Perhaps a Warning

 People who do not trust their government to refrain from confiscating their wealth often want to keep some of their money in a foreign country where it would be impossible or at least more difficult for their home country’s larcenous officials to get ahold of it. People who only fear their government might react to its future economic difficulties by blocking its residents from or limiting their ability to move or spend money outside of the country often want to do the same thing. Most financial experts and people in  the financial media have dismissed such worries  by people in the United States and most of the rest of the world’s “developed economies” as misplaced or even paranoid. They have argued that democratic governments can be trusted since they do not expropriate, and it has been a long time since the postwar currency controls in western  Europe ended with no one planning to bring them back. The skeptics among them – some cryptocurrency enthusiasts, some gold bugs, and  a few libertarian financial writers here and there -  are a small minority arguing that expropriation or currency controls are possibilities to take seriously enough to justify precautions, because politicians and bureaucrats just about everywhere are vicious, avaricious, and untrustworthy. At least they have been a small minority.

 Justin Trudeau may be changing that, both for some experts and writers and for some ordinary investors. According to reports in the news, his government in Canada is blocking activity on bank and other financial accounts of protesters and people who donated money to support  the protesters and perhaps expropriating the money in those accounts.  (He is also stealing people’s trucks, threatening to murder their dogs, holding protesters without bail, and sending in thuggish cops to beat up peaceful protesters and their supporters, including women. Fidel would be proud of the boy.) Now people not only have arguments for the untrustworthiness  of even democratic govenrments, but also an important example of it to consider.

After considering that example many people may decide they would like to have some of their assets in places where it would be harder for their civil masters to steal or interfere with them. They may find such places hard to find. Americans with investment income have to report their foreign bank accounts, brokerage accounts,  and trusts to the IRS on their income tax returns.  The difficulty  in  American officials  getting their hands on those accounts would vary from place to place, but I would guess  the feds usually could do it if they really wanted to. They have certainly been able to bully the Swiss into abandoning their principles in regard to privacy.

Some people think cryptocurrencies are a solution to the problem. Cryptocurrency balances probably are harder  to find and grab than bank accounts, and transactions are more nearly private.  However,  people should note that every American who files an income tax return has to tell the feds under penalty of perjury whether he uses cryptocurrencies, and flocks of potential regulators are circling.  Cash is hard to trace and easy to hide, but it is not always easy to store safely. There are limits on how much cash an American can take out of the country at one time without telling the feds, and a person moving cash out of the country might have trouble finding a safe place to keep it if he did not want to use a foreign bank or brokerage house. Jewels and precious metals have the same drawbacks for storage as cash. Some people have suggested buying real estate in a foreign country. As far as I know, foreign property that does not generate income does not have to be reported to the IRS. However real estate is usually expensive and sometimes illiquid, and rules for foreigners owning real property vary by country.

If the remarkable events in Canada lead to many more  people in North America making  financial privacy and keeping some assets out of officials’ reach an important goal, it will be interesting to see what they can work out to accomplish it, if anything. The deck is stacked against them, and the house rules change in the middle of the game whenever the house decides to change them.