Post From KTFA by Memphis » March 28th, 2014, Deflation is Good...right?
It occurs to me that due to the nature of our discussions we need to occasionally bring balance to things. It is impossible for every blog, every post to be an all encompassing thesis and so let's begin here by acknowledging that yes, America is a leader in the world's economy. Serious discussions of the world must always include the US.
The reality tho, the thing that we follow daily, is the trend is away from the US. Our influence in the world is, has been, and based on all indicators, will continue to be diminishing. The question now becomes why. It is an impossibility to answer this question in a few paragraphs or on a short cc.
The indicators are so varied and our ability to absorb, to process requires that we take brief "snapshots", small glimpses.
Every essay that I have brought is nothing more than a small piece of this complex puzzle and today's is no exception. As mentioned yesterday, all the actions of our gov't are deflationary meaning that the value of stuff is declining. The word also speaks to retraction, withdrawal, and these forces destroy hopes,of growth, recovery, etc.
Many things are driving this unseen force from, an aging demographic, to the effects of our nation's debt, coupled with insane monetary policy, magnified by mindless leaders who care only for their jobs and must regulate EVERYTHING, all combine to create an atmosphere that is rapidly destroying America.
This post is yet one more example, a snapshot that is evidence, visible proof of this unseen force. Much like it's counterpart, inflation (known as the unseen tax), deflation must be recognized and factored into our model of what the "new normal" will L@@K like in America.
The economic term that best describes what we are witnessing at present and (will be, increasingly so) in the future is called "stagflation" in which two destructive extremes are simultaneously at work.
We are speaking of both inflation and deflation. I have heard some smart people imply that deflation is good. The discussion is not that simple tho and I assure you that the effects of deflation in America are not helping! Martin Armstrong feels strongly that deflation will be our undoing and to quote him: "We will beg for inflation before this is over."
Ever wonder why employment is not picking up? Why multiple banks turned you down for a simple student loan? as we touched on yesterday, capital is going into hiding.
The "velocity" of money tracks this and is one good measure of a nation's fiscal health. Ours has been tanking as business is fearful of the future. These forces that range from regulations such as FATCA, to the Affordable Health Care Act to other realities as simple as uncertainty of the future, have forced businesses to simply ( with rare exception) "hold on".
NOTHING at present will lead to the creation of jobs and regardless of your knowledge of economics, I am convinced that deep down inside everyone recognizes that the above statements are true DESPITE what you see to the contrary on your TV.
You will not progress as a student by watching any TV channel. My only purpose in watching anything is to use it as a measure, an indicator of where not to be L@@King and yes, I am one of THOSE people who yells at his TV on occasion....
With that cheery introduction let's L@@K at a well written essay by Jeff Berwick, a clear thinking Canadian who now lives abroad. Blessings, Memphis
U.S. Citizen? No Foreign Bank Account For You!
Thursday, 27 March 2014 06:47
This article was written by Jeff Berwick and originally published at The Dollar Vigilante
Many people laughingly remember the image of the Soup Nazi in Seinfeld. If you did anything out of order or that he didn’t like, “No soup for you!”
Sadly, thanks to the upcoming Foreign Account Tax Compliance Act (FATCA) in the US, banks around the world are turning away US passport holders, “No bank account for you!” But you don't even have to do anything wrong other than having been born a US citizen.
Decades ago holding a US passport was a ticket to worldwide opportunity. Today it is nearly the opposite. First it started with the erosion of the US's reputation as a bastion of freedom. Then, legislation-after-legislation made it nearly impossible to do business with US persons as the nation became increasingly paranoid and fixated with raising funds.
Faced with draconian penalties on foreign banks who accept US citizens countless banks worldwide are deciding it is easier and safer to just turn away all US customer business. Not to mention much cheaper.
