by Peter Macfarlane

I want to apologize for posting bad news at this time of year, when I truly hope that all our readers will get to spend some peaceful, stress-free, quality time with their families. In fact this bad news does not come as a great surprise to us, but we have just been made aware of it and I feel it is my duty to pass this on as soon as possible.

The ‘clear and present danger’ from this bad news is to Americans, but this matter is very much of global significance for two reasons: first, where America treads, other countries like the UK, Australia etc tend to follow. And second, this is all related to America’s most daring extra-territorial legislation ever, FATCA (the Foreign Account Tax Compliance Act) that aims, seriously, to draft all banks and other financial institutions in the rest of the world as unpaid spies and tax collectors.

There can be no doubt at this point that the US government is serious in its wish to know everything about everything you own, anywhere in the world. The only reasons they could legitimately need this information would be for capital or exchange controls, and the imposition of a wealth tax.

A wealth tax, for those who are not familiar with the term, is a kind of tax imposed in certain European countries – France being the most prominent example – where the tax is on the savings and capital of citizens, irrespective of income. It is not like income tax that you only pay on profits.  Wealth tax is a form of tax that has never been known in the US.

So what is this immediate cause for concern? The new reporting guidelines that we have just been made aware of.

REPORTING REQUIREMENTS BECOME MUCH MORE INTRUSIVE: INTRODUCING FORM 8938

The American IRS and Treasury Department have just published guidance notes regarding a new form, that will replace the old FBAR (Foreign Bank account Reporting) form TDF 90-22.1 that all Americans with foreign bank accounts are (one hopes) familiar with.

This is not an IRS form. Collecting the expanse of information requested in this form would clearly be outside the limits of the IRS’s constitutional remit, which is to ensure collection of taxes.

Neither is it a Treasury Department form like the old FBAR form. The Treasury Department’s remit is amongst other things to prevent money laundering, and it was under that guise that the FBAR form was required.

Form 8938 is a joint IRS and the Treasury Department that demands complete information on all of your foreign assets – no longer just offshore bank accounts.

The exact terminology used on the FBAR form and its accompanying notes often left open to debate what constituted a “financial account.” For example, it was never really clear whether gold bullion stored offshore in a vault constituted a “financial account.”

The notes accompanying form 8938, however, make it clear to us that the US government is no longer satisfied with taxpayers merely filing their taxes accurately and paying on time. They now want to know everything about everything you own, even if it is not taxable. The sheer scope of this invasion of privacy is just breathtaking. For readers with offshore assets, the old questions of definition have been rendered moot with form 8938.

There are some exceptions – for example for Americans living overseas, or for those with very small amounts overseas. If you want to read more on the exact details, we suggest you start with this article in Mountain Vision.

WHERE TO FROM HERE?

Are the concepts of offshore asset protection, offshore investing and offshore banking for Americans dead? Should Americans at this stage throw in the towel, give up the fight to protect what is rightfully theirs, keep all their assets at home in dollars and rely on the US government to ‘protect’ them?

I think you know my answer to that already. And if you have found this article and read this far, the chances are you agree with me.

As much as we like American values and what America originally stood for, it’s clear that the US government doesn’t have much faith and credit left anymore. The US is already bankrupt. Anyone who thinks politicians on either side have the capacity to ‘solve’ this is living in a fantasy.

Keeping your assets entirely in the US or in US dollars at this point would be equivalent to financial suicide. Diversification into hard assets, outside the grasp of a hungry US government, is the only way to protect your savings and business. There’s a lot of information on the best and safest ways to do this scattered around the Q Wealth site, with more specifics in the Members’ Area and in our quarterly Q Wealth Report.

At Q Wealth our focus is always on positive solutions. This one, we admit, is difficult to solve. We have said for a long time that we believe a point will be reached, at some point in the not too distant future, where compliance will be impossible. But, let’s stay positive… here are our thoughts.

THE WATER IS GETTING HOTTER

You’ve certainly heard the boiling frog analogy. If a frog is thrown straight into hot water, it will jump out to save itself. But if you put it in cold water and slowly turn up the heat, it will eventually boil to death.

You can see how this analogy fits with what is going on now. The heat has just been turned up a notch on all Americans who have assets worth protecting, or even the American dream of building up such assets one day.

At the same time, another notch I won’t get into much depth on here is SOPA, the Stop Online Piracy Act. This is effectively a mechanism for taking away freedom of expression on the internet, dressed up as a way to protect American consumers from all those horrible foreigners who would try to rip them off online. It is actually a law that would allow the US government to censor the internet, similar to China’s internet censorship mechanisms… it’s just a bit more subtle and it transfers the cost and compliance burden away from the government onto the shoulders of already-struggling private American businesses.

