04
August
2014

Out of Political Reach

This is WHY it is important to keep your savings out of political reach?

kat bij de melkBecause Authorities have NO legal jurisdiction in other countries. At least this is still true for the EU and Europe and less so for the USA since we have FATCA.

Authorities have no way in directly taxing or confiscating assets which are located out of their country. Authorities have no jurisdiction in other countries. For EU citizens, this means savings must be kept out of Europe. For American citizens, it means savings must be kept outside the USA.

If you keep your Gold in a Safe Deposit box within political reach, one day it will be legally taken away/seized. Even if you're a non-resident.

It becomes more and more apparent that the Authorities will appoint the Banks as their tax collectors: they will collect whatever tax, bail-in the Government decides to levy and pay it directly to the Government. A recent example is the 0.03% retro-active tax levied in Spain on deposits.

The money was gone out of the accounts before the account holders actually realized it.

Because in those countries you are also a non-resident and hence not subject to the local taxation requirements (except for the local withholding tax on condition such applies to aliens) the risk is smaller. Some countries however have bilateral tax agreements where under certain conditions one can claim back part of the tax. Hence some countries are better (ask a specialist – we know) places to keep your savings. In case of a Bail-In or retroactive tax, ANY DEPOSITS (belonging to residents and non-residents) are subject to a potential legal theft!

Because sometimes the local legislation sometimes offer a higher insurance on deposits/securities and you are better covered when a financial institution goes belly up. In Europe deposits are most of the time insured up to € 100,000. In other countries the limit can be much higher: $ 250,000 and more.

Fiscal amnesty doesn't mean that you are by law requested to repatriate savings within political reach...but only that you have to declare these. Those who repatriated the funds made a huge mistake...

I am from the governmentBecause in certain countries there is a clear distinction between Commercial Banks and Investment Banks/Brokers. Commercial banks are a lot riskier. In Europe for example, banks are - most of the time - wholesale institutions which are at the same time 'commercial' , offer credit and mortgages and are involved in the security business. Extremely dangerous are the banks involved in Derivatives (HSBC, Deutsche Bank, Societe Generale,..._

Because in certain countries the minimum required reserve ratio is by law HIGHER than in other countries. The reserve ratio is the amount of deposits a bank must keep in its vaults versus the total of deposits. Example: a bank with $100,000 deposits and a 30% reserve ratio must have at all times a minimum of $ 30,000 in its vaults .

Most of the time (this applies both the Europe and the USA) the ratio is 1% and sometimes less. This is the reason WHY the banks want you to pre-order cash...They tell you it is out of security reasons, reality is that they simply don't have it on hand.

In case of a bank run, it is a lot easier to pay out depositors if you have at least a 30% buffer than if you have only 1% or less.

Next comes the potential sovereign protection in case a bank goes belly up. Certain countries have banks which have NO by-banks or daughter-banks outside their country. Banks which are spread all over the world, are riskier than banks which only operate in one single country.

Example: Credit Suisse has not only banks and assets (ex. real estate) in Switzerland but also in other European Countries and the USA. The US assets can at all times be used by the local authorities to BRIBE the non-american bank. [this is what happened to BNP-Paribas, Credit Suisse].

Assuming a bank with no foreign ties becomes the subject of a bank run or if there is a pending risk of bankruptcy, the local financial authorities may decide to step in. They may take over the bank and pay out/cover all deposits. This was what happened when a bank went under in Panama. The local authorities took over the bank and paid out every last cent to its depositors. The bank is still in operation and doing well.

Conclusion:

  1. Keep your financial assets out of political reach.
  2. The higher the reserve ratio of the bank and the less commercial exposure the smaller risk for a bail-in.
  3. Banks without commercial risk (no credit, no mortgage, no derivatives) are the safest.
  4. Never keep assets in a country where the risks of default are high (Argentina, Cyprus, Portugal, Belgium, USA) unless you want to become the subject of a bail-in and/or capital control and/or confiscation of your assets. Often investors tend to make deposits with banks in risk countries or with banks having their main roots in such countries because they receive a somewhat higher interest rate.
  5. Don't think that foreign banks are less safe than your local bank. Most of the time they are safer.
  6. Internet banking will as a rule NOT spare you if the internet bank operates out of a local geographically location.(ex. an american bank operating in Europe through an European bank is subject to the European legislation like an american bank operating in Argentina through and Argentinean branch is subject to the Argentinean legislation).
  7. Don't move assets to a country with a culture which differs too much of yours and where it is night when it is daylight at home..
  8. Assets out of political reach will allow you to leave your home and start a new life in case of war threat.
  9. Moving your assets out of political reach will ensure your savings are SAFER. However, because most banks are inter-connected be aware this ain't no fail proof operation.
  10. An American bank/financial institution which a daughter in Europe (ex. France) has twice the risk: it may default because the US-mother bank runs into trouble and/or it can default because the local daughter runs into problems and/or there is a bail-in by the local Authorities (In this case France).
As long as you declare to the IRS or Tax Authorities that you have savings abroad, you don't breach the law!

Note:

  • In the FATCA affair the IRS (USA) tries to enforce the American fiscal legislation to non-USA countries. They can only try so by blackmailing Natural and/or legal entities which have ASSETS within the United States.
  • Swedish Citizens have to ask permission to the local authorities to open an bank account OUTSIDE Sweden.

The solutions Goldonomic offers/provides:

  1. What to invest in: safe and unsafe investment instruments.
  2. Where to keep these : locally, overseas and how to open accounts overseas.
  3. Which juridical structure should one keep it in?
  4. Which countries are safe and which countries are a no-go?
  5. Answers to questions which have not been answered here.

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