Historically, when governments attempt to make laws that are
based on economic principles, the results are disastrous. It's been
proven time and time again that when governments stay out of free
markets, they tend to experience more growth and prosperity follows for
the entire population. Unfortunately, the United States is going to have
to learn this lesson again the hard way. The party is unofficially over
and no one really gets it yet. Before we even get into FATCA, let's
review other significant events that have recently happened. China,
Russia and other countries are signing agreements to trade in other
currencies such as the Ruble or the Yuan. If the dollar is the reserve
currency of the world, then why are they wanting to trade in another
currency?
To make things more interesting, Texas and Germany have both demanded their gold to be returned to them from the Federal Reserve. The Fed immediately countered and explained this is very difficult and could take up to 7 years to complete. Are you serious? This reminds of that old Wendy's commercial where the tag line is "Where's the beef" except this is a much more serious matter. Immediately people wondered where the gold was. There was simply no logical reason why it should take that long unless they didn't actually have it! These small news bites allude to a bigger issue in the global economy and that issue is a lack of trust. If you read between the lines on these things, other countries are saying that they're losing faith in the United States and in the dollar.
Now let's circle back to FATCA. This might be the single stupidest law that Congress has passed so far, which is quite a feat considering there have been some real humdingers. In 2010, lawmakers passed this law requiring both US citizens and foreign financial institutions to report any money that is housed in an account outside of the US and is owned by a US citizen. Now when the IRS starts asking for information on where your money is located, it can only mean two things and both of them are bad. Either they want to tax it or they want to confiscate it. No one knows for sure what will happen but it sure seems like an abuse of power. In July of this year, the law went into full effect internationally. Banks abroad had to start filing all kinds of paperwork with the US government for all of their US citizen account holders. US citizens also have to report accounts overseas with their annual tax returns. All of this paperwork is a tremendous headache. But this isn't the meat of the issue, the real problem is much worse.
You see, Congress is made up of lawyers and politicians; there are very few business people in the aisle which is the case with many governments around the world. It's a problem that any business person or economist would see staring them right in the face. The most obvious effect is that foreign banks and investment firms will start turning down Americans for new accounts. The second obvious effect is that annoyed Americans will move their money back to the US to save themselves from the annoyance of extra reporting every year. In fact, this is happening right now. So most of you might be saying what's the big deal, well hear it is. At this moment in time, the US Dollar is the reserve currency of the world. Likewise the US Dollar's money supply has doubled because of all the money printing we did to "save the global economy" post 2008. Most of this money was put into use overseas since it is the reserve currency and is widely used for trade. This created inflation in other countries and now there is nowhere for this money to go outside the US. Most banks won't open new accounts for US citizens and more and more countries want to trade in other currencies.
At the same time, many Americans are bringing their money back home to simplify their tax reporting lives. This is all very understandable and to be expected. The problem is that when the money supply expands like that in one country, doubling or maybe even tripling in a matter of a few years, severe inflation can be expected. Very few people have picked up on this or even get it. It's like watching your friends stand on the train tracks as you see and hear the train approaching off in the distance. Most people don't even see it coming, it's like they can't even fathom it. I'm sure people in Germany didn't think it would happen to them after World War I. Argentina didn't see it coming in 2001. How can we expect to do any better? I've been preparing my members for this over the past year. I already alerted them to the coming Argentina default before it broke the news last week. I've also told them about a Portuguese Bank that recently failed and needed to be bailed out. Not only have I warned them of these things, I'm helping them to learn new investing techniques to make them money in these environments.
To make things more interesting, Texas and Germany have both demanded their gold to be returned to them from the Federal Reserve. The Fed immediately countered and explained this is very difficult and could take up to 7 years to complete. Are you serious? This reminds of that old Wendy's commercial where the tag line is "Where's the beef" except this is a much more serious matter. Immediately people wondered where the gold was. There was simply no logical reason why it should take that long unless they didn't actually have it! These small news bites allude to a bigger issue in the global economy and that issue is a lack of trust. If you read between the lines on these things, other countries are saying that they're losing faith in the United States and in the dollar.
Now let's circle back to FATCA. This might be the single stupidest law that Congress has passed so far, which is quite a feat considering there have been some real humdingers. In 2010, lawmakers passed this law requiring both US citizens and foreign financial institutions to report any money that is housed in an account outside of the US and is owned by a US citizen. Now when the IRS starts asking for information on where your money is located, it can only mean two things and both of them are bad. Either they want to tax it or they want to confiscate it. No one knows for sure what will happen but it sure seems like an abuse of power. In July of this year, the law went into full effect internationally. Banks abroad had to start filing all kinds of paperwork with the US government for all of their US citizen account holders. US citizens also have to report accounts overseas with their annual tax returns. All of this paperwork is a tremendous headache. But this isn't the meat of the issue, the real problem is much worse.
You see, Congress is made up of lawyers and politicians; there are very few business people in the aisle which is the case with many governments around the world. It's a problem that any business person or economist would see staring them right in the face. The most obvious effect is that foreign banks and investment firms will start turning down Americans for new accounts. The second obvious effect is that annoyed Americans will move their money back to the US to save themselves from the annoyance of extra reporting every year. In fact, this is happening right now. So most of you might be saying what's the big deal, well hear it is. At this moment in time, the US Dollar is the reserve currency of the world. Likewise the US Dollar's money supply has doubled because of all the money printing we did to "save the global economy" post 2008. Most of this money was put into use overseas since it is the reserve currency and is widely used for trade. This created inflation in other countries and now there is nowhere for this money to go outside the US. Most banks won't open new accounts for US citizens and more and more countries want to trade in other currencies.
At the same time, many Americans are bringing their money back home to simplify their tax reporting lives. This is all very understandable and to be expected. The problem is that when the money supply expands like that in one country, doubling or maybe even tripling in a matter of a few years, severe inflation can be expected. Very few people have picked up on this or even get it. It's like watching your friends stand on the train tracks as you see and hear the train approaching off in the distance. Most people don't even see it coming, it's like they can't even fathom it. I'm sure people in Germany didn't think it would happen to them after World War I. Argentina didn't see it coming in 2001. How can we expect to do any better? I've been preparing my members for this over the past year. I already alerted them to the coming Argentina default before it broke the news last week. I've also told them about a Portuguese Bank that recently failed and needed to be bailed out. Not only have I warned them of these things, I'm helping them to learn new investing techniques to make them money in these environments.
Jamie has an MBA from Rutgers University and a Professional
Certificate in Real Estate Finance, Investment and Development from NYU.
He's traded stocks since he was 13 and bought his first property within
a year of graduating college. He also flipped properties and got out
before the 2008 mortgage meltdown because he was able to see the market
turning before it happened. He's started two companies and also has
experience in investing in antiques, collectibles, gold, silver and
trading futures.
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