Tags: denis | kleinfeld | money | laundering

Too Many Laws May Spark US Heart Attack

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Monday, 22 Nov 2010 09:09 AM Current | Bio | Archive

Let's start with the basics. The United States needs to pull in money from everywhere in the world for its economy to survive.

Anything impeding that flow of foreign (and not-so-foreign) cash to the U.S. capital-dependent economy is a major problem, potentially a catastrophic one.

Every dollar of investment is important. Like plaque buildup in the arteries, each little restriction in blood flow may not be a disaster in itself. But when enough accumulates, then you have a heart attack.

That's what is happening to the United States.

Congress has been enacting more and more legislation, restricting the flow of capital (America's lifeblood) from getting into the U.S. economy.

The U.S. economy, similar to a heart patient with blocked arteries, is sick.

The latest symptom of this disease happened this week.

Barely noticed by the media and apparently totally ignored by the political establishment in Washington, D.C., The Wall Street Journal reported that "some of the nation's largest banks are exiting or scaling back their dealings with foreign embassies and missions in the U.S. because of the burden of complying with money-laundering regulations."

I don’t mean to debate anything involving money-laundering. This isn’t about stopping criminal activity. It is a fact that international money-laundering, drug trafficking, arms dealing, terrorism, and the rest are growing (and seemingly) unhindered, industries.

No doubt Wall Street could figure out how to hold an IPO on them — with U.S. government guarantees to boot.

What I am talking about is the fact that the method that Congress and governmental agencies attempt to use in increasing foreign-account reporting and the collection of tax isn’t only a failure for what it was supposed to do, it does something even worse.

It is severely undermining the ability of the United States to attract foreign, and foreign-based, capital which is desperately needed to heal the American economy.

This latest symptom of congressional legislative failure is yet again proof of the so-called Law of Unintended Consequences.

If a foreign government's embassy can't maintain a bank account in the United States and comply with what Congress has demanded, then how can any foreign investors?

And that is exactly what we are seeing everyday in the real world of the U.S. economy.

There is still a lot of foreign money, or U.S. money held in foreign accounts, flowing into the United States. But our economy is having a series of "strokes" because the capital flow is being hindered more and more.

Unless there is a big change in the approach by Congress and the Obama administration, the United States is headed for the economic equivalent of a major heart attack.

If collection of tax on foreign accounts is what the government really wants (since it can't really be about stopping the flow of drugs, or armaments, or trafficking people), then it would make sense to just use a more efficient tax system that is based on taxing cash transactions at the source. It is a tax system that works just fine when we buy a hamburger, fries and a soda at the local fast-food chain.

The mechanisms Congress deems necessary to enforce the current mega complex tax system (a system devised in the 19th century) effectively can’t be managed by the government. It’s also nearly impossible for U.S. taxpayers and others, like foreign government embassies, to comply.

The problems created for the United States economy are being made worse, not better. And little, if anything at all, not even much tax, is gained in return.

With money-laundering compliance law hurting the American economy, what should this realization mean to investors, business owners, and professionals?

It means two things: that we need to take the action steps necessary to protect our personal financial safety net, and we need to severely limit our own exposure to undesirable investment and liability risk levels.

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Kleinfeld
Let's start with the basics. The United States needs to pull in money from everywhere in the world for its economy to survive. Anything impeding that flow of foreign (and not-so-foreign) cash to the U.S. capital-dependent economy is a major problem, potentially a...
denis,kleinfeld,money,laundering
637
2010-09-22
Monday, 22 Nov 2010 09:09 AM
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