Investing Abroad: What US Investors Need to Know

At a time when overindebted governments are making increasingly desperate grabs for their citizens’ money, keeping all your assets invested in one country—and denominated in one currency—is a very bad idea.

Image courtesy of Gordon T Long

Image courtesy of Gordon T Long

A vitally important question for you

 Do you have a bank account in another country? If not, you should hurry up & get one.

Holding foreign currencies in an account outside of the United States is the way to go if you REALLY want to diversify your assets internationally—but in the last few years the US government has left no stone unturned to make it harder for investors to get a foreign bank account. It’s not too late, though—there are still feasible ways to open one. But you have to act quickly, before Washington enacts even stricter controls in a desperate grab for your money.

Most people know of the general investment benefits of not having all your asset eggs in one basket. This portfolio-diversification concept—investing in multiple asset classes—also applies to the political risk associated with your home country. It is a risk few people think about diversifying.

In short, internationalization is prudent because it frees you from absolute dependence on any one country. Achieve that freedom, and it becomes very difficult for any country to control you.

While diversifying political risk is something that everyone in the world should strive to achieve, it goes double for those who live under a government that is sinking deeper into fiscal trouble (e.g., most Western governments).

Here are a few compelling arguments on why you should diversify, diversify, diversify—across different countries, exchanges, currencies, banks, and asset classes.

1: IMF Endorses Capital Controls

Bloomberg reported that the “IMF has endorsed the use of capital controls in certain circumstances.“

“In a reversal of its historic support for unrestricted flows of money across borders, the IMF said controls can be useful…”

2: There Is Academic Support for Capital Controls

Harvard Economists Carmen Reinhart and Ken Rogoff suggest debt write-downs and ‘financial repression’, meaning the use of a combination of moderate inflation and constraints on the flow of capital to reduce debt burdens.

3: Confiscation of Savings on the Rise

The IMF, in a report entitled “Taxing Times,” published in October of 2013, on page 49, states:

“The sharp deterioration of the public finances in many countries has revived interest in a capital levy—a one-off tax on private wealth—as an exceptional measure to restore debt sustainability.”

A study from the IMF: The tax rates needed to for a sample of 15 euro area countries is 10% on households with a positive net worth.

Note: The tax would apply to anyone with a positive net worth. And the 10% wealth-grab would, of course, be on top of regular income taxes, sales taxes, property taxes, etc.

4: We Like Pension Funds

Unfortunately, it’s not just savings. From a paper by Carmen Reinhart & M. Belén Sbrancia:

A subtle type of debt restructuring takes the form of ‘financial repression.’ Financial repression includes directed lending to government by captive domestic audiences (such as pension funds), explicit or implicit caps on interest rates, regulation of cross-border capital movements, and (generally) a tighter connection between government and banks.

Yes, your retirement account is now a “captive domestic audience.”
“Directed” means “compulsory” in the above statement, and you may not have a choice if “regulation of cross-border capital movements”—capital controls—are instituted.

5: The Eurozone Sanctions Money-Grabs

Germany’s Bundesbank weighed in on this subject last January:

“Countries about to go bankrupt should draw on the private wealth of their citizens through a one-off capital levy before asking other states for help.”

And it’s not just in Germany. On February 12, 2014, Reuters reported on an EU commission document that states:

The savings of the European Union’s 500 million citizens could be used to fund long-term investments to boost the economy and help plug the gap left by banks since the financial crisis.

Reuters reported that the Commission plans to request a draft law, “to mobilize more personal pension savings for long-term financing.”

EU officials are explicitly telling us that the pensions and savings of its citizens are fair game to meet the union’s financial needs. If you live in Europe, the writing is on the wall.

Actually, it’s already under way… Reuters recently reported that Spain has introduced a blanket taxation rate of .03% on all bank account deposits, in a move aimed at… generating revenues for the country’s cash-strapped autonomous communities.

6: Canada Jumps on the Confiscation Bandwagon

You may recall this text from last year’s budget in Canada:

“The Government proposes to implement a bail-in regime for systemically important banks.”

