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SWITZERLAND CAUGHT IN THE CROSSHAIRS OF OVERZEALOUS OECD BUREAUCRATS, BANKRUPT SOCIALISTS AND DERANGED DICTATORS
"Civilization is the progress toward a society of privacy. The savage´s whole existence is public, ruled by the laws of his tribe. Civilization is the process of setting man free from men."
~ Ayn Rand
Dear Mountaineers,
Over the past few years, months and weeks, Switzerland in general -- and its financial services industry in particular -- have been under siege from socialist neighbors and large, barely-solvent OECD countries. The fiscal, economic and protectionist interests of these countries are being prioritized over their own -- and others -- respective laws, international law, their agreements with Switzerland, not to mention the proper and peaceful dealings with an important trade partner.
In the western media, the attacks on Switzerland´s independence, its democratic system and of course its banking secrecy can be heard on nearly a daily basis. As during other historical phases of economic and geo-political crisis, the Swiss are again caught in the crosshairs of international ‘contenders´. As discussed in the article written by Ron Holland that follows, the respective nations should consider the Swiss democratic and economic system as a model to clean up their own disastrously messy bedrooms. Instead, in a concerted effort to eliminate one of the last bastions of freedom and true democracy in the Western hemisphere, they prefer to denigrate Switzerland in their drive for socialist harmonization and serfdom.
I must say that the developments are starting to take on a rather bizarre shape and scale. The Germans appear intent on buying stolen data from a criminal Swiss banker in order to destroy Swiss banking secrecy and the rights to privacy altogether. Up until only about 5 years ago, banking secrecy still existed in Germany. Today, the transparent citizen appears to be a widely accepted principle and objective across Europe and the OECD. Astonishingly, the people are not defending their fundamental rights.
Germans, Italians and French tax residents passing over the border of Switzerland are regularly and increasingly being searched for cash and documents that could tie them to possible hidden accounts. The OECD is considering now listing tax offenses as a form of money laundering. All of this has a very bad taste to it and reminds me of the days when Swiss banking secrecy was erected in response to a need for protection from fascist neighbors.
As if the OECD assualt was not enough, Switzerland is also being pestered by the whimsical insults of Libya, of all places! In his latest fanatic outburst, Libya´s somewhat deranged dictator, Muammar Abut Minyar al-Gaddafi, in response to the recent Swiss ban on minarets, has called for a jihad against Switzerland. Last September, the eccentric dictator had filed a motion with the UN saying the Alpine state should be wiped off the map and split among France, Italy and Germany. Gaddafi presented his grand vision when Libya took on its one-year presidency of the UN. This tells you as much about Mr. Gaddafi as it does about the UN.
Some are now quick to forecast the end of Switzerland, the end of its economic success, its neutrality, and its independence altogether. Some voices, mostly from the increasingly socialistic block of European debtor nations, consider the Swiss model of a direct democracy and decentralized confederation outdated. Clearly, in their view, the proper trend everywhere else is headed toward more central power and less influence by the people. Interestingly, the countries with the strongest tendencies toward socialism and fascism are the ones that propagate the supremacy of their ‘democracy´ the loudest.
Is it possible that the SWISS MODEL IS SIMPLY TOO SUCCESSFUL? In times of economic crisis, success and financial health stands out like a sore thumb. This seems to apply to individuals as well as sovereign nations.
Switzerland´s fiscal health stands in stark contrast to that of the United States and many European countries. The economy as a whole has needed relatively little government financial stimulus to keep it going. The result has been to keep national debt under control. While most countries are piling up debt and running unprecendented deficits, Switzerland booked a federal budget surplus of 2.7 billion Swiss francs ($US 2.51 billion) in 2009 and paid down debt despite reeling from the worst recession in decades. Despite these good fiscal results, the state recently announced its objectives for more savings in the next few years in an effort to balance the books further.
