Forget #FATCA. The Currency Wars Continue.
I look people are complaining about FATCA and painting the US government as
some evil empire out to bully poor innocent American expats and foreign
financial institutions. Like many
observers, I read predictions of FATCA leading to a mass exodus of Americans
and accelerating a global shift away from the US dollar. Well FATCA officially kicked in on July 1st
and the world has not come to an end. Not
strikes me most is the way so much of the discourse around FATCA fails to put
these laws and regulations into any wider sociopolitical or even geopolitical context. I was talking to a US tax attorney last month
and she did not see any real connection between FATCA and the OECD’s Tax
Information Exchange Agreements. FATCA
was a rider to the 2010 HIRE Act but the OECDs model tax information exchange
agreement dates back to at least 2002!!
According to the OECD’s website, the purpose of
the model agreement is
to promote international
co-operation in tax matters through exchange of information.
It was developed by the OECD Global Forum Working Group on Effective
Exchange of Information (“the Working Group”). The Working Group consisted of
representatives from OECD Member countries as well as delegates from Aruba,
Bermuda, Bahrain, Cayman Islands, Cyprus, Isle of Man, Malta, Mauritius, the
Netherlands Antilles, the Seychelles and San Marino.
The Agreement grew out of the work undertaken by the OECD to
address harmful tax practices. The lack of effective exchange of information
is one of the key criteria in determining harmful tax practices. The
mandate of the Working Group was to develop a legal instrument that could be
used to establish effective exchange of information. The Agreement represents
the standard of effective exchange of information for the purposes of the
OECD’s initiative on harmful tax practices.
So yes - the idea of information
exchange predates FATCA and we have not even touched BEPS.
Regardless, it is
interesting to observe just how the mighty Switzerland has been brought to its
knees and its century’s old culture of banking secrecy is no more. It was also interesting to see how France's BNP
Paribas has also been held to account for failing to adhere to US policy. Now Germany’s Commerzbank and Deutsche are in
the cross hairs of US regulators. I also
see a connection with Germany’s dropping their insistence on retrieving their
gold from US banks. What is the
connection? I see global finance as
warfare without the use of conventional military might. The US government, like every other government,
is right to use all the tools at its disposal to defend its own interests. It just so happens that the US dollar
continues to be the world’s reserve currency so foreign financial institutions
need to toe the line or risk being cut off.
I smile when I think
about all the theories I read in my economics text books back at
university. The real world can often be
so different. Beyond market forces,
there are governments rightfully pursuing their national interests. With that in mind, while many were distracted
by the theatre of the World Cup, the BRICS nations were preparing to sign a
deal to create a $100 billion development bank and emergency reserve fund. Obviously a clever move as certain nations
band together to oppose Anglo-American hegemonic power. Now they have a tool to pursue their own
interests just as the IMF and World Bank pursue “western” interests. This could turn out to be the biggest event
in the financial system since Bretton Woods.
Another big event in
the currency wars that could be missed is the apparent alliance between US
banks and the NSA. SIFMA is the
Securities Industry and Financial Markets Association and is arguably the richest
/ biggest lobbying group in Washington.
SIFMA has retained former NSA Director Keith Alexander as part of a bid
to create a committee of executives and deputy-level representatives from at
least eight U.S. agencies including the Treasury Department, the National
Security Agency and the Department of Homeland Security, all led by a senior
White House official.
This group would operate as a government- industry war council to stave
off terrorist attacks that could trigger financial panic. The significance of this to me is the overt
alliance between private sector institutions and the national security
apparatus to defend US national interests.
So my message to those
who don’t see the bigger picture and dream of FATCA going away? Wake up.
It’s here to stay.
To those who are
trying to ignore it? Be very careful.
Just keep your head
down and follow the rules. Otherwise you
risk being collateral damage in a game that is bigger than you can imagine…
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