Yes, dear readers, the water is getting really, really hot! Some of America’s smartest frogs have already jumped out, obtained foreign citizenship and expatriated. That’s the only way of making a clean break and legally escaping all the hassles. But for most people, this option is still not practical.

Kevin Brekke writing in Mountain Vision says:

Whatever the IRS has in store for US taxpayers, the only way to fight back is to keep what you have. And to do that means complying with reporting requirements no matter how offensive, intrusive, maddening, or unjust they are. Penalties are now defined by the IRS as a revenue raising measure. The new mindset is clear: If we can´t tax them, we will penalize them.

Unfortunately, a new era for individual privacy is upon us. We must sacrifice our financial privacy for our financial security. We will accomplish this by staying compliant with reporting requirements and safeguarding our wealth from confiscation via seizure and penalties.

We will prevail by keeping our wealth outside the US and invested in assets that will protect and grow our wealth. That is the mission of today´s international investor.

We at Q Wealth would agree with this. As long as you can stay compliant you should, as penalties for non-compliance are substantial.

Fortunately, a lot of this is for show, designed to discourage people from protecting their assets overseas. There are still things you can do to protect yourself. And as a responsible individual, you not only can do these things, you should!

We regularly write about these solutions, and if you haven’t already done so, you should definitely sign up for our free weekly newsletter, Q Bytes, and read our free reports. If you like what you see, then just $87, the price of a good lunch, will get you a year’s membership to our Members’ Area, where you will find lots of exclusive, up to date offshore banking, asset protection and overseas investing information.

We also suggest that if you are really serious about protecting yourself, your family and your assets, you should definitely come to visit us at BFI’s Inner Circle Briefing at Atlantis, Paradise Island in the Bahamas at the end of January 2012. At the time of writing, there are still places available. For your invitation, contact the Q Wealth offices or contact BFI directly. Please mention Q Wealth in order to qualify for a discount on the normal registration fees.

by Peter Macfarlane

Yesterday, 30th November 2011, something very significant happened that I would like to inform you about. It was briefly reported in the mainstream media, but was not analyzed correctly.

Lots of people have asked me recently if the Euro was going to collapse. Yesterday the answer to this question became very clear to me. I can now confidently make predictions. Is the Euro going to collapse? The answer is both yes and no. Allow me to explain…

Regular readers will know that I frequently refer you to the big picture, telling you to forget about the noise of the daily ups and downs reported on TV and in the press. The big picture is very grim when viewed in conventional terms, though it also opens up the greatest wealth-creating opportunities in generations. We are living in a very exciting time with a real change in power taking place. More on this later and here at the Q Wealth site.

DICTATORSHIPS IN EUROPE, SUSPENSION OF CONSTITUTIONAL RIGHTS IN THE USA

Against my own advice to follow the big picture and avoid being distracted by day-to-day news, I got caught up in following the recent Euro crisis. Granted, it has certainly been quite spectacular.  Italy’s and Greece’s democratically elected governments have been replaced by technocrats.  The amazing thing is that most people don’t appreciate the severity of two EU governments effectively being replaced by dictatorships controlled from outside those countries. (Spain’s decisive change in government is more positive, the result of a landslide general election, and generally makes me more positive on Spain’s future.)

In the same way, most people don’t seem to appreciate the significance of Senator John McCain introducing an amendment on Tuesday that allows the American army to arrest and intern American citizens forever without the right to trial. Call me old fashioned, but the mere fact that such a proposal could even be debated in the US Senate shocks me on one level… never mind the fact that it could actually pass. When I grew up, this was something we would have expected of the Soviet Union, not the USA. I think it was James Madison, the primary author of the US constitution, who said “If Tyranny and Oppression come to this land, it will be in the guise of fighting a foreign enemy”.

On a practical level, however, this news of the suspension of basic civil rights in the USA doesn’t shock me at all. It reminds me why I vowed several years ago never to set foot on US territory again while the current system of US government (Democrat-Republican) remains, because I really don’t consider it safe. But I digress. I was supposed to be writing about economics. Back to the story.

All this theatre distracted me from my own insight. I can now confidently say that the Euro will not appear to collapse. It will continue to exist in some form or another. Why? Because the Federal Reserve will not let the euro collapse. To do so would trigger a dollar collapse. Yesteday’s news makes this very clear, and also exposes the usual suspects who play along with the US and Europe (regrettably including Switzerland, but notably not including Australia).

Here are some selected quotes from Bloomberg and The Street (here and here) published yesterday, that tell the story:

The Federal Reserve, Bank of Japan, European Central Bank, Swiss National Bank, Bank of Canada and Bank of England have joined together to make more dollars available at cheaper prices in an effort to ease liquidity strains in financial markets.

