Understanding the European Money Haven Debacle
and its Ramifications
In the early part of 2008, illegally obtained documents
from banking institutions--that have very strict privacy laws--were
provided to third party governments using coercive tactics. The trail
of evidence, however tainted, and under what court of law of jurisdiction,
began a ripple effect that contributed to the current collapses in
the world financial markets.
Arguably, the world would have you believe that it
was subprime lending instruments and associated leverage, coupled with
insufficient collateralization. In actuality, more sellers than buyers
created a depression of pricing for such instruments that affected
the overall market place and then became more fueled by lack of investor
confidence further exacerbated by lack of liquidity.
All this because of one person stealing illegal bank
documents? Quite possibly. The beginning of the saga starts with
governments that have grown to a point where entities with in the governments
are fighting for funding and ultimately job preservation within a department,
branch or office. The easiest method to raise money in such a situation
is to take it by use of force or “government law.”
Many westernized Governments, most of whom by definition
do not have profit centers outside of taxation, are faced with this
difficult dilemma. Taxpayers criticize governments and lawmakers when
they print currency or spend more tax dollars then they take it. Therefore,
to create villains (someone to blame) and take their money in the name
of “law breaking” seems like a plausible excuse for theft. This initial
petty theft intent by Government resulted in ultimate loss of faith
in the private banking community in Switzerland and Liechtenstein by
non-residents, and the need to move assets elsewhere. The first panic
was by US and German investors, and then added UK and Canadian investors
to the list. This was a combination of fear by investors for loss
of privacy and also new information and criteria required by existing
bank relationships in Switzerland and Liechtenstein.
The semi-controlled panic of money movement and change
of asset agendas has placed downward pressure on the markets. Even
faster sales in the US and elsewhere because of eroding prices created
and continues to create a lot of downward pressure. Without consideration
for the implications of what many sellers can do, the markets react
in a fashion based on the amount of buyers and sellers. Because the
capital markets are not zero sum contracts such as commodities and
options are, the value is created from confidence and support by buyers,
offset by some smaller sellers taking profits but moving into a new
opportunity. If this were not the case, the capital markets would
be marked to zero or solely valued based on income distributions only.
Believe it or not, a few sellers can hurt a lot of owners if there
are not commensurate buyers to support the selling desires. Welcome
to the world of the capital markets.
The world now has a wake up call that it is attempting
to absorb that is well beyond the comprehension of most citizens.
It is therefore incumbent upon politicians and businessmen from the
financial sector to appreciate one another and come to an understanding
that respects worldwide considerations. Without solving the whole
problem, one of the parts can come back and infect the whole again.
The globality of the financial markets are such that
the market valuation of financial instruments will impact every Country
and every currency. Simply stated, the value of all assets has recently
shrunk dramatically and will continue to do so until stabilized by
one of a number of possible factors. This is a topic of another white
paper.
According to Swiss News within financial circles,
as much as 42 pct of all assets deposited in Swiss financial institutions
had had US roots. This is likely to have changed dramatically in
2008 because of the previous mentioned privacy issue debacle. Whether
this statistic be true or not, the US Government and German Government
have used nothing short of Gestapo tactics to put pressure on Switzerland
and Liechtenstein to "cooperate" which would ultimately
cause the respective Governments to violate their own laws.
It is not the place of another Government to cooperate
with the civil budgetary issues of another Government relative to enforcement.
Although socially responsible people should want to contribute to the
well being of where they reside in the form of taxes.
The result of the egregious acts by the US and German
Governments has been an end run that started the collapse. The US,
now famous for its Patriot Act Treaty requirements, now has Governmental
Employees interpreting the law allowing indirect exercising of control
on Switzerland. The ultimate goal is to collect money. The abuse
and instrument for doing so is nothing short of fraud tactics using
inter country treaty provisions.
The Governments involved, particularly the US, would
prefer to seize assets by alleging fraud than to collect taxes. Why
take only a percentage of wealth when you can take it all.
The result of this has caused chaos in the Swiss and
Liechtenstein Banking systems that are now under new reporting rules
attempting to justify potential cooperation to other bully Government
tactics covered by stretches of treaty law. The end result has been
a rapid move toward financial liquidity, which likely sparked the beginning
of the collapse within the global financial system.
Albeit that I am a firm believer that citizens of
respective countries should observe the tax considerations under the
jurisdictions where they reside or are governed by, the reign of terror
has now started, and a complete bailout and resurgence of faith in
the world markets is necessary.
Governmental bodies have now taken on lives that they
were never supposed to do that no longer represent or serve the people
that they govern. Even employees in top level positions within westernized
Governments are afraid of who they work for.
Fear is an element that people should not have to live under. It impacts
confidence and trust. It undermines the need for the velocity of money
created by faith in economic conditions and reinvestment. Those that
openly oppose “the system” are now jailed. This should sound familiar
to historians.
Those that discuss Governmental impropriety in intellectual
circles are labeled as crazy by those that still believe. Assuming
that history will repeat itself, the no longer sleeping giants will
need to collapse to give way to the next cycle of governance that will
repeat all of what we have experienced in this era.
There are solutions available but given the Stare
Decisis of Government Culture and their philosophy of increased regulation
as the response, there is little hope for a well-conceived plan. The
good news is that out of chaos there will be opportunity and perhaps
the transition will better serve the people for whom it may govern.