The Grip Gets Tighter, IRS Finalizes FATCA

The grip continues to get tighter.

Last week the IRS finalized the widely unpopular FATCA regulations, a monstrosity of 544 pages.

Unpopular with everyone but the US government and the financial advisers who are set to profit from the stacks of paperwork that FATCA creates. “Stimulating” the economy I suppose.

The final regulations include a step-by-step process for identifying US accounts, information reporting, and withholding by foreign financial institutions.

The ability to threaten cutting off access to the US financial system and the world’s most important reserve currency is the main reason why the US government can get away with absurdities like FATCA and others governments cannot.

Imagine if Mexico decided to implement a FATCA-like law, requiring all foreign financial institutions to incur large compliance costs to disclose certain information about Mexican clients, regardless if such disclosures would violate local laws. Those countries that refused this dictate from the Mexican government would be cut-off from the Peso and the Mexican financial system. I imagine not many countries would comply in this hypothetical scenario.

The circumstances are quite different if the government in question controls the world’s premier reserve currency and the de facto access to international trade that it entails. I suspect that the US will be able to continue to get away with forcing other countries to comply with FATCA and other overreaching regulations as long as it retains this status.

These costly regulations make the world a smaller place for Americans. Most foreign banks want nothing to do with American clients and it is no wonder why. The benefits do not outweigh the costs; any rational business owner would make the same decision.

Perhaps it is a desired effect.

Edicts like FATCA serve as an indirect form of capital controls, as they effectively create significant barriers for capital to leave the US.

We shouldn’t be surprised that broke governments everywhere are finding all sorts of dastardly creative ways to squeeze their citizens more and more.

Take California for example, which is seeking to hit businesses with an absurd retroactive tax going back 5 years.

You'll find these stories and other current events you need to know about below, as well as a couple of interviews with Doug Casey.

Also, new IM articles include an overview of the best offshore banks used for business or personal purposes written by an international consultant, an overview of why gold royalty companies have good risk/reward profiles, and Jeff Thomas' take on one of the most overlooked factors by expats when choosing a suitable country for expatriation.

 

Sincerely,

 

 

 

 

Nick Giambruno

Nick Giambruno

Nick is Doug Casey’s globetrotting companion and is the Senior Editor of Casey Research’s International Man. He writes about economics, offshore banking, second passports, value investing in crisis markets, geopolitics, and surviving a financial collapse, among other topics. He is a CFA charterholder. In short, Nick’s work helps people make the most of their personal freedom and financial opportunity around the world. To get his free video crash course, click here.

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