FedUpUSA

Archive for January 1st, 2011

You and I live in a totally different world than the ultra-rich and the international banking elite do.  Many of them live in a world where they simply do not pay income taxes.  Today, it is estimated that a third of all the wealth in the world is held in offshore banks.  So why is so much of the wealth of the globe located in places such as Monaco, the Cayman Islands, Bermuda, the Bahamas, and the Isle of Man?  It isn’t because those are fun places to visit.  It is to avoid taxes.  The super wealthy and the international banking elite think that it is really funny that our paychecks are constantly being drained by federal taxes, state taxes and Social Security taxes while they literally pay nothing at all.  These incredibly rich elitists make a ton of money doing business in wealthy western nations and then they transfer virtually all of their profits offshore where they don’t have to contribute any of it in taxes.  It works out really great for them, but it sucks for the rest of us.

It is estimated that approximately $1.4 trillion is held in offshore banks in the Cayman Islands alone. According to an article in Forbes magazine, there is a total of approximately 15 trillion to 20 trillion dollars in offshore bank accounts, brokerage accounts and hedge fund portfolios.

A recent article in the Guardian stated that a third of all the wealth on the entire globe is held in offshore banks and that the vast majority of international banking transactions take place in these tax havens….

On a conservative estimate, a third of the world’s wealth is held offshore, with 80% of international banking transactions taking place there. More than half the capital in the world’s stock exchanges is “parked” offshore at some point.

All of the biggest banks in the world are involved in playing this game.  All of them have big branches in these various tax havens.  All of them work very hard to ensure that the tax burdens on their ultra-rich clients are as light as possible.

Nobody knows for sure how much money big governments around the globe are missing out on from all this tax avoidance, but everyone agrees the number is huge.  It is at least in the hundreds of billions of dollars every single year.

It is a shadow banking system that most Americans don’t know anything about. Most Americans don’t have the resources to be able to set up shell companies in half a dozen different countries so that they can “filter” their profits.  Most Americans don’t know a thing about complicated tax avoidance plans that tax lawyers use such as the “Double Irish” and the “Dutch Sandwich”.  Most Americans would have no idea how to eventually have most of the money that they make end up in Bermuda so that it can avoid taxes.

No, most Americans just go to work every week and have their hard earned paychecks raped by an oppressive taxation system.

To the ultra-wealthy and the international banking system we are all just a bunch of suckers.  In fact, a big portion of our taxes ends up going into their pockets to pay the interest on all of the government debt that they are holding.

When the global elite decide that they want to do some “social engineering” inside the big countries where they operate, they just set up tax-free “charitable trusts” that usually aren’t very “charity-oriented” at all.  Rather, many of these “charitable trusts” push the various radical political and social agendas that many of these elitists love to promote.

Examples of this include The Rockefeller Foundation and The Ford Foundation.  George Soros also loves to use entities like these to push his various agendas.

The wealthy know how to play the game.  For most of the rest of us, the game kicks our behinds.

So for those who are constantly screaming “tax the rich”, the cold, hard truth of the matter is that those who are truly ultra-rich know how to escape just about any oppressive tax regime you may set up.  They are light years ahead of the rest of us in knowing how to play the game.

What are you going to do?

Kick them out of the country?

Yeah, they will be really sad to spend even more time down in Bermuda or in the Cayman Islands.

Are you going to kick out any company that has any stock holders that have offshore bank accounts?

Well, you would have to kick out virtually every single major corporation in the United States.

This is just another example of how deeply flawed our system of income taxation really is.

Do you want to become a master of the tax code?

You might want to set aside some time for reading.

A lot of time.

The income tax code and its associated regulations contain well over 7 million words and are more than seven times longer than the Bible.

The IRS employs more than 90,000 people and it costs more than 11 billion dollars a year to operate.

Talk about a colossal waste of resources.

Meanwhile, the ultra-rich are just parking all of their money in Bermuda and the Caymans and are laughing at all the rest of us.

It would be hard to understate just how much influence and power all of this offshore money has.  The ultra-wealthy and the elite international bankers own many of our largest corporations, they exert influence over central banks, they control big media outlets and they “contribute money” (bribes) to political campaigns.

The elite are always two steps ahead of any new laws that get passed.  They are masters at moving money around.  They will quickly find a half dozen ways around any new law that you could possibly dream up.

Most of us never even get to meet any of these incredibly wealthy individuals.  They don’t attend the local church or go shopping down at the local shopping mall.

No, the global elite generally live in very exclusive gated estates or hang out at the most expensive private resorts.  They don’t spend a lot of time mixing with the rabble.

It turns out that life is pretty good when you have a ton of money coming in and you pay next to nothing in taxes.

