Tag: Mark Nestmann

Carrying Cash? Be Ready to Lose It

Guest Post by Mark Nestmann

Don’t trust banks to protect the money you’ve deposited? You’re hardly alone.

From a legal standpoint, the money you deposit in a bank no longer belongs to you. Instead, the bank owns it. You are merely just another one of their unsecured creditors. What’s more, in the event of future bank failures, the US government has now signed an international agreement confirming that it will not pay off depositors. Instead, it will force them to submit to a “bail-in” regime, like bank depositors in Cyprus experienced in 2013.

The bail-in scenario, on top of the lowest interest rates in 5,000 years, has led many bank depositors to make the entirely rational decision to withdraw their savings from banks. They’re taking the cash and storing it, often in a home safe. Indeed, sales of home safes are soaring worldwide.

This behavior deeply disturbs the powers that be. In response, they’ve imposed stricter and stricter controls on cash. I wrote about those controls a year and a half ago, and since then, it’s only gotten worse.

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Why Billionaires Are Buying Gold

Guest Post by Mark Nestmann

In the last few days, gold has been on a losing streak. Last Tuesday, gold prices fell by $42 per ounce – 3.3% – the biggest single-day drop in value in nearly three years.

Does that mean gold has resumed its long-term downtrend since it reached its all-time high of $1,923.70 per ounce in 2011? Some analysts predict gold prices will fall another 20% or more before stabilizing.

That’s certainly what central banks and governments would like you to believe. But it’s not how the world’s richest investors and central banks themselves are investing.

Billionaire George Soros, for instance, recently sold stocks and instead bought gold and shares of gold mining companies. The world’s central banks are buying gold at the fastest pace in decades, adding nearly 500 tons of gold to their vaults in 2015. The pace increased in 2016; central bank demand in the first three months climbed 28% versus the previous year.

A big reason people are piling into gold is the lack of other good options.

Take bank accounts, for instance. When you deposit money into your bank account, from a legal point of view, it’s no longer your money. You become an unsecured creditor holding an IOU.

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What Would the IRS Do if This Happened to You?

Guest Post by Mark Nestmann

You’ve just arrived home from work. As you walk through your front door, your wife hands you a cocktail.

“Honey, we’ve got to talk,” she tells you as she pours herself a double. “I was balancing the checkbook today, and guess what. We’re missing $6.5 trillion from our account.”

“No problem,” you respond, as you take a sip from your cocktail. “I’ll just call up Federal Reserve Chairman Janet Yellen tomorrow. I’m sure she can help us make good on the shortfall. After all, the Fed has the authority to create money out of thin air.”

Of course, this scenario would never occur. While the Fed can create monetary reserves “ex nihilo” – literally, “out of nothing” – it acts on behalf of the US Treasury, not private citizens.

On the other hand, if you’re the Pentagon, losing $6.5 trillion is just another day at the office. Indeed, in a report released in June, the Defense Department’s inspector general admitted that just one branch of the military, the Army, made $6.5 trillion in wrongful adjustments to accounting entries. In many cases, the Army had no receipts or even invoices to support those expenditures. Incredibly, according to the report, in some cases the Army simply invented the adjustments out of thin air.

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You’re Likely Committing a Crime Right Now

Guest Post by Mark Nestmann

Do you own a dog? You could face six months in federal prison If you walk it on federal lands on a leash longer than six feet in length.

Do you have a bank account? If you deposit or withdraw more than $10,000 in cash over multiple transactions, you could be imprisoned for up to five years. You could also lose every penny in the account, under the theory it “facilitated” your crime.

Do you have foreign investments? If you neglect to tell Uncle Sam about them, you could face draconian penalties. Forget to file just one form? You could face a $10,000 penalty per account per year.

There’s no requirement that you know any of these crimes exist for you to be found guilty of violating them. After all, “Ignorance of the law is no excuse.”

Given that fact, you might think that Uncle Sam would make it easy to understand exactly what’s legal and what’s not. Think again.

