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The Real Cypriot "Blueprint" - How To Confiscate $32 Trillion In "Offshore Wealth"
The Cypriot deposit confiscation has come and gone (and in a parallel world in which the global Bernanke-put never existed and in which bank shareholders were not untouchable, this is precisely how real-time bank restructurings should have taken place), but fears remain that the country's "resolution" mechanism will be the template for future instances of "resolving" insolvent banks. That may or may not be the case: the only way to know for sure is during the next European bank bailout, but one thing is certain - Cyprus was certainly a template when it comes to how a world full of insolvent sovereigns (all engaged in currency warfare), where easing, quantitative or otherwise no longer works to boost the economy, will approach what is the last chance for monetary replenishment - taxation of financial assets, just as we warned first back in 2011. Specifically, Cyprus showed the "template" for confiscating Russian oligarch billionaire "ill-gotten", untaxed cash, which many in Germany demanded should be the quid for ongoing German-funded quo. And here's the rub. There is more where said "ill-gotten" cash has come from. Much more... $32 trillion more.
An estimate by James Henry, senior advisor of Tax Justice Network, confirms that the Cypriot confiscation template will certainly be used again and again for one, or 32 trillion simple reasons: the amount of illicit, off-shore held wealth, to which the proprietors have zero recourse in a world in which the war against tax evaders has gone both nuclear and global, has grown to stupendous levels. To wit: "A significant fraction of global private financial wealth -- by our estimates, at least $21 to $32 trillion as of 2010 -- has been invested virtually tax-free through the world's still-expanding black hole of more than 80 "offshore" secrecy jurisdictions."
It hardly needs mentioning that to a Europe mired in years of painful "austerity" (which is what Europe inaccurately blames its sordid, depressionary fate on when in reality it is merely reverting to a state that is justified by reality when an unsustainable decade-long credit bubble finally pops), "tax-free offshore wealth" is the purest possible code word for "confiscation-eligible."
Tying it all together, as a reminder a few days ago we noted that in the US alone there is a "high quality collateral" shortage of some $11 trillion. Extrapolating this to the entire world, the amount balloons to a little over $30 trillion.... or roughly the amount that is held in offshore tax shelters which may or may not be susceptible to confiscation. And while confiscated cash is hardly the collateral that banks need in order to preserve the illusion that a world rooted in repo and other shadow liabilities is stable, it will certainly extend and pretend the illusion for a little longer.
From this perspective, it becomes immediately obvious that the Russian oligarchs parking their cash in Cyprus were merely the Guniea Pigs, and the several billions or so confiscated (under the guise of bank resolution of course), will hardly be sufficient to fund Europe's coffers, where insolvent nations and banks have become synonymous, which is why any incremental capital deficiencies will be cured precisely using the Cypriot tax confiscation weath-redistribution template.
But even that is just the beginning. Because in the Tax Justice report we immediately read that...
Remember: this is just financial wealth. A big share of the real estate, yachts, racehorses, gold bricks -- and many other things that count as non-financial wealth - are also owned via offshore structures where it is impossible to identify the owners. These are outside the scope of this report.
On this scale, this - offshore economy - is large enough to have a major impact on estimates of inequality of wealth and income; on estimates of national income and debt ratios; and - most importantly - to have very significant negative impacts on the domestic tax bases of key "source" countries (that is, countries that have seen net unrecorded private capital outflows over time.)
(yes, we underlined gold bricks - soon to be confiscated from a bank vault near you all to fund "bank resolution").
So for anyone who still hasn't gotten the memo, and understood that "offshore tax-haven" is now the most dangerous oxymoron in an insolvent world, here is the intro from the 2012 Tax Justice report which is a must read for everyone confused about Europe's confiscatory blueprint:
The 139-country focus group: who are the real debtors?
We have focused on a subgroup of 139 mainly low-middle income "source" countries for which the World Bank and IMF have sufficient external debt data.
Our estimates for this group underscore how misleading it is to regard countries as "debtors" only by looking at one side of their balance sheets.
