The Bank Runs In Greece Will Soon Be Followed By Bank Runs In Other European Nations

The bank runs that we are watching right now in Greece are shocking, but they are only just the beginning.  Since May 6th, nearly one billion dollars has been withdrawn from Greek banks.  For a small nation like Greece, that is an absolutely catastrophic number.  At this point, the entire Greek banking system is in danger of collapsing.  If you had money in a Greek bank, why wouldn’t you pull it out?  If Greece leaves the euro, all euros in Greek banks will likely be converted to drachmas, and the value of those drachmas will almost certainly decline dramatically.  In fact, it has been estimated that Greek citizens could see the value of their bank accounts decline by up to 50 percent if Greece leaves the euro.  So if you had money in a Greek bank, it would only make sense to withdraw it and move it to another country as quickly as possible.  And as the eurozone begins to unravel, this is a scenario that we are going to see play out in country after country.  As member nations leave the eurozone, you would be a fool to have your euros in Italian banks or Spanish banks when you could have them in German banks instead.  So the bank runs that are happening in Greece right now are only a preview of things to come.  Before this crisis is over we are going to see bank runs happening all over Europe.

If Greece leaves the euro, the consequences are likely to be quite messy.  Those that are promoting the idea that a “Grexit” can be done in an orderly fashion are not being particularly honest.  The following is from a recent article in the Independent….

“Whoever tells you a Greek exit would be no big deal is an idiot, lying or disingenuous,” said Sony Kapoor of the European think-tank Re-Define. Economists fear that a disorderly exit would prompt a huge run by investors on Spanish and Italian debt, forcing those countries to seek support from an EU bailout fund, which, with a capacity of just €500bn, is widely regarded as too small to cope with those pressures.

A Greek exit from the euro would not only result in a run on Spanish and Italian bonds, but it would also likely result in a run on Spanish and Italian banks.

If Greece is allowed to leave the euro, that will be a signal that other countries will eventually be allowed to leave as well.  Nobody in their right mind would want their euros stuck in Spanish or Italian banks if those countries end up converting back to national currencies.

Fear is a powerful motivator.  If Greece converts their euros back to drachmas, that will be a clear signal that all euros are not created equally.  The race to move money into German banks will accelerate dramatically.

And a Greek exit from the euro is looking more likely with each passing day.  Even the IMF is now admitting that it is a very real possibility….

Christine Lagarde, head of the IMF, warned she was “technically prepared for anything” and said the utmost effort must be made to ensure any Greek exit was orderly. The effect was likely to be “quite messy” with risks to growth, trade and financial markets. “It is something that would be extremely expensive and would pose great risks but it is part of options that we must technically consider,” she said.

Meanwhile, banks in other troubled European nations are already on shaky ground.  The Spanish banking system is an absolute disaster zone at this point and on Monday night Moody’s downgraded the credit ratings of 26 Italian banks.

The situation in Italy is especially worth keeping a close eye on.  As Ambrose Evans-Pritchard recently noted, things are not looking good for Italy at all….

Italy’s former premier Romano Prodi said the EU risks instant contagion to Spain, Italy, and France if Greece leaves. “The whole house of cards will come down”, he said

Angelo Drusiani from Banca Albertini said the only way to avert catstrophe is to convert the European Central Bank into a lender of last resort. Otherwise Italy faces “massive devaluation, three to five years of hyperinflation, and unbearable unemployment.”

So what can be done about any of this?

Well, there is actually a lot that could be done if politicians in Europe were willing to think outside of the established global financial paradigm.

The truth is that Greece could solve their current financial problems in four easy steps.  They would have to be willing to stick it to the rest of Europe and to risk being blackballed by the international community, but it could be done.

The following is my prescription for Greece….

1) Default on all debts.

2) Leave the euro.

3) Issue drachmas that are debt-free and that do not come from a central bank.  Instead, have the Greek government create them and spend them directly into circulation.

4) Enjoy a return to prosperity.

In such a scenario, the Greek national debt would no longer be a problem, the Greek government would never have to borrow any more money and austerity would no longer be needed.

Yes, inflation would be an issue with the new currency, but a bit of inflation would be a walk in the park compared to the horrible economic depression that Greece is experiencing right now.

And once the Greek economy was growing again, it would certainly be possible for them to make the transition to “hard money” if they wanted to.

It is imperative that we all understand that just because the global financial system works a certain way today does not mean that it must always work that way.

If you have a few minutes, I want you to watch an incredible speech by a 12-year-old Canadian girl named Victoria Grant.  In this 6 minute speech, she details how the bankers are defrauding the people of Canada and how the Canadian government does not actually need to borrow a single penny from the bankers….

If a 12-year-old girl can figure this out, then why can’t the rest of us?

Sadly, the financial world still seems enamored with the corrupt central banking system that has gotten us into this mess.  In fact, one recent poll found that Federal Reserve Chairman Ben Bernanke has a 75 percent approval rating from global investors.

