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It's Official - America Now Enforces Capital Controls

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  • billstew
    replied
    It's Official: America's Capital Controls can be overridden ...

    It's Official: America's Capital Controls can be overridden ... by one simple idea.

    Immigration or permanent residency.

    So long as the USD holds some value (that is to say as long as hyperinflation has not totally destroyed the USD) most nations can create a non-enforcement clause of USD Capitol Controls in their own regulatory framework with the principals that

    -- So long as the person is seeking permanent residency
    -- So long as the person is seeking future citizenship

    the Capitol Controls rule can be totally overlooked and completely ignored.

    American resident and passport holding persons may have to fill out paperwork (with their non-US bank, or non-US bank regulator) stating that the money is for future immigration purposes, but that is it.

    No nation will want to willingly punish Americans (or any other nationality for that matter) that move their USD into the local currency into local (non-US finance system) banks.

    The US is in a long term total decline as a world power, so I don't see how the US itself is going to enforce these Capitol Control rules.

    You can either hold Mesopotamia and Afghanistan, or you can enforce Capitol Controls -- but you cannot do both.

    Like with Sir Roderick Spode (the 7th Earl of Sidcup) -- you can either be a fanatical right wing amateur dictator (and a member of the House of Lords) ... or you can design ladies undergarments. It must be one or the other. Not both. Before Spode inherited the title of Earl of Sidcup from his uncle, he made a living as the "founder and proprietor of the emporium in Bond Street known as Eulalie Soeurs", a famed designer of ladies' lingerie.

    There is an old American habit -- perhaps dating back to Andrew Jackson's time (but it could even predate this) that the US economy has been [and always will be] designed from the ground up to allow people to make themselves rich and then get up and leave with all their [acquired] wealth without any questions ever being asked. This is a habit that has been in place since 1650, and I do not see it changing.

    This is a classical 'money on the land' issue of a totally corrupt and collapsing empire.

    These Capitol Controls are not a real problem [in the short or long run] as there are always more and deeper loopholes that can always be found, even for common people. The US is a failed state that exists in a state of lawlessness -- and classically failed states obsess over enforcing exceptions as much as they obsess over not enforcing any real law.

    The sum total of US finance sector regulation has always been designed to have loopholes that can be taken advantage of by those that can find them.
    Last edited by billstew; 04-17-10, 05:37 AM. Reason: content

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  • radon
    replied
    Re: It's Official - America Now Enforces Capital Controls

    Originally posted by ViC78 View Post
    This article has prompted hysteria in the blogosphere. I was hoping to see this posted here and the reaction of the iTulip management to this article. Seeing the response has re-affirmed my faith in iTulip stewardship. This was a litmus test for me to separate the phonies from the truly knowledgeable. ZeroHedge is too steeped in conspiracy and hysteria to be of any worthwhile use, S/N ratio is way too high.

    Thanks for the clarifications, FRED.
    With zerohedge screaming "wolf" at the top of their lungs every 5 minutes how will people know when there is really something to worry about. You hit the nail on the head with regards to the kind of readers that sort of sensationalism attracts.

    Leave a comment:


  • ThePythonicCow
    replied
    Re: It's Official - America Now Enforces Capital Controls

    Originally posted by babbittd View Post
    Is BV a foreign nonfinancial entity or a foreign financial institution?
    From the <a href="http://www.bullionvault.com/">BullionVault</a> website:
    BullionVault is owned by Galmarley Limited [name origin], which is company number 4943684 registered in Great Britain.

    As at October 2008 the company had 47 shareholders. For a modest fee you can obtain a full and formal shareholder list, updated annually, from Companies House on http://www.companieshouse.gov.uk.

    Galmarley's offices are in West London (UK) and we welcome callers by appointment. Our contact details are here.
    I don't pretend to understand the legalese, but it sounds like a British company to me.

    Leave a comment:


  • Slimprofits
    replied
    Re: It's Official - America Now Enforces Capital Controls

    Is BV a foreign nonfinancial entity or a foreign financial institution?

