Memphis - Some "post RV" thoughts Emailed To Recaps
Despite attempts to simply recede into the shadows I felt compelled today to offer some thoughts about the world and how coming changes will affect us all.
Whether we devote a lot or little of our actual time and energy into preparing for “economic change” I am convinced that it is a nagging and troubling thought for many.
This post will hopefully settle a concern or two and possible provoke you into some deeper reflection. It is important to note tho that this short blog is not an exhaustive one by any measure.
Where you will read only a short paragraph here, there is a long chapter that SHOULD be added as support.
As one who despises incompleteness, please accept this then as a feeble attempt to direct our thoughts to those things that we can actually influence. Fair enough?
Let’s roll up our sleeves and take a quick L@@K at some snapshots of our world…
As our gov't is blindly following the playbook of all developed nations that have gone before (in their relentless pursuit for money) we run the very real risk of becoming complacent. We are daily bombarded with news and often what we are given is either incomplete or misleading.
This requires that we be sharp, that we discern those items of value and hold onto them vs those things that should be examined and then quickly dropped.
JC Collins would describe this as keeping the fight INSIDE the bar as we should never allow our opponent to re-define the fight and distract us from what we know to be of value. This is an important step for without it we are subject to drifting with every wind that comes our way.
Compounding the matter we are seeing persons/groups using these very real realities of the world to play upon our fears as the discussion is always in the extreme with the next week or month being the end of the world! So we are left wondering where is the truth?
The truth is seldom in either extreme. FATCA is being used at present as "exhibit A" to prove that the world ends on July01 and yet the reality is that this is simply one of the many destructive things that all governments are doing as they cast their net towards capital controls.
How destructive is FATCA? On Dec26, 2013 I described FATCA in a CC as:
“…the most invasive legislation to ever hit our planet.”
Does this spell the end of the USD in July 2014? Not even close guys.
What FATCA is doing tho? The truth of the matter (as I see it)? This illegal act that is being thrust upon the entire developed world by the US taxing authority is (and has been) influencing the movements of the world’s powers for the past few years.
This is commonly called “unintended consequences” and FATCA (as does nearly all gov’t interference into the free market) has created more than it’s share.
I could make a compelling argument here that China’s public monetary changes in the past 2+ years is a REACTION to FATCA and other ignorant attempts by governments and the IMF to lock down the world.
These realities coupled with China’s exposure to western debt is forcing them to react in their own self interest. Where our leaders make decisions based on two or four year election cycles the Chinese make plans based on decades. Being long term thinkers that also respect history obviously gives them the advantage.
The world is changing and these changes need to be comprehended.
We need to begin seeing the world as it actually is and not as we have been conditioned (thru education, media, etc) to believe.
Some harmful effect will result and I am convinced that the worst of them can be avoided.
Either way it is important that we recognize the world will still be spinning in the same direction when we come out the back side of things.
The effects that these coming changes will have on Americans can only be debated as to their degree. We can speculate as to how bad things might devolve but any argument that the next several years will blossom with fields of flowers with unicorns dancing is not grounded in reality.
In case you have not followed me it needs to be mentioned that to truly comprehend our world requires action on our part. I am NOT the answers guy.
I seek value and then attempt to ask the right questions and beyond that my only exercise is coming out publicly to spark the same interest in others.
Willful ignorance must have no place to reside and if we (as individuals) feel inadequate to the task then we must surround ourselves with good counsel.
I have spoken often that there are warning signs, harbingers if you will, that we should look for that will guide us in the timeline that we face towards economic (and possibly societal) collapse in America.
Some were unsatisfied with the suggestion that we watch the decline of southern Europe and so I changed elevation several weeks ago and pointed to France as an important marker.
What possible value could events in France hold for us in America?
Adding to what was mentioned above concerning the news that we are bombarded with daily is an entirely different layer and that is the news that is withheld from us.
Has anyone been watching France? If no, then the following event might paint the picture clearly and you likely did not see or read of this in the mainstream American press…
This past week all of the French gov’t was thrown into “damage control” after Michel Sapin, French Secretary of State for employment admitted that the country was totally bankrupt.
This unthinkable admission was quickly followed up by this ‘clarification’ from the Finance minister Pierre Moscovici who said: “What he [Secretary Sapin] meant was that the fiscal situation was worrying”.