A bail-in is what they call it when a government takes depositors’ money to plug a bank’s financial holes—just as was done in Cyprus last year.

The bank can be recapitalized and returned to viability through the very rapid conversion of certain bank liabilities into regulatory capital.

What’s a “bank liability”? Your deposits.

7: FATCA

Have you considered why the Foreign Account Tax Compliance Act was passed into law? It was supposed to crack down on tax evaders and collect unpaid tax revenue.
However, the result of FATCA keeps US savers trapped in US banks and in the US dollar, where the US could implement a Cyprus-like bail-in. Given the debt load in the US and given statements made by government officials, this seems like a reasonable conclusion to draw.

Source>http://www.caseyresearch.com/articles/the-single-most-important-strategy-most-investors-ignore-1

CAPITAL CONTROLS ROLLING INTO HIGH GEAR UNDER FATCA

If you haven’t begun planning your financial assets around FATCA,
you had better start doing it yesterday.

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The traditional banking system was already bad enough but now, with banks around the world rushing to comply with the Foreign Account Tax Compliance Act (FATCA) it is beginning to reach extreme levels. And it isn’t just affecting the most financially restricted people on Earth: US citizens… it is affecting everyone.

Take myself for example (TDV Editor-in-Chief, Jeff Berwick) I operate numerous businesses worldwide. I am a Canadian citizen as well as the citizen of a Caribbean country and our business operations are also operated out of a non-tax jurisdiction in the Caribbean. On top of that we hold no bank accounts, whatsoever, in the US… instead, we have bank accounts all over the world.

Yet, in the last two months we have had our accounts or transactions frozen, denied or questioned in different jurisdictions at least ten times. And we have had countless other problems over the last two years.

Here are just a list of the most recent:

We got FATCA’ED:
We received a FATCA notice from one of our banks in Eastern Europe. They told us that we must comply and contact them immediately. We contacted them and let them know that the company is not a US company and no US citizen is involved with the company nor the bank account. They told us that one of the phone numbers they had on file for us was a US number and therefore they’d have to close our account. We informed them that the number they had was a virtual Skype number, one of many we have, that forwarded to the property departments in our companies around the world. We are still dealing with this issue.

Constant Inquiries:
At the same Eastern European bank a few weeks ago they demanded to see detailed contracts and information on a large number of our transactions. We are still also dealing with that.

Wires Constantly Scrutinized:
At one of our bank accounts in Canada with which I have had a 20 year relationship in good standing they have blocked numerous of our recent wires and demanded to see information on who the money is going to and why. In more than one instance, when sending funds to the Middle East, we were informed that any and all wires sent to the Middle East were under heavy scrutiny causing us numerous problems.

The Paypal Monster:
Paypal has frozen many of our numerous Paypal accounts that we have worldwide on an ongoing basis. This shouldn’t come as news to any merchants who use Paypal as the company is notorious for constantly freezing funds and accounts for all manner of reasons. In one instance, as part of operations in our hotel in Acapulco (Las Torres Gemelas Private Suites) they froze our account until we could show them proof of numerous very small denomination transfers. The transactions were for room rentals that had occurred weeks or months prior and Paypal would demand that we show proof that the person had stayed with us and approved the transaction. Often these were past guests who had just booked for a few nights, who we had no other relation with, that we would have to somehow try to contact afterwards and bother them to supply Paypal with their information and approval of the transaction!

No Cuba For You:
In another instance, just a few weeks ago, another Paypal account we had was frozen after we paid for a flight from Havana, Cuba (ironically I had just stopped there for one night because I wanted to avoid the pain and risk of flying through the US) via Paypal because it was nearly impossible to purchase a flight to or from Cuba by any other means. Because we denoted the payment done was for a flight from “Havana” the account was frozen. The total dollar amount was for just a few hundred dollars.