    Stoel Rives LLP:
    Provisions Affecting Foreign Activities of U.S. Businesses:

    New Tax and Withholding Regime. The HIRE Act imposes a 30% tax, withheld at the source, on certain payments to foreign financial institutions and certain other foreign nonfinancial entities. The types of payments subject to this new tax are: (1) U.S.-source fixed or determinable annual or periodic ("FDAP") income (e.g., interest, dividends, rents, and royalties); (2) gross proceeds from the sale of property that produces interest and dividend income; and (3) interest on deposits with a foreign branch of a U.S. commercial bank. Foreign financial institutions generally can avoid being subject to this withholding tax by entering into an agreement with the IRS that, among other provisions, generally would require the foreign financial institution to provide information about "U.S. accounts." Subject to certain exceptions, an account constitutes a U.S. account if it is owned by a U.S. person or by a foreign entity in which a U.S. person owns, directly or indirectly, more than 10% of the interests. Other foreign nonfinancial entities generally can avoid being subject to this withholding tax by providing the withholding agent (generally, the person making the payment) with either (1) certification that no U.S. person owns, directly or indirectly, more than 10% of the interests in the entity or (2) the name, address, and taxpayer identification number of each U.S. person that owns, directly or indirectly, more than 10% of the interests in the entity. The withholding tax regime does not apply to certain foreign nonfinancial entities, including publicly traded foreign corporations. The new withholding tax regime generally is effective starting in 2013.

    Leave a comment:


  • marvenger
    replied
    Re: It's Official - America Now Enforces Capital Controls

    good point

    Leave a comment:


  • serge_oc
    replied
    Re: It's Official - America Now Enforces Capital Controls

    Sometimes in the name of 'factual' reporting and discussion here, the common sense gets lost. I don't care what is this called, I care what it means.

    What does this mean for a middle-class person, say having 100K in BV, or sending 5K to family overseas? Has anyone thought of implications for someone with 9-5 job and who's not studying charts every day and using a language of what amounts to fire-babble?

    Some practicality please? Big words are great in the heads of people whose profession is to deal with them, but it also distances them from from the rest of us. Earth calling Jupiter!

    Leave a comment:


  • ThePythonicCow
    replied
    Re: It's Official - America Now Enforces Capital Controls

    Originally posted by FRED View Post
    Where are the capital controls?
    I'm confused.

    Are we stumbling over two different meanings of the word control?

    If my town installs traffic lights and cameras at an intersection, would that be installing "controls?"

    Or would they only be "controls" when the light is red and the camera is used to issue tickets?

    In an other analogy, are the "naked body scanners" air traffic "controls?" They presumably don't stop any law abiding, legitimate travelers.

    I would say, if speaking carefully that all these mechanisms are not controls per se, bur rather are mechanisms that enable control. It would be the future, potential use of these presently enacted mechanisms that would be the actual control.

    Still, to call these mechanisms "control" is an abuse of language with which I am quite comfortable. Complaints that the institution of these mechanisms is an objectionable intrusion are valid in my view, and dismissing such complaints on the technicality that the word "control" is confused with the phrase "mechanism enabling control" is a regrettable distraction (in my view) from a valid objection to these mechanisms.

    Leave a comment:


  • ViC78
    replied
    Re: It's Official - America Now Enforces Capital Controls

    This article has prompted hysteria in the blogosphere. I was hoping to see this posted here and the reaction of the iTulip management to this article. Seeing the response has re-affirmed my faith in iTulip stewardship. This was a litmus test for me to separate the phonies from the truly knowledgeable. ZeroHedge is too steeped in conspiracy and hysteria to be of any worthwhile use, S/N ratio is way too high.

    Thanks for the clarifications, FRED.

    Leave a comment:


  • FRED
    replied
    Re: It's Official - America Now Enforces Capital Controls

    Originally posted by skidder View Post
    In EJ's latest subscription article (which I won't post here in the public section), he mentioned capital controls that China has implemented in the past (IIRC)and indicated they basically tax withdrawals as their means of capital controls.

    Isn't this the exact same thing? I mean it is unclear to me what happens to say an $100,000 AFTER TAX deposit made to a foreign account with this law change.

    Does the foreign institution now take $30,000 and send that to uncle sam and stick me with the privilege of convincing said uncle that I already paid the taxes on that money?

    Is this law going to be net neutral with regard to folks sending money overseas if they think they will potentially have 30% of after tax money confiscated upon withdrawal? I don't think so.

    Just like folks won't be sending money to China once they start taxing withdrawals, no one is going to be sending money offshore, at least to institutions that comply with this nonsense, once this gets widespread attention, IMO.

