the last decade alone, we’ve increased the amount of dirty rice by about 45%. But fatboy’s appetite is up 168% from where it was in 2002. Today, the greedy bastard grabs 40% of the rice, when, back in the 1960s and '70s, he only ate about a quarter of the pan, sometimes as much as a third. As he grows fatter, and as his appetite expands faster than we can make more dirty rice, he is by definition crowding out everyone else. In the Epic Battle For Cash ...
We the People Lose At the most fundamental level, investing in the stock market is predicated on a growing economy. After all, if the economy in which a business operates isn’t growing, then that business will reach a saturation point and stop growing, too. When Uncle Sam consumes an ever-larger piece of the economy, then the private economy - the real economy that creates jobs and wealth - has less room to grow. And if government consumption is growing faster than our ability to grow the country’s GDP, then the private economy is actually shrinking. What I’m ultimately talking about here is the fact that government is crowding out business expansion in America... slowing the economy as a result and thereby hampering job creation. It’s the dirty-rice example... there’s only one GDP to share, and the more your fat uncle consumes, the less there is for everyone else. In this case, the dirty rice that government is consuming is cash. Because of overgrown spending and the massive debts that government at all levels has to service these days, government must consume more and more of our cash to keep itself from starving. What we end up with is exactly what I see at those Thanksgiving meals ... a fundamental competition for a limited resource. Government and business are battling for access to cash - one seeking to grow and the other to keep itself from having to cut consumption. One produces the real widgets and services that grow the American economy. The other produces nothing but the need to consume a larger portion of our dirty rice. The upshot is that a significant portion of the American economy is a fraud. It’s just government consuming our savings to keep itself alive. Real businesses, meanwhile, go lacking for access to the money they need to expand. Even Treasury Secretary Tim Geithner warned of this earlier this year in a speech at The Harvard Club: Government borrowing in the future will crowd out private investment. With so much capital being required to finance government debt, interest rates are likely to increase for other types of borrowing. Higher borrowing costs for American households and businesses will discourage future private investment, lowering our capital stock, reducing our economic growth and depressing our standard of living. The costs of paying higher interest rates will make us poorer. Your Only Option as an Investor: Get Out! Unless Uncle Sam stops gorging himself on the only pan of dirty rice we have, we’re stuck with a shrinking private economy. We’re stuck with permanently high unemployment and underemployment, because business will struggle to expand. We’re stuck with inflation, which is in the offing, because government sucking up so much cash ultimately leads to higher borrowing costs for the rest of us. We’re also stuck with slow economic growth and a stock market incapable of living up to long-term expectations - which has negative consequences for retirees dependent on pension plans and retirement accounts heavy on stocks. To protect yourself, you want to be in stock markets where government isn’t such a glutton. There you will find economies that are growing because real business is growing. Almost all of those economies are in emerging and frontier markets in Asia, Africa, Latin America and parts of the Middle East. Ideally, you want to own blue chip stocks in those markets - and that’s what I help readers of my Emerging Market Strategist do. If nothing else, you want to own U.S. companies with most of their operations overseas, or U.S. mutual funds that own nothing but emerging- and frontier-market stocks. Until next time, keep a global view... 
Jeff D. Opdyke
Editor, Emerging Market Strategist
P.S. Here at the Sovereign Society, we search the world for investment and lifestyle opportunities for our members. While America falters, our continued investigations have led us to countries where economic growth, profit and freedom all share the same side of the same coin. The Sovereign Society’s Executive Director, Erika Nolan and I are planning a tour to one of those places, Uruguay, from February 27, 2012 to March 3, 2012. We’re taking a handful of sovereign-thinking individuals with us to wine and dine with hand-picked experts, who will share secrets most Americans will never discover. This is a unique opportunity to visit this fascinating South American nation and, at the same time, learn how to secure your wealth in the future. Places are limited, so please get in touch as soon as possible to make your re servation. | 
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