BarroMetrics Views: The Problems with FACTA
The issues with FACTA keep surfacing. Some of those that have been staring at traders, are just being appreciated.
For example, it was widely expected that FACTA would net around US$800M a year. Sounds like a grand sum, right? One problem, IRS Commissioner, John Koskinen, advised Congress that the cost of implementation will be at least US$800M. In short, FACTA may add to the debt burden rather than ease it.
One issue that is just being recognised are the enforcement proceedings: “institutions labelled as ‘recalcitrant’ by Treasury (for not cop-operating with FACTA) will not be paid the full interest they are due on US treasuries; the act allows Treasury to deduct up to 30%.
Now here is the hidden tiger:
- 5.8 Trillion of US debt is held by non-US institutions and Sovereign States.
- Only 24 countries have to date signed FACTA; and China, the biggest overseas holder is not one of the them. Finally,
- US Treasuries are maturing monthly
What do you think will happen to US interest rates if foreign buying dries up? And if interest rates start to rise dramatically, what impact will that have on the US economy?
Let’s see what happens………