Since the 1970s, with eager (and often aggressive and illegal) assistance from the international private banking industry, it appears that private elites in this sub-group of 139 countries had accumulated $7.3 to $9.3 trillion of unrecorded offshore wealth in 2010, conservatively estimated, even while many of their public sectors were borrowing themselves into bankruptcy, enduring agonizing "structural adjustment" and low growth, and holding fire sales of public assets.
These same source countries had aggregate gross external debt of $4.08 trillion in 2010. However, once we subtract these countries' foreign reserves, most of which are invested in First World securities, their aggregate net external debts were minus $2.8 trillion in 2010. (This dramatic picture has been increasing steadily since 1998, the year when the external debts minus foreign reserves was at its peak for these 139 countries, at +$1.43 trillion.
So in total, by way of the offshore system, these supposedly indebted "source countries" - including all key developing countries - are not debtors at all: they are net lenders, to the tune of $10.1 to $13.1 trillion at end-2010.
The problem here is that the assets of these countries are held by a small number of wealthy individuals while the debts are shouldered by the ordinary people of these countries through their governments.
As a U.S. Federal Reserve official observed back in the 1980s: "The real problem is not that these countries don't have any assets. The problem is, they're all in Miami (and, he might have added, New York, London, Geneva, Zurich, Luxembourg, Singapore, and Hong Kong)"
These private unrecorded offshore assets and the public debts are intimately linked, historically speaking: the dramatic increase in unrecorded capital outflows (and the private demand for First World currency and other assets) in the 1970s and 1980s was positively correlated with a surge in First World loans to developing countries: much of this borrowing left these countries under the table within months, and even weeks, of being disbursed.
Today, local elites continue to "vote with their financial feet" while their public sectors borrow heavily abroad - but it is First World countries that are doing most of the borrowing. It is these frequently heavily indebted source countries and their elites that have become their financiers. In terms of tackling poverty, it is hard to imagine a more pressing global issue to address.
How this wealth is concentrated. Much of this wealth appears to be concentrated in the hands of private elites that reside in a handful of source countries - many of which are still regarded officially as "debtors."
By our estimates, of the $7.3- $9.3 trillion of offshore wealth belonging to residents of these 139 countries, the top 10 countries account for 61 percent and the top 20 for 81 percent.
Untaxed Offshore Earnings start to swamp outflows. Our estimates also correct the sanguine view that since new outflows of capital appear to have recently declined from countries like Mexico and Brazil, capital flight is no longer a problem for these countries.
Once we take into account the growth of large untaxed earnings on accumulated offshore wealth, it turns out that from 1970 to 2010 the real value (in $2000) of these earnings alone may be has much as $3.7 trillion - equivalent to about 60 percent of the global total unrecorded capital outflows during this period. For Latin America, Sub-Saharan Africa and the Middle East that have long histories of accumulating offshore wealth and unreported earnings abroad, the ratio is close to 100 percent or more.
By shifting attention from flows to accumulated stocks of foreign wealth, this paper calls attention to the fact that retention of investment earnings abroad can easily become so significant that initial outflows are eventually replaced by "hidden flight," with the hidden stock of unrecorded private wealth generating enough unreported income to keep it growing long after the initial outflows have dried up.
Offshore earnings swamp foreign investment. Another key finding is that once we fully account for capital outflows and the lost stream of future earnings on the associated offshore investments, foreign direct and equity investment flows are almost entirely offset - even for some of the world's largest recipients of foreign investment.
Wide open and "efficient" capital markets: how traditional theories failed. Standard development economics assumes that financial capital will flow predominantly from "capital-rich" high-saving rich countries to "capital-scarce" countries where returns on investment are higher.
But for many countries the global financial system seems to have enabled private investor motives - understandable ones like asset diversification along with less admirable ones like tax evasion -- to swamp the conventional theory. Reducing frictions in global finance, which was supposed to help capital flow in to capital-starved developing countries more easily and efficiently, seems to have encouraged capital to flow out. This raises new questions about how "efficient" frictionless global capital markets are.
The active role of private banks. Our analysis refocuses attention on the critical, often unsavory role that global private banks play. A detailed analysis of the top 50 international private banks reveals that at the end of 2010 these 50 collectively managed more than $12.1 trillion in cross-border invested assets from private clients, including via trusts and foundations. Consider the role of smaller banks, investment houses, insurance companies, and non-bank intermediaries like hedge funds and independent money managers in the offshore cross-border market, plus self-managed funds, and this figure seems consistent with our overall offshore asset estimates of US$21-$32 trillion.
