Panama Investor Blog

Investors bailing out of Muni bonds

Things are unfortunatly taking a turn for the worst in most municipalities in the U.S. as the sale of municipal bonds have stopped and those holding them are bailing out. No wonder with the number of municipalities under water with bloated pensions and debt from over spending during the heyday of the housing bubble. With tax receipts dramatically falling municipalities are desperate for cash to pay salaries and many are cutting much needed services such as police and fire department personnel. How long will people within these communities go along with higher crime while the public servants with six figure pensions live high on the hog at their expense? Well, if the muni bond redemption's continue at their ever escalating rate, we won't have too long to find out. Unemployment unfortunately brings increased crime and it all comes together to spell disaster at the community level. This is a most interesting article from Financial-Planning.com

Excerpts:

Investors have withdrawn $25.3 billion — a sum that exceeds the gross domestic product of Panama — from municipal bond mutual funds the past nine weeks, according to Lipper FMI. Funds that report their figures weekly posted a net outflow of $1.51 billion for the week ended Jan. 12.

Municipal funds are now reporting outflows at a rate of $3.25 billion a week, based on the four-week moving average. That’s well above any pace seen before the latest series of redemptions in the $478 billion municipal fund industry.

The spate of outflows has fund managers scrambling to sell municipal bonds at a time when dealers are already worried about the willingness of retail investors to digest long-term tax-exempt paper, breeding considerable volatility and weakness at the long end of the yield curve.

 

Overseas Banks May Shun U.S. Investors

According to Bloomberg, overseas banks may no longer cater to US. clients. Tell us something we don't know. More and more banks here in Panama see the handwriting on the wall and are making it a policy to no longer handle U.S. customers. The cost of complying with U.S. regulations is just getting to expensive. One might think this was a plan by the U.S. treasury and IRS to keep money from leaving the U.S. and force those abroad to repatriate their funds.

January 13, 2011 (Bloomberg News) U.S. citizens may become global “pariahs” when a law forcing foreign banks to report their accounts takes effect, according to Switzerland’s oldest bank.

Americans “risk becoming pariahs of the global banking system through the fault of their own government,” Konrad Hummler, managing partner of Wegelin & Co., said in the copy of a speech presented today in the Swiss capital, Bern.

The U.S. law will require all foreign financial companies to supply information on American clients to the Internal Revenue Service and withhold 30 percent of U.S. interest and dividend payments from account holders who provide inadequate information to determine their U.S. status. The Foreign Accounts Tax Compliance Act will complicate offering services to clients with U.S. links when it takes effect in two years, Hummler said.

“The risks run by financial intermediaries promising to respect these rules are considerable,” said Hummler, who is also chairman of the Swiss Private Bankers Association. Banks “could be held liable for making a commitment” that a client isn’t subject to U.S. tax, he said.

St. Gallen-based Wegelin, founded in 1741, advised clients 16 months ago to sell U.S. assets because extended reporting requirements may saddle investors with tax obligations for themselves or their heirs. Wegelin, which is an unlimited partnership, has said that it can’t afford the risk of increased liabilities at time when American tax authorities are cracking down on international banks.

Implementation Costs

Implementation of the law risks costing the U.S. more than it will generate over ten years, Hummler said. It’s unclear whether Swiss banks will be allowed to sign such agreements with the IRS under Swiss law, he said.

“We still don’t know whether these criticisms will be taken into consideration or on the contrary, ignored by the American administration,” Hummler said.

Banks have been lobbying for an easing of the rules since the law, known as FATCA, was incorporated into jobs legislation enacted in March. Now diplomats are stepping into the campaign, with countries including Switzerland, the U.K. and Canada weighing in with the Treasury.

According to the Joint Committee on Taxation, the law is estimated to bring in $8.7 billion in revenue to the U.S. over 10 years--an amount banks and governments say is relatively low compared with the expense of complying with the law.

UBS Fallout

The Obama administration pushed for the measure in the wake of the political firestorm arising from the case against UBS AG, which in 2009 settled U.S. government claims that the Zurich-based bank helped thousands of rich Americans hide their money offshore.

Wegelin, along with Geneva-based Pictet & Cie. and Lombard Odier Darier Hentsch & Cie., is one of 13 banks in Switzerland in which partners collectively own and have unlimited liabilities for commitments made by the bank.

Switzerland manages an estimated 27% of the world’s privately held offshore wealth.

Saving Social Security with Personal Retirement Accounts

Our Friends from the Cato institute have come out with another great video, this time with a way to save social security. Many countries have privatized SS to the benefit of their citizens and maybe Panama could consider do the same. Unfortunately for the U.S. there is no money in the account so one wonders if their is really any sort of solution to this unfunded liability.

