We’ve been saying that the United States has threatened economic sanctions against all the countries and banks in the world. The Press now officially agrees.
IRS – The US Economic Weapon to Be Unleashed on Russian Banks
US to unleash IRS on Russian banks
The new law means that Russian banks that buy U.S. securities after July 1 will forfeit 30 percent of the interest and dividend payments. The withholding applies to stocks and bonds, including U.S. Treasuries. Some previously owned securities would be exempt from the withholding, but in general, previously owned stocks would not.
There is of course a simple solution: Don’t invest in the United States. I’ve been saying this for three years now.
Why don’t the Russians just buy German Bunds. Germany has a better credit rating than the US.
I think Russia could care less about the American government at this stage of the game. Unfortunately, this looks like war between Russia and the USA. Some feel it is inevitable….
this is nothing new … take a look at the origins of the Eurodollar in the 1950s
Well, that is certainly “showing your hand”, eh? If they follow through, which remains to be seen, what country in their right mind would continue to invest in anything US? I mean, the withholding is only a weapon if a country has US securities. If not, it isn’t much of a stick to beat them with.
But I agree that Russia doesn’t care. Kinda like China who appears to be quietly setting up networks of trade that don’t require the USD.
I don’t see war coming though. Russia has a very effective propaganda machine operating in the Ukraine that keeps the ethnic Russians and insurgents motivated and simply sitting troops on the border keeps the Ukrainian govt from cracking down too hard on contested areas.
I think what people forget is that the new Ukrainian govt is full of players who are nearly as loathsome as the former govt and that Russia doesn’t hold a monopoly on stealth interference in that country and its politics. If it’s a war at all, it’s like Syria – by proxy.
Why doesn’t the USG get more pressure from publicly traded companies against these misplace sanctions.
Ultimately, they’re the ones who are going to hurt from these sanctions.
I wonder how many CFOs are aware of FATCA and the potential trouble that lies ahead.
What’s incredible is that this is characterized as economic warfare uniquely against Russia. Russian institutions would be treated exactly as those in any other country that doesn’t have an IGA. The only unique wrinkle is that Russia evidently is not being permitted to surrender as several dozen other countries have, and its institutions would have to individually comply. But that only puts them the same boat as 130+ other countries not currently exempted.
A more accurate headline would be “US ECONOMIC WEAPON UNLEASHED ON MOST OF THE WORLD (EXEMPTING ONLY THOSE THAT HAVE ALREADY SURRENDERED)”
The new US government foreign policy message is:
We treat our friends as badly as we treat our worst enemies. If you try to help us by investing in our economy there’s a pretty good chance we will come up with a scheme to steal a big chunk of your money. Don’t feel hurt, we treat everybody this badly.
@Jatras, You’ve expressed it perfectly. Thanks.
@OMG, also perfect.
I tweeted that to Stephen Ohlemacher
@stephenatap more accurate headline “US ECONOMIC WEAPON UNLEASHED ON MOST OF THE WORLD (EXEMPTING ONLY THOSE THAT HAVE ALREADY SURRENDERED)”
Or another tweet was…
@AP @stephenatap correctly calls #FATCA “an economic weapon” http://isaacbrocksociety.ca/2014/05/05/ap-writer-stephen-ohlemacher-calls-fatca-an-economic-weapon/ … Not just targeted at Russia, it carpet bombs the world!
Also, I hate seeing journalist repeat that their are 50 IGAs… Sent this..
@stephenatap You do know that there are NOT 50 IGAs in place? ~30 are ‘deemed” and VERY FEW have actually be approved by Parliaments,
Here is the link to the Original BIG STORY as they characterize it.
The big question is: where are people going to invest their money if they take it out of America. THATS what matters most. If there were alternatives then none of this would be happening. So what ARE the alternatives? Because it seems to me there is no greater money-producing machine that the US stock market.
@Polly, I don’t think that’s really the question. I think the real question is this: what distortions or bubble will take place once US investments have become so toxic that those with trillions of dollars in cash or other instruments no longer feel it is safe to invest in the United States.