A disproportionate share of these assets were managed by major global banks that are well known for their role in the 2008 financial crisis, their generous government bailouts and bountiful executive compensation packages. We can now add this to their list of distinctions: they are key players in many havens around the globe, and key enablers of the global tax injustice system.
It is interesting to note that despite choppy markets the rank order at the top of the private banking world has been remarkably stable - key recent trends have been for an increased role for independent boutique money managers and hedge funds, and a shift toward banks with a strong Asian presence.
Offshore Investor Portfolios. Based on a simple model of offshore investor portfolio behavior, data from the Bank for International Settlements (BIS), and interviews with private bankers and wealth industry analysts, this yields a "scale-up" factor that is also consistent with the aggregate range for 2010 noted earlier.
A simple model, based on a combination of BIS data on cross-border deposits and other asset holdings by "non-bank" investors, an analysis of portfolio mix assumptions made by wealth industry analysts, and interviews with actual private banks, suggests an overall multiplier of 3.0 to scale up our cross-border deposits figure to total financial assets. This is very conservative.
And the punchline, or where the "template" was literally spelled out for anyone seeking:
New Revenue Sources for Global Needs. Finally, if we could figure out how to tax all this offshore wealth without killing the proverbial Golden Goose, or at least entice its owners to reinvest it back home, this sector of the global underground is also easily large enough to make a significant contribution to tax justice, investment, and paying the costs of global problems like climate change.
Guess what Cyprus was: Europe finally "figuring out" how to tax all this offshore wealth. So the only thing needed to reapportion even more offshore wealth - more "bank failures" whose "resolution" will represent precisely the "ethically-justified" basis for German popular consumption to confiscate the money which to some 99.9% of the population should not have been accumulated in the first place.
Or, to summarize all of the above: with the middle class now wiped and tapped out, the wealthy have finally turned on themselves!
Finally, for those who find themselves at the top of these two wealth pyramids, we suggest you panic:
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Nice graphs.
Yes, but shouldn't there be a eye at the top of the pyramid?
A brown eye, shitting like a sprinkler.
American taxpayers are already screwed with B of A placing Merrill's derivatives in its FDIC guaranteed unit. The FDIC was overruled in objecting to having deposit liabilites come after derivatives' exposure but the powers that be decided the banks' speculation deserved more protection than depositors cash. So the shoe has already dropped on the American bank depositors. When will Cyprus happen in the land of the Dollar Bill?
As long as the move was cash neutral from a mark to market point of view on what bases could it have been denied? TPTB made their decision when Glass Steagall was revoked, BoA was right when they said they didn't even need permission ...
Also FDIC has full faith and credit, if it comes to it the guarantuees will simply be paid by printing to infinity.
This like a monopoly game on Acid and no one can even afford a shack on Baltic Avenue.
+1 Baltic Avenue Acid Shack ... great band name.
This sort of shit is precisely why I decided long ago to never become a billionaire.
We'll all be trillionaires soon - Zimbabwe style.
I am a Zimbabwe dollar quadrillionaire!
Santelli just shouted out ZH...anyway i apoligize again for topic shift but i think it should be dissiminated....there r no markets...just fraud and manipulation...
"So-called algorithmic traders may account for more than half of activity on the London Metal Exchange, the world’s biggest marketplace for metals, according to Marex Spectron Group. “Algo-driven trading is probably in the north of 50 percent of LME trading,” Simon Van Den Born, global head of metals at Marex Spectron, said in an interview in London last week. He was referring to so-called “outright” trades that don’t involve borrowing or lending on the exchange.
The LME handled $14.5 trillion of contracts last year and a record 14.5 million transactions in April. Marex Spectron is one of 11 companies including INTL FCStone Inc. entitled to transact on the exchange’s floor. Algorithms, which execute bigger orders by breaking them into pieces and routing them to different exchanges, also typically use high-frequency techniques."
http://www.businessweek.com/news/2013-05-03/algorithms-seen-by-marex-driving-more-than-half-of-lme-trading
If you didn't think the EuroZone was fucked before...
