Does America Still Know Rule Of Law – Nationally, Internationally, Or At All

This article is an excerpt from the Mountain Vision newsletter, an excellent service which we strongly recommend.

In last week’s Mountain Vision Update, Frank alerted our Mountaineers to the alarming rise of yields in bonds around the world. That signal should not be underestimated or disregarded lightly, as it may have a huge impact on all financial markets.

Bonds are being sold by banks around the world. In Japan, banks sold a huge chunk of their bond holdings – most probably in expectation of the much-proclaimed global recovery. As Mountaineers know, we have strong doubts about this “recovery story”. Fundamental realities just don’t match up.

However, the mainstream appears to believe in it. And therefore, they are concerned about an improving economy, accompanied by rising interest rates. Afraid of the potential blood-bath in bonds, they have started selling…and selling hard. That, in fact, may become a self-fulfilling prophecy that has the potential of flowing over into other financial markets, and certainly the stock market.

In this context, I came across an interesting article posted by Humble Student of the Markets, which expands on the above. The article is titled “The bear case for equities”. The articles is timely and worth the read.

The US-Swiss “Tax Deal” – Does the US Still Understand Rule of Law ?!

The US-Swiss tax deal is, as you can probably imagine (and what we would have hoped), turning into a hotly debated topic in Switzerland. At this point, it does not appear as though the Swiss Parliament will accept the deal, which was plunked down on their desks with much secrecy, little time to decide, and no flexibility on the terms. This, combined with the latest revelations about alleged CIA activities in Switzerland, will most probably kill the deal.

Frank, in an exclusive interview with the International Man, discussed this topic with Nick Giambruno of IM in depth. We’ve added that interview in the commentary below. However, as an American living in Switzerland, I’d like to add my two cents in a somewhat “less Swiss and diplomatic” manner here.

What concerns me most as an American is that the US does not really care whether Swiss banks have done anything wrong or not. Yes, some bankers at UBS and a few other banks have probably breached US law by entering the US and giving Americans advice and/or support in hiding their funds overseas in an attempt to evade taxes. However, the current broad allegations and incredible pressure against Swiss banks in general is unfounded.

Where has international rule of law gone?!?! Just because a Swiss bank – one without any presence or advisory action in the US – receives funds from a US person, declared or not, doesn’t mean the bank breached any US tax or SEC rules. And the bank should certainly not be held liable under US law unless it, in fact, acted within the US jurisdiction.

The principles of international law would be on very shaky ground if suddenly we would be required to maintain foreign law in our jurisdiction. For example, abortion is illegal in Poland. What if a Polish woman decides to travel to America, or to Switzerland, for the purpose of having an abortion? Should America or Switzerland now be required to prosecute the woman since she breached Polish law?

What if I go to Germany to “really” drive my car on the German Autobahn? Germany is well-known for its no-speed-limit freeways. And, from my experience of even just last weekend, I can tell you that it is quite a rush. However, in Switzerland, we have a maximum speed limit of 120 km/h. If I’m driving 140km/h in Germany, should the Swiss be able to fine me for driving too fast in Germany. Or, furthermore, should the Germans be required to arrest and extradite me right there on the spot based on Swiss law? Of course not!

Let’s come back to an example at the heart of the issue: a Swiss banker meets a prospective US investor in Zurich, Switzerland. The Swiss bank accepts that US person as a client and the client deposits his dollars with the bank. Then, the same US client later decides not to report his Swiss bank account. Has the Swiss banker done anything illegal? Well not according to Swiss law. Nor has the Swiss banker broken any US law. The US taxpayer, on the other hand, may be liable for tax evasion because he did not file his FBAR and didn’t report earnings.

So why is Switzerland even considering this so-called “deal”? The reason is very simple: America is simply not playing by the rules. Just as was the case in the situation with the Swiss private bank, Wegelin, they are threatening to block US dollar transactions. No bank can afford to not be able to transact in US dollars or to invest in the US markets. The US Dept. of Justice is using this as leverage and a threat to destroy several leading Swiss banks – whether the allegations against the banks are legally justified or not.

What is this all about anyway? Is America in such bad shape that it needs to criminalize its citizens and its supposed Swiss friends? Is complete citizen transparency and so-called “tax justice” really important enough to throw our long-time values and principles of freedom overboard? What’s happened to the country I grew up in?

I apologize if I’m stepping on the toes of any of my fellow Americans, but this is exactly how I’m seeing it perched up here in the Alps from my Mountain Vision.

This article is an excerpt from the Mountain Vision newsletter, an excellent service which we strongly recommend.


Receive these articles per e-mail

Subscribe for the free weekly newsletter and receive 3 papers about physical precious metals investing