No Brokerage For You:
Last year, a brokerage account I use in Luxembourg threatened to close my account. When I asked why they said that the brokerage had recently been bought by a Canadian brokerage and there is a Canadian law that says that no Canadian can deal with a brokerage owned by a Canadian company outside of Canada. Luckily they accepted my Caribbean residency and therefore let the account remain open. US citizens are not so lucky. The SEC has made it so hardly any brokerage outside of the US will accept US citizens effectively locking their accounts inside the US as a capital control.

http://dollarvigilante.com/blog/2014/5/28/capital-controls-rolling-into-high-gear-under-fatca.html

The Plan to Trap Your Money

The $3.5 Billion in Taxes the IRS is Ignoring

I often think the Internal Revenue Service was designed to strike fear into the hearts of Americans — the government’s own boogie man. And what better way to scare people who have been careful enough to protect their wealth from America’s downward spiral by putting it on those of us smart enough to stock our wealth outside of U.S. shores and financial institutions.

The government’s latest attempt at currency controls comes in the form of the Foreign Account Tax Compliance Act (FATCA), which is set to take effect on July 1. By forcing banks across the globe to report on any American account holders, the IRS will now have the ability it wants to go after wealth held overseas. But the real value of FACTA will be to make Americans unattractive clients … giving us no way to move our money out of harm’s way.

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Democratic Senator Carl Levin claims that $100 million in taxes is being evaded each year by U.S. citizens through the use of offshore accounts.

That’s a pretty figure, Senator Levin, but I’ve got a better one for you.

How about $3.5 billion in unpaid taxes from just federal employees?

Shocking, isn’t it? But it’s true.

According to the IRS, and reported by USA Today, more than 311,000 federal employees were tax delinquents in 2011, owing a total of $3.5 billion to the government.

Yes, as you can see, the best way to avoid paying taxes is to actually work for the government. And here I thought having an offshore account to protect and diversify my assets against the coming dollar collapse due to government mismanagement and asinine monetary policies was the best choice. It’s almost as if FATCA were little more than a diversion to keep you from realizing that the real money owed is held in Washington D.C.

And the icing on the cake? The pièce de résistance?

You could actually earn a bonus while not paying your taxes. A recent report from the Treasury Inspector General for Tax Administration showed that the IRS paid out discretionary awards of more than $1 million in cash bonuses and more than 10,000 hours in paid vacation time — valued at about $250,000 — was awarded to more than 1,100 IRS employees who have not paid their taxes. What’s more, five employees were given performance awards after they were disciplined for intentionally under-reporting their tax liabilities for several years, paying their taxes late and under-reporting taxes.

Last I checked, the entire purpose of the IRS was to enforce U.S. tax laws. If I had failed to pay my taxes last year, I’m pretty sure that IRS wouldn’t have handed me a cash bonus. But apparently all I really needed to do was get a job with the IRS.

An Old-Fashioned Witch Hunt

Rather than get its house in order and force its own employees to operate by the rules they are supposed to be enforcing, Washington has chosen to chase after fiscally responsible Americans who are trying to protect what they’ve worked hard to earn.

The palpable desperation in Washington to bring in funds for their reckless spending has made them indifferent to that fact that the implementation of FATCA will result in banks spending about $1 billion to ensure compliance, according to a survey by the Securities Industry and Financial Markets Association. They also seem indifferent to the fact that record numbers of Americans are giving up their citizenship not to avoid taxes but to protect their privacy and the income of their non-American spouses from FATCA. Instead these people trying to protect themselves have been labeled traitors and tax dodgers, while the real tax dodgers are living fat and sassy working for the government.

We’ve seen countries enact harsh laws in the past to keep money from leaving their borders. Just look at Iceland in 2008 when they made it illegal for their citizens to exchange their massively deflated krone for dollars or euros. Or how about Argentina’s corralito in 2001, when banks froze all assets for 12 months, allowing only small sums to be withdrawn. FATCA is proving to be a more subtle form of the exact same monetary policy, making America landlocked for investments. If the government makes it too difficult to diversify your assets in offshore accounts, the idea is that you will give up and keep them in the U.S., where they remain vulnerable to dollar collapse and economic upheaval.