Federal Europe will be 'a reality in a few years', says Jose Manuel BarrosoA fully fledged federal Europe may seem like "political science fiction" today but will soon become reality for all European Union countries whether inside or outside the euro, Jose Manuel Barroso has said.
http://www.telegraph.co.uk/news/worldnews/europe/eu/10041817/Federal-Eur...
that's the EU, not the EZ. and sometimes I get the impression that the Telegraph is the only one listening to what Barroso says...
'...and paying the costs of global problems like climate change.' (Really guys?)
'...and paying the costs of global problems like Leviathan government.' (Fixed!)
edit: only special people get character strikethrough to work? wtf, my wife tells me I'm 'special'...
Obscure quote warning;
Bud:Bruce I. Peason, brokerage consultant. Fucking millionaire six payments behind. I've never understood it.
Otto: What's that?
Bud: The fucking millionaires. They never pay their bills.
That goes for tips too. As a teen I used to work for an upscale restaraunt delivery service - the Richey Rich's tip for shit! Every delivery to the middle-class neighborhoods almost always tipped well. Shocked, I am shocked!
Rich people generally are misers. Try collecting for a charity in a rich neighborhood. Then repeat same in a working class neighborhood. You will probably collect more in the latter than the former.
For some reason I'm quite sure the plan does not include redistributing the hidden wealth of the Rothschilds, Queen of England, Rockefellers, Taxis, et al., I doubt it even includes the Soros, Romney and Gore level.
They will take Gore's.
Do you think the Rothschilds and their ilke will allow their offshore trusts and foundations to be touched? no need to answer...
That wealth will all be converted to gold and disappeared long before anyone gets around to stealing it. That is why GLD and the COMEX are being drained at advantageous prices.
Yeah and some of it may be paid out for contracts on the heads of those getting so grabby.
Thing I don't get is how the banks can stay alive without their money laundering profit centers?
Welcome to capitalism...
Btw, inb4 the downvotes: never heard anyone talk about "crony socialism", communism, etc. - it seems all political systems have equally intrinsic problems, except for capitalism's, which are (un)equally extrinsic...
Crony is implied in Socialism and Communism. You don't need to state it.
And obviously, not in capitalism...
The Tax justice network is workinf for whom?? so far the individuals, middle class who have worked their all life hard., tried to protect their assets from the abuse of gvt and policies ...once again shall be taxed ... in order to foot the bill of the TBTF, the fucking technocrats corrupted politiciens, the great QE experiment with unintended consequences. Time to get a revolutions aginst all those suckers, time to limit gvt spending and size, time to fight economic parasitism, time to cut off the heads of all those corruputed bankster and politicien implementing self protecting QE and other policies to save their ass off.
Time to get real capitalism to work!! you invest badly, take the wrong decision, is big.. too big... go to hell, go down the hill with all your followers ! next time... people will think before trusting money in your hand.
The great master plan is to render money worthless comparing to asset price so gvt can tax you and all bad debts.... disappear.
We've grown up being taught to live within our means, to be disciplined, to be honest, to pay our fair share of taxes, to save money for your old days, etc... and all those values are BS??
Every time I see the word "justice" I make sure my wallet is safely hidden away.
maybe just a dumb UKman but many companies registered in the offshore havens (including Cyprus) would have their Bank accounts in London,New York,Singapore,Luxembourg etc etc (where do you think Appleetc keep their cash)
And if I want to invest in a fund then many will be domiciled in Caymans , Luxemborg etc (all HMRC approved).when I sell & assuming a profit I pay Capital Gains here in UK - all above board
Is the 32trillion another illusion ????
I'd consider the City of London to be a haven of sorts. And what's the deal with asylum being granted to all sorts of slugs, i.e. Mubarak family, Icelandic bankers, Russian oligarchs? They must be paying some "tithes" for protection-- I'd consider this a financial terrorist haven.
For once, I'm glad to be a bottom dweller.
'alas, a brussel`sprouts mania...
a cabbage-patch scarecrow for all in thy sequestered throes of a forbidden garden...
a death zone, where sisyphus toils never moar along the banks of a rubicon'ic`rhine for his germanic master...
this euro`locked'nes monster, never moar'
"with the middle class now wiped and tapped out, the wealthy have finally turned on themselves!" ...
