by John Galt
May 8, 2012 19:30 ET
Finally, some two years after Zero Hedge and these pages warned about the imposition of capital controls in the United States to prevent the flight of wealth out of our nation, Bloomberg News finally realizes that this de facto capital controls are already in effect. Bloomberg published the following story this afternoon about the dilemma FACTA created:
When I first published the following article on March 29, 2010:
many readers thought I was either a traitor, a coward, or just plain nuts. However, the law is quite clear and the results of this grand plan designed by Democrats and Republicans and ushered through the Senate under the guise of a “jobs” bill (The H.I.R.E. Act of 2010 H.R. 2847) courtesy of Senators Chuck Schumer (D-NY) and Orrin Hatch (R-UT). In the time period since this law was enacted, opportunities for American investors to participate in emerging market investment opportunities, much less open an bank account, have been reduced greatly as the overseas financial institutions do not wish to sacrifice their privacy or sovereignty to the ominous oversight of the Internal Revenue Service of the United States.
Fast forward to the time period after the law was enacted and put into force in 2011 against the Swiss banking system as the initial test case for forcing international cooperation. The results beyond a lot of cases heading to tax court, Federal court, and in all probability some international judicial institutions? My fine reader, if you guessed retaliation against wealthy Americans, you are 100% correct. As predicted in these pages during the spring of 2010, I warned that if one had wealth and wished to get out of the United States, time was running out and the countdown clock on the right had side of the page indicates 236 days as of this posting is all the time that is left.
In March of 2009, Dow Jones Financial News published the following article (subscription required):
In the article, one of the bankers made the following statement:
Krause said: “Although it will be difficult to ignore the US completely, some of the more bespoke wealth managers are entirely washing their hands of it. The administration involved with Fatca – the Foreign Account Tax Compliance Act – is just too burdensome.”
Thus the doors for the wealthy to escape are closing faster than ever and the Bloomberg article acknowledged the solution the ultra-wealthy have chosen:
Renouncing citizenship is an option chosen by increasing numbers of Americans. A record 1,780 gave up their U.S. passports last year compared with 235 in 2008, the IRS reported.
Hence not only does the U.S. Government lose its leverage to collect taxes on income or earnings on investments for these individuals, the nation is seeing a discreet case of capital flight begin which will only accelerate if President Obama gets four more years in office. The problem that the average schmuck does not understand that once people and capital begin to flee a nation, it is not too long after that before it begins to look like, well, Greece.
In December of last year, I highlighted this threat again on these pages:
From the Der Spiegel article I referenced in the piece above:
According to a report in the Wednesday edition of the Financial Times Deutschland, several European banks have elected to no longer serve American securities investors due to stricter reporting requirements pushed through last year by the administration of President Barack Obama.
German financial institution HypoVereinsbank has informed its customers that it will no longer offer certain services to its US-based clients or to US citizens as of Jan. 1. Deutsche Bank told the paper that it already cancelled such accounts held by American citizens in the middle of 2011. Germany’s second largest bank, Commerzbank, is considering a similar move. Customers with normal checking or savings accounts in Germany are not affected, however.
British banking giant HSBC has also reported that it will no longer serve US investors as has the Swiss bank Credit Suisse.
The reason for the sudden reticence to serve American clients is the Foreign Account Tax Compliance Act (FATCA), which was passed in 2010 and will go into effect in January of 2013. The act requires all foreign banks to identify and report on US citizens with accounts holding more than $50,000 in an effort to clamp down on tax evasion. If banks refuse to comply, they could face a punitive 30 percent withholding tax on all payments from the US. The law is expected to increase tax revenues by $8 billion over the next 10 years.
When you tie all of the old articles together with the current Bloomberg piece it dawns on any intelligent reader (which is all that I have) that the United States courtesy of Schumer, Hatch, and the corrupt two party machine running Washington, D.C., that the U.S. will achieve Hellenic greatness at almost the same pace and speed that the Molotov cocktail throwing inhabitants of Athens did during the past two years. Enjoy the historical show my fellow Americans, as incompetence this great will be judged harshly by both markets and historians for decades to come.