If you are easily swayed by the press that says the French minister’s statement was truly a mis-statement by him? Consider also that an online poll conducted Friday in France’s Le Figaro newspaper showed, by lunchtime, that 80.5 per cent of readers agreed that France was indeed bankrupt.
That is a staggering and sobering percentage as anyone familiar with statistical analysis will readily tell you. I submit that we place THIS story in the ‘fact’ column.
In reply to the French (not so startling revelation) Martin Armstrong stated quite simply: “There is no way France will survive.” I could not have said it more clearly.
In the interest of completeness, we must concede that the REALITY of any bankruptcy will only manifest with the unraveling of their bond market.
Can the same statement be made of the United States? I refuse to attempt that answer in less than a full (and lengthy) chapter…sorry. I don’t make intentional “drive by” statements that leave the reader frustrated and ill-informed.
Here are a couple of ‘links’ to the France story:
Taking this real world example how do we now APPLY it? This type of knowledge of our world, if properly applied and compared to all other factors, can then assist us as we speculate on the future, on events that we might want to predict BEFORE they unfold.
Naming just one, the recent return of chemical attacks upon the Syrian people and the resultant “blame game” that is again unfolding might suddenly become illuminated to us IF we also recognize that France is among the FEW nations who are blaming the Syrian gov’t of Assad for these events.
When added to the known plight of the French gov’t one might expect this (desperate) return of momentum towards war in Syria to….increase.
The greatest encouragement I can provide here (in 50 words or less) to the willing student who might question their ability to see our world as it actually operates would be the great value to be gained in recognizing just one simple and yet profound truth.
The nature of mankind has not changed since creation. Let that sink in really deep and then things will (I promise) begin to fall in place.
As cycles unfold such as the fall of a developed nation(s) the same playbook is followed every time. Why is this? Because man’s nature does not change. Yes each generation thinks itself wiser than all who came before but the truth is that man’s self interest and greed (in it’s various forms) directs his course.
Regardless of who controls a nation it is assured that they will preserve their position to the (bitter) end and in so doing make the same mistakes as every nation state that preceded them with little or no deviation from the historical record.
We do not learn from history and thus we…..repeat it.
The world truly is not as complex as most men make it out to be and many many things are knowable/predictable to us if we only L@@K in the right places, see the value in what we are given, allow the rest to fall to the floor, and then begin to ask the right questions.
I will finish here by giving an illustration and then close with a powerful example of how our own gov’t is presently destroying the world’s economy thru the self interest, greed, and ignorance, of our elected leaders.
Below is an attempt to draw attention to the world’s two greatest powers, provided in hopes that we might follow this discussion and add to it in the days ahead.
It is a central part of the new financial system being unfolded and of great value to us all even tho the following attempt to express it will fall short. :-)
At present we are being fed evidence that the two powers who have together been responsible for the creation of the world’s sovereign debt crisis are now at apparent odds with one another.
I am speaking here of the central bankers of the world (inclusive of the IMF & BIS) having an agenda that is at odds with that of the nations that they control, the politicians who are normally their useful partners in crime.
It is clear that the bankers are being warned not to repeat their past errors as gov’t will not take on the public debt to bail them out.
Compounding the problem is that the level of gov’t (public) debt has reached proportions that require the respective nations to enact regulations that will allow them to tax everything that does not move and then take whatever is left in order to maintain the status quo.
Meanwhile the IMF appears to be attempting to restructure these sovereign debts and centralize their own power at an even higher level in a desperate attempt to maintain their own self interest.
If these two powers, government and central banks, discover along the way that society will suffer as a result then we ought not to think that they will be deterred in their efforts. Perhaps hard for some to swallow but these are the realities of our world put as gently as I can possibly express.
While on the surface it is true that there is a conflict of interest between these two groups, this ought to be factored into our thinking as we watch this new financial system unfold for they are joined at the hip as I have detailed many times in recent months.
Are the BRICS nations truly breaking from the IMF (BIS)? Not likely but the storyline is being played out for the masses quite well and the masses never consider that one of the IMF governing board members is a Chinese Central Bank official.
We must not think that the people who run our world have plans to relinquish power with the attitude of “O well, we had a good run”. The new game that is coming is simply a re-packaging of the present one and our only advantage to be had is in recognizing this and being positioned to be on the right side of the equation.
