The financial markets are heading into complete disarray.
Clearly, there will be a global recession.
The world’s central bankers have exhausted all their best financial weapons to trying to create the semblance of stability.
Interest rates have been manipulated and distorted in a pathetic effort to prop up the façade of market asset values. Trillions of dollars have been borrowed and spent in a process called quantitative easing or infusion of capital. Hyperbole that hasn’t eased or infused anything.
The United States does not generate enough capital internally to expand its economy. It needs other people’s money.
Without an expanding economy, those in political power cannot raise the taxes or borrow enough money to support the vast number of schemes necessary to keep themselves in power.
Even countries with vast natural resources with little other economic activity need capital to exploit those resources, generate tax, and achieve their number one goal of political survival.
Those in command over the financial markets which accumulate and allocate think that financial resources must be controlled. It is an arrogant and false belief.
They exercise their authority by establishing multiple bureaucracies to carry out the policies as dictated by political necessity. They do not believe either in the free-market or personal liberty.
History tells us that without personal liberty and the free-market allocating capital resources an economy will fail.
Every institution and business related to the financial markets is highly regulated and taxed.
Multiple layers of regulatory bureaucracies are crassly endowed with the power of life or death over the financial industry.
They dictate who can be in the financial business; the services offered; how they provide their services; when they do it; where they can operate; and amount of payment they can squeeze out of the investor.
The financial industry is incentivized to play ball by using the regulatory system to reward the dutifully compliant and punish the defiant.
Under the tax system, the government decides what the split of the gains will be between the financial industry and government. Investors take 100% of the losses.
The welfare of the investor and taxpayer is to the financial merchants and bureaucrats as a sheep waiting to be shorn by a farmer.
It makes no difference on what the form of government takes. No matter whether the government organization is republican, democratic, socialist, communist, fascist, or any other way, all of them depend on getting capital into their respective economy, generating productivity, and taxing the heck out of it.
All are capitalists. Some forms of government are just less bad at allocating it. None are good.
There has always been competition in every country in the world to attract capital or undermine competitors.
The United Sates has garnered an extraordinary share of the world’s capital by establishing itself as the foremost tax haven in the world. The US is the tax haven for the world’s other tax havens.
If someone is a foreign investor—seemingly legal and illegal alike—the US offers tax-free investing, secrecy, and a lax system of oversight. It also offers a rather easy means for rich non-US people to buy citizenship. No waiting in line.
With more money being needed to pay for a seemingly endless stream of new governmental programs, merely attracting capital from foreign sources is not enough.
The United States realized that it needed to both undermine its financial competitors and simultaneously force overseas capital back into its economy and subject to tax.
The strategy involved is rather simple. The trillions of dollars held in foreign financial institutions and investments became the target.
Direct and indirect tactics were then applied.
Tax compliance measures directly attack the foreign accounts and their owners. Accounts are closed and money is deposited in the US.
Indirect attacks used the OECD, the IMF, the World Bank, and other surrogates to assault the legitimacy of competing tax haven countries. Competitors were crippled and their business went to the US.
In the best of Orwellian traditions, the call to action uses euphemisms such as unfair tax completion, tax harmonization, and sustainability, with appeals to nationalism or patriotism. Undefinable terms and abstract concepts perfect for propaganda. The media ate it up.
What had been a mostly tit-for-tat competition for capital was transformed into an all-out war.
The United States has succeeded in strong-arming the world-wide financial industry and competing countries into submission to its political domination and tax regime.
Unfortunately for investors, politicians, bureaucrats, and the financial industry, the Law of Unintended Consequences and the reality of economic market forces are prevailing.
What is happening is that the U.S. global tax war is adding fuel to the chaos engulfing the international financial markets.
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