Do not misunderstand the difference between rich-and-powerful and the merely rich.
The rich-and-powerful [just imagine the collective power of old-family, multiple-generations of connections of mutual interests] are on top. They eat the lunch ofany mere rich persons.
E.g. The newby Bill Gates v. Rockefeller. Or Morgan. Or Carnegie. Or Rothschild. Recall their "trusts" and "foundations" and global webs.
What happens when you decide to take money away from billionaire sociopaths? Do they just turn the other cheek? Will the world turn into Mexico?
"Say hello to my little friend"
First, they hire fleets of lawyers who know where the bodies are buried...
Then the kids cat gets nailed to the front door.
Then the case gets dropped because the prosecutor claims he can't establish intent 'beyond a reasonable doubt'.
And that's that.
Something like that, yeah.
So sovereign debt is payable with private wealth? Obviously this is what our leaders believe. Given they have stolen our identity in the form of a unlimited credit card and a "nations" debt is backed by its people, unless we are able to "offshore" ourselves to another planet, we will be stuck with the bill. Earth has become the "Prison Planet" of debt.
"Earth has become the "Prison Planet" of debt."
You might conclude that was the plan, as many have. If you read "Confessions of an Economic Hitman," you'll see the basic model layed out in detail on a country by country basis.
most of that wealth was accumulated through over-priced government financed (by increasing sovereign debt ultimately to be paid back by taxpayers) projects...
"it is very hard to defend “tax
enforcement at any price” when the tax collector is the military security industrial complex. "
FIFY Mr. Henry
This is shaping up to being a pissing contest between the world's governments, who want more tax revenue, and the world's ultra-wealthy who view governments or countries as convenient operating environments for accumulating wealth. As long as governments were useful in wealth acquisition and storage, there was no conflict. Now, those little upstart governments have apparently forgotten for whom they're working and now have the gall to come and actually take money from the deservedly wealthy! Oh, what horrors.
Excuse me while my heart bleeds and the tiny violins play.
Don't forget the big international gangsters, the ones who don't operate under the veil of legitimacy. They may hire some jackals of their own to get a message across regarding their concept of property rights.
All true... but don't forget he who has the gold makes the rules... the wealthy are not just going to sit back and take this. I'm still waiting to hear reports of Cypriot bankers floating along the cost sometime soon... in back of some Russian fishing trawler.
If this actually happens, then things go nuclear... fast.
These "offshore shelters" is not where the actual "wealth" is. Rather, all this Offshore Wealth talk is double-speak for:
1. "Onshore is where the wealth is. Offshore is where the map & keys to the wealth-owners is."
2. "The Central Bankers of the indebted countries are now so desperate to keep their global Ponzi going, that they're looking for the map & keys of the remaining players to plunder. They're aiming to build a joint task force, for offshore treasure hunts."
Got it? Against this Global Expedition of Treasure Island, we have the Theater...
A. "The sovereign fiat-currency countries are all going broke, thanks to the fiat-Ponzi they've been playing with CB's. Although the militarism and socialism did not create the fiat-Ponzi (the CB's did that!), it was the way & means to make is grow, to make it metastesize into a sovereign cancer, and to make it spread throughout the sovereign body."
B. "This inflate & tax had become a Financial Arms Race. The smart, rich and wordly people are front-running and trying to escape their broke home countries. They know that the leaders do not want to 'cure' their fiscal cancer, but want to keep feeding it. They see no benefit or patriotism in aiding & abeting their co-opted politicians. While the smart & rich keep Front-Running, the politicians keep running after them."
There is no easy Exit Strategy: There is no Eat & Run, no Dine & Dash after this national orgy. Someone always pays the Tab. After the Tab is "Settled" (not the same as "Paid") between creditor and debtor, the smart thing is to avoid its re-currence by changing the Game.