    So regardless of what everyone decides to name this law, it is a defacto capital control and was probably designed to be such.
    It is not a defacto capital control. Excerpt from the ‘‘Foreign Account Tax Compliance Act of 2009’’ that was tagged on as an amendment to HIRE.
    MCG09515 S.L.C.

    A BILL

    To amend the Internal Revenue Code of 1986 to prevent
    the avoidance of tax on income from assets held abroad,
    and for other purposes.

    TITLE I—INCREASED DISCLOSURE OF BENEFICIAL OWNERS
    Sec. 101. Reporting on certain foreign accounts.
    Sec. 102. Repeal of certain foreign exceptions to registered bond requirements.
    TITLE II—UNDER REPORTING WITH RESPECT TO FOREIGN
    ASSETS
    Sec. 201. Disclosure of information with respect to foreign financial assets.
    Sec. 202. Penalties for underpayments attributable to undisclosed foreign financial assets.
    Sec. 203. Modification of statute of limitations for significant omission of income in connection with foreign assets.
    TITLE III—OTHER DISCLOSURE PROVISIONS
    Sec. 301. Disclosure of assistance in acquiring or forming a foreign entity.
    Sec. 302. Reporting of activities with respect to passive foreign investment companies.
    Sec. 303. Secretary permitted to require financial institutions to file certain returns
    related to withholding on foreign transfers electronically.
    TITLE IV—PROVISIONS RELATED TO FOREIGN TRUSTS
    Sec. 401. Clarifications with respect to foreign trusts which are treated as having a United States beneficiary.
    Sec. 402. Presumption that foreign trust has United States beneficiary.
    Sec. 403. Uncompensated use of trust property treated as a distribution.
    Sec. 404. Reporting requirement of United States owners of foreign trusts.
    Sec. 405. Minimum penalty with respect to failure to report on certain foreign trusts.
    TITLE V—DIVIDEND EQUIVALENT PAYMENTS RECEIVED BY
    FOREIGN PERSONS TREATED AS DIVIDENDS
    Sec. 501. Dividend equivalent payments received by foreign persons treated as dividends.

    1 TITLE I—INCREASED DISCLOSURE OF BENEFICIAL OWNERS
    2
    3
    4 SEC. 101. REPORTING ON CERTAIN FOREIGN ACCOUNTS.
    5 (a) IN GENERAL.—The Internal Revenue Code of
    6 1986 is amended by inserting after chapter 3 the following
    7 new chapter:
    8 ‘‘CHAPTER 4—TAXES TO ENFORCE REPORTING ON CERTAIN FOREIGN ACCOUNTS
    ‘‘Sec. 1471. Withholdable payments to foreign financial institutions.
    ‘‘Sec. 1472. Withholdable payments to other foreign entities.
    ‘‘Sec. 1473. Definitions.
    ‘‘Sec. 1474. Special rules.
    11 ‘‘SEC. 1471. WITHHOLDABLE PAYMENTS TO FOREIGN FI12
    NANCIAL INSTITUTIONS.
    13 ‘‘(a) IN GENERAL.—In the case of any withholdable
    14 payment to a foreign financial institution which does not
    15 meet the requirements of subsection (b), the withholding
    16 agent with respect to such payment shall deduct and with
    17
    hold from such payment a tax equal to 30 percent of the
    18 amount of such payment.

    If a financial institution is not exempt from the existing taxes that have been in place under the IRS code since 1986, enacted under the Reagan administration by the way, and is found to have not complied with the law, they will pay a rate of 30% instead of the lower rate they would have paid if they'd complied with the law.

    Where are the capital controls?

    Leave a comment:


  • skidder
    replied
    Re: It's Official - America Now Enforces Capital Controls

    In EJ's latest subscription article (which I won't post here in the public section), he mentioned capital controls that China has implemented in the past (IIRC)and indicated they basically tax withdrawals as their means of capital controls.

    Isn't this the exact same thing? I mean it is unclear to me what happens to say an $100,000 AFTER TAX deposit made to a foreign account with this law change.

    Does the foreign institution now take $30,000 and send that to uncle sam and stick me with the privilege of convincing said uncle that I already paid the taxes on that money?

    Is this law going to be net neutral with regard to folks sending money overseas if they think they will potentially have 30% of after tax money confiscated upon withdrawal? I don't think so.

    Just like folks won't be sending money to China once they start taxing withdrawals, no one is going to be sending money offshore, at least to institutions that comply with this nonsense, once this gets widespread attention, IMO.