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The Taxman Can’t Do Math

Guest Post by Mark Nestmann

Last month, lawmakers in Massachusetts approved a constitutional amendment that will lead to the departure of many of the state’s wealthiest and most productive citizens. This move is likely to cause tax revenues to drop and real estate values to collapse.

The proposed change imposes a 4% surtax on residents with taxable income of $1 million or more. Currently, the state income tax rate is a flat 5.1%. So, when the measure comes into effect in 2019, the wealthiest taxpayers in Massachusetts will see their state income tax burden nearly double, which will cause many of them to move elsewhere.

Before the surtax comes into effect, it must be endorsed at a constitutional convention and approved by state voters. But judging by the lopsided votes for approval in both chambers of the legislature, the amendment being passed seems a foregone conclusion. The state Senate voted 33–7 in favor of it; the House vote was 102–50.

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Orwell could never have predicted this…

Guest Post by Mark Nestmann

I love technology. I can’t imagine life without modern conveniences like telephones, email, and the Internet. Not to mention running water, air conditioning, and automobiles.

But sometimes, technology gets… well, creepy.

And the creepier the technology, the more likely your friendly Big Brother will use it to keep tabs on you. A case in point is the increasing sophistication of face recognition technology.

Face recognition combines digital images of faces with -software that creates a unique “faceprint” of each one, along with a database of images against which “faceprints” can be compared.

A few years ago, face recognition systems were almost laughably inaccurate. I have an article in my archives from 2003, in which two Japanese tourists visiting Australia fooled an early version of the technology simply by swapping passports.

However, this strategy wouldn’t fool today’s face recognition software.

In the US, you generally have no right to privacy with respect to your facial features. And no federal law regulates the collection of biometric data. If you’re in a public place, the courts have concluded you have a greatly reduced expectation of privacy. Anyone with a camera can legally take your picture in a public space.

But the rules for face recognition are beginning to change, thanks to laws in a handful of states and a court decision involving one of the largest collections of faceprints in existence, compiled by Facebook. Earlier this month, a federal judge in California refused to dismiss a class action lawsuit against Facebook brought by residents of Illinois. The lawsuit alleged Facebook collected, stored, and used faceprints in violation of the Illinois Biometric Information Privacy Act (BIPA). The law is intended to protect the privacy of Illinois residents in their personal biometric data. Regulated biometric identifiers can include a scan of “face geometry.”

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This law would really leave us defenseless

Guest Post by Mark Nestmann

You have to admit that the US government has a pretty dismal record when it comes to computer security.

In just the last year, the Office of Personnel Management (OPM) revealed that hackers had stolen the personal information of more than 20 million current and former federal government applicants and employees. The stolen data included more than six million fingerprints – considered the “gold standard” for proof of identity.

If that wasn’t enough, the IRS acknowledged it also had suffered a massive data breach, with hackers stealing information of more than 300,000 taxpayers to claim more than $50 million in bogus refunds. And just a few months later, the IRS admitted that the system it used to identify taxpayers electronically had itself been hacked!

While I don’t consider myself an expert on computer security, I can tell you the steps I would take if an organization I ran suffered breaches of this magnitude. The first thing I would do is pull the plug. Take the systems offline – completely – until the vulnerabilities were isolated, repaired, and then tested under a variety of attack scenarios.

The second thing I would do would be to encrypt everything on both infected and non-infected networks. And by “everything,” I mean exactly what that word indicates.

With encryption software, no one but you and your intended recipient can read your email messages, text messages, instant messages, etc. You can even encrypt your entire hard disk to protect everything on your PC from prying eyes. If hackers managed to penetrate your network, all they’d see is unintelligible gibberish.

For instance, here’s a link to a message I just wrote to myself in an encrypted format. Can you tell me what it says?

Give up? The message is simply, “Encryption works.”

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The IRS could stop you from flying. Here’s how…

Guest Post by Mark Nestmann

Imagine arriving at your local airport one morning for a domestic flight to a neighboring city. You approach the security checkpoint and the TSA lackey asks for your identification. After handing him your driver’s license, you prepare to be groped as you pass through the checkpoint.

But instead, the TSA man tells you your driver’s license is no longer accepted as identification for domestic flights. He asks you for your passport.

