There is a disturbing trend developing. As the US Dollar craters against so many currencies around the world, and as US economic, fiscal and monetary policy has completely unclear consequences; the US Government is embarking on a stronger and stronger campaign to limit your financial rights.

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While not illegal to move your wealth offshore, it has become a nightmare because of the significant paperwork required by the IRS once you do move money offshore. Aside from real estate, the minute you have more than $10,000 in one account or a combination of accounts, holding anything from cash or gold or stocks, you have to report this fact. And, if you fail to do so, the penalty for non-reporting or erroneous reporting can be worse than that of committing a violent felony.

Back in the day, foreign bankers loved to see an American walk through the door. It meant big money in fees. Today most foreign jurisdictions won’t touch funds if the holder is an American Citizen. It’s just not worth the hassle to deal with the IRS and the paperwork required. So, what’s behind all of this?

Well, the stated goal behind all policy that governs the declaration of foreign investments or funds or accounts is to be able to track money launderers and tax cheats. There used to be a time when having a numbered Swiss account held cache, now it just holds headache. A more sinister line of thinking would say that these laws are no longer in effect to track terrorists, drug dealers or tax dodgers, but more to prevent Americans from exporting their wealth from the US to other countries.  Countries with greater economic stability and better fiscal and monetary policies. In other words, capital flight is not good for America.

But, that is not very American is it? What happened to freedom to invest? And, what difference does any of this make anyway? Well, if you want choice and access to a myriad of investing opportunities and stock markets outside the US, you have to have money in other countries so that you can buy “local” and not pay the premiums associated with non-local shares…if they are even available.

If you want to convert your US dollars to say Swiss Francs, now the whole world knows since you have to declare any offshore account on your 1040 if the cumulative total of offshore funds exceeds US$10,000. Listen, US $10,000 has been the rule for decades – it made sense when the US dollar was strong, but now people in Asia carry around more than that when they go shopping. Forty years ago one US dollar bought more than 300 yen – today it buys 80. Worse, having an offshore account raises your “audit” profile – believe it!

There are NO laws against taking any amount of money offshore – let me be clear on that point. You can walk onto a plane with $20 million in two steamer trunks and the US government won’t do a thing  – as long as the cash is declared. That said, its surprising that in a country where freedom of “everything” is so cherished, we are more than willing to have freedom to move OUR own money, without the threat of penalties or audits, trampled upon.

Geithner Slips as Bernanke Flips

On October 19^th, Treasury Secretary Tim Geithner said words to this effect, as reported by Bloomberg: “ A weaker dollar might be in the best interests of the US”. Of course he came out a few days later and said the exact opposite. Why bother Tim? Just two weeks later Bernanke announces QE 2, quantitative easing part 2 and lays out the timetable for printing another $600 billion dollars to help stimulate the economy by keeping rates low. Hell, it might as well be QE 10 since all the Fed and Treasury have done in the past decade is print money, and more money and even more money. Remember when a billion dollars actually meant something. For heaven’s sake, the Long Term Capital Debacle of 1998 was centered on just a few billion dollars but the market treated it as if it could have collapsed the system.

A few days ago Bernanke, responding to criticism said, “the Fed was not trying to stoke inflation”. Liar. Listen; have you been paying attention to the commodities markets? Gold, Silver, Corn, Sugar, Coffee, Oil – all setting new 52-week or all-time highs. Hey buddy, when it costs you more to buy something because your money is worth less – that’s inflation. Bernanke’s defense was that with capacity utilization so low, it would be hard for producers to pass those costs on to consumers – hence deflation was a bigger concern. Last time I checked, my “gas producer” had NO problem charging me more!

Forget the slippery slope, we’re heading down a ski-jump this time. Is there a saving grace in sight? Maybe. If the new political landscape puts an end to this spending and entitlement madness – we may still be able to right the ship. I would love to be even cautiously optimistic, but I’m not holding my breath.

Regards,

Kevin Raymond

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