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At Miles Franklin, we watch all trends involving the regulation of capital flows in and out of the countries we have clients in, particularly the United States.  Our largest concern is Precious Metals, but more broadly anything that might influence asset allocation decisions.  Tops on our list would be anything related to government confiscation of private assets – such as Precious Metals or retirement accounts – and secondarily anything related to tax and liquidity policy changes on such.

Thus far, we have seen NOTHING indicating potential confiscation or tax law changes regarding Precious Metals, but numerous signs portending both in the world of retirement plan assets, as espoused in numerous RANTS in recent months.  Changes will be legislated for nearly all assets classes in the coming years, but what form such changes take will be dictated by highly uncertain political outcomes, essentially all of which will be for the worse.  In the meantime, we all need to anticipate those outcomes as best we can, starting with the only premise we can be certain of – COLLAPSING FIAT CURRENCIES.

Today’s RANT was inspired by the article below by Simon Black of Sovereign Man, on a topic we at Miles Franklin have been following for some time, the Foreign Account Tax Compliance Act of 2010, or FATCA.

Guess who folded now – Simon Black

This draconian law, yet another enacted under the radar by our sinister Congress, mandates that all U.S. citizens disclose their ownership of “Foreign Financial Accounts” in “Foreign Financial Institutions,” two terrifying legal terms that leave much to be INTERPRETED by the courts, and ultimately our arch-nemesis, the Internal Revenue Service.

However, the scariest part of this law – scheduled for enactment on January 1st, 2013 – is that not only are American citizens required to disclose overseas-held “financial accounts” to the government, but the “Foreign Financial Institutions” must report custody of U.S. citizens’ assets as well, under stiff penalization of a 30% withholding tax on ALL such unreported funds.

FATCA: A new disclosure and withholding regime – Deloitte

In other words, this law is not only extending Big Brother’s reach to your overseas assets, but the very “foreign financial institutions” – whatever that means – that house them.  And thus far, the U.S. government’s intended effect is coming about, in three forms.

To start, many citizens have become reluctant to hold cash in foreign banks and offshore funds, achieving the government’s aim of back door capital controls to prevent “asset flight” and the utilization of legal (and illegal) tax havens.

Secondly, many foreign banks are refusing new American accounts, and sometimes closing current accounts to avoid the reporting requirements, particularly when they bear the burden of false information sent to them by American customers.

Last, but far from least, several major Western governments – Spain, Italy, Germany, France, and the U.K. thus far – are creating centralized ‘bank information bureaus” to share such information with each other.  Such draconian agreements ring of high-level “elitist” cooperation that should scare any citizen of any nation, as this racketeering scheme can only be utilized to hurt them.  Thus, be very careful about where you store your funds, completing extreme due diligence prior to such decisions.

The beauty of this law is it supports my recommendation that citizens’ store their capital in the only form of REAL MONEY the world has known, PHYSICAL gold and silver, which, as of now, can be held privately without such disclosure.  Fiat currency is a government’s liability, and thus will be diluted to nothing if you save it, and perhaps taxed or confiscated if you attempt to house it in another country.  Not to mention the risk of bank holidays or other financial system events that could limit access – or totally deprive you of – your capital.  Precious Metals are pure assets, immune from all such banking risks, particularly in the coming FATCA world of universal bank account monitoring.

Of course, even Precious Metals are not entirely immune from the inevitable growth of Big Brother’s purview, and already we are seeing numerous States – Colorado and Florida, for instance – requiring PM buyers to scan driver’s licenses and/or provide mug shots  for the edification of local police departments.  Right now, no such rules exist in Minnesota – Miles Franklin’s home – so citizens can buy Precious Metals from us without any such disclosure.

It won’t be long before EVERYTHING Americans do is not scrutinized, regulated, or monitored, and it also won’t be long before the Precious Metals MANIA stage, yielding heightened public monetary fear and distressed, besieged politicians intent on retaining the status quo.  That is why we must make decisions NOW regarding how to position our assets – and lives – for the imminent economic and social breakdown, and consequently the volatile political state that will ensue.

Given the myriad risks surrounding us – expanding with each passing day – I strongly believe the best way to PROTECT your assets is with the 5,000-year old safety of PHYSICAL Precious Metals.  There is no way of knowing how events will transpire, but in ALL scenarios, in my view, gold and silver prices will be dramatically higher and PAPER assets lower, possibly nominally but definitely in real terms.