Right now, America is going down the same path as Greece, Spain and Italy have gone.  Eventually we will hit a wall and our financial system will fall apart.

We need the American people to understand that the Federal Reserve system is a perpetual debt machine.  The U.S. national debt is now more than 5000 times larger than it was when the Fed was first created.  It is at the very core of our national financial problems.

When will people wake up and realize that central banking is the problem and not the solution?

When will people wake up and realize that national governments do not have to go into debt to anyone if they do not want to?

In our world today, there is far more debt than there is money.

It is a system that will inevitably crash.

But there are other alternatives.

Unfortunately, politicians all over the globe continue to want to be married to our current debt-based financial system.

As a result, we will suffer the consequences of that system.

The Global Elite Are Hiding 18 Trillion Dollars In Offshore Banks

In recent days, the fact that Mitt Romney has millions of dollars parked down in the Cayman Islands has made headlines all over the world.  But when it comes to offshore banking, what Mitt Romney is doing is small potatoes.  The truth is that the global elite are hiding an almost unbelievable amount of money in offshore banks.  According to shocking research done by the IMF, the global elite are holding a total of 18 trillion dollars in offshore banks.  And that figure does not even count any money being held in Switzerland.  That is a staggering amount of money.  Keep in mind that U.S. GDP in 2010 was only 14.58 trillion dollars.  So why do the global elite go to such trouble to hide their money in offshore banks?  Well, there are two main reasons.  One is privacy and the other is low taxation.  Privacy is a big issue for those that are involved in illegal enterprises such as drug running, but the biggest reason why people move money into offshore banks is in order to avoid taxes.  Some set up bank accounts in foreign nations because they want to legally minimize their taxes and others set up bank accounts in foreign nations because they want to illegally avoid taxes.  You would be absolutely amazed at what some large corporations and wealthy individuals do to get out of paying taxes.  Unfortunately, the vast majority of the rest of us don’t have the resources or the knowledge to play these games, so we get taxed into oblivion.

So why do they call it “offshore banking”?

Well, the term originally developed because the banks on the Channel Islands were “offshore” from the United Kingdom.  Most “offshore banks” are still located on islands today.  The Cayman Islands, Bermuda, the Bahamas, and the Isle of Man are examples of this.  Other “offshore banking centers” such as Monaco are actually not “offshore” at all, but the term applies to them anyway.

Traditionally, these offshore banking centers have been very attractive to both criminals and to the global elite because they would not tell anyone (including governments) about the money that anyone had parked there.

These days some governments (particularly the U.S. government) are trying to change this, but we certainly will not see the end of offshore banking any time soon.

The amount of money that goes through these offshore banks is absolutely astounding.

It has been estimated that 80 percent of all international banking transactions take place through these offshore banks.  $1.4 trillion is being held in offshore banks in the Cayman Islands alone.

One article in the Guardian estimated that a third of all the wealth on the entire globe is being held in offshore banks, and others believe that as much as half of all the capital in the world flows through offshore banks at some point.

Obviously, all of this tax avoidance means that governments around the world are missing out on a whole lot of money.

It has been estimated that the U.S. government is missing out on $100 billion a year because of these offshore banks.  Others would put that figure significantly higher.

Avoiding taxes is a game that the global elite have mastered.  They are playing a whole different ballgame than you and I are.  They don’t just sit there like idiots and get blasted with taxes.  Instead, they hire the best experts and they employ every trick in the book to hold on to as much money as they possibly can.

These days, taking advantage of offshore tax havens is not that complicated to do.  The following is from a recent Politico article….

A plausible scenario plays out like this: I hire an accountant. Doing her job, my accountant tells me that if I sign a few legal documents and route my money through a small Caribbean island, I could keep more of my paycheck and pay a lower tax rate. I may have earned my money in the United States, but legally I can claim that it was, in fact, earned in a tax haven.

If it is legal, perhaps more of us should look into this.

After all, if playing these kinds of games is good enough for Mitt Romney, then why isn’t it good enough for all the rest of us?

During a campaign stop recently, Romney said the following….

“I can tell you we follow the tax laws”

I certainly believe him when he says that.  But it is what he said next that is troubling….

“And if there’s an opportunity to save taxes, we like anybody else in this country will follow that opportunity.”

I certainly believe him when he says that too.

ABC News recently revealed that Bain Capital has established an astounding 138 different offshore funds in the Cayman Islands.

Something has got to work pretty well to want to do it 138 times.

But Bain Capital was also very busy over in other offshore banking centers as well.

One of the largest shell companies that Bain set up down in the Caribbean was called Sankaty High Yield Asset Investors Ltd.  It did not have an office in Bermuda and it had no staff in Bermuda.  But it helped clients of Bain Capital avoid a whole lot of taxes.

The following comes from a 2007 Los Angeles Times article….

