The Money Trap

The Non-Dollar Report View in browser Thursday, October 15, 2015 The Ultimate Stock Booster In the 11 years between 2002 and 2013, the stock Aeropostale did fairly well. It turned $20,000 into $88,613. However, without any options or other gimmicks, you could have turned that $20,000 into $612,466 - more than six times more money. Even better, you could have done that while taking less risk. You buy the stock just like everyone else, but somehow you make more money. Find out how right here. Eric Fry, recalling an earlier, simpler time, reports... In 1986, I moved to France for a year. I was a 26-year-old Francophile who had accumulated a little bit of money, but absolutely no responsibilities. It was a perfect moment to do anything at all... or nothing in particular. After kicking around in Southern France for a few days, I managed to find a very cheap rental in Cannes, the not-so-cheap resort town on the Côte D'Azur. My rent was 1,500 French francs a month - or about $250. But the landlord wanted francs, not dollars... and so did all the other merchants and vendors in Cannes. So I strolled into Société Générale and opened a checking account. I gave them dollars, which they converted to francs... and I was good to go. I felt like a local. A couple months later, I took the train over to Monaco to open a second bank account. This one was to facilitate investing in the stock markets - both the European bourses and the U.S. markets. So I walked from the train station to the Banque Transatlantique and opened an account with just a few hundred dollars. Once the account was opened, I wired funds from my E.F. Hutton brokerage account in the States to the E.F. Hutton office in Monaco. There, I picked up a check payable to myself, walked down the street to Banque Transatlantique and deposited the funds. Everything was very simple and easy... despite the fact that 1986 was the technological Stone Age, relative to today. I had to arrange everything by phone and telex. But once arranged, the process went off without a hitch. Today, in the Internet Age, trillions of dollars fly around the globe everyday... with the ease of a mere keystroke. Transacting commerce or transferring funds has never been easier... unless the funds belong to an American. The Eric Fry of today cannot do what he did in 1986. He cannot walk into the Société Générale branch in Cannes and open an account. He cannot walk into a non-U.S. bank in Monaco and open an account. In fact, he cannot walk into a non-U.S. bank almost anywhere on the planet and open an account. He is a financial pariah, thanks to FATCA, the Foreign Account Tax Compliance Act. As Professor Colleen Graffy recently explained in a terrific Op-Ed for The Wall Street Journal: Aimed at preventing money laundering, the financing of terrorism and tax evasion, FATCA requires foreign financial institutions such as banks to report the identities of their American customers and any assets those Americans hold. Institutions that don't comply are subject to a 30% withholding tax on any of their own transactions in the U.S. This provision was enacted without regard for its effects on the 8.7 million U.S. citizens living abroad, who have essentially been declared guilty of financial crimes unless they can prove otherwise. Many institutions no longer consider their American clients worth the burden and potential penalties of the law, and are abandoning them in droves. Being an American overseas has become a liability, and not just because it's difficult to open or keep a bank account. Americans are now often seen as toxic... No one wants an American involved when their citizenship attracts a maze of rules, regulations, potential fines and criminal penalties. In one case, a Swiss hospital, understandably reluctant to have its account information released to the U.S. Treasury because it has an American chief financial officer, gave the American executive a choice: Give up your job or give up your citizenship. Clearly, the extreme and onerous dictates of FATCA are producing a wide range of unintended consequences. One of the most extreme consequences is that Americans have become "financial exiles." Most financial institutions around the world have banned American depositors completely. As a result, FATCA has chased U.S. savings out of foreign banks into U.S. banks. Was this "unintended consequence" truly unintended? And even if it was unintended, would the architects of FATCA consider it an undesirable consequence? No matter the answers to these questions, one fact is certain: the U.S. government possesses much greater authority over private savings now than it did before FATCA became law. Surely the U.S. government would not abuse that power, would it? Dear American: Sorry, But Your Money Is Trapped in the USA by David Galland A side benefit of living in La Estancia de Cafayate, Doug Casey's upscale expatriate community in Northwest Argentina, is the steady parade of interesting individuals passing through. Some are owners and guests, and some are just individuals curious to see the sporting and lifestyle estate Doug and his partners have established. One of the latter, an individual who lives in Switzerland, recently spent the better part of a week with us, enjoying the golf, horseback riding, leisurely dinners at the Grace Hotel, and so forth. Over the course of our time together, the talk turned to global investments, and he told me about a property investment fund (in which he is a partner) that buys and refurbishes Swiss apartment and office buildings in order to sell them for a profit, or - if the math is right - generate ongoing rental revenue. As I'm a huge believer in diversifying across political jurisdictions, markets and asset classes, I asked my new friend if he could make room in an upcoming fund for me. He said he would be happy to have me