Austerity measures in France, Greece, and Spain demanded by these countries' creditors have spurred unemployment, cuts in pension costs, and above all, politically motivated attacks on wealth.
In France, socialist candidate Francois Hollande won a clear victory in the country's May 6 presidential contest. Central to Hollande's platform: an "end to austerity" and a whopping 75% tax rate on France's wealthiest residents. Hollande proposes that the rate apply to anyone earning more than one million euros annually. Not to be outdone, Hollande's opponent, incumbent Nicolas Sarkozy, has proposed that French citizens who relocate abroad be forced to pay any tax savings to the French government. If they fail to do so, they would forfeit their French citizenship and passport.
Perhaps it's time for wealthy French citizens to consider obtaining a second passport, as well as a second home!
Spanish residents who wish to conduct business privately might want to look for a second home as well. Spain's government recently outlawed the use of cash in business transactions larger than 2,500 euros. This is designed to crack down on tax evasion and the underground economy.
But, there is a larger purpose to this initiative. It is to restrict and eventually eliminate the cash economy. Governments don't like cash. Cash is difficult, if not impossible to trace. Cash makes it possible to do business "off the books." Spain's new law is fundamentally a war on cash—one that is sure to spread to other countries.
Meanwhile, in Greece, political chaos reigns. Last week's election led to extreme right-wing and extreme left-wing parties collectively receiving more than 50% of votes. On the left, former communist youth activist Alexis Tsipras is credited for inciting violent protests against austerity measures demanded of Greece by its creditors. On the right, the neo-Nazi "Golden Dawn" party, led by Nikolaos Michaloliako, intimidates journalists who criticize its populist, anti-immigrant stance. According to Michaloliako, "Those who slander us" and "those who betray this country should be afraid: we're coming." Golden Dawn graffiti calls for "a new Holocaust to clear the filth from the country." Needless to say, anyone living in Greece who can afford to find a second home would be well-advised to do so.
Populist proposals to tax the wealthy at confiscatory rates, strip citizenship from those engaged in legal tax avoidance, restrict the use of cash, and punish immigrants should come as no surprise. Such political initiatives tend to proliferate in times of economic crisis. And as global economic collapse intensifies, Europe's political chaos will spread to the United States. Count on it!
The Great Depression of the 1930s provides a clue as to what to expect. One of the most popular politicians of that era was Louisiana Sen. Huey Long. His message was simple: confiscate the fortunes of wealthy Americans and redistribute the money to the masses. President Franklin Roosevelt responded by banning private ownership of gold and silver and imposing a "Wealth Tax," boosting the tax rate for the wealthiest Americans to 79%. And in an orgy of anti-immigration sentiment, more than 400,000 U.S. residents were deported or otherwise forced to leave the United States. Most deportees were immigrants, but some were born in the United States and thus U.S. citizens.
Make no mistake: political developments in Europe are a harbinger of events to come in the United States. As the era of easy money, near-guaranteed employment, and welfare benefits for anyone who asks for them comes to an end in the United States, political polarization will become even more pronounced. Tax hikes, anti-immigrant rhetoric, attacks on wealth, and political violence will become everyday events, as they are in Greece.
Are you prepared for this new reality? Having assets overseas, a suitable residence in a financially stable offshore jurisdiction, and a second passport will only become more important as the collapse of the global financial system accelerates.
Copyright © 2012 by Mark Nestmann
