“You never let a serious crisis go to waste… It’s an opportunity to do things you could not do before.” -Rahm Emanuel
The once unthinkable is quickly becoming probable.
At some point in the next few years, your assets could well become the target of a “Supertax” as high as 17%.
Last week, we talked about the need to buy “out of print” assets to protect our wealth from brazen government seizures.
I explained that quantitative easing (QE) was likely to get bigger, not smaller, and that you needed to become your own central bank.
The truth is, the writing’s already on the wall. We’ve seen it happen.
Cyprus’s “bail-in” cost numerous bank depositors more than 47% of their capital.
Poland’s “pension reform” saw private pensions raided to help lower the government’s debt-to-GDP ratio.
And Spain plundered its Social Security Reserve Fund to keep buying its own risky debt, when no one else would.
Dangerous precedents are being set, with chilling regularity.
More than ever, you need to be prepared…
Distraction Could Cost You
The media have attempted to distract us with “news” of the National Security Agency’s “gathering” of all the world’s phone calls and emails, and the endless “hiccups” with Obamacare.
All the while, something much more serious and insidious has been taking place.
In its October Fiscal Monitor Report, the International Monetary Fund (IMF) has quietly set the stage for what could eventually be a European, or perhaps even worldwide, “Supertax.”
Think I’m kidding?
Here’s what they had to say, and I quote:
“The sharp deterioration of the public finances in many countries has revived interest in a ‘capital levy’ – a one-off tax on private wealth – as an exceptional measure to restore debt sustainability [emphasis added]. The appeal is that such a tax, if it is implemented before avoidance is possible and there is a belief that it will never be repeated, does not distort behavior (and may be seen by some as fair).”
Done throwing up? The report goes on:
“The conditions for success are strong, but also need to be weighed against the risks of the alternatives, which include repudiating public debt or inflating it away.”
Translation: We think we could pull this off, but we need to consider the alternatives: debt default, or inflation/hyperinflation.
Clearly, they’re not going to go for debt default, as it would lead to a depression. No central banker in power today would ever get the leeway to try that. Besides, the 1930s were not much fun. Come to think of it, neither were the early 1940s.
Nor are they convinced that the current attempt – inflation through mega-printing as the path of least resistance – is going to work. But that certainly hasn’t stopped them from trying harder and harder, especially Japan.
So like any good central planner, they’ve been hatching a backup plan – one that involves taking a serious chunk of your hard-earned assets.
Will this happen here? I honestly don’t know.
What I do know is no one’s dumb enough to believe this would be an “exceptional, one-off” tax.
A move like this will only buy governments some time, so they can go right back to borrow-spend-print. Eventually, they’ll be back for more.
If it happens anywhere, you’re going to hear about it everywhere. Tiny Cyprus was considered about as insignificant a place as any, ideal for “testing the waters.” Yet news of its “bail-in” was plastered everywhere. If the next target is larger, the uncertainty will be massive, and the aftershocks will be felt far, far away.
So what can you do about it?
Put Your Wealth Out of Their Reach
I recommend buying “out of print” hard assets. This way, you can put as much distance as possible between your wealth and the government that would seize it – or the central bank that would debase it.
Invest in real estate, local and foreign; hold physical cash; and own assets internationally.
This is serious.
The IMF’s October Fiscal Monitor Report goes so far as to consider (in print, no less) what, if any, weight to give to people’s level of wealth. They conclude that it’s probably best to tax the rich at a higher rate – even if it’s contentious – since they are few, and it’s more efficient.
Remember, the IMF were the ones who, together with the European Central Bank, went in and “rescued” Cyprus – and before that Greece, Portugal, Ireland, and Iceland. And we all know how well that went. Trailing close behind are Italy and Spain – not exactly the healthiest economies either, but whose sheer size makes them financial landmines.
My sense is that the closer we get to the next crisis – sovereign debt, banking, currency, take your pick – the more weight the IMF will carry because they are the ultimate “lender of last resort.”
And no one, it seems, ever wants to default… at any cost.
The opinions expressed are those of Money Morning and the author, not those of the Wall Street Examiner. The Wall Street Examiner makes no representation regarding the accuracy or validity of the ideas expressed in the post. No recommendation or endorsement is intended or implied. This post is presented for informational purposes as representative of one of a range of views on the subject. Do all necessary due diligence before considering any investment.
Wall Street Examiner Disclosure: Lee Adler, The Wall Street Examiner reposts third party content with the permission of the publisher. The opinions expressed in these reposts are not those of the Wall Street Examiner or Lee Adler, unless authored by me, under my byline. I curate posts here on the basis of whether they represent an interesting and logical point of view, that may or may not agree with my own views. Some of the content includes the original publisher's promotional messages. No endorsement of such content is either expressed or implied by posting the content. All items published here are matters of information and opinion, and are neither intended as, nor should you construe it as, individual investment advice. Do your own due diligence when considering the offerings of information providers, or considering any investment.