There is a small hope of reform. Bills have been introduced to both the House of Representatives and to the Senate that would require federal employees to be fired if they are seriously late paying their taxes. Despite the government’s efforts to get its hands on our hard-earned wealth, keeping a portion of your money outside the U.S., while being fully compliant in all the reporting regulations is an absolute necessity so you are protected against additional government antics.

“Trust me, they’re not done yet”
By Erika Nolan, Executive Publisher of The Sovereign Society

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Conclusion:  Take Action Now !

Discover how to plan your taxes & how to maximize this opportunity
Free FATCA SEMINAR at the Ritz Carlton Tokyo: June 4th at 18:45

Reserve your seat by now Email: adrian.rowles@dv-p.com

 

The Looting Of Ukraine Has Begun! Starting with a 50% Reduction on Pensions

The Looting Of Ukraine Has Begun – Paul Craig Roberts
Naive protesters who believed that EU membership offered a better life are due to lose half of their pension by April.

But this is only the beginning…

The recently installed Kiev government has prepared an economic austerity plan that will cut Ukrainian pensions from $160 to $80 so that Western bankers who lent money to Ukraine can be repaid at the expense of Ukraine’s poor.
According to a report in Kommersant-Ukraine, the finance ministry of Kiev

It is Greece all over again.

This supporter of the Ukraine joining the EU has received her reward: a 50% cut in her pension

This supporter of the Ukraine joining the EU has received her reward: a 50% cut in her pension

11 billion euros is being offered by the EU as aid, this is not aid. It is a loan. Moreover, it comes with many strings, including Kiev’s acceptance of an IMF austerity plan.

Ukrainians participated in the protests that were used to overthrow their elected government, because they believed the lies told to them by Washington-financed NGOs that once they joined the EU they would have streets paved with gold. Instead they are getting cuts in their pensions and an IMF austerity plan.

The austerity plan will cut social services, funds for education, layoff government workers, devalue the currency, thus raising the prices of imports which include Russian gas, thus electricity, and open Ukrainian assets to takeover by Western corporations.

Ukraine’s agriculture lands will pass into the hands of American agribusiness.

Europe Considers Wholesale Savings Confiscation

From Reuters’, “the savings of the European Union’s 500 million citizens could be used to fund long-term investments to boost the economy and help plug the gap left by banks since the financial crisis, an EU document says.” What is left unsaid is that the “usage” will be on a purely involuntary basis, at the discretion of the “union”, and can thus best be described as confiscation.

These actions would directly impact pension funds & bank accounts!
Bail-In – Research & be informed.

This has been approved & signed into law by global governments, the new resolution tool that empowers the confiscation of savings when a financial institution is considered to be significantly important to the banking system, becomes too stressed.

Is your wealth diversified strategically ?
Are your pensions & savings exposed to confiscation ?

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Reuters article link: Exclusive: EU executive sees personal savings used to plug long-term financing gap

Further research reading from Zerohedge

Front Page Warning: 72 hours to withdraw cash funds

Link: Up to 10,000 people could find their funds frozen !!!

Irish banks lock 10,000 out of their accounts (time for a bail-in?) with another 15,000 current accounts are to be “terminated”

News Link to full article.

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Bank to Depositors : It’s not your money !

Podcast from mcalvany weekly commentary.

HSBC Bank Allegedly on Verge of Collapse: Second Major Banking Crash Imminent

HSBC Bank on Verge of Collapse: Second Major Banking Crash Imminent

Concerns about an imminent bank crash were further fuelled today at news that HSBC are restricting the amount of cash that customers can withdraw from their own bank accounts.
Customers were told that without proof of the intended use of their own money, HSBC would refuse to release it.
This, and other worrying signs point to a possible financial crash in the near future.

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HSBC imposes restrictions on large cash withdrawals

Some HSBC customers have been prevented from withdrawing large amounts of cash because they could not provide evidence of why they wanted it, the BBC has learnt.

Max was right! HSBC technically insolvent

IMF Report warning: Defaults, Savings-Tax & Higher Inflation policies are required to tackle 200-year high debt levels

IMF paper warns of ‘savings tax’ and mass write-offs as West’s debt hits 200-year high

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Much of the Western world will require defaults, a savings tax and higher inflation to clear the way for recovery as debt levels reach a 200-year high, according to a new report by the International Monetary Fund.