 

 

THE MADNESS OF A LOST SOCIETY- Must see video

This video is extremely powerful and left me numb for a long time after watching. This is what happened on Black Friday just  last week and is a sample of what the U.S., if not the entire world, may experience in the near future. The U.S. leadership is taking us straight down this road by devaluing our currency and when people can no longer buy the basics they will react even more insane and violent than when they are trying to buy cheap crap from China that they don't need. I encourage all of you to watch this and to take individual action to protect yourselves and your families from what you may have to experience some day. May God help us! Hat tip Ty b. For some important advice on what you can do to prepare, pay a visit to this interesting website.

 

WSJ says U.S. officials gleeful over new tax treaty

According to this article from the Wall Street Journal U.S. officials are very pleased with Panama signing of the tax agreement today. "The agreement will permit the nations to seek information from each other on all types of national taxes in criminal and civil matters for tax years beginning Nov. 30, 2007." I would wager that access to U.S. banks will allow the current administration to seek tax information on previous leaders suspected of money laundering. After all, the U.S. is the worlds largest tax haven for politicians from all around the globe. Other than that it is of little direct benefit to Panama.

Here is how the WSJ put it.

The U.S. has won greater access to information about bank accounts in Panama, a step that COULD move the U.S. closer to ratifying a stalled trade deal with the Central American nation. U.S.. Treasury Secretary Tim Geithner and Panamanian Vice President Juan Carlos Varela signed the tax information exchange agreement Tuesday.

Panama has been labeled a tax haven by international organizations including the Organization for Economic Cooperation and Development.

It has previously inked a host of such information exchange deals with countries such as Belgium, the Netherlands, Spain and Mexico, in the hopes of being removed from the OECD's tax haven list.

Some Democrats in the U.S. Congress had said that Panama must make more progress in helping the U.S. catch tax evaders, before they are willing to let the trade agreement advance.

Congressional Republicans, who have been pressing for action on the trade deal, said Tuesday's announcement shows Panama's desire to cooperate with the U.S.

"The fact that we have now signed a Tax Information Exchange Agreement with Panama should remove any remaining hurdles to moving forward with this important trade agreement, something we should do as soon as possible," said Rep. Dave Camp (R., Mich.). Camp will assume the chairmanship of the Ways and Means Committee when Republicans take control of the House in January.

"This is a long-needed and welcome step," said a spokesman for Ways and Means Committee Democrats.

Geithner said the signing of the tax information exchange deal heralds "a new era of openness and transparency" between the nations.

The agreement will permit the nations to seek information from each other on all types of national taxes in criminal and civil matters for tax years beginning Nov. 30, 2007.

"Upon entry into force, the new [agreement] will provide the United States with access to the information it needs to enforce U.S. tax laws, including information related to bank accounts in Panama," the Treasury Department said.

"We know who you are!" attack ads by cash desperate state government

This nastey piece of work was sent to me by a reader today and I must say, it should get your blood boiling. This is an advertisement that the Pennsylvania state government has been airing in order to increase state revenues. As all government tax collection techniques, it is designed to scare you into submission. Take a look at this video and then read the commentary from the Lee Bellinger news letter. Hat tip Robert R.

 

 

F.Y.I.   Lee Bellinger, Publisher
Re: Beware: State Governments Becoming As Abusive and Aggressive As The Federal Establishment!

You've probably noticed your cash-strapped state government is becoming increasingly aggressive as tax revenues continue to tank due to extremely weak business activity.
Now we have the worrisome spectacle of cash-desperate state and federal authorities taking out TV ads threatening the public. Not the sort of TV ads critical of incumbent politicians, that the federal government has tried to ban from reelection campaigns either. This new form of attack ad is based upon raw intimidation of the public by so-called public servants.
I've been warning readers for some time that cash-strapped state and federal bureaucrats are on the prowl for money. A creepy, skin-crawling new government attack ad directed at Pennsylvania taxpayers does exactly that. You have to see it to believe it.
What's telling about Pennsylvania's taxpayer attack ad campaign is that it brags how you have no shield of privacy from government snoops. It is a classic example of a disturbing trend: A situation in which bureaucrats have forgotten their place as public servants and now openly regard taxpayers as subjects to be preyed upon -- not a master to serve.
The tax-collection ad informs residents "We DO know who you are," and it warns them to "find us before we find you."
View the State of Pennsylvania's TV ads on TV and Radio:   And no, this is not a spoof!   Dangerous Financial Pressures on Government Authorities Threaten Our Futures
You see, America's dangerously overextended public-sector is quite literally papering over a solvency crisis of epic proportions. There are gigantic financial pressures on federal and state officials driving them to desperation.
Consider just this one slice of the government's little-understood funding pickle:
On the state-level alone, Uncle Sam is looking at a multi-trillion-dollar bailout of public employee pensions. More specifically, federal bureaucrats know that a major bailout of total state-level pension obligations is coming.
That's because there are an astronomical $5.7 trillion in pension obligations against only $1.94 trillion in actual holdings.
Northwestern University economist Joshua Rauh recently calculated 50 states' pension obligations by removing the rigged statistics governments use to make their pensions appear solvent. Rauh learned that in addition to horrific operating deficits, state government pension obligations are (on a national level) a whopping three times greater than their rapidly collapsing reserves.
Take Steps Now To Protect Yourself – Governments Are Desperate for Your Cash
Desperation moves by states foreshadow what is to come. Cash-strapped Colorado just tried, unsuccessfully, to grab $500 million from a newly-privatized pension fund. Connecticut has tried to issue creative new accounting rules to camouflage its insolvency.
And the State Supreme Court of New Hampshire recently ordered state officials to return $110 million they "borrowed" from a medical malpractice insurance pool.
As the old saying goes, the problem with socialism is that you eventually run out of other people's money. Now that horrific moment appears to have arrived. Governments at all levels are running out of cash.