Everything in the world is connected and nothing happens in a vacuum.
The supposed actions of gov’t to shut down the party of the bankers have lead to regulations (that are fully in place) that will be portrayed as having forced the bankers to simply seize (haircuts) monies from their “investors” and that means you and I.
Speaking to the above words “supposed actions”, the only true marker that would PROVE that the rules are going to be changed in favor of the people would be if criminals were sent to jail.
None of the bankers are going to jail guys. Many are turning up dead in recent months but the New York courts are “bought and paid for” so we MUST conclude that our politicians and their bankers are still fast friends.
Let’s finish with some powerful evidence that these action’s of our gov’t have some deep and unintended consequences (rooted deeply in ignorance) that are all deflationary and are leading to the destruction of the world’s economy.
If that sentence did not grab your attention then consider that NOTHING will “right the ship” for a nation that is deeply in debt if their economic engine is not running on all cylinders.
I would urge the careful study of the following article. It speaks of FATCA and asks some good and important questions and is the single best article that I have seen at capturing the essence (the big picture) of what these capital controls are doing to destroy our world.
The “roll-out” promises to be a “goat rope” of massive proportions. And lest we forget? FATCA is simply the poster child for gov’t regulation as it is just perhaps the worst example among many lesser creations being unleashed by governments.
After close study of this article some of you will be a student of your world in a way that you might never have expected. Allow me to welcome you onto this path of understanding our world. Strap in tight and enjoy the journey folks as it promises to have some twists and turns…
FATCA – Region preparing for Uncle Sam
Forthcoming US rules loom large over Middle Eastern banking sectors
FINANCE April 30, 2014 by Paul Cochrane
FATCA is due to come into force on July 1 2014
The four-year build up to the Foreign Account Tax Compliance Act (FATCA) going live is nearly over, with just eight weeks left until financial institutions have to be compliant.
But the act, which is intended to rein in tax evasion by United States citizens abroad with accounts above $50,000, involves such a complex reporting and withholding regime that much of the Middle East and North Africa (MENA) will likely not be ready by the July 1 deadline, experts believe.
Such an extraterritorial law puts the onus on foreign financial institutions (FFIs) to act, in essence, as unpaid agents for the US Internal Revenue System (IRS), or face a 30 percent withholding tax on US account holders.
Further impetus to comply is the possibility of being cut-off from the US financial system and not being able to deal with FATCA compliant institutions.
“If a country is not FATCA compliant it will be financially sanctioned in a new way, ‘the FATCA way’, and the readiness in the MENA is not sufficient in my opinion for a FATCA go-live situation,” said Camille Barkho, chief compliance officer at Lebanon and Gulf Bank.
The potential sanctioning of the Lebanese banking sector is a grave concern in Beirut, given the high degree of the economy’s reliance on banking.
Fortunately, Lebanon is ahead of the regional curve in getting to grips with FATCA. “At a FATCA Q&A session at a conference in March, some of the questions asked were very basic.
You still hear regional banks asking questions about FATCA that Lebanese banks dealt with two years ago,” added Barkho.
Understanding FATCA at an institutional level has been one of the main stumbling blocks to compliance.
The initial FATCA document was over 500 pages long and a further 500 pages have been released since.
The starting date for reporting had also been delayed multiple times – the last one gave a further six months, to July this year – which has sent mixed signals as to how serious the deadlines are, while implementation on the US side has been badly handled.
“There are not sufficient IRS platforms to assist FFIs in better understanding the regulations.
Recently the IRS released the ‘Temporary and Final Regulations,’ but how to go live with something ‘temporary’? And the W8 form was released in March, and other documents released this month. How can you prepare for an exam if the teacher doesn’t provide enough course material?” said Barkho.
The biggest stumbling block is the lack of agreement between governments and Washington.
To provide information to the IRS, inter governmental agreements (IGAs) are needed, or alternatively central banks can allow FFIs to file directly to the IRS, which is what Lebanon is doing.
Other MENA countries are considering the same reporting mechanism as Beirut. With the exception of Oman and Kuwait, the rest of the Gulf Cooperation Council (GCC) countries have indicated they will opt for an IGA, although with just over two months to go before FATCA goes live time is ticking.
