What We're Reading

A friend I haven’t heard from in many years since he left the USA wrote me. He closed the letter in an unusual way, saying:

PS — USA has gone completely bonkers these days? or what the heck is going on over there? would love to pick your mind over a glass of wine. someday!

I’m not intending on writing on politics as a regular habit at Aleph Blog, and most of what I am going to say is economics-related, so please bear with me.  Hopefully this will get it out of my system.

To my friend,

There are a lot of frustrated people in the US.  Though you’ve been gone a long time, you used to know me pretty well; after all, I trained you on economic matters.

Let me give a list of reasons why I think people are frustrated, then explain how that affects their political calculations, and finally explain why they have mostly misdiagnosed the issues, and won’t get what they want regardless of who is elected.

The electorate is frustrated because:

• Living standards have declined for the lower 80% of so

With recent market weakness, I'm amazed that supposedly factual, informative and unbiased (cough cough) news television isn't pondering the markets recent weakness being at all tied to FACTA. 

The Foreign Account Tax Compliance Act ("FATCA"), enacted in 2010, imposes a variety of requirements on foreign banks however foreign banks that do not report such information may be subject to a 30% withholding tax on payments they receive from U.S. sources. In order to avoid this withholding, beginning July 1, 2014, certain foreign banks will be required to report information to the IRS about U.S. account holders with accounts of $50,000 or more.

Let that sink in a moment.  That's HUUUGE money we're talking about.

Beginning July 1st, there will be penalties for non-reporting so if you were big business with large corporate cash storage, or even a gas pipeline worker located in Saudi Arabia, would you shift your investments?  Why not?  The market's at all time new highs.  Better to do it now.