"is the U.S. sliding into a tyranny of good intentions?

I receive a daily dispatch from Doug Casey that I find enlightening in these difficult times. It is a free subscription that some readers may find of interest. Today the following missive came from the dispatch that I found most interesting considering the polarization of politics currently taking place in the U.S..

Of course what happens to the U.S. will dramatically affect the rest of the world so maybe reading the real downside might give pause to some and help them to consider taking steps to protect their assets and their families. To sign up for the free daily dispatch just click here.

Are we sliding into a tyranny of good intentions?

‘Nationalizing the moral life of the people is the first step toward totalitarianism’

Nearly 50 years ago, Kenneth Minogue, a professor of political science at the London School of Economics, published The Liberal Mind, his classic study of the dominant philosophy of the 20th century: radical niceness. Rooted in extreme liberal optimism and salvationist aspiration, this triumphant ideology (Prof. Minogue said) tenaciously advanced the notion that history requires the perfection of human society, that governments – in pursuit of this perfection – are obliged “to provide every man, woman, child and dog with the conditions of the good life." Prof. Minogue ended with a warning: “A populace which hands its moral order over to governments, no matter how impeccable its reasons, will become dependent and slavish."

Now professor emeritus at LSE, the 80-year-old has published a remarkable sequel – The Servile Mind: How Democracy Erodes the Moral Life. He picks up where he left off, documenting the ways in which democracy (which once expanded freedom) requires strict obedience to the state – and to the bureaucratic moral order that sustains it.

An elegant essayist of the old school, Prof. Minogue advances his argument by small steps that can end abruptly in crisp revelation.

“I am of two minds about democracy," he writes, “and so is everyone else. We all agree that it is the sovereign remedy for corruption, war and poverty in the Third World. We would certainly tolerate no other system in our own country. Yet most people are disenchanted with the way it works. One reason is that our rulers now manage so much of our lives that they cannot help but do it badly. They have overreached. Blunder follows blunder."

Far worse, traditional democratic theory has been flipped upside down: “Our rulers now make us accountable to them."

Count the ways.

“Most Western governments hate me smoking, or eating the wrong kind of food, or hunting foxes or drinking too much. Most of these governments think we borrow too much money for our personal pleasures and many of us are very bad parents. Ministers of state have been known to instruct us in elementary matters, such as the importance of reading bedtime stories to our children.

“Many of us have unsound views about people of other races, cultures or religions, and the distribution of our friends does not always correspond to the cultural diversity of our society. We must face up to the grim fact that the rulers we elect are losing patience with us.

“Debt, intemperance and incompetence in rearing our children are no doubt regrettable – but they are vices, and – left alone – they will soon lead to the pain that corrects. Life is a better teacher of virtue than politicians and most sensible governments in the past have left moral faults to the churches.

“The point is that governments have no business telling us how to live. They are tiresome enough in the exercise of authority. They are intolerable when they mount the pulpit. Nor should we be in any doubt that nationalizing the moral life of the people is the first step toward totalitarianism."

Original article here.

It's Simple to Balance The Budget Without Higher Taxes

This for those who are interested in the economic and political situation in the U.S., this new video from Freedom&Prosperity.org shows that the budget could be balanced without raising taxes. Although I doubt very seriously if the powers that be will follow this advice as they would rather continue to spend on social programs in order to have more control over the people

Steve Wynn says its time to get out of the U.S.

Steve Wynn has come out with another interview where he bemoans the present financial situation in the U.S.. In this interview on CNBC,  he explains why businessmen are so afraid to invest in the U.S. and why he is making his investments in China where the "government is more predictable and stable". Although I believe he is correct in his analysis of the U.S. financial situation, I wish he was not making his investments in a communist country.

