Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
AI Tech Stocks State Going into the CRASH and Capitalising on the Metaverse - 25th Jan 22
Stock Market Relief Rally, Maybe? - 25th Jan 22
Why Gold’s Latest Rally Is Nothing to Get Excited About - 25th Jan 22
Gold Slides and Rebounds in 2022 - 25th Jan 22
Gold; a stellar picture - 25th Jan 22
CATHY WOOD ARK GARBAGE ARK Funds Heading for 90% STOCK CRASH! - 22nd Jan 22
Gold Is the Belle of the Ball. Will Its Dance Turn Bearish? - 22nd Jan 22
Best Neighborhoods to Buy Real Estate in San Diego - 22nd Jan 22
Stock Market January PANIC AI Tech Stocks Buying Opp - Trend Forecast 2022 - 21st Jan 21
How to Get Rich in the MetaVerse - 20th Jan 21
Should you Buy Payment Disruptor Stocks in 2022? - 20th Jan 21
2022 the Year of Smart devices, Electric Vehicles, and AI Startups - 20th Jan 21
Oil Markets More Animated by Geopolitics, Supply, and Demand - 20th Jan 21
WARNING - AI STOCK MARKET CRASH / BEAR SWITCH TRIGGERED! - 19th Jan 22
Fake It Till You Make It: Will Silver’s Motto Work on Gold? - 19th Jan 22
Crude Oil Smashing Stocks - 19th Jan 22
US Stagflation: The Global Risk of 2022 - 19th Jan 22
Stock Market Trend Forecast Early 2022 - Tech Growth Value Stocks Rotation - 18th Jan 22
Stock Market Sentiment Speaks: Are We Setting Up For A 'Mini-Crash'? - 18th Jan 22
Mobile Sports Betting is on a rise: Here’s why - 18th Jan 22
Exponential AI Stocks Mega-trend - 17th Jan 22
THE NEXT BITCOIN - 17th Jan 22
Gold Price Predictions for 2022 - 17th Jan 22
How Do Debt Relief Services Work To Reduce The Amount You Owe? - 17th Jan 22
RIVIAN IPO Illustrates We are in the Mother of all Stock Market Bubbles - 16th Jan 22
All Market Eyes on Copper - 16th Jan 22
The US Dollar Had a Slip-Up, but Gold Turned a Blind Eye to It - 16th Jan 22
A Stock Market Top for the Ages - 16th Jan 22
FREETRADE - Stock Investing Platform, the Good, Bad and Ugly Review, Free Shares, Cancelled Orders - 15th Jan 22
WD 14tb My Book External Drive Unboxing, Testing and Benchmark Performance Amazon Buy Review - 15th Jan 22
Toyland Ferris Wheel Birthday Fun at Gulliver's Rother Valley UK Theme Park 2022 - 15th Jan 22
What You Should Know About a TailoredPay High Risk Merchant Account - 15th Jan 22
Best Metaverse Tech Stocks Investing for 2022 and Beyond - 14th Jan 22
Gold Price Lagging Inflation - 14th Jan 22
Get Your Startup Idea Up And Running With These 7 Tips - 14th Jan 22
What Happens When Your Flight Gets Cancelled in the UK? - 14th Jan 22

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Capital Controls, The Real US Border Fence

Politics / US Politics Aug 12, 2010 - 02:46 AM GMT

By: Jennifer_Barry

Politics

You probably haven’t heard of capital controls, but they are common around the world. These mechanisms can control the inflows of money into a country or money leaving the nation or both.

Why do countries impose capital controls? Governments may try to limit inflows if they believe their currencies or stock markets are appreciating too fast, or they may slow outflows because they fear crashes like the Asian Financial Crisis of 1997-8.


It may come as a surprise to many Americans, but the US already has some soft capital controls. Two years ago, an exit tax was quietly slipped into the Heroes Earnings Assistance and Relief Act of 2008 (also known as the HEART Act). As I discussed in the November 2008 newsletter, the US is the only nation that levies income tax on money earned abroad. Since Americans could escape this burden ten years after renouncing US citizenship, and foreign residents could always return home, Congress decided to close this “loophole.” Now long-term residents or citizens expatriating permanently will have pay to tax on all their assets as if they were sold that day.

