Short and thought-provoking post today at Cyptogon.com.
"Now, which one of the following do you think would involve the most red-tape?A) Getting a driver's license
B) Buying a gun
C) Setting up a corporation
D) Establishing a daytrading account to trade stocks and options on margin (that is, with money you don't have)
E) Having the ability to send your money out of the U.S. at will
Hmmm??? Any guesses?
'E' is the correct answer."
As you may know, I work for a major financial firm, and the last three years have seen an unprecedented flurry of regulations being brought down on the industry. Various reasons are given for these regulations, all of them nominally being to "protect the public" or to "prevent crime/terrorism"--and certainly that is true. But at some point, like Kevin at Cryptogon.com, you perhaps begin to wonder whether the over-arching reason is nothing more than simply to establish greater and greater control over individuals. Not that this control is necessarily a means to an end...it is perhaps the end in itself. But suppose you actually come to realize that you want to draw the line somewhere for yourself, and like Kevin, you begin to become concerned that you may already be too late....
Everyone has probably heard the term "offshore hedge fund"--these are "investment accounts" established outside of U.S. tax and governmental jurisdiction, sort of like hyper-active versions of the legendary "Swiss bank account". The amount of money in them is unknown, but without doubt it is in the hundreds of billions, if not trillions. And this doesn't even address the actual 'corporate' money which has gone into overseas investment and holding companies, ne'er again to return....*
This is the money of people who did pay attention to the direction things were headed, who did draw the line somewhere. This is the so-called "smart money". Sure, a big incentive might have been to avoid taxes, but isn't it apparant in a myriad of ways that tax avoidance is only a small part of the larger view, which is maintaining freedom from control? And so maybe this gives you a little bit of an insight into the future that they are betting on....
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* Or perhaps it will. Robert Bell makes the case in an insightful article "The Invisible Hand (of the U.S. Government) in Financial Markets" that the American Jobs Creation Act signed last October was an effort to coax some of this corporate money back home.
"In late October 2004, the U.S. public was looking the other way when the tax cut was passed. Most people were obsessing over who would win the presidential election. Few were paying much attention to what the Republicans in Congress were doing, which was giving billions in tax cuts to U.S. corporations which had profits parked in tax havens around the world, such as in Ireland or Singapore.…The law Bush signed in late October 2004 goes by the obscenely false name, the American Jobs Creation Act. If there is one thing it will not do is to create jobs. It will instead create takeovers, which nearly always produce losses in jobs—in the name of synergy. Takeovers are on the limited menu of activities companies are permitted to do with the money they can “repatriate” under this law.
…Normally such profits earned in foreign subsidiaries of U.S. companies would be subject to a tax rate of 35% if they were brought home, which is why the money had stayed parked in the tax havens. But the law gives companies a one-year window for the “repatriation” of this cash at a tax rate of only 5.25%. Nobody knows how much will be brought in. When the law was passed in October, the general expectation reportedly was that the figure would be about $135 billion. But one player has estimated it at $319 billion."
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