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Archive for the month “June, 2015”

Unfrozen Assets

Prime Real Estate

Prime Real Estate

I think the main reason I have been cautious and conservative all my life is a particular madness I observed in the 1970s as I was on the threshold of adulthood. There was a property boom in the UK and people were making a packet buying and selling anything with a front door. One fine day, a wealthy property dealer from our neighbourhood went spectacularly bust – at that time the biggest bankruptcy in UK