Unfortunately, you don’t have a passport. A few months ago, you received a letter from the State Department stating that since you owed the IRS money, your passport was hereby revoked, effective immediately. It further ordered you to turn your passport in.

You’re officially grounded – courtesy of the IRS.

How could this happen? Thank Congress for enacting a pair of obscure laws, one in 2005 and another in 2015.

#1 The Real ID Act of 2005 established federally mandated “national uniform standards” for driver’s licenses… 43 separate requirements in all. State driver’s licenses that fail to conform to these standards are no longer valid for any federal “official purpose.” Examples of “official purposes” include boarding an airplane, buying a firearm, or even entering a federal courthouse.

Originally, the deadline for states to comply with the law was December 31, 2009. But the Department of Homeland Security repeatedly extended it. However, after October 1, 2020, you won’t be able to use a noncompliant driver’s license to identify yourself for any federal “official purpose,” including boarding an airplane. And 26 states have yet to comply with the new requirements.

#2 H.R. 22, the FAST Act (Fixing America’s Surface Transportation Act) passed Congress last December. It added a little-noticed section to the Internal Revenue Code entitled, “Revocation or Denial of Passport in Case of Certain Tax Delinquencies.” This section empowers the State Department to “deny, revoke, or limit the passport of individuals” with a “seriously delinquent tax debt.” This is defined as a tax debt that exceeds $50,000 for which the IRS has filed a notice of lien or levy. The act doesn’t solely apply to just criminal tax cases either; any tax debt over this threshold could trigger passport revocation.

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Is this only for “tax cheats” and “moochers”?

Guest Post by Mark Nestmann

Earlier this month, the Federal Register published its quarterly list of former US citizens and permanent residents who have “expatriated,” i.e., given up their US citizenship or permanent residence. The published data comes from the IRS, which has tracked expatriation trends since 1998.

The number of people bidding adieu to the red, white, and blue for the fourth quarter of 2015 came to 1,058. For all of 2015, the total came to 4,279. This was an all-time record, beating the former record set in 2014 (3,415 expatriates) by 25%.

Here’s a chart of expatriation trends since 1998, after a law took effect in 1996 requiring the IRS to publish this data quarterly in the Federal Register.

What could lead someone to take the admittedly radical step of severing official ties to Uncle Sam? The mainstream media report the culprit is tax. Tax is a factor, but hardly the only one. But it’s certainly a place to start.

US citizens and permanent residents must pay US tax on their worldwide income, even if they live permanently outside the country. The US is one of only two countries with this policy. The other is the one-party dictatorship of Eritrea. (Ironically, until 2013, the State Department’s annual report on human rights throughout the world condemned Eritrea for this policy.)

As the old adage goes, “Do as I say, not as I do,” or more simply, “Might makes right.”

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They’re coming for your cash

Guest Post by Mark Nestmann

It might sound like a conspiracy theory spun by right-wing crazies. But judging by the increasing desperation of governments to reboot the world economy, it just might happen.

“It” is the recall or confiscation of cash, i.e., dollars, euros, pounds, etc., in physical form. And a key justification that those calling for this radical measure cite is that it reinforces the ability of central banks to impose negative interest rates.

Negative rates mean that lenders literally pay businesses and consumers to borrow money. They also penalize savers for hoarding it. The Danish and Swiss national banks have gone the farthest into negative territory, with interest rates of -0.75%. That means €100,000 in a euro-denominated account in Switzerland would be worth only €99,250 after one year. While these rates apply only to “excess reserves” banks maintain at the central bank, nothing stops banks from requiring depositors to share the pain.

But that’s not enough, according to some economists. Citicorp’s chief economist, a technocrat named Willem Buiter, thinks the US needs much lower interest rates to push the economy out of the doldrums. He thinks negative interest rates around -6% would do the job. But there’s one condition: For his plan to work, he says, the government must abolish cash.

It’s easy to understand why Buiter might not have warm and fuzzy thoughts about cash. After all, if your bank is taking 6% from your savings, $100 in your account would be worth only $94 at the end of one year, $88.36 after two years, and $83.06 after three years. On the other hand, a $100 bill with Ben Franklin’s picture on it would still be worth… well, $100. Buiter understands that as long as cash exists, no one will voluntarily keep their savings in accounts with negative interest rates.

