Wealth Banking in countries with insane interest rates

[Conquistador]

Recently, I saw a newsflash about Russia raising its official interest rate to a whopping 19.0% (to control the inflation caused by the government throwing money at the wartime economy).
Now, obviously I am not going to be opening a bank account in Russia anytime soon. However, there are a number of fairly politically and economically safe countries with rates well above 10%, such as Nigeria and Kazakhstan.

How hard would it be to just open a savings account with a reputable bank in such a country and then make a steady market-beating passive income off of it? This would be easily enough to grow the capital while skimming off a disposable income stream.

Is it that simple? I feel like once you do due diligence ensuring that the regulators in the target country are functional (or anyway, at least as functional as the captured system we have in US) and that the bank in question is solid, you could just stick several K or more and just keep tabs on that country’s economy to make sure new risks don’t arise. Right?

Separately, if it is indeed ridiculously lucrative yet fairly safe, more profitable yet less risky than the stock markets, why don’t more people do this?

 

[POB]

Very simple answer...it's all about taxes, goverment interventions and corruption.
Volatile markets tend to have higher goverment taxes and fucked up market regulations.
Which means you gonna pay them a hefty price that will lower your overall profits, AND they will allow banks to use shady tatics that manipulate the market to favor a few chosen ones (and you won't know about it, after all they have to save face to attract foreign investors).
On top of all that, a simple goverment decision can just lock your money there indefinitely
(I've seen it happen a few times in South America, not pretty)
It's 100% a shot in the dark ime.

 

[Atlas IV]

such as Nigeria and Kazakhstan.

I'd sooner trust my savings in crypto than in a bank of either of those countries...

All it takes is one bad government decision, the currency crashes, and suddenly your savings are worth only a fraction of what they were.

I'm sure the interest rates offered by Argentina's banks are amazing...

 

[POB]

I'm sure the interest rates offered by Argentina's banks are amazing...

They are...but go ask investors who put their money there 5-6 years ago how they are feeling right now

 

[Tim Iron]

Recently, I saw a newsflash about Russia raising its official interest rate to a whopping 19.0% (to control the inflation caused by the government throwing money at the wartime economy).
Now, obviously I am not going to be opening a bank account in Russia anytime soon. However, there are a number of fairly politically and economically safe countries with rates well above 10%, such as Nigeria and Kazakhstan.

Don't do it! I am from Nigeria and our currency "the Naira" has depreciated massively in the past 12 months, inflation is 22%+. By the time you decided to convert your Naira back to dollars, you would have lost more money. There are so many people here who even save in dollars, pounds sterling and euros as a hedge against out depreciating Naira - once again, don't do it!

 

[MagicRomania]

India not a bad idea. They'll be expanding social welfare in my opinion and are obviously a strongly growing state

 

[DarkKnight]

Higher interest is higher risk. Basic economics.

 

[Conquistador]

Thanks guys for all the pointers.

I forgot to mention, I would obviously be looking into dollar-denominated accounts. Idk what such products are available.

Higher interest is higher risk. Basic economics.

When it’s determined by market forces, sure. But central banks are often explicitly tasked with manipulating the rate to influence other economic metrics.

 

[Conquistador]

Very simple answer...it's all about taxes, goverment interventions and corruption.
Volatile markets tend to have higher goverment taxes and fucked up market regulations.
Which means you gonna pay them a hefty price that will lower your overall profits, AND they will allow banks to use shady tatics that manipulate the market to favor a few chosen ones

(and you won't know about it, after all they have to save face to attract foreign investors).

Wait, doesn’t that mean they’re beholden to my Yelp reviews?

On top of all that, a simple goverment decision can just lock your money there indefinitely
(I've seen it happen a few times in South America, not pretty)

It's 100% a shot in the dark ime.

Well if the rest of my portfolio is in conventional investments like an S&P500 ETF, the worst that can happen would be the equivalent of a couple bike thefts back to back. Say I stick 2500 USD in such an account…in a year the likely payout is close to 3k. The risk-reward prob doesn’t make sense for an entire best egg, but as a component of a larger portfolio is there really a problem?

Also, I am quite willing to do extensive due diligence on the country and bank I end up picking. For example, Nigeria is unlikely to be a safe choice, but what about Central Asia? I have some understanding of how those systems (kzk, kgz, tjk etc) tick already.

 

[DarkKnight]

When it’s determined by market forces, sure. But central banks are often explicitly tasked with manipulating the rate to influence other economic metrics.

You believe 19 percent is normal in any circumstances?

 

[Conquistador]

You believe 19 percent is normal in any circumstances?

In some cases, yes. Super low interest rates like in some OECD countries are intentionally super low in order to drive GDP growth. Apart from countries and central banks that prioritize factors, an economy based around resource extraction doesn’t need low interest to thrive.
Some of these economies (Iran, Argentina etc) are obviously having problems. Others less so.