Central banks agreed to establish temporary bilateral currency swap arrangements “so that liquidity can be provided in each jurisdiction in any of their currencies should market conditions so warrant,” the Fed said today in a press release, calling the agreement a “contingency measure.”

Michael Feroli, chief U.S. economist at JPMorgan Chase & Co., called the bilateral arrangements “a novel step and a curious feature of today’s announcement” that “are apparently being set up as a backup plan in the event of a worsening in global financial conditions.”

So rather than European operations of Citigroup Inc. or Morgan Stanley seeking euros from the ECB, the Fed could contribute to euro liquidity by doling out loans to those institutions in the U.S.

Europe isn’t facing a liquidity crisis. The world is facing a structural solvency crisis in which businesses, governments and individuals have all borrowed money — and made promises — that cannot be repaid unless more money is printed (or, more specifically, until more credit is issued).

This actually strikes me as more than a little ‘curious.’ So now the Fed is going to start bailing out American banks with Euros???!!!

It doesn’t make a lot of sense… unless you go back to my original stealth devaluation premise, described in this Q Wealth article from November 2010 as well as earlier articles.

NO, THE EURO WILL NOT COLLAPSE

I take yesterday’s news as a clear signal that the euro is not going away any time soon. It will probably maintain approximately its current exchange rate against the dollar, give or take a few points. It is even likely to gain a bit, since this new multi-currency form of quantitative easing is clearly based on printing more dollars, not euros. So looked at from this point of view, I say the euro is not going to collapse.

One could certainly argue that America is bailing out Europe on one level. But I don’t really buy that either. America desperately needs to devalue the dollar as being the only hope of ever repaying debts. America is not in a better shape than Europe. The European crisis is nothing more than a distraction from a much bigger problem.

YES, THE EURO WILL COLLAPSE

On the other hand, in reality the euro already has collapsed, and it has a lot further to go. Looked at it from this point of view my answer is ‘yes, sure, the Euro will collapse.’ It’s just that the US and Canadian dollars, the yen, the pound sterling and the Swiss Franc are all going down the toilet too, in a co-ordinated global effort, at much the same speed. The central bankers are just hoping that the population won’t notice.

Of course, people are beginning to notice that something is wrong – very wrong. Grass roots citizen movements like the Tea Parties and the the ‘Occupy’ movements effectively share the same goal: to change a system of government that has become thoroughly corrupt, dysfunctional and despotic.

DECISIVELY CLOSER TO ONE GLOBAL CURRENCY

Yesterday we moved decisively closer to one, global currency, with the governments of major western economies all making this concerted move. Let’s look at how the euro came into existence, and consider the parallels with what we are seeing today wit the US, Canada, Japan, Switzerland, UK and the EU… According to Wikipedia:

In 1971, US President Richard Nixon removed the gold backing from the US dollar, causing a collapse in the Bretton Woods system that managed to affect all of the world’s major currencies. The widespread currency floats and devaluations set back aspirations for European monetary union. However in March 1979 the European Monetary System (EMS) was created, fixing exchange rates onto the European Currency Unit (ECU), an accounting currency, in order to stabilise exchange rates and counter inflation. It also created the European Monetary Cooperation Fund (EMCF).

That last organization sounds suspiciously similar to the European Financial Stability Fund (EFSF). Anyway, time passed, and internal bickering in Europe continued. Fast forward to 1999.

The currency was introduced in non-physical form (traveller’s cheques, electronic transfers, banking, etc.) at midnight on 1 January 1999, when the national currencies of participating countries (the Eurozone) ceased to exist independently in that their exchange rates were locked at fixed rates against each other, effectively making them mere non-decimal subdivisions of the euro.

It was not until several years later that the euro as we now know it came into being. Still, a lot of people don’t want to give up the old currencies. As an aside, for example, I found this interesting:

Efforts to secure the return of German coins continue. In 2005, Deutsche Telekom modified 50,000 pay phones to take Deutsche Mark coins, at least on a temporary basis. Callers were allowed to use DM coins, at least initially, with the Mark pegged to equal one euro, almost twice the usual rate.

I suggest you take time to reflect on this precedent. I don’t have all the answers, but we do seem to be getting closer and closer to a situation where the US dollar, the euro, the pound and other currencies become ‘mere non-decimal subdivisions’ of a global currency unit. These things take time and are not immediately obvious. You should, however, be very scared by this prospect.

WHO ARE THESE CENTRAL BANKERS?

And who are these Central Bankers? Are they pawns of the Morgans, the Rothschilds, the Queen, the church, the Obamas, the corporatists, the globalists, creatures from Jekyll Island…?