    So regardless of what everyone decides to name this law, it is a defacto capital control and was probably designed to be such.

    Leave a comment:


  • Sharky
    replied
    Re: It's Official - America Now Enforces Capital Controls

    It seems to me that this law could only apply to foreign banks that have branch offices in the US; otherwise, the US has no mechanism to enforce any kind of reporting requirements, etc. Assuming that's correct, one possible side-effect could be the closure of many such branches, due to increased overhead, loss of customers, etc, etc. Could that be one of the underlying goals?

    Leave a comment:


  • ThePythonicCow
    replied
    Re: It's Official - America Now Enforces Capital Controls

    Originally posted by charliebrown View Post
    Does this in any way affect a BV account?
    It doesn't seem to me that it does, since a BullionVault account is an arrangement between your (American, I presume) bank account and BV's account at Bank of America, New York. Any foreign held property (say that gold in Switzerland) is done entirely on BV's account.

    However I have no particular confidence that I'm right here.

    Leave a comment:


  • charliebrown
    replied
    Re: It's Official - America Now Enforces Capital Controls

    Does this in any way affect a BV account?

    Leave a comment:


  • jtabeb
    replied
    Re: It's Official - America Now Enforces Capital Controls

    Originally posted by jtabeb View Post
    Wow, this is getting REALLY interesting.

    http://www.zerohedge.com/article/its...pital-controls

    "
    It couldn't have happened to a nicer country. On March 18, with very little pomp and circumstance, president Obama passed the most recent stimulus act, the $17.5 billion Hiring Incentives to Restore Employment Act (H.R. 2487), brilliantly goalseeked by the administration's millionaire cronies to abbreviate as HIRE. As it was merely the latest in an endless stream of acts destined to expand the government payroll to infinity, nobody cared about it, or actually read it. Because if anyone had read it, the act would have been known as the Capital Controls Act, as one of the lesser, but infinitely more important provisions on page 27, known as Offset Provisions - Subtitle A—Foreign Account Tax Compliance, institutes just that. In brief, the Provision requires that foreign banks not only withhold 30% of all outgoing capital flows (likely remitting the collection promptly back to the US Treasury) but also disclose the full details of non-exempt account-holders to the US and the IRS. And should this provision be deemed illegal by a given foreign nation's domestic laws (think Switzerland), well the foreign financial institution is required to close the account. It's the law. If you thought you could move your capital to the non-sequestration safety of non-US financial institutions, sorry you lose - the law now says so. Capital Controls are now here and are now fully enforced by the law.
    Let's parse through the just passed law, which has been mentioned by exactly zero mainstream media outlets.
    Here is the default new state of capital outflows:
    (a) IN GENERAL.—The Internal Revenue Code of 1986 is amended by inserting after chapter 3 the following new chapter:
    ‘‘CHAPTER 4—TAXES TO ENFORCE REPORTING ON CERTAIN FOREIGN ACCOUNTS
    ‘‘Sec. 1471. Withholdable payments to foreign financial institutions.
    ‘‘Sec. 1472. Withholdable payments to other foreign entities.
    ‘‘Sec. 1473. Definitions.
    ‘‘Sec. 1474. Special rules.
    ‘‘SEC. 1471. WITHHOLDABLE PAYMENTS TO FOREIGN FINANCIAL INSTITUTIONS.
    ‘‘(a) IN GENERAL.—In the case of any withholdable payment to a foreign financial institution which does not meet the requirements of subsection (b), the withholding agent with respect to such payment shall deduct and withhold from such payment a tax equal to 30 percent of the amount of such payment."


    This is Jesse's response to the ZH article. He seems to agree with FRED.

    by Jesse
    on Sun, 03/28/2010 - 14:58
    #278875

    Not to be nitpicky, but these are not "capital controls."
    Capital controls are restrictions on moving currency in and out of a country, in order to help to manage against volatile swings in valuation.
    These are tax controls on foreign held assets, part of the admittedly widening grip of the US on its citizens wealth. It is almost assuredly in anticipation of a 'capital flight' from those who wish to evade taxes as you suggest.
    China has capital controls. One cannot take their currency out of country when you leave. But given the huge amount of eurodollars and their relative free flow, it is a bit misleading to say that 'capital controls' are now in place.
    It sounds nitpicky again, I know. But it is important. Because if the US ever does put in genuine capital controls, you know the dollar is on the precipice.
    As it is this is just the taxman doing his thing, trying to crack the tax shelters, and upsetting some nations that made an industry out of it.