The Swiss trade surplus increased to CHF 2.42 billion in January from CHF 1.36 billion in December. Unemployment, amidst this ‘Great Recession´ is at 5%, a level of umemployment some OECD nations could only dream of during the boom years. The Swiss population is growing, both from increased birth rates as well as from rapidly increasing immigration, mostly from Germans looking for a better place to live. Despite all the leftist news and political nonsense, Swiss banks are recording record inflows of new client money. As London is increasing their taxes, droves of British investment bankers and wealthy entrepreneurs are expected to move to Zurich and Geneva.
Is Switzerland under pressure? Absolutely! Will the Swiss financial services industry be forced to adjust and make more concessions in regard to its client confidentiality laws? It looks like it. Will banking secrecy be lost entirely, possibly with automatic exchange of information? I don´t think so.
Will this destroy Switzerland and end the viability of the ‘Swiss model´? By no means! I am confident that Switzerland will come out at the other end of this mess a winner. For investors, businesses, entrepreneurs and families looking for a solid, safe and legally reliable home, Switzerland remains at the top of the list.
Sincerely,
Your "Swiss Mountain Guide",
Frank R. Suess |
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FREEDOM VS. FORCE - WHY THE FAILING US AND EU SHOULD FOLLOW THE SWISS MODEL
By Ron Holland - published originally on the LewRockwell website and also in Pravda
The European Union and the United States should consider the successful freedom model of Swiss confederation government rather than the failed top down examples of other nations and empires. Few would question that Switzerland is the most secure, stable, and freedom-oriented nation in the world but it is time to ask what is so unique about the Swiss.
The answer is there is nothing particularly different about the nation or its people. They like to work hard, play hard and provide a good life for their families. So do the citizens of most other nations when given the opportunity.
They prefer peace and diplomacy to war and aggression but will fight to defend their independence and liberties. They prefer a stable currency, low taxes, financial privacy, economic prosperity and a government that represents and defends the people. Again, these are not unusual wants but few nations and governments provide an opportunity for these basic human needs and rights to flourish.
So why is Switzerland different? Here are some examples of why the Swiss government model works and the European Union and American Union have failed to deliver on their big-government utopian promises.
National Expansion By Voluntary Association vs. Force - The term "Willensnation" is a Swiss concept of national growth and expansion by attraction through the voluntary association of neighboring principalities, cities, and individuals. This makes Switzerland a nation created by acts of free will rather than force. Growth by attraction of those willing to be part of the Helvetian Confederation rather than war and invasion have served the Swiss well over the last few hundred years of peace and prosperity.
How totally different from the American model of "manifest destiny" and military aggression which is how most of the national expansion of the United States took place. The growth of the Union was followed again by force with the outright invasion of the Southern states that decided to leave by Lincoln´s armies during the War Between the States.
The history of Europe has been far worse than the US both historically and now with the EU. Today the citizens in most European nations were never allowed the opportunity to vote on throwing away their national sovereignty and coming under EU rule. Whether these nations can voluntarily withdraw is still an open question.
Tax Competition vs. Forced Tax Harmonization - In Switzerland the vast majority of taxes are collected at the canton (state) level while the federal income tax level is quite small and comparable to state tax rates in the United States. This allows different cantons and even localities in individual cantons to dramatically compete for residents, corporations, businesses and even retirees.
The tax difference can range over 20% of income from high-tax cantons like Zurich and Geneva to low-tax jurisdictions like Zug. Tax competition keeps the cantonal governments lean and productive and the politicians honest. Retirees from outside Switzerland can even create a type of low-bid competition for a set amount or percentage tax rate between cantons. This is the ultimate in tax competition.
In the US, there is little reason to move or locate businesses in specific states because the majority of the parasitic tax burden is universal at the federal level. The tax difference between the few states with no income tax and the others is minimal and with most states and cities on the verge of bankruptcy like the federal government, taxes will be rising everywhere.
It is the same with the failing European Union. The EU preference is a harmonized tax rate that guarantees a steady supply of revenue to governments and politicians and the ultimate goal is to end low-tax jurisdictions so there will be no tax competition. For example the EU requires a VAT tax of at least 15% in each country whether the nation or people want or need this burden on top of already crushing income tax rates.
