Night Always Follows Day

Logical Fallacy or Inevitability?

There’s an inevitability to the march of totalitarian economic control which Austrian School Economists have warned about repeatedly. There’s a tipping point which exists when a state interferes in an economy beyond which a state will invariably enact the same destructive policies which have collapsed the economies of other states which engaged in similar folly. This folly consists of practices such as debasing the currency, running up massive deficits and debt, and excessively regulating economic activity. (Note, of course, that for us anarchists all state regulation of economic activity is excessive; but, for my purposes here, we can limit the purview to the stifling, bureaucratic interferences like housing acts, forced lending to “sub-prime” borrowers, GSEs, mandates by the FDA and FTC and other three-letter economy-killers, etc.) What happens is simply this:

  1. Some economic “injustice” or “inequity” or “imbalance” (it almost always starts with those keywords, so be on the lookout) exists and is too upsetting to be tolerated.
  2. The state is used to enforce justice/equity/balance.
  3. These attempts to overthrow the laws of economics succeed only in creating new problems (“unintended consequences”) which then require further state action to attempt to alleviate.
  4. A slippery slope comes into play at this point, with each new state interference into the market creating new problems until everything the Austrian School economists warned of comes to pass.

So it should come as no surprise to anyone who’s been paying attention that the state is now making it very difficult (and painful) for people to escape the country with their assets (link goes to Zero Hedge) :

It couldn’t have happened to a nicer country. On March 18, with very little pomp and circumstance, president Obama passed the most recent stimulus act, the $17.5 billion Hiring Incentives to Restore Employment Act (H.R. 2487), brilliantly goalseeked by the administration’s millionaire cronies to abbreviate as HIRE. As it was merely the latest in an endless stream of acts destined to expand the government payroll to infinity, nobody cared about it, or actually read it. Because if anyone had read it, the act would have been known as the Capital Controls Act, as one of the lesser, but infinitely more important provisions on page 27, known as Offset Provisions – Subtitle A—Foreign Account Tax Compliance, institutes just that. In brief, the Provision requires that foreign banks not only withhold 30% of all outgoing capital flows (likely remitting the collection promptly back to the US Treasury) but also disclose the full details of non-exempt account-holders to the US and the IRS. And should this provision be deemed illegal by a given foreign nation’s domestic laws (think Switzerland), well the foreign financial institution isrequired to close the account. It’s the law. If you thought you could move your capital to the non-sequestration safety of non-US financial institutions, sorry you lose – the law now says so. Capital Controls are now here and are now fully enforced by the law.

This is one of the dangers inherent in running up enormous deficits. Since it’s becoming harder and harder for the Treasury to sell its bonds, and since it’s almost unprecedented for a government to reduce spending once it has created massive dependency on its various doles, it’s inevitable that taxes will be raised, initially upon the “wealthy”. When the wealthy decide they’re being fleeced beyond toleration, and that their attempts to combat this in the political arena have failed, they will move their assets offshore and leave the country. It’s inevitable. Well, as that erodes even more of the tax base and thus the deficits not only don’t shrink, but likely rise, what is the next logical step for those in power? Make it prohibitively painful (and difficult) for people to leave with their assets. We’re at that point now. We’re talking about 30% of all outgoing capital flows on money which has already been taxed. Ouch. Inevitable and painful.

For my assessment of what else is coming down the pipeline based on the same, simple logic I’ve described above, readers can check out this post on my personal blog: What’s Next?

3 comments… add one

  • This is awful, perhaps it is time to start doing wire-transfers to nations with trusted friends, or cash-carry-outs when going on vacations. However, there may be a loophole:

    by such holder and maintained by the same financial institution which maintains such account does not exceed $50,000.

    So, could you use more than one institution to keep the bulk of your assets in, and then another one to transfer them to before moving them out of the US? Would that be considered money-laundering or something-such if discovered?

    Reply
  • Clark, thanks for the reference, seems like an area where one would need to consult a lawyer to figure out how to safely avoid triple-taxation. Another awful aspect of the State.

    Reply

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