“In the UAE an IGA is getting close but institutions are not sure if it will be wrapped up in time,” said Ranjith Kumar, Director at Keypoint, a financial services consulting firm in Bahrain.
Elsewhere in the region it is a similar story, from Turkey to Morocco. “Egypt said it will participate without an IGA. Tunisia and Libya are considering IGAs, but they’ve not progressed significantly,” added Kumar.
“Institutions could register directly, but with disclosure of customer information to a government outside their jurisdiction, they are looking to regulators for guidance to decide how to go ahead with disclosure.
In Algeria for instance, some of the banks have highlighted that they would get ready but will register for FATCA only after regulatory guidance.”
In Iraq, no IGA has been signed, but the Central Bank of Iraq (CBI) is pushing banks to comply.
“There will be a lot of teething problems about disclosure and transparency, and lots of Iraqis are dual nationals so it will have an affect,” said a source at the CBI who requested anonymity.
Curiously Syria, in the midst of a conflict and international sanctions, is considering playing ball with the US.
“The central bank has formed a FATCA committee to decide what to do, but I’m not sure if they can sign an IGA due to [US] sanctions,” said Dr Paul Morcos, founder of the Justicia law firm and President of the Banking Commission at the Beirut Bar Association.
On a global level, the MENA is not lagging behind. Only 26 countries have signed IGAs, while 19 countries have in the words of the IRS “reached agreements in substance” with the US this year, of which Qatar is the only MENA country listed.
The lack of IGAs is raising question marks. “I don’t know how they will be able to go live on July 1, with so few IGAs signed. I am not saying they should delay again, but is the market ready? Where’s Russia? Where’s China, Europe and Australia?” asked Barkho.
Three areas of impact
The lack of assistance from the IRS is a major gripe of financial institutions, especially as implementing FATCA requires major initial investment within an institution, estimated at $25,000 for smaller institutions, to $100,000 to $500,000 for most institutions and $1 million for larger firms.
While a boon for the financial consultancy and IT industry, it is an extra cost that institutions would rather not have.
As such, FATCA may well have a knock-on effect on banks to cut costs elsewhere. “International challenges can lead to the restructuring of the banking sector. So FATCA poses a question – will we have to restructure the banking sector here?” said Morcos.
More pressing in the immediate term is the issue of privacy and the safety of American citizens. “One thing the Treasury has not thought about is how do you protect US citizens?
In a country like Lebanon, with Hezbollah and other US designated terrorist organizations, banks will identify US citizens, which could put them at risk,” said the BDL source.
Dual citizenship is a related concern, as in many MENA countries it is not allowed.
“It will be a challenge as some citizens are known to have US citizenship, but now they have to explicitly declare if they have US citizenship or not,” said Kumar.
“How institutions use the information once clients waive their right of confidentiality could be an area of concern for customers.”
The regional and global impact of FATCA has also not been addressed. With so few IGAs signed and banks not ready or willing to file directly to the IRS, will they be cut off from the US financial system?
There is the assumption that the IRS will have to be pragmatic in the first year to prevent major reporting issues. Indeed, the IRS reported 2.7 million filing errors – out of 60.5 million tax returns – in the US in 2011. “Imagine the number of errors by FFIs reporting to the IRS? Even the most compliant banks will have high levels of errors,” said Barkho.
How will banks implement the withholding of tax, and how will compliant FFIs deal with non-compliant FFIs? Answers are also not clear.
While FATCA is likely to go ahead, it is not a 100 percent given, with members of the Republican National Committee voicing concerns recently, and the possibility of the Democrats losing the Senate to the Republicans in the fall.
More questions about the viability of FATCA will no doubt arise, such as the returns versus the outlays. Indeed, in the IRS’ 2013 Annual Report to Congress, it notes that the Congressional Joint Committee on Taxation estimates that FATCA “will generate additional tax revenue of approximately $8.7 billion over the next 10 years,” while private sector implementation costs could “equal or exceed” the amount FATCA may raise.
Further questions may arise if there is a dawning realization about negative economic impacts on the US itself. “What happens when we start shorting payments on our Treasury bonds (TBs) by 30 percent?
A sovereign holder is not subject to withholding, but for a private institution, what if the interest payment is done through SWIFT to a commercial bank that has not signed an IGA?