BarroMetics Views: FACTA
FACTA, the Foreign Account Tax Compliance Act is on track to become law on July 1, 2014. According to Tax News, US Treasury says that the framework is finalised. That’s bad news for US citizens, and probably for the rest of us.
I had never heard of FACTA until I read an article by Porter Stansberry. I agree with The Motley Fool when it said that Porter’s analysis is sound, but that his view of the future of the US is extreme. Note too that Porter was convicted for fraud in 2007, following a 2003 US SEC charge. Full details are in the reference link at the end of this blog.
That said, I do agree with Porter’s conclusion in the attached report: that FACTA is likely to cause a collapse of the US dollar. I think it is also highly likely that history will look back at FACTA and see it marking the beginning of the end for the US$ as the world’s reserve currency. The US loss of its status will not happen overnight; like the GBP, the loss of status will evolve over time – at least in my view.
The possible loss of the reserve status will have an impact on the US economy, and it could well be the catalyst that will trigger a bear market in stocks. It certainly qualifies as a Black Swan event that breaks the belief in the power of the FED to prevent a stock market decline. Indeed, the FED’s strength (to create money) will be turned into a weakness in the FACTA environment. FACTA will probably also cause volatility in the FX markets.
Porter in not the only voice sounding a warning. ACA (American Citizens Abroad) have also taken up the call in an article: “Why FACTA is Bad for America“. Both the Porter and ACA’s article are too long to post here, so I have attached them as pdf files.
- For a summary of FACTA see http://en.wikipedia.org/wiki/Hiring_Incentives_to_Restore_Employment_Act
- For a background on Porter Stansberry see http://en.wikipedia.org/wiki/Porter_Stansberry
- For a background on ACA see http://en.wikipedia.org/wiki/American_Citizens_Abroad