Competing Currencies vs. Currency Monopoly - In Switzerland, most retailers, hotels and restaurants will gladly price your purchase in Swiss francs or the Euro depending on your preference. Change is given in Swiss francs but the freedom to choose your preferred currency is usually available. Recently, in the Zurich train station, Burger King was even accepting dollars on a one to one basis with the Swiss franc.
Contrast Swiss currency competition to the silence from US political establishment when Ron Paul called for currency competition here in the US. Private entities like the Liberty Dollar people are threatened and imprisoned just for attempting to offer a gold and silver alternative to the Federal Reserve´s fiat paper dollars which have an intrinsic value of absolute zero.
Here the European Union nations do have a possible alternative to the Euro. Each nation should again issue their own currency and allow it to circulate with the Euro with each national central bank or treasury pegging the national currency in a range relative to the Euro just like the Swiss central bank does.
While much has been written about how the EU is threatened by the government debts and questionable accounting methods used by nations including Portugal, Ireland, Greece and Spain, why should the concern stop here? Today´s Greece could be tomorrow´s UK, France and even the United States. Few of the western democracies have a monopoly on corrupt politicians or out-of-control national debts.
Ultimate Citizen Control vs. Political Establishment - In Switzerland, the voters ultimately rule over the politicians and political elites due to the political rights of referendum and initiative. Is the majority always right, of course not as Thomas Jefferson warned about the dangers of democracy and mob rule but at least they aren´t always wrong like politicians controlled by special interests. Switzerland has a very weak "confederation model" central government with most of the programs, regulations and taxes handled at the local level. This way programs benefit the people rather than powerful federal politicians and interests like in most other nations.
Switzerland has a neutral non-interventionist foreign policy because this is the will of the people. This is why the Swiss waited 50 years to join the United Nations even though most of the UN organization is based in Geneva.
For similar reasons, this is why the Swiss have a stable currency, why individuals can buy stock in their central bank, why they have financial privacy and a low crime rate. The Swiss people demand this from their government or else the people will act. They can nullify a law or legislation by referendum or pass legislation through the right to actually create legislation and laws by-passing parliament with the right of initiative.
Again, this is a direct contrast to the United States where everything runs downhill from the federal government to the states, local jurisdictions and ultimate the people sort of like a political sewer system. Our representative democracy does not allow direct citizen control or oversight at the federal level and this is why the will of the people is usually ignored other than with false rhetoric at election time.
The EU should act as a decentralized confederation of sovereign states similar to the Swiss Confederation as did America´s first government, the Articles of Confederation if it wants to prosper and benefit the nations of Europe. Each nation should be given the opportunity to vote on membership, to have the option of maintaining their own currency and uniqueness of their nation.
Time To Look At A Successful Political Model - Both America and the upstart European Union would do well to look at the Swiss model of limited government over state jurisdictions rather than the failed dictatorial and fascist models which are all too prevalent in history. Freedom, liberty and independence have survived to a remarkable degree in Switzerland for hundreds of years despite the hatred and fear both near and far from nations and politicians more interested in looting their citizens than in promoting liberty and limited, efficient government.
We are in the death throes of the grand experiment of top down, special-interest-controlled government and fake prosperity based on unlimited debt. The time is up for Brussels, sell-out national politicians and Washington. I hope the political elites and international financial interests who screwed the people of the world and future generations all for short-term profits and political gains should be held accountable.
How About Freedom? - Finally, it is time for the nations and peoples of the world whether occupied by corrupt political elites or foreign troops to demand what the Swiss have had for centuries. A government of their own, controlled by the citizens that works to benefit the nation instead of outside interests. I truly believe unique Switzerland has the government model which holds the key to freedom, prosperity and independence for many nations in the world today.
