Crackdown on Offshore accounts – good for gold?
With the IRS going after Swiss bank accounts, and potentially working to find more accounts in other countries, I’ve been wondering where all this money might end up? I doubt that these accounts are pocket change. If you can’t easily hide money anymore, most likely you are going to re-patriate those funds back in the U.S. My guess would be it would end up in physical metals. If the idea is to shelter your money from government, you could somewhat hide it in physical gold and/or silver, assuming you have a secure place to store it. Which leads me to believe that that can only be good for gold and silver prices. Where am I off on my thinking?
Full disclosure: I’m not advocating breaking any laws, just speculation as to where this re-patriated money ends up going.
It is not illegal to have a foreigh bank account. You just have to declare it and pay any appropriate taxes. The people that are having a problem are those that had undeclared accounts and payed no taxes. I guess I don’t know why that would in and of itself be a reason to suspec that that money would go to PM.
Not a bad idea to buy PM but I am not sure that these foreign accounts will necessarily migrate that way.
kenc – I think the problem comes in if someone decides they want to diversify their cash risk by opening a foreign bank account. From what I understand a lot of banks will no longer open an account for an American (speaking from an anecdote I heard or read about Canadian banks) because all the paperwork they have to go through along with the inherent risk (of getting the smack down by the full force of the American muscle machine) makes it too much trouble for them.
To answer your speculation, joemanc, I think people will probably diversify in foreign currency etf’s or over forex before buying gold or silver. The common sense of precious metals as a barbarous relic or useless investments that return nothing is going to be very hard for joe average to shake. Any massive run up in the demand for precious metals will happen after 2 major currencies collapse and people literally put two and two together that these paper tickets aren’t backed by anything and that the governments that run them don’t care about the well being of their people as much as they do about keeping their own power. It will take the reality of ‘no other way out’ to make the light bulbs start going off…
Just my opinion, of course, and the tiny size of those markets make it such that you can see great dollar appreciation with only a small rush into it, but I don’t think IRS crackdowns on foreign accounts will be it.
I had overestimated how much Americans had in Swiss accounts.
[quote] According to the DOJ the 52,000 names had a total of $15 billion in their black accounts. [/quote]
However, it looks like there is a $1 Trillion, with a T, still in so-called Black Accounts.
[quote] “Switzerland has become a paradise for foreign capital on which tax is not paid. The uproar from foreign governments is understandable.” These are not the words of a critic of the banks, but of private banker Konrad Hummler. He says that around 30%, or CHF 1,000 billion, of the CHF 2,800 billion or so of foreign assets in Swiss banks is untaxed “black money”. [/quote]
After reading this, if more governments do indeed start going after these hidden accounts, or just the fear factor of government going after individuals, I gotta believe that that money has to go into precious metals.