The Risk of Confiscation Continues to Grow

by Kevin D. Freeman on December 11, 2013


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When we reported on the happenings in Cyprus, we shared that there would likely come a push to confiscate wealth in order to deal with the severe indebtedness of the West:

Is the Confiscation Risk Real? – Global Economic Warfare

At the time, our warnings seemed to many to be “out there.” But recently, these discussions have become more mainstream, even appearing on the pages of The Wall Street Journal and as topics for discussion by the likes of the IMF and even billionaire money manager Bill Gross of PIMCO. Here are a few excerpts from The Wall Street Journal Opinion page last week:



Romain Hatchuel: The Coming Global Wealth Tax

Indebted governments may soon consider a big one-time levy on capital assets.

By  ROMAIN HATCHUEL  Dec. 3, 2013 7:15 p.m. ET

Between ObamaCare, Iran and last quarter’s uptick in U.S. economic growth, taxpayers these days may be distracted from several dangers to come. But households from the United States to Europe and Japan may soon face fiscal shocks worse than any market crash. The White House and New York Mayor-elect Bill de Blasio aren’t the only ones calling for higher taxes (especially on the wealthy), as voices from the International Monetary Fund to billionaire investor Bill Gross increasingly make the case too . . .

Of course these [standard tax] measures won’t return the world’s top economies to sustainable levels of debt. That could be achieved only through significant economic growth (the good way) or, as the IMF puts it, “by repudiating public debt or inflating it away” (the bad way). In October the IMF floated a bold idea that didn’t get the attention it deserved: lowering sovereign debt levels through a one-off tax on private wealth.

As applied to the euro zone, the IMF claims that a 10% levy on households’ positive net worth would bring public debt levels back to pre-financial crisis levels. Such a tax sounds crazy, but recall what happened in euro-zone country Cyprus this year: Holders of bank accounts larger than 100,000 euros had to incur losses of up to 100% on their savings above that threshold, in order to “bail-in” the bankrupt Mediterranean state. Japanese households, sitting on one of the world’s largest pools of savings, have particular reason to worry about their assets: At 240% of GDP, their country’s public debt ratio is more than twice that of Cyprus when it defaulted.

From New York to London, Paris and beyond, powerful economic players are deciding that with an ever-deteriorating global fiscal outlook, conventional levels and methods of taxation will no longer suffice. That makes weapons of mass wealth destruction—such as the IMF’s one-off capital levy, Cyprus’s bank deposit confiscation, or outright sovereign defaults—likelier by the day.

Mr. Hatchuel is managing partner of Square Advisors, LLC, a New York-based asset management firm.

Recently, the Obama administration has begun to focus attention on wealth disparity, setting up a call for “shared responsibility.” Many see this as a prelude to a wealth tax. Others would call that wealth confiscation. We do know that the President’s proposed budget had a plan to tax IRA accounts above a certain threshold.

Most people have just glossed over these considerations. But, such discussions are an important part of the backdrop behind the reality of global economic warfare. Last week’s WSJ editorial is just further support for what we and a few others have been sharing. What happens if there’s another economic attack?

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