We live in a strange world now. A world in which Western democracies are broke and totalitarian regimes are flooded with cash. Examples of people with cash, the Saudis, the Chinese, the Russians. Example of people without cash. The Americans. So how can we make the people with cash give to the people without cash without dealing with their totalitarian regimes? Well USA has been doing a lot of that already by selling them US government debt. But these are desperate times. USA now needs another $700bn to shore up its financial institutions. How could it possibly get this money. Now here is an idea. USA should give nationality to those who invest over $1 million in equity in US real estate.
We know that most wealthy people in China live double lives. On one side praising their government and on the other side worrying that one day privileged lives will end. And same is true with oligarchs in Russia, and wealthy people in Iran, princes in Saudi Arabia. I am not saying they live in fear everyday but if US offered a passport to be used in case of need I think millions around the world would pay for the insurance. Let´s remember that there are 6.5bn people in the planet and 6.3bn are not American and tens of millions of those are pretty well off. At the same time we all know that USA real estate prices are on a free fall and that is the reason why mortgages are defaulting. So how about combining greed and fear in one package that gives foreigners first access to US real estate at bargain prices and secondly the US nationality?
To me the math is compelling. If one million foreigners invest one million dollars that is the trillion that America needs. Moreover America will not need the trillion because real estate prices will go up and mortgages will be backed. And if eventually those million very rich people end up moving to America more investment will follow. There are already many countries that give you residence and eventually nationality if you invest with them. I think it´s time for USA to do the same.
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Nikolaj Nyholm on September 30, 2008 ·
Martin, while I like the reasoning it seems to me like pissing in your pants to keep warm. What the US needs to do is go to the bathroom.
/n
Martin Vives on September 30, 2008 ·
Martin, do you think your idea would really solve America’s problem in the long run? Which is getting used to live by their sutainable means?
Americans have been used to incredible growth, unprecedented debt levels and cheap money (thanks to the rest of the world). Is this sustainable? I think it’s not.
If you look at history, great empires (political or economical) have come to ashes the same way. Living well, getting lazy, being overthrown when they fall sleep.
It’s like overprotecting a kid all his life. You must let him fall so he grows stronger. And americans have forgoten what is the mud.
I’ve overinformed myself about this topic, so I don’t have a clear opinion about the bailout. But one thing I’m sure: Governments should do just enough not to kill us, to make us stronger.
Kriz Galicia on September 30, 2008 ·
The US already offers some kind of program where if you invest 1 million dollars (not necessarily on real estate) and create “X” number of jobs for Americans, and meet some other conditions, you get permanent resident status which puts you on the path to U.S. citizenship. Perhaps skipping right to getting a U.S. passport like you suggested might attract some foreign money. I like the idea.
yani on September 30, 2008 ·
well, it becomes more and more known to the more affluent people that US citizenship ‘sucks’ because of their tax laws. actually many americans are trying to get rid of it. don’t think you will get a million … but at least a good number i guess.
Elena on September 30, 2008 ·
With U.S. citizenship comes worldwide taxation, meaning you have to pay taxes on all income no matter where you earn it. Not good for the rich!
Steven Posner on September 30, 2008 ·
Martin,
One problem with the idea…one of the great honors of having an American is that you get to pay taxes to the US on worldwide income. Not sure many wealthy Saudis, Russians and Chinese would want the IRS to get anywhere near their assets. Additionally, you must declare to the Treasury all worldwide bank accounts with average annual balances. If you then decide to give up your US citizenship you could be liable for capital gains tax on the unrealized gains of all your assets (the gov’t decides what fair market value of you assets would have been on the day before you gave up your citizenship and tax you on it regardless of if you sold the assets or not). Hard to believe, but true.
If you could turn the plan into some type of US-based tax haven where you are only taxed on US based income, your idea might have some legs to it…
Martin Varsavsky on October 1, 2008 ·
Yes, I thought about this. Recipients would only be expected to pay taxes when they actually move to the States.
Martin Varsavsky on October 1, 2008 ·
@ Kriz Galicia:
To me this is repackaging what as you said is mostly available to foreigners with money. There are green card lotteries, investment visas. But a clear program like this available for a short period to get out of the crisis could attract a lot of equity very fast.
Enric on October 1, 2008 ·
Sorry Martin, but how do you know that those trillion dollars will raise real estate prices?. Furthermore, as far as I’m concerned, it’s difficult to establish what’s the real price for any house. It sounds me to subsidize the banks and distorting the market at the same time. What would happen if the subsidy is not enough?
Gustavo L on October 1, 2008 ·
Martin,
As much as I can appreciate outside the box thinking I’m very surprised with this post.
I guess if you don’t have $1M you should be prohibited and slapped from even dreaming of living in the USA?
How about this resolution – Show that you have an IQ of 165+, PhD in Economics and a written plan and steps necessary to bring the USA out of this situation. By opening up the standards and drawing the brightest minds you level the playing field against the crooks from third world countries that have stolen money from their people.
Martin Varsavsky on October 1, 2008 ·
@ Gustavo L:
Gustavo, first of all USA already has a residence visa that is given to people who invest a million dollars. But it also has visas for many other reasons like the ones you recommended. In my Spanish blog I was also heavily criticized by people who think this proposal is undemocratic. But if that is the case then let´s just open the borders and let anyone in. That is the only democratic solution. Yet hardly practical.
Martin Varsavsky on October 1, 2008 ·
@ Enric:
Because of supply and demand. One trillion in demand will affect prices upwards.
Marta Gentile on October 4, 2008 ·
Sorry your idea is just part os the US Immigration law, and you only need to invest $500,000.00 to take your Greencard, the first step to become a US citizen. But let me tell you something nobody living outside of US with $1,000,000.00 to invest need to become citizen of any country, they are citizens of the world, if you have $1,000,000.00 disponible you have great investments that produce that lazy income. You can stay and live where you want and may be never in a country where your money is not save like USA today.
akay on October 6, 2008 ·
hey,
1. maybe what it really needs to do is get back to something more tangible. move back to the gold standard?.
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Marc Arza on September 30, 2008 ·
Martin,
You just had a great idea! This is creative thinking of the kind needed just now. The money brought by foreigners looking for US nationaly is real and would be free from the inflationary tensions the FED creates when it pumps liquid on a daily basis.
I guess it would be difficult to sell the idea to the american public although desperate times need desperate solutions and there is a real risk that America can loose (partly) its position as finance center of the world. This risk could help your proposal go down.
For the idea to be effective in terms of confidence creation in the market, a few tens of thousands should be on board right away. At the end, a good deal of this crisis is psichology based.
In liberty,
Mark Arza
http://twitter.com/markarza