Submitted by Simon Black via Sovereign Man blog [7],
Yesterday, the IRS announced the International Data Exchange Service.
If you’ve not heard of it, it’s is an outgrowth of the Foreign Account Tax Compliance Act (FATCA), which requires every single bank in the world to get in bed with IRS to share information about customers.
We’ve said this over and over, FATCA is probably the dumbest law in the history of the United States. And I don’t say that lightly, because there’s definitely stiff competition.
Like any other bankrupt government, the US government has taken to intimidating its own citizens and the entire world in an attempt to make ends meet.
Their hope was that the minority of people committing tax evasion would come clean and that it would result in some huge boost in tax revenue.
But the fact is that tax revenues actually haven’t improved at all.
Looking at tax revenue as a percentage of GDP, the numbers haven’t budged at all from their long-term average. Not a single bit.
So in actuality, FATCA has done nothing positive for America.
That said, FATCA has managed to destroy what little remaining credibility the United States government still had.
Bear in mind these people have spied on their allies, dropped bombs by remote control, and force fed people negative real interest rates and $18 trillion in debt.
But if that weren’t enough, FATCA goes after foreigners with absurd logistical challenges, commanding every single bank on the planet to comply.
Here’s the ultimate irony: there are nations in this world that are not recognized by the United States. The Turkish Republic of Northern Cyprus. Abkhazia. Etc. Yet banks in these regions still have to sign up with the IRS.
It’s like– you don’t exist. But you must still comply.
The IRS tells us that so far more than 145,000 financial institutions have already signed information-sharing agreements.
Now with yesterday’s launch of IDES they have an online platform to invade customer privacy at every one of those banks. This is a terrible trend.
I was talking to Jim Rickards the other day, author of both Currency Wars and The Death of Money (both excellent books).
He was telling me how decades ago he could ring up a bank and open an account over the phone in just a matter of minutes.
Now, because all these governments are bankrupt, banks have become unpaid financial spies required to treat customers as if we’re criminal terrorists.
The lifeblood of capitalism is capital, and banks are supposed to be the responsible stewards of our capital.
So by obstructing the ability of banks to engage in commerce, the US government is grinding down the pitiful remains of global capitalism down to the mere punch line.
This has consequences.
Perhaps more importantly, and the reason we think FATCA is the dumbest or at least the most destructive law in US history, is that it provides an enormous incentive for the rest of the world to simply avoid dealing with the United States.
There’s no bank on the planet that likes FATCA.
The only reason they comply is because the US has a nuclear option: sign up for FATCA or else we’ll withhold 30% of all transfers that go through the United States.
This is a big deal for banks.
Since the US dollar is the world’s dominant reserve currency, the majority of global transactions are denominated in US dollars and cleared through the US banking system.
This makes the US banking system critical to global finance. And it has long been a major advantage to the United States.
You would think that a government entrusted with such an awesome responsibility, from which it has benefitted for decades, would treat this advantage with dignity and care.
But no. Instead, the US government has turned its banking system into a weapon with which it threatens the entire world.
It doesn’t take a rocket scientist to realize that the rest of the world is one day going to create its own alternative system. One that would no longer rely on the US dollar.
Oh wait– they’re already doing that.
With FATCA, the US has shot itself in the proverbial foot. They’re practically begging the world to please take away its last remaining financial advantage.
And the rest of the world is listening.