The IMF working paper said debt burdens in developed nations have become extreme by any historical measure and will require a wave of haircuts, either negotiated 1930s-style write-offs or the standard mix of measures used by the IMF in its “toolkit”

Email me to request a copy of the NEW “Financial & Sovereign Debt Crises” IMF Working Paper

adrian.rowles@dv-p.com

Cyprus-Style Wealth Confiscation Is Now Starting To Happen All Over The Globe

Now that “bail-ins” have become accepted practice all over the planet, no bank account and no pension fund will ever be 100% safe again.  In fact, Cyprus-style wealth confiscation is already starting to happen all around the world.  As you will read about below, private pension funds were just raided by the government in Poland, and a “bail-in” is being organized for one of the largest banks in Italy.  Unfortunately, this is just the beginning.  The precedent that was set in Cyprus is being used as a template for establishing bail-in procedures in New Zealand, Canada and all over Europe.  It is only a matter of time before we see this exact same type of thing happen in the United States as well.  From now on, anyone that keeps a large amount of money in any single bank account or retirement fund is being incredibly foolish.

Let’s take a look at a few of the examples of how Cyprus-style wealth confiscation is now moving forward all over the globe…

Poland

For years, there have been rumors that someday the U.S. government would raid private pension funds.

Well, in Poland it just happened.

According to Reuters, private pension funds were raided in order to reduce the size of the government debt…

Poland said on Wednesday it will transfer to the state many of the assets held by private pension funds, slashing public debt but putting in doubt the future of the multi-billion-euro funds, many of them foreign-owned.

The Polish government is doing the best that it can to make this sound like some sort of complicated legal maneuver, but the truth is that what they have done is stolen private assets without giving any compensation in return…

The Polish pension funds’ organisation said the changes may be unconstitutional because the government is taking private assets away from them without offering any compensation.

Announcing the long-awaited overhaul of state-guaranteed pensions, Prime Minister Donald Tusk said private funds within the state-guaranteed system would have their bond holdings transferred to a state pension vehicle, but keep their equity holdings.

He said that what remained in citizens’ pension pots in the private funds will be gradually transferred into the state vehicle over the last 10 years before savers hit retirement age.

Iceland

For years, Iceland has been applauded for how they handled the last financial crisis.  But now it is being proposed that the “blanket guarantee” that currently applies to all bank accounts should be reduced to 100,000 euros.  Will this open the door for “haircuts” to be applied to bank account balances above that amount?…

Following the crisis in October 2008, Iceland’s government declared all deposits in domestic financial institutions were ‘blanket’ guaranteed – an Emergency Act that was reafrmed twice since. However, according to RUV, the finance minister is proposing torestrict this guarantee to only deposits less-than-EUR100,000. While some might see the removal of an ‘emergency’ measure as a positive, it is of course sadly reminiscent of the European Union “template” to haircut large depositors. This is coincidental (threatening) timing given the current stagnation of talks between Iceland bank creditors and the government over haircuts and lifting capital controls – which have restricted the outflows of around $8 billion.

Europe

European finance ministers have agreed to a plan that would make “bail-ins” the standard procedure for rescuing “too big to fail” banks in the future.  The following is how CNN described this plan…

European Union finance ministers approved a plan Thursday for dealing with future bank bailouts, forcing bondholders and shareholders to take the hit for bank rescues ahead of taxpayers.

The new framework requires bondholders, shareholders and large depositors with over 100,000 euros to be first to suffer losses when banks fail. Depositors with less than 100,000 euros will be protected. Taxpayer funds would be used only as a last resort.

What this means is that if you have over 100,000 euros in a bank account in Europe, you could lose every single bit of the unprotected amount if your bank collapses.