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Spy on Your Customers… or Else

Guest Post by Mark Nestmann

Do you distrust the banking system? Prefer to do business in cash? Complain about the encroachment of Big Brother into every facet of your life?

If you answered “yes” to any of these questions, you’d better watch out. You’re a “person of interest” – and a growing number of businesses must report your “suspicious activities” to the feds. If they don’t, they can be fined and the responsible parties even imprisoned.

These requirements originated in a law called the “Bank Secrecy Act” (BSA). Of course, this Orwellian law has nothing at all to do with protecting bank secrecy. Indeed, the BSA has all but eliminated confidentiality.

Regulations issued under the BSA require financial institutions to notify the Financial Crimes Enforcement Network (FinCEN), a Treasury Department bureau, of any unusual transactions in which their customers engage. Reporting is mandatory for transactions that exceed $10,000 and are not the sort in which the particular customer would normally be expected to engage. For money transmitter businesses, a $2,000 threshold applies.

The businesses covered by these requirements must file “suspicious activities reports” (SARs) secretly, without your knowledge or consent. FinCEN makes the reports available electronically to every US Attorney’s office and to dozens of law enforcement agencies. No court order, warrant, subpoena, or even written request is needed to access a report.

What exactly is suspicious? According to official Treasury guidance, suspicious behavior includes:

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There Are No Markets, Only [IMF] Manipulation

Guest Post by Mark Nestmann

I can’t help but be reminded of the truism of this week’s article title, watching Chinese stock prices drop, day after day. In response, Chinese securities regulators have banned most short selling. They’ve pressured mutual funds to buy stocks and run advertisements that extol the virtues of buying stocks.

The Chinese central bank has even parceled out cash to brokers to make it easier for investors to buy on margin. As central banks do, it’s creating the cash out of thin air. The central bank also announced a surprise devaluation of the yuan, China’s currency.

So far, the intervention hasn’t worked. Chinese stocks continue to plummet. The latest interventions urge companies to buy back their shares and boost dividends. Perhaps the central bank will create more money to pay for it all.

That might stop the plunge. But then again, it might not.

China is hardly alone in overtly manipulating its markets. This blatant effort to manipulate stock prices is only the most recent desperate gamble by global governments to prop up markets. They’ll do just about anything to prevent a repeat of the 2007-2008 recession.

Their playbook comes from the International Monetary Fund (IMF), which advises governments to engage in “financial repression” to buoy up global markets.

The IMF’s recipe to avoid what former Fed Chairman Ben Bernanke calls “chaotic unwinding” includes bail-ins, higher inflation, negative interest rates, and capital controls. The IMF even proposes a “one-off capital levy” – outright confiscation of private savings – at a rate of 10% or higher.

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A Sneaky Way to Grab Your Retirement Savings

Guest Post by Mark Nestmann

With an $18 trillion debt and $97 trillion or so in unfunded liabilities, Uncle Sam is anything but flush with money. So Congress and President Obama are looking for ways to stem the flow of red ink. And your retirement or pension plan is square in their sights.

No, Congress isn’t going to confiscate your IRA or 401(k) retirement plan, although there are lots of people marketing various products and services that want you to believe that. Sensationalism sells, after all.

But as I discussed in this essay, confiscation isn’t politically feasible. Look at the numbers. More than 60 million Americans have IRAs or 401(k)s, holding nearly $6 trillion parked away for retirement. Sure, the Feds would love to get their hands on these assets. But any politician who openly advocated confiscation would face near-instant impeachment.

Instead, Congress will whittle around the edges of the Tax Code to raise some additional revenue. President Obama even wants to end tax-deductible contributions to IRAs and other pension plans once their combined account balances exceed $3.4 million. And since we’re now dealing with the “rich,” no real political obstacles to changing the rules exist.

