Swan I appreciate your contributions as it made me go back and do some more research and while I haven't found anything particularly new and positive in terms of tax avoidance, it was a nice R&D experience into the latest trends in off-shore business practices.
My posts on this topic in general basically boil down to:
I have a firm belief, based on great American precedent, that you can't trust a strong central government.
The problem is, we REALLY can't trust a strong central government in the kind of debt we find our existing one in. It is liable to do crazy things when it is put against a wall, things like seizing 401Ks, implementing capital controls (we are getting capital controls lite in 2013 already, it is law right now), devaluing the currency overnight, raising taxes to 90% for the top bracket, etc.
Do these things sound implausible and unfathomable to many of you? Well here is the scary thing, there are 20th century historical precedents for ALL of the above many of which happened here in the USA. Pension (aka 401ks and IRAs nowadays) seizures are the one thing I don't believe has happened here historically but we saw it happen in Argentina in the last year or so. Although our government has done it in a round about way with the social security tax.
I'm not a super doomer. I'm not a fairy tale believer either. I like the facts and empirical data. Too many Americans are operating on blind faith and blind hubris both of which are unwarranted at this juncture.
I believe, in an effort for the government to deal with this mathematical certainty of default they have created, the scenario is going to play out approximately as such:
1. Aggressively close tax loopholes. If you are not a monster multi-national with a bag-load of lobbying cash or enough tax lawyers to keep the Feds bamboozled for the next 20 years in discovery, your loopholes are closed or you are going to be get audited eventually and the consequences could be dire.
2. Implement Test-Case Capital Controls. We have a light version of these coming into effect in 2013, see the HIRE act where they buried in this bill that you will be subject to a 30% withholding tax for trying to move any significant amount of cash out of the country:
http://www.gpo.gov/fdsys/pkg/BILLS-111hr2487ih/pdf/BILLS-111hr2487ih.pdf
3. Implement full-blown capital controls so there is no escape when the 4th stage engages.
4. When the crisis hits, devalue currency, raise taxes, seize assets, and put this thing in a such a bad state that phase 5 seems like a real good idea. For most whose assets are still in-country or within reach, there is no escape from some level of harm in this phase. Everybody loses it is just a matter of how much.
5. With the circus in full swing, come to the rescue with a new currency. Use IMF and World bank to restructure debt agreements with powerful foreign creditors to deal with trade problems stemming from the default. Stability slowly comes back and the system is effectively "reset".
6. Credit expansion, new generation of suckers, here we go again!
My posts on this topic in general basically boil down to:
I have a firm belief, based on great American precedent, that you can't trust a strong central government.
The problem is, we REALLY can't trust a strong central government in the kind of debt we find our existing one in. It is liable to do crazy things when it is put against a wall, things like seizing 401Ks, implementing capital controls (we are getting capital controls lite in 2013 already, it is law right now), devaluing the currency overnight, raising taxes to 90% for the top bracket, etc.
Do these things sound implausible and unfathomable to many of you? Well here is the scary thing, there are 20th century historical precedents for ALL of the above many of which happened here in the USA. Pension (aka 401ks and IRAs nowadays) seizures are the one thing I don't believe has happened here historically but we saw it happen in Argentina in the last year or so. Although our government has done it in a round about way with the social security tax.
I'm not a super doomer. I'm not a fairy tale believer either. I like the facts and empirical data. Too many Americans are operating on blind faith and blind hubris both of which are unwarranted at this juncture.
I believe, in an effort for the government to deal with this mathematical certainty of default they have created, the scenario is going to play out approximately as such:
1. Aggressively close tax loopholes. If you are not a monster multi-national with a bag-load of lobbying cash or enough tax lawyers to keep the Feds bamboozled for the next 20 years in discovery, your loopholes are closed or you are going to be get audited eventually and the consequences could be dire.
2. Implement Test-Case Capital Controls. We have a light version of these coming into effect in 2013, see the HIRE act where they buried in this bill that you will be subject to a 30% withholding tax for trying to move any significant amount of cash out of the country:
http://www.gpo.gov/fdsys/pkg/BILLS-111hr2487ih/pdf/BILLS-111hr2487ih.pdf
3. Implement full-blown capital controls so there is no escape when the 4th stage engages.
4. When the crisis hits, devalue currency, raise taxes, seize assets, and put this thing in a such a bad state that phase 5 seems like a real good idea. For most whose assets are still in-country or within reach, there is no escape from some level of harm in this phase. Everybody loses it is just a matter of how much.
5. With the circus in full swing, come to the rescue with a new currency. Use IMF and World bank to restructure debt agreements with powerful foreign creditors to deal with trade problems stemming from the default. Stability slowly comes back and the system is effectively "reset".
6. Credit expansion, new generation of suckers, here we go again!