You change the Game by changing the rules, rewards and enforcements. You revert to basics and type of simplicity, that is analogous to a voluntary & peaceful Revolution. Because it beats the alternative. Failing that, a messy Revolution (from bottom up) takes place. The laws of human nature demand it. You change the Game thusly:
i. Kill the national cancer of fiat-currency and FRB. Return to sound money: Paper and/or electronic money that is indexed to hard & precious assets (PM).
ii. Nationalize CB's. Have them issue low-interest (<0.5%) money to banks. Since money is a medium of exchange (for goods & services that drive the GDP), limit the Money Supply to banks, by linking it to the real GDP. Natural cycles do and must occur, regardless of social or political ideology that seeks to manipulate the economy and the markets.
iii. Simplify the taxes to 1 sheet of paper: a 2-Pager. You thus limit the size of governments & empire building by limiting their ability to tax.
Fix the Problem, change the Game, and the wealth will come back on its own. It will want to come back.
Eliminate all electronic forms of money.
Only cash that you can carry.
Confiscate = Steal
Tax = Confiscate
Tax Justice
illicit, off-shore held wealth
so i guess this means i should buy an island in the pacific, get satellite connection, and open the wmm bank of last resort, charge .001% storage fees for the usb stick and get wealthy-er. i don't need to run no stinkin investments, just return of capitol minus the .001 %.
gotta love it.
hey, no copying of my idea!
Global poverty is the biggest problem that is growing exponentially.If you think the world has problems now,take a good,hard look at demographics.Population doulbing again should be enough to send out alarm bells.So yes,make the crooks pay up and take it all away.I don't feel sorry for what scammer banks and corporations have done to a lot of the poorest in our world.What these gangsters have done to native and aboriginal peoples is a disgrace and part of these money transfer scams on Governments and taxpayers.
if i understand this right, the claim is that unpunished crime has accumulated over decades so that it equals almost the entire national debt of the G7 economies.
If correct, this would represent the impoverishment of the 90% of people not involved with crime by the 10% who create mob money (mafia, tong, yakuza, latin and south america and other criminals evading taxes).
again, if correct, the arrest and prosecution of these criminals would result in the lifiting of poverty of the bottom 47%, allow companies to invest more, employ more people, make more profit and pay more taxes.
of course, this could just be the flip side of the failed experiment that goes for cntral bank policies that not only enable profligate government spending, but also enable the criminals to continue their activities within, god forbid, the global banks in switzerland, hong kong, tokyo, london and rome..
hmmm
The poster brings up an interesting question doesn't he, "..the wealthy have finally turned on themselves." What an interesting conundrum, to which the few commentors here that addressed it have reflexively reacted according to their biases, mostly along the lines of the big players (rothschilds, etc) will never let their wealth get caught up, while missing the bigger picture, as in "I point to the moon and they focus on my finger". Revealing, of course, the fundamental mind confusion of many that comment here. Free market capitalism is sacred! But when free capitalism results in TBTF banks controlling all of US politics, well, that shouldn't really have worked that way, you know. Right, it shouldn't have worked that way because there was NO REGULATION! But regulated markets aren't FREE markets, we can't have regulation! Thus most here, including the Tylers, have a big inconsistency they just can't get around, but you'll never admit it. So the wealthy (actually the uberwealthy controllers, whover they are-and I wish there was an intelligent thread dedicated to that subject here somtime-are turning on the merely wealthy). Look at the moon! Your spastic fear of financial oversight blinds you to the fact that these are the people that include upper level management of TBTF, that have profited from the criminal system now in place, that have used their access to politicos that have taken food from many of your mouths and polluted your backyards. Many of you probably have the funds to have overseas hidden accounts, but I would suspect it is the minority. Those in the majority, think for a minute, could there not be any good to what the poster is lamenting about at all?
i may have missed your point..are you saying that regulators did what they could to control the circle jerk of government intervention into the housing market and the banks would have taken the same risks had they failed following poor lending decisions or competitive pressures? or that the fed does not enable excessive leveraged lending/trading by banks by printing money, over which the only regulator is the Fed via fractional reserve lending?
if i read you right, you are saying that only regulators and governments can control bad behavior ..how do you square this claim when countries exist without central banks, almost no regulation and very few bank failures like Hong Kong and Singapore?
Taxes schmaxes, the global elite own the tax code, ask Roland (Ameriquest) Arnall's widow. Cyprus wasn't about taxing the elite, it was about taxing the stupid and masses.