Now is the time to work, build and restore a limited government which promotes freedom and free-markets rather than force in governing and solving problems. George Washington, Thomas Jefferson and our founding fathers would do no less and we can do no more. |
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BAD BANK LOANS SOAR IN AMERICA
The US Federal Deposit Insurance Corporation (FDIC), in its Failed Banks List, names some 20 banks that have failed so far in 2010. Meanwhile, the number of bad loans continues to soar in America.
So, while official accounting is struggling to portray a US economy in recovery, the number of bank failures and bad loans is an objective and not so easily manipulated measure of the true state of an economy largely built on credit - and the rapidly growing debt burden that comes with it.
Meanwhile, "US bank lending falls at the fastest rate in history". That was the headline of a story which appeared on February 17th in the UK Telegraph newspaper. The Telegraph reported that thus far in 2010, US bank lending has fallen by over $US 100 billion, the equivalent of an annual rate of contraction of 16%. At the same time as this news came out, shadowstats.com was reporting that the money supply number the Fed does NOT report -- in other words broad money supply M3 -- has been contracting at a rate of 5.6 % over the past three months.
Source: NY Times / Federal Deposit Insurance Corporation (FDIC)
The Fed´s race against credit DEFLATION in the US economy is being lost. All the stimulus, all the guarantees, all the deficits and all of the outright cash giveaways which the US financial authorities have been lavishing on their economy over the course of the global financial crisis to date have NOT compensated for the shrinkage of credit-based ‘money supply´. Some US banks don´t want to lend, period. Some cannot find any borrowers - outside of the government guaranteed entities - they want to lend to.
But the biggest "problem" is that outside of the government entities, the demand for loans is simply NOT there. |
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NEWS BRIEFS
The Current State of Bank-Client Confidentiality in Switzerland
Bank-client confidentiality protects privacy in accordance with the constitution and laws of Switzerland. Article 13 of the Swiss Federal Constitution confers on every person "the right to receive respect for his/her private and family life". This includes privacy in relation to financial income and assets.
However, this does not cover abuses, particularly of a criminal nature. Bank-client confidentiality has always been waived for criminal investigators, to whom banks are required to pass client information. The addition of new crimes to the statute books has led to the creation of new duties of disclosure, for example regarding insider trading (1988) and money laundering (1990). This also applies to foreign prosecuting authorities, through the medium of international administrative and judicial assistance.
The double taxation agreement between Switzerland and the US extended administrative assistance, which had been restricted to tax fraud, to ‘tax fraud and the like´ (1997). On March 13th, 2009, the Swiss Federal Government announced that it was to adopt the standards of the OECD (Organisation for Economic Cooperation and Development) and in the future would also offer administrative assistance in respect of tax evasion in new negotiations with major financial centers (Article 26 of the OECD Model Tax Convention). This does not, however, imply the automatic exchange of information, as there are strict conditions on administrative assistance (e.g. well-founded suspicion of a tax offense). Otherwise, bank-client confidentiality remains in place.
The following links provide valuable insights into the background and current state of banking secrecy and the financial services industry of Switzerland.
• The Economic Significance of the Swiss Financial Centre
• Were Swiss outmanoeuvred in tax evasion scrum?
• Stolen account data creating tensions between Germany and Switzerland
Stealth Expansion of Government Power
According to the New York Times, "The Obama administration is planning to use the government´s enormous buying power to prod private companies to improve wages and benefits for millions of workers, according to White House officials and several interest groups briefed on the plan... Because nearly one in four workers is employed by companies that have contracts with the federal government, administration officials see the plan as a way to shape social policy and lift more families into the middle class."
This is what Murray Weidenbaum, in his excellent article on The Freeman Online refers to as "Stealth Expansion of Government Power". By altering how it awards $US 500 billion in contracts each year, the government would disqualify more companies with labor, environmental or other violations and give an edge to companies that offer better levels of pay, health coverage, pensions and other benefits, the officials said. More power to government -- more power to those whom government decides to favor...