Italy

As Zero Hedge reported on Tuesday, a “bail-in” is now being organized for the oldest bank in Italy…

Recall that three weeks ago we warned that “Monti Paschi Faces Bail-In As Capital Needs Point To Nationalization” although we left open the question of “who will get the haircut including senior bondholders and depositors…. given the small size of sub-debt in the capital structures.” Today, as many expected on the day following the German elections, the dominos are finally starting to wobble, and as we predicted, Monte Paschi, Italy’s oldest and according to many, most insolvent bank, quietly commenced a bondholder “bail in” after it said that it suspended interest payments on three hybrid notes following demands by European authorities that bondholders contribute to the restructuring of the bailed out Italian lender. Remember what Diesel-BOOM said about Cyprus – that it is a template? He wasn’t joking.

As Bloomberg reports, Monte Paschi “said in a statement that it won’t pay interest on about 481 million euros ($650 million) of outstanding hybrid notes issued through MPS Capital Trust II and Antonveneta Capital Trusts I and II.” Why these notes? Because hybrid bondholders have zero protections and zero recourse. “Under the terms of the undated notes, the Siena, Italy-based lender is allowed to suspend interest without defaulting and doesn’t have to make up the missed coupons when payments resume.” Then again hybrids, to quote the Dutchman, are just the template for the balance of the bank’s balance sheet.

Why is this happening now? Simple: the Merkel reelection is in the bag, and the EURUSD is too high (recall Adidas’ laments from last week). Furthermore, if the ECB proceeds with another LTRO as many believe it will, it will force the EURUSD even higher, surging from even more unwanted liquidity. So what to do? Why stage a small, contained crisis of course. Such as a bail in by a major Italian bank. The good news for now is that depositors are untouched. Unfortunately, with depositor cash on the wrong end of the (un)secured liability continuum it is only a matter of time before those with uninsured deposits share some of the Cypriot pain. After all, in the brave New Normal insolvent world, “it is only fair.”

Fortunately, it does not appear that this particular bail-in will hit private bank accounts (at least for now), but it does show that European officials are very serious about applying bail-in procedures when a major bank fails.

New Zealand

The New Zealand government has been discussing implementing a “bail-in” system to deal with any future major bank failures.  The following comes from a New Zealand news source

The National Government are pushing a Cyprus-style solution to bank failure in New Zealand which will seesmall depositors lose some of their savings to fund big bank bailouts, the Green Party said today.

Open Bank Resolution (OBR) is Finance Minister Bill English’s favoured option dealing with a major bank failure. If a bank fails under OBR, all depositors will have their savings reduced overnight to fund the bank’s bail out.

“Bill English is proposing a Cyprus-style solutionfor managing bank failure here in New Zealand – a solution that will see small depositors lose some of their savings to fund big bank bailouts,” said Green Party Co-leader Dr Russel Norman.

“The Reserve Bank is in the final stages of implementing a system of managing bank failure called Open Bank Resolution. The scheme will put all bank depositors on the hook for bailing out their bank.

“Depositors will overnight have their savings shaved by the amount needed to keep the bank afloat.”

Canada

Incredibly, even Canada is moving toward adopting these “bank bail-ins”.  In a previous article, I explained that “bail-ins” were even part of the new Canadian government budget…

Cyprus-style “bail-ins” are actually proposed in the new Canadian government budget.  When I first heard about this I was quite skeptical, so I went and looked it up for myself.  And guess what?  It is right there in black and white on pages 144 and 145 of “Economic Action Plan 2013″ which the Harper government has already submitted to the House of Commons.  This new budget actually proposes “to implement a ‘bail-in’ regime for systemically important banks” in Canada.  “Economic Action Plan 2013″ was submitted on March 21st, which means that this “bail-in regime” was likely being planned long before the crisis in Cyprus ever erupted.

So what does all of this mean for us?

It means that the governments of the world are eyeing our money as part of the solution to any future failures of major banks.

As a result, there is no longer any truly “safe” place to put your money.

One of the best ways to protect yourself is to spread your money around.  In other words, don’t put all of your eggs in one basket.

If you have your money a bunch of different places, it is going to be much harder for the government to grab it all.

But if you don’t listen to the warnings and you continue to keep all of your wealth in one giant pile somewhere, don’t be surprised when you get wiped out in a single moment someday.

Source: Global Research