So the next time you get your paycheck and you see that a half a dozen things have been taken out of it, take a few moments to think of the global elite that don’t pay any taxes at all and see how that makes you feel.

Hopefully when enough Americans get mad enough and start demanding change, the current income tax system will be scrapped for good and something much more equitable will be put in place instead.

The Economic Collapse

When people talk about the credit bubble they typically refer to the housing bubble and the trillions of dollars of debt secured by real estate. Yet the credit bubble also applies to student loans, government debt, and those pesky wallet hugging credit cards.  The American economy has embraced credit cards as quickly as apple pie or a weekend picnic at the park.  During this holiday season many people pulled out the plastic and loaded up on debt to face a hefty bill come 2011.  While banks have generously gorged at the taxpayer bailout trough, they have slowly put a tourniquet on the amount of credit Americans can access.  In other words banks have applied standards to American consumers that they are not willing to adhere to themselves.  The total amount of credit card debt outstanding has contracted vigorously since the debt crisis emerged.

The below chart highlights the total amount of credit card debt in the United States:

The above is a stunning chart because it highlights how quickly discretionary debt has been pulled off the shelf for most average Americans.  Banks are selectively going after the quality borrowers while slowly cutting off borrowers who are at the end of their financial ropes.  The blank check that was written to the banks will not be extended to these borrowers.  Banks still have their platinum credit card with no limit attached to the US taxpayer.  The Federal Reserve and US Treasury call this card the bank of too big to fail.  At the same time most Americans have seen their credit limits slashed and have seen the amount of 0 percent offers go from a flood to a drought in their mailbox.  The above chart went from a peak near $1 trillion to the current $800 billion outstanding in revolving debt.  Some of this is being paid off but a large part of it is being written off via bankruptcy.

Consumer bankruptcies keep moving up:

Source:  Calculated Risk

It is interesting that little coverage is given to the crisis in credit cards in the United States.  The assumption for spending is always based on the notion that people will spend beyond their means when we look at mainstream advertising.  Spend today what you will earn tomorrow is typically the motto.  No reasonable retailer will ask a potential customer if they have their household balance sheet in order before making that additional flat screen TV purchase.  Yet banks are dealing with peak debt and many Americans are simply unable to make their payments on revolving debt.  We already know that many are unable to make their mortgage payments with millions of Americans in foreclosure or living in a home where they are no longer make a payment.  With credit card debt banks have little collateral to go after and much of this is gone and is best left to history.  Yet the lingering issue of bankruptcies will stay with us for years to come.

Many of you will ask why did bankruptcy filings spike in 2005?  This spike occurred because the bankruptcy process became more complicated for average Americans with legislation.  Income testing and additional protections for the banks were put in place to siphon off as much from Americans as possible.  After all, if banks actually spent time doing due diligence instead of relying on bailouts then things wouldn’t be so bad.  Yet banks have little incentive to change their practices and the fact that bankruptcies are elevated with the new legislation is a testament to how bad things are in the real economy.

Another fascinating aspect of this is per capita the states with the biggest housing bubble also are seeing the largest amount of bankruptcy filings:

Source:  US Courts

The too big to fail banks are at the center of this mess with credit cards as well:

U.S. general purpose credit card market share in 2008 based on outstandings
(Note: 2007 ranking in parentheses)
1. JPMorgan Chase – 21.22% (17.74%)
2. Bank of America – 19.25% (19.36%)
3. Citi – 12.35% (13.03%)
4. American Express – 10.19% (11.40%)
5. Capital One – 6.95% (6.95%)
6. Discover – 5.75% (5.65%)
7. Wells Fargo – 4.21% (3.07%)
8. HSBC – 3.47% (3.65%)
9. U.S. Bank – 2.14% (1.84%)
10. USAA Savings – 2.02% (2.01%)

Source:  Creditcards.com
In the end the American consumer is facing a drastically new financial market.  Credit card debt never contracted on a year over year basis since 1965 but it did in this crisis.  The amount of credit card debt outstanding has fallen nearly 20 percent from its peak only a few years ago.  Yet the economy at least measured by GDP has grown:

All the while unemployment remains persistently high.  Banks and large corporations have benefitted from this crisis by suppressing wages, using government plutocracy power to their benefit, and generously taking on bailout after bailout.  So the economy has grown for these individuals and that is why the top 1 percent now controls the largest amount of wealth since the Great Depression.  Credit cards were merely another hammer in the banking tool bag that hid the fact that the middle class was being banished in America.  Little by little with toxic mortgages, 0 down offers, and student loans for bogus colleges did Americans get sucked into a debt pipedream designed by the banks.  It is no surprise that for each of these categories, the too big to fail continually show up like unwanted party guests.  With credit card debt contracting and bankruptcies on the rise we get a true glimpse of what is going on for average Americans.

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