Go to Story
ECB Discussing Lending Covered Bonds to Banks
The ECB is considering a further support mechanism that could facilitate bank lending and market liquidity. While most European governments are pretending to withdraw from their economic involvement, and while Greece is in fact forced to tighten its belt, alternative methods of ‘lifeline supports´ are devised.
According to Bloomberg, the European Central Bank may lend covered bonds to financial institutions for a fee as part of a strategy that would ease banks´ access to funds. The proposal comes as the ECB tries to withdraw the emergency measures used to fight the financial crisis without spooking investors concerned about Greece´s record budget deficit.
Go to Story
Treasury Paper Anyone?!?! The UK and US are Desperately Seeking Buyers
The Brits and Americans are running out of buyers for their increasingly questionable treasury paper. In January, Bank of England data showed foreign investors had sold the most U.K. government debt in a nine month period, offloading a net 1.49 billion pounds.
Meanwhile, worldwide foreign holdings of US Treasury paper dropped by $US 53 billion in December. All but $US 700 million of this comes from sales by "official" (read foreign central bank) holders. That fall was an all time monthly record, surpassing the $US 44.5 billion drop in April, 2009. But the crowning set of data was the ‘year-on-year´ shift in foreign holdings of Treasury paper. In 2008, foreigners increased their holdings of US Treasuries by $US 456 billion. In 2009, these holdings FELL by $US 500 million.
If there was any question remaining as to why the US Fed instituted a program of direct buying of US Treasury debt in March 2009, this should erase it. In December 2009, foreign selling accelerated to a record monthly pace. Why? The first answer comes in Mr Obama´s recently announced budget for fiscal 2011 - the year which starts on October 1, 2010.
Go to Story
Is the Stage Being Set in the US for a Greek-like Tragedy?
With uncharacteristic bluntness, Federal Reserve Chairman Ben S. Bernanke warned Congress on Wednesday that the United States could soon face a debt crisis like the one in Greece, and declared that the central bank will not help legislators by printing money to pay for the ballooning federal debt. Now this is a really new spin!?I?
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Pound Drops After Polls Show Political Deadlock
The pound may decline further after falling below $1.50 for the first time in almost 10 months as polls showed Britain may have its first minority government since 1974, hampering efforts to reduce the nation´s debt.
The euro fell yesterday against the dollar the most in almost two weeks as a European Union official said that Greece must achieve its 2010 deficit target in order to regain credibility. The yen dropped versus higher-yielding currencies including Brazil´s real after Financial Services Minister, Shizuka Kamei, said the Bank of Japan should consider purchasing government debt.
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Chart of the Day: Inflation-adjusted Dow is Not Impressive
For a long-term perspective effect, today´s chart illustrates the Dow adjusted for inflation since 1925. There are several points of interest. For one, when adjusted for inflation, the bear market that concluded in the early 1980´s was almost as severe as the one that concluded in the early 1930´s. Also, the inflation-adjusted Dow is a little more than double where it was at its 1929 peak and trades 54% above its 1966 peak - not that spectacular of a performance considering the time frames involved.
It is also interesting to note that the Dow is up 57% from its March 9, 2009, low which is actually slightly more than what the inflation-adjusted Dow gained from its 1966 peak to today.
SUPPORTING THE EURO HAS BECOME A HEAVY CHORE - THANKS TO U.S. RATING AGENCY SHINANIGANS...
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| © Copyright 2010, by BFI Capital Group AG, Bahnhofstrasse 29, 6300 Zug, Switzerland, website: www.bficapital.com. The MOUNTAIN VISION UPDATE is published by BFI Capital Group (‘BFI’). Quotation is allowed if credit is given. Although every care has been taken in the preparation of Mountain Vision, BFI does not guarantee and cannot be held responsible for the accuracy of any statistic, statement or representation made. We recommend that you consult qualified professional advisors to determine the applicability of this information and opinion. The publisher is not a registered investment advisor. Readers should not view MOUNTAIN VISION as offering personalized legal or investment advice. |
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