The biggest objection that the tax-and-spenders have is that Americans in higher tax brackets get a bigger tax benefit for retirement plan contributions than anyone else. Someone in the 39.6% tax bracket saves almost $40 in income tax for each $100 contributed to a retirement plan. In contrast, someone in the 15% tax bracket only saves $15.

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Congress’s Plans to Lock You in

Guest Post by Mark Nestmann

Freedom to travel is a fundamental and internationally recognized human right. Article 13 of the Universal Declaration of Human Rights (UDHR) states:

Everyone has the right to freedom of movement and residence within the borders of each state. Everyone has the right to leave any country, including his own, and to return to his country.

Congress ratified the UDHR on April 2, 1992. But it’s now having second thoughts.

The “right to travel” makes some politicians very nervous. Consider the issue from their viewpoint. Leaving the country makes it more difficult to detain you if the Feds suspect you of a crime, such as withdrawing lawfully earned cash from your bank account. It’s also less convenient to surveil you if your political opinions don’t toe the party line. And above all, it’s harder for Big Brother to grab your assets.

So, it’s hardly surprising that in May, Sen. Orrin Hatch (R-Utah) introduced legislation that would seize the passport of any US citizen with “seriously delinquent tax debts.” The proposal, part of an omnibus trade bill, isn’t new. Indeed, this is the fourth year in a row that Hatch, or other Big Government apologists, have introduced this measure.

The proposal requires no hearing or any other due process to grab your passport. All that’s needed is for the IRS to issue a “Notice of Levy” for any amount greater than $50,000.This is a letter informing you that the IRS thinks you owe it money.

Sure, $50,000 sounds like a lot of dough. But when it comes to tax liabilities, it’s practically chump change. The IRS has sent me assessments for this amount or more twice. When you operate a business, it’s easy for liabilities to add up. That’s especially true if you take positions the IRS disagrees with and get audited. Should disagreeing with the IRS mean the Feds can take your passport? Obviously, Senator Hatch, along with many of his colleagues, thinks that it should.

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The Beginning of the End for the Euro

Guest Post by Mark Nestmann

A little over two decades ago, the elites of Europe met in Maastricht, the Netherlands, to realize a long-held dream. It was to create a common currency that could be used throughout Europe, and possibly, the world.

The “euro” arrived, with great fanfare, in 1999, as a trading-only electronic currency. Three years later, the “eurozone” officially came into being. 11 national currencies were abolished and exchanged for euros at a fixed exchange rate.

Over the next decade, a growing number of European countries clamored to get on board. The eurozone eventually grew to 19 members.

Like so many other grand plans, the intentions of the European elites were good, albeit self-serving. The European Union (EU) itself was cobbled together after World War II to help prevent the rise of super-nationalists like Adolph Hitler. The euro was another step along the way. As former German Chancellor Helmut Kohl often said: “We seek a European Germany, not a German Europe.”

And the promised benefits were impressive:

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Are You Ready for the e-PATRIOT Act?

Guest Post by Mark Nestmann

Earlier this month, news emerged that the US government had suffered its worst cyberattack ever.

On June 4, the Office of Personnel Management (OPM) revealed that hackers had penetrated its networks, possibly for many months. The data thieves stole personal information of up to 18 million current and former federal government applicants and employees.

There’s a good chance the attack is even worse than what you’ve read about. The OPM hack included a database holding security clearance information on hundreds of thousands of federal employees and contractors. This database contains details of applicants’ financial and investment records, family members, and even names of neighbors and close friends.

Another database that may have been breached includes criminal history, psychological records, and information about past drug use. The hackers might even have acquired detailed personal and sexual profiles obtained through lie detector tests.

With all the talk of Edward Snowden and the supposed “irreparable” damage he did to US interests, this theft is a lot worse. While OPM doesn’t hold personnel records for the CIA, it does for other US intelligence agencies. The hackers now know the identity of hundreds of thousands of federal employees with security clearances. Not only that, they also have sensitive background information on each of them, which they could easily use for blackmail.

Oh, and get this – the breach wasn’t actually discovered by the OPM. It was only uncovered during a sales demonstration by a security company named CyTech Services.

So what does the Obama administration want to do to solve the problem?

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