We are seeing currently distortions in luxury apartments in Vancouver and works of fine art (like Van Goghs). But I’m thinking that we are likely to see a greatly distorted gold and silver market. Fair value for gold may currently be as high as $50,000 per oz. A distorted value could conceivably be many times that amount. Silver could easily go above $1000 per oz.
I gave instructions for all of my US investments to be gone — so none last year. My rate of return (without US investments) doesn’t appear to be much different from what I received before. It is mostly a matter of principle for me — I want to contribute $0.00 to the economy of the USA.
I gave instructions for all US investments ended in 2005. Did not want to invest in a country that is war driven for profit.
@Polly, I too don’t invest in the US for many of the same reasons mentioned by others.
And the rate of return is far better than anything I could find in US markets. There are plenty of
choices if people will only look. US is unwittingly contributing to its own demise.
@Brockers. Year before last, I gave up USA investments completely. But I kept an online model portfolio with US stocks for comparison. The reality is my volatility is down and I am a little better off.
This former good will ambassador has become a bad will ambassador.
Ran into an older couple who said their daughter and son in law almost went to America last fall but did not. My comment to them was they were fortunate they did not go to that rat hole.
In speaking to business people? I am saying with my accent, “Never ever trust the Americans, they will lie and cheat.”
Not only will I never invest in the US, I tell everyone exactly what I think of the US.
It is my patriotic duty as a good ex-American.
What I am seeing professionally is the incorporation of FATCA compliance obligations in ISDA forms and required completion of W-8BEN -E forms in US dollar swap transactions between an overseas US branch/subsidiary bank and a local non US related ‘foreign’ company – for example, buying US dollars for Ruples/Yen/Baht/Euro. In other words, the 30% withholding may be interpreted to included such transactions as buying US dollars in an overseas swap, or the transactions through a US correspondent bank – much broader than US source income and dividends.
You can see the power of the Empire and how ‘mission creep’ is making FATCA a favorite for economic sanctions.
OK, I’ll have to be the first to say it. Withholding on their debt interest payments is called DEFAULT. Like hell I’ll be investing anything there. I’ve already cancelled a vacation trip. Who loses here? Wake up, America, or the world will be telling you “don’t let the door hit………”
If you remain an American, your choices are getting limited to just U.S. financial institutions.
Was just in Sydney yesterday talking with my brother-in-law who is in the Australian financial industry.
They DO NOT accept American clients, and have not for some time. Still trying to figure out what to do about FATCA, and still do NOT have anyone designated to start the compliance process. Joe Hockey, the Treasurer has just capitulated and signed the IGA, but not approved by Parliament yet, although it is assumed it will be buried in the soon to be submitted budget. Silly boy thinks the IGA has treaty status…
FATCA IGA’s are doing us a perverse favor by making us see the corruption in the banks. Like Peter says, gold is going to 50,000.00 an ounce and silver to 1,000.00 soon. Most knowledgeable people (those who read ZERO HEDGE, as the rest out there are hopelessly ignorant of reality) already know that the system is on its last breath.
Ron Paul has a message for all today:
Jim Sinclair: Russia Can Collapse US Economy, Gold Update, Silver is Gold on Steroids & More
This where Petros is getting the 50,000.00 gold target
Has anyone noticed in this article McCain talking about making FATCA stronger in order to use it as a future “foreign policy tool” I mentioned this yesterday and I’m going to point this out to Rankin and others. They intend to use these sanction threats under FATCA to push the envelop every time they want something new. Harper has opened the door by caving on this and now they know they can get away with it. http://p.washingtontimes.com/news/2014/may/5/superlawyer-jim-bopp-takes-on-mccain-backed-tax-ac/
Does Carl Levin have dementia?
Atticus, FATCA and the financial sector in general have been brewing as a weapon for a while now and McCain is not the first person who has articulated it. It’s their last big gun.