    Here is the retort I liked:

    by Rogerwilco
    on Sun, 03/28/2010 - 15:22
    #278893

    They are indeed capital controls -- by proxy. The net result of these regulations is that many foreign banks will now simply refuse to do business with U.S. citizens to avoid the hassles and reporting requirements. The extremely wealthy will always find ways to move their assets, this law is aimed at the less-connected who may want to trake some retirement savings and invest overseas as a hedge. Without a foreign checking account or a local credit card, expats live at the mercy of the ATM machines. Ever try to buy a car or rent an apartment when the most you can pull out of ATMs is $500 a day?

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  • jtabeb
    replied
    Re: It's Official - America Now Enforces Capital Controls

    Originally posted by FRED View Post
    FIRE Economy interests will not like this bill. They will spin it as socialist, capital controls on the little guy, and so on. Why is Zerohedge helping them?

    When real capital controls are here for iTulipers to worry about, we'll let you know well beforehand.
    Zerohedge is ALWAYS on some sort of anti-socialist agenda (health care is a great example) and they WILL DELETE and/or edit comments made by viewers that they DISAGREE WITH! Itulip may rant and rave you, but at least they allow you to express a relatively unfettered opinion. But ZH has had some really good stuff esp RE the gold and silver market manipulation and also on the pretend and extend potempkin economy, not to mention the energizer bunny auto-climbing stock markets.

    Just as there are several "FREDs" for Itulip, ZH has several "Tylers". And in both cases, the quality varies (not a swipe at you Fred, just saying people are different and some have better stuff than others)

    But this is an effort to prevent funds escaping the jurisdiction of the US Authorities, Right? But it's not capital controls, as in restrictions are not placed on capital movement (or are there restrictions)?

    Yeah, I think it's good too, BUT let's call it what it is shall we (whatever that is).

    From your source,

    here is the area in question and the confusion:

    Under the existing U.S. withholding rules, payments made to foreign persons of fixed or determinable annual or periodical (“FDAP”) income from U.S. sources are already subject to a 30-percent U.S. withholding tax, unless the beneficial owner qualifies for an exemption or a reduced withholding rate under an income tax treaty. FDAP income includes interest and dividends but not gains on sales of property. Statutory exemptions from withholding apply to interest on bank deposits, portfolio interest, and capital gains.

    The HIRE Act adds a new Chapter 4 to the Internal Revenue Code (Code Sec. 1471 through Code Sec. 1474, as added by Act Sec. 501). It provides for withholding taxes to enforce new reporting requirements on specified foreign accounts owned by specified U.S. persons or by U.S.-owned foreign entities. The Act establishes rules for “withholdable payments” to foreign financial institutions and for withholdable payments to other foreign entities. These rules are generally effective for payments made after December 31, 2012. However, they do not apply to any obligation outstanding on March 18, 2012 (the date that is two years after the enactment date), or from the gross proceeds from any disposition of the obligation.

    What is not clear is if the second paragraph is a new flow of funds that will ALSO be subject to the 30% withholding tax (and previously not subject to this tax).

    This is from the other source that you posted:

    The Act imposes
    substantial new reporting and tax-withholding obligations on a broad range
    of foreign financial institutions that could potentially hold accounts of U.S.
    persons. The reporting and withholding obligations imposed on the foreign
    financial institutions will serve as a backstop to the existing obligations of
    the U.S. persons themselves, who have a duty to report and pay U.S. tax on
    the income they earn through any financial account, foreign or domestic.
    These new reporting obligations for financial institutions will be enforced
    through the imposition of a 30-percent U.S. withholding tax on a wide
    range of U.S. payments to foreign financial institutions that do not satisfy
    the reporting obligations
    .

    They say "substantial new reporting and tax-withholding obligations ..."

    If they are new, do they cover the same transactions as before or an EXPANDED amount of entities and transactions. (Expansion would seem to indicate a Hike, right?)

    Thoughts?

    As an aside, I'm starting to have to wonder if Obama is suffering from the Gorbachev Syndrome (trying to reform at pace he thinks system can tolerate while getting OBE'd due to internal and external contradictions)
    Last edited by jtabeb; 03-28-10, 08:41 PM.

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