U.S. government soon to know who buys gold and where they live

I'm sure many of my readers already are aware of this new law that is to take affect in January 2012, but for those who aren't aware and are  living in the U.S. it should be of interest. It is just another example of just how desperate that government is and to what lengths they will go to try and track every dime you spend and every move you make.  Those who buy gold believing that it is the ultimate protection in the event of a currency melt down may find they will be targeted just when they need it the most. What does this have to do with Panama? They don't have such reporting requirement here.

What makes matters worse is that this law was buried in the 906 page health care law and no one had an opportunity to review or debate it. As discussed in this report from Bob Bauman, gold purchases will be reportable making this one last area of freedom no longer viable. Best to load up before it takes affect!

From Bob Bauman;

Americans are already outraged by President Obama's new health care law. And now, many are up in arms about a little-noticed provision buried deep in the 906 pages of that law.
“The 2010 Patient Protection and Affordable Care Act” (Health Care Act, P.L. 111-148) contains a sneak provision (IRC §6041(h)) that is set to directly impact you.

This law requires any person engaged in a trade or business to file an IRS Form 1099, reporting all payments totaling $600 or more in a calendar year to any single person, other than a tax-exempt corporation (non-profit). No, they don’t care to know who donated $600 to a local animal rescue. Only that Joe Schmo sold you an old pick-up truck for $750 for your lawn service company.

He’d better pay tax on that transaction! And you are responsible for getting him the forms and, at the same time, submitting them to the IRS. And when you mail off your rent check for your equipment bay, guess what…Time to send the old 1099s to the IRS and your landlord.

But that’s not all! Even corporations are affected. That’s right. That John Deere lawnmower you just bought? Again, you’ll need to mail a 1099 to the IRS and John Deere.

Until now, IRS 1099 forms have been used to track and report miscellaneous income paid for services of independent contractors or self-employed individuals. Under current U.S. law, payments to corporations -- except those for medical or health care services -- are not required to be reported to the IRS. Now almost all corporations will be affected.

Small Businesses Outraged. Rightfully So.

Pat Heller, owner of Liberty Coin Service in Lansing, Mich., is mad, according to ABC News. He said, “I'll have to hire two full-time people just to track all this stuff, which cuts into my profitability.”

And you know what less profitability means for the IRS? Less tax revenue.

Just think for a minute about every financial transaction between businesses and individuals or other businesses which exceed $600… That’s a whole lot of paperwork!

Hard on small business, hard on big business. That translates to, “hard on the economy.” Is this really the time to be creating extra hassles for small businesses struggling to stay afloat?

Every U.S. business, and individuals as well, will be forced to obtain the tax ID number and/or the Social Security number of everyone with whom they do more than $600 worth of business in a year. It takes effect on Jan. 1, 2012 -- and it applies to all U.S. business and private transactions.

Based on 2009 IRS data, about 40 million businesses and other entities will be subject to this 1099 debacle, at greatly increased cost and trouble. There’s only one word to describe the paperwork and reporting requirements: Draconian. Small-business owners are already complaining that the time and effort it will take to obtain this documentation will be a drag on business. That’s assuming that a lot of small transactions aren’t driven to the black market!

America: Land of the … Tax Evader

This provision is based on the IRS’s unproven belief that millions of Americans are evading taxes.The bureaucrats’ idea is that IRS computers can process hundreds of millions of Form 1099s, comparing them against each buyer’s Form 1040, to see if reported income and purchase numbers match.

Of course, this onerous restriction was never explained during the health care debate in Congress -- and if it had been it would have likely been defeated. But that’s what you get when you can’t determine what’s in a spending bill until it becomes law. Shame on Congress.

This is yet another example of legislators using sneak provisions in an inches-thick bill to impose policies that would otherwise have been rejected. The same tactic was used in March when the “HIRE Act” was adopted containing a potential 30% tax on offshore banking transactions by U.S. persons.

An exercise in total fiction: Sponsors claimed the Form 1099 provision will expose what the IRS thinks is a vast ocean of uncollected income taxes … and will supposedly help to pay the trillions the health care law will cost. Without any proof, they predict the 1099 requirement will raise $17 billion over the next 10 years. And this was the law that Obama insisted would impose no new taxes.

But Now for the Really Scary Part…

Precious metals such as coins and bullion fall into this new 1099 category and U.S. coin dealers are among those most outraged by the new law. And it’s on privacy buffs’ and freedom lovers’ radars for another reason.

Those who remember history recall that Americans’ freedom to own gold (except for jewelry, dental, and numismatics) was made illegal after 1933, when President Franklin D. Roosevelt issued an executive order prohibiting gold ownership. Those who value their right to own gold note the obvious:

The 1099 reporting rule will tell IRS agents who owns gold and where they live.

Bob Bauman
Legal Counsel
The Sovereign Society