NO INVESTMENTS OR BROKERAGES FOR YOU EITHER
This has been the case for a long time in regards to investments and brokerages. The SEC has made it clear to anyone worldwide that if you even offer investment opportunities to US citizens they will come after you with the full power of the US government.
The reason, they say, is to protect the fragile and gullible American citizens from losing money in foreign investment opportunities. What it really does is limits the investment options of Americans dramatically … at a time when the US economy is tanking and other economies around the world have been booming.
One such example is at Peter Schiff’s EuroPacific Capital in St. Vincents. EuroPacific has a great option … you can actually hold gold with them and have an ATM card where you can withdraw fiat dollars from your gold holdings.
He opened up operations there because opening it within the US would have been too difficult regulatorily (sound familiar?). But, in order to get outside of those regulations they also do not allow American clients. In fact, they go so far as to not even answer the phone if it comes from a US area code!
BANKS RAPIDLY SHUTTING DOWN US CLIENTS
With thousands of banks in the world it is impossible to keep track of the changes taking place. But it will probably become a rule-of-thumb that international banks simply do not accept US clients ... in fact, most banks we deal with at TDVOffshore do not accept US clients.
Most information we receive just comes from US passport holders who have recently had their accounts closed down or were denied application. The future is clear: banks are no longer accepting Americans because of FATCA. From Europe to Asia to the Caribbean the same is true.
The decision is simple for banking institutions. In fact, it is merely an issue of the bottom line. It is not worth it to track and report the data they are now required to under FATCA.
Bobby Casey, a good friend of TDV who deals with international banks all the time recounted recent experiences he has been having. Meeting with bank representatives, "I asked if there were any changes to the bank’s policy on accepting American clients. The answer was yes.
They no longer accept Americans as of March 1st, 2014. The reason – FATCA. We have another Caribbean bank we work with that has, as of February 1st, stopped accepting American clients. Just this week one of my business partners walked into a local bank in Latvia to open an account and they rejected him. Why? He is American."
OVER-LEVERAGED US BANKS
By hemming in Americans to keeping their money in US banks it creates a number of serious risks to their capital.
The US banking system is leveraged at 13-to-1, which means that an 8% drop in asset values will destroy all US equity. It's worse elsewhere: Japan’s banks are leveraged at 23 to 1. France’s are 26 to 1. Germany is 32 to 1. But the US's own Federal Reserve is by far the most over-leveraged at 53 to 1.
That means the Federal Reserve, which has bailed out the world to the tune of trillions of dollars, is more over-leveraged than many of the institutions it is supposed to help.
That is twice as over-leveraged as the European Union banking system, which, as you may remember, housed the Cyprus banks, which ultimately collapsed. It is no wonder why they want to keep all their money domestically! All the easier "bail-in" when the time comes.
Either that or they will have to print a torrent of more money to keep the system alive ... leading to hyperinflation and destruction of the dollar.
FATCA GOES GLOBAL
At the same time, many nation-states all over the world are drafting legislation to put them on par with US post-FATCA. To comfortably bank anywhere in the world is steadily becoming a thing of the past. Yesterday we reported ("Governments Worldwide Adopting FATCA Style Legislation") that Russia has introduced its own FATCA-style legislation.
It is all a nefarious form of capital controls that is descending on many countries throughout the world. Rather than tell you that you can’t take your money out of the country (straight-up capital controls) they just pressure banks around the world to not accept your citizens as clients … or to report all transactions back to them like an unpaid tax collector … which most banks do not want to go through the trouble to do.
There are still ways to internationalize your funds and protect them from the prying eyes and outstretched claws of your government but it is not looking good in the near future. As governments around the world continue to implode under record-breaking amounts of debt they will continue to take their own citizens wealth at ever-increasing levels.
There are still legal and viable options to protect yourself from that as I have personally done nearly a decade ago … but if you still haven’t begun to prepare I’d be running not walking to do so. When it comes to your and your family's hard-earned wealth it is always better a year or two early than a day too late.