as a partner and promised to send me the details on returning to his home in Switzerland. And that sets the stage for the following "Dear David" letter, which fully reveals the noose tightening around the neck of Americans looking to move assets out of the direct grasp of their government. The correspondence which follows has been edited only to protect the identity of my Swiss friend. Dear David, I am sorry for not having returned to you sooner regarding the promised overview of our partnership and investments in Swiss real estate. We have just completed another project concerning a property in the German-speaking part of Switzerland. As part of securing a mortgage from a local bank, we had to read and sign papers for almost one hour (and I do not exaggerate) only regarding FATCA. The bankers present at the meeting didn't even know how we should answer half the questions without incriminating ourselves! If it was not so depressingly serious a matter, it would be very funny in a Monty Python sort of way! However, to cut a long story short (and reduce my promised overview to a single paragraph), and despite the fact that I would personally treasure to have you as a co-investor, it is simply impossible to include a U.S. citizen in our group of co-investors. And investing through a trust doesn't change anything; the Swiss banks are looking for a copy of the passport of the ultimate owner or beneficiary of whatever financial vehicle is used by our co-investors. My Swiss partners (and also our Swiss bank connections) tell me that there used to be plenty of options available to hide the identity of the ultimate owner of just about any investment. That is no longer the case. The only completely durable option for a U.S. citizen is to renounce U.S. citizenship and get another from a less problematic country - which is at the moment equivalent to saying almost anywhere else in the world! Just getting a second passport is not enough; FATCA killed that option. I am sorry about this - I had hoped to find a way through. ******* MY REPLY ******* Dear (Friend), Thanks for the note and the explanation. Sadly, this is where the future is... to wit, capital controls. And soon, I suspect, it won't just be the Americans who are locked in, but most of the Western world... Best, David ****** Dear David, It is indeed a grave development and I am afraid that you are spot-on regarding the spread of this capital control nonsense to most of the Western world. As a matter of fact, in our property investment partnership, we believe we have an "open window" period of only a few years more and then either the bureaucrats of EU or the "knaves, dupes and do-nothings" in Switzerland itself will stop our purchase of commercial properties with foreign co-investors of any nationality. Residential properties are already "off-limits" for foreign investors with residency outside of Switzerland (due to an earlier law: Lex Koller)... Anyway, we are for sure entering interesting times... [but] I am also sure that the "prepared will be spared"; actually, I believe the prepared might even profit... All the best, ****** While it is increasingly difficult for Americans to find foreign financial institutions who will accept them - and soon it may be impossible - it's still possible to buy land in many desirable countries around the world without being a resident. This is why, in addition to our property in La Estancia, which is more of a lifestyle diversification than an investment (though I expect it will do well in that regard as well), we also now own Paraguayan farmland and are always on the lookout for land in other attractively priced markets. However, unless the statists with their anti-capitalist meddling are turned out of power, I believe in time we'll see restrictions on buying foreign property as well. And once that happens, the wealth trap will be closed tight, giving the U.S. government free rein to tax, confiscate and otherwise threaten the populace with penury if they don't follow orders. Given the leadership role the U.S. government plays, I don't believe it will be long before all the large Western governments with cross-border interests will demand the same sort of reporting and compliance as required by FATCA. It really does behoove you to take countermeasures before the trap closes by exploring foreign real estate, establishing foreign trusts (which still can be of help in many jurisdictions), and looking into a legal and properly organized second passport program. But you'll need to get off the dime, because the clock is ticking. Cheers! David Galland For The Non-Dollar Report P.S. One way to get the ball rolling is to sign up for Doug Casey's Estancia Experience, a private gathering at La Estancia de Cafayate being held this November 7-12. In addition to your weeklong immersion into the incredible lifestyle at La Estancia, the Casey Research folks will hold a half-day conference featuring experts on topics related to foreign investing and overseas residency. For a complete itinerary and more information, email Chris Leverich at experience@LaEst.com. Please tell them The Non-Dollar Report sent you! *A version of this column was published originally in International Man. Collect $56,744 in Income Without stocks... Without gold... Without real estate... Without annuities... Without working or barely lifting a finger!! This $56,744 is obligated by contractual law to be paid to you once you enroll. Click here to get started. Click here to comment RECENT ARTICLES THE GOLDEN HOUR IS HERE by Sean Brodrick October 13, 2015 We are speeding headlong toward an hour that the gold market has been waiting for... for four long years. It's the Golden Hour. When it comes, the death grip the bears have had on the gold market for four years will finally be broken. Read On... 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