In Bermuda, Romney served as president and sole shareholder for four years of Sankaty High Yield Asset Investors Ltd. It funneled money into Bain Capital’s Sankaty family of hedge funds, which invest in bonds and other debt issued by corporations, as well as bank loans.

Like thousands of similar financial entities, Sankaty maintains no office or staff in Bermuda. Its only presence consists of a nameplate at a lawyer’s office in downtown Hamilton, capital of the British island territory.

“It’s just a mail drop, essentially,” said Marc B. Wolpow, who worked with Romney for nine years at Bain Capital and who set up Sankaty Ltd. in October 1997 without ever visiting Bermuda. “There’s no one doing any work down there other than lawyers.”

The amount of money being funneled through Sankaty today is absolutely stunning….

Today, Bain Capital manages $60 billion in assets, according to a spokesman. The total includes $23 billion in Sankaty debt and credit funds. Half a dozen Sankaty affiliates now are active in Bermuda, corporate registry records show.

The Sankaty debt hedge funds are organized as partnerships in Delaware that produce taxable business income by investing in fixed-income bonds and other debt instruments. Under tax law, even tax-exempt U.S. institutions may face a 35% tax if they invest directly in such hedge funds. By investing instead through a Bermuda corporation, the taxes are legally blocked, experts say.

Of course all of this is perfectly legal.

So nobody gets into trouble for any of this.

By keeping money offshore, even those managing these kinds of funds can avoid being taxed.

Victor Fleischer, a tax professor at the University of Colorado Law School, recently explained how this works….

“The idea behind some of the Cayman Island strategies was that the income that the fund managers receive for managing the money would be kept offshore in the Cayman Island — and the chief benefit is that you can defer when you recognize that income until a later date and you can reinvest the money from the Cayman islands and none of those reinvested funds get taxed until you bring them back either”

So was Romney doing this?

We may never know unless he shows us his tax returns.

What we do know is that Romney has millions of dollars of his own personal wealth invested in offshore tax havens.

The following comes from ABC News….

In addition to paying the lower tax rate on his investment income, Romney has as much as $8 million invested in at least 12 funds listed on a Cayman Islands registry. Another investment, which Romney reports as being worth between $5 million and $25 million, shows up on securities records as having been domiciled in the Caymans.

But Romney does not just have money invested down in the Cayman Islands.  Apparently his money is invested in a whole host of offshore tax havens.

The following quote comes from a Reuters article….

Bain funds in which Romney is invested are scattered from Delaware to the Cayman Islands and Bermuda, Ireland and Hong Kong, according to a Reuters analysis of securities filings.

So is there anything wrong with this?

Well, it depends on how you define “wrong”.

What Romney is doing is perfectly legal.

But it also stinks.  Washington lawyer Jack Blum recently told ABC News the following about Romney’s finances….

“His personal finances are a poster child of what’s wrong with the American tax system”

So now we may have a few hints as to why Romney may not want to release his old tax returns.

But as noted above, what Romney is doing is just small potatoes compared to what the ultra-wealthy do.

The U.S. Congress has been trying to clamp down on offshore banking, but the ultra-wealthy are always two or three steps ahead of them.

The ultra-wealthy will go to just about any extreme in order to avoid paying taxes.

In fact, the Washington Post has reported that an increasing number of wealthy individuals are actually deciding to renounce their citizenship rather than face the wrath of the IRS.

The ultra-wealthy aren’t really concerned that much with national citizenship anyway.  If they want to influence an election, they can have far more influence by donating a few million bucks to a “Super PAC” than they can by casting the few votes that they have.

In a previous article, I described how the ultra-wealthy use offshore banks as a “shadow banking system” that plays by rules that most people don’t even know exist….

It is a shadow banking system that most Americans don’t know anything about. Most Americans don’t have the resources to be able to set up shell companies in half a dozen different countries so that they can “filter” their profits.  Most Americans don’t know a thing about complicated tax avoidance plans that tax lawyers use such as the “Double Irish” and the “Dutch Sandwich”.  Most Americans would have no idea how to eventually have most of the money that they make end up in Bermuda so that it can avoid taxes.

Most among the global elite simply do not care that U.S. debt is climbing into the stratosphere.  All they care about is keeping as much of their own money in their pockets as they possibly can.

Of course there are always exceptions to this rule.  Warren Buffett recently wrote a check to the U.S. Treasury for a little more than $49,000 to help pay off the national debt.

But considering the fact that the U.S. national debt is increasing by more than 100 million dollars an hour, that didn’t exactly do much to help.

Our system is deeply broken and the global elite are getting away with bloody murder.  Over the decades, they have carefully crafted the rules so that as much wealth as possible is funneled into their pockets, and they have carefully crafted the rules so that as much wealth as possible stays in their pockets.

Of course if we got rid of the personal income tax and the corporate income tax entirely and replaced them with a completely new system we could get rid of all of this game playing once and for all.

But what do you think the odds are of that happening?

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