However, the IRS (US tax authority) is notoriously capricious about the enforcement of the tax code. Decisions may depend on what country you move to, or what the opinion of the IRS agent is that day. When a subscriber moved back to Canada this year after living and working for decades in the US, he received 3 or 4 contradictory opinions on what to do with his retirement account.

On March 18 of this year, a more overt form of control was sneaked into the Hiring Incentives to Restore Employment Act, which cleverly shortens to HIRE. As of 2013, foreign banks will be required to withhold 30% of any withdrawals from an American’s account, effectively turning bank employees into US tax agents. Privacy is totally gone, as financial institutions will be compelled to report detailed information about all American account holders. If foreign institutions don’t wish to comply, or can’t because of national law, they will be required to close the account. The exemptions to this rule are holding a combined overseas balance of less than US$50,000, or being an individual that the Secretary of the Treasury deems a low risk for tax evasion - a clause that is ripe for abuse. The law also makes foreign life insurance policies or annuities reportable for the 2010 tax year.

The reality is that Americans found it very difficult to open non-US accounts before the HIRE Act. Multiple sources have informed me that it took months of regular prodding last year to open an account in Panama. The pressure on “tax havens” that I detailed in the May 2009 article, “The Truth About Tax Havens,” has led many banks to refuse to deal with US citizens even if they are residents of that country. At this point, only banks servicing a large percentage of American clients will be willing to tolerate the paperwork, and probably only if they have US subsidiaries.

The sudden imposition of capital controls is no accident. In October 2008’s “The Dollar Is Doomed,” I saw that hyperinflation in America was inevitable. Rapid money printing debases the currency and robs small investors of their life savings. However, the trick doesn’t work if everyone moves to a strong currency. It makes sense that US government officials would quietly make it harder for the average citizen to diversify out of the dollar before it becomes worthless. At the same time, loopholes remain for the friends of government officials so they may protect their assets.

While the US may be one of the most egregious offenders in printing money, they are hardly alone. When nations like Greece attempt to cut their debt, anti-austerity riots rock Athens, and no sitting government wants that. It’s more politically popular to inflate the currency and scapegoat “tax cheats.”

Once the politicians run out of easy targets, I expect they will slander as unpatriotic anyone removing capital from their nation. Next, they will probably smear the “gold bugs” for daring to preserve their wealth. I predict capital controls will sweep the world in the next few years, as governments attempt to keep both their citizens and “greedy” foreigners from fleeing with their assets.

by Jennifer Barry
Global Asset Strategist
http://www.globalassetstrategist.com

Copyright 2010 Jennifer Barry

In 2003, Jennifer started an online bullion dealership, becoming part of a select group in the new generation of bullion dealers. She ran the business successfully until 2007, closing it to focus on writing Global Asset Strategist, which grew out of her customer newsletter for the coin dealership. She takes pride in having guided her customers into silver near the bottom of the market. Those early customers have almost tripled their investment.

Jennifer was originally trained as a therapist, receiving a Bachelor of Arts in Psychology from Connecticut College, and a Master of Social Work from Simmons College in Boston. She worked as a licensed professional in human services for several years, until reading Ayn Rand's Atlas Shrugged, which motivated her to reject working to support the State. She left the field and taught herself Austrian Economics while working a series of positions in industry.

Disclaimer: Precious metals, commodity stocks, futures, and associated investments can be very volatile. Prices may rise and fall quickly and unpredictably. It may take months or years to see a significant profit. The owners and employees of Global Asset Strategist own some or all of the investments profiled in the newsletter, and will benefit from a price increase. We will disclose our ownership position when we recommend an asset and if we sell any investments previously recommended. We don't receive any compensation from companies for profiling any stock. Information published on this website and/or in the newsletter comes from sources thought to be reliable. This information may not be complete or correct. Global Asset Strategist does not employ licensed financial advisors, and does not give investment advice. Suggestions to buy or sell any asset listed are based on the opinions of Jennifer Barry only. Please conduct your own research before making any purchases, and don't spend more than you can afford. We recommend that you consult a trusted financial advisor who understands your individual situation before committing any capital.

Jennifer Barry Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in