There's an old playbook that politicians have used for centuries; it contains a handful of tried and true plays to call when they're completely desperate. History is full of examples of bankrupt nations relying on these tactics, and one of their favorites is capital controls.
Capital controls essentially restrict the flow of funds across a nation's borders. They take different forms, but the end result is trapping money inside a country, making it very difficult to move money overseas.
Why would a government do this? Simple. Because once capital controls are imposed, the next step is to oblige individuals and businesses into buying their government debt. They force us to park our money in domestic banks, then they force the banks to use OUR money to buy THEIR bonds.
Just imagine being forced into loaning the government your hard-earned money for a 30-year stretch at less than 4% interest! You'd be eaten alive by inflation!
If it sounds far-fetched, think again... it's happening all the time. Just a few days ago, Argentina's socialist president imposed strict capital controls for the country's mining companies and sought to prevent Argentines from holding foreign currency. This is after she already nationalized pension funds and seized private bank accounts.
Not to be outdone, the US government passed something called the Foreign Account Tax Compliance Act (FATCA) last year, and it's tantamount to capital controls. Let's put it this way-- if you really wanted to screw American businesses and make it difficult for them to be competitive, FATCA is EXACTLY the legislation you would pass.
Once all the rules kick in, it will be very hard for American individuals and businesses to operate abroad. This is what capital controls are all about-- make it difficult for people to move money overseas so that they'll keep it in the United States.
Given that the US government already controls the banking system, how long will it be before banks have to start investing their depositors' funds into the 'safety and security' of US Treasuries?
For all the sheep who are soundly asleep despite what's going on around them, they're going to wake up one day soon (once all the rule go into effect) and realize that their money is trapped as if they're living in some third world dictatorship.
For anyone who's aware and paying attention, the FATCA legislation poses a clear deadline for taking action.
To put it very plainly, you NEED to take action and diversify internationally before these FATCA rules kick in. It's that simple.
Get a Dominican Passport and open an offshore safe deposit box or offshore account now. Banker Trust is not subject to FACTA rules.
The United States is on a one-way collision course with its financial judgment day; the country long ago passed the historical point of no return-- the point at which it has to start borrowing money simply to pay interest on the money it has already borrowed.
Throughout history, countries that passed this point of no return soon defaulted on their debts, entered into extended periods of severe inflation, or both. This is nothing new-- the idea of a government going bankrupt is practically as old as the concept of government itself.
Along the way as they slide down the slippery slope of economic calamity, governments typically hit the accelerator by resorting to financial repression; rather than making the economy open and attractive to talented people and investment capital, they instead confiscate, inflate, and over regulate.
These tactics include oldies but goodies like civil asset forfeiture, capital controls, and a host of whacky new taxes. Like a Christmas Tree tax, for example.
Sumptuary laws (regulation and taxes over lifestyle habits) are quite common, dating back to the Renaissance period 'beard taxes'. If you wore a beard during the time of Peter the Great in Russia, or Henry VIII in England, you paid a tax to the government for the privilege.
There are many modern day equivalents of the beard tax-- taxes on cigarettes, mobile phones, vehicles, luxury goods, etc. We should expect the introduction of even more-- a national sales tax, an Internet tax, a carbon emissions tax, and a financial transactions tax.
After this, the next mind-boggling category of taxes that will be introduced are 'social taxes'. In other words, you get taxed on what everyone else is doing... like an anti-terrorism security tax, or better yet, national healthcare where you pay for other people to go to the doctor.
During the Tokugawa period in feudal Japan, they called this 'honto mononari'. Village peasants were taxed by the local daimyo on the basis of the entire village's rice yield for that season. Even if you didn't grow a single grain, you still paid.
Perhaps the most heinous forms of taxes to come, though, are asset taxes. And at roughly $5 trillion in total value, individual retirement accounts (IRAs) are the lowest hanging fruit that the federal government can grab.
It's not that far-fetched. Argentina has done it. Hungary and Ireland have done it. Even France passed a law last year authorizing the government to use pension fund assets to pay off its debts. And if you recall, the US Treasury raided public pensions this year to tide itself over during the budget debacle.
The next step will be for the government to nationalize a portion of IRA assets. They'll wait for a severe market downturn that wipes a huge chunk from most IRA accounts, blame capitalism for the failure, and then pass a law requiring that X% of IRA funds be held in the 'safety and security' of government debt.
If you think this can't happen, then I encourage you to do absolutely nothing. Keep your IRA funds parked with a big, conventionally-thinking financial institution that has absolutely no interest in your financial security.