I really don’t care. If someone tries to mug me on the street my instinct will be either to defend myself, or to make a pragmatic, fast decision that it’s smarter to comply with the attacker’s demands. But I certainly won’t be worrying about the pedigree of the attacker. The same applies here.

All I can say, is these people clearly have the support of all branches and forms of all major governments. That’s right, those nice people like Senator McCain who want the right to lock you in jail and throw away the key, without having to worry about trifling details like the facts of the case. “Facts,” says McCain, “are stubborn things.”

HOW LONG CAN YOU REMAIN LEGAL?

The time has certainly come – as if you are being mugged – to panic, then quickly and calmly to do whatever is necessary save yourself and your family. If you can’t physically move yourself directly out of danger fast, the safest course of action is to keep up all appearances of complying with the attacker’s demands. That way you can stealthily move assets and family members out of harm’s way.

Where possible, you should not just maintain the appearance of compliance. You should actually be compliant. That is still possible, just. In The Q Wealth Report, we frequently give you details of compliant offshore banking and investment structures.

However, you should keep in mind that one day soon, the time might come when it is impossible to remain compliant. Hidden currency and exchange controls like FATCA are hastening this day. When that day finally arrives, you will be forced to make possibly the most difficult decision of your life – do you break the law, or do you allow the government to pillage your assets? If you are not very careful, you might end up doing both.

PROTECTING YOURSELF WITH A SECOND CITIZENSHIP

There are ways to protect yourself. Obtaining a second foreign passport for you and your family is one of the best. This will give you the option of renouncing your existing citizenship later. It’s very relevant for US citizens now, but could also be relevant for citizens of other countries that, out of desperation, will try to follow the US lead and tax even their non-resident citizens on worldwide income. FATCA will put the information required to do this at their fingertips.

Look at the example of Uruguay. Uruguay long taxed its residents only on domestic income. But last year, they suddenly announced that forthwith, Uruguayan residents would also be taxed on income from overseas investments. To paraphrase the President, he said the only reason they hadn’t taxed overseas income before was that they didn’t have the means to do so. The signing of a series of tax information exchange agreements, ironically under the pressure of the OECD who considered Uruguay a tax haven, had changed this – now, with these treaties, they did have access to information on the overseas holdings of Uruguayans. So they started taxing.

The UK, Canada, France or Australia could turn around and do the same thing tomorrow – and in the current climate, rich tax exiles would undoubtedly be a politically popular target.

You’ll find more information on second passports here and in almost every issue of The Q Wealth Report.
BUY PHYSICAL GOLD

Gold already shot up yesterday on the news of the new multi-currency QE program. Physical gold stored in a safe, offshore jurisdiction is undoubtedly one safe store of value. As I said in my original stealth devaluation articles, those who look at gold as their base reference currency, rather than as a simple investment, will see the real crash of the euro, the dollar, the pound et al.

Don’t be fooled into buying things like the Gold ETF. Find out why in our Free Gold Report.

OFFSHORE BANK ACCOUNTS TO AVOID THE GLOBAL STEALTH-DEVAULATION CONSPIRACY

As bad as government-issued fiat money is, you’ll probably need to keep some in the short term at least. For this reason, we recommend opening a multi-currency bank account somewhere offshore (that is, outside your home country and its immediate sphere of influence). This way you can keep money out of the big currencies, in the money of nations that are not participating in the global stealth devaluation conspiracy.

This will give you access, for example, to offshore credit and debit cards that work across the board – always provided plastic payment cards continue to be accepted, bearing in mind that emergency currency controls could cut them off at any time.

Further information on the practicalities of how to open an offshore multi-currency bank account, including anonymous numbered accounts (yes – they still exist!) and offshore corporate bank accounts, is available in Q Wealth’s Practical Offshore Banking Guide. The 2011 edition is currently available for download in our Members’ Area, and will be replaced before the end of the year with the drastically updated 2012 edition.

READ Q WEALTH REPORT

There’s a lot more I could say about practical strategies for protecting your assets, but I’ll save that for the articles my colleagues and I write regularly in The Q Wealth Report and our series of exclusive special reports. You might also be interested in attending BFI’s Asset Protection event in the Bahamas in January, where a host of experts will be discussing this subject.

If you’re not ready to make a monetary commitment yet, please consider signing up for our free newsletter and/or free sample reports on important topics that are available at this site. Remember there is no obligation, you are free to unsubscribe at any time, and we will not pass your e-mail address to any third parties.

To conclude on a positive note, as I said at the beginning, the crisis we are just entering now will result in huge transfers of wealth, more than we have seen in our lifetimes. Those who keep their savings in fiat money will lose most of it. Those who invest their fiat money smartly and quickly, while it still buys things that are of value, stand to make almost obscene profits. Which side will you be on? Are you with us or with the government?