Forget #FATCA. The Currency Wars Continue.

Everywhere 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 yet anyway.

What strikes me most is the way so much of the discourse around FATCA fails to put these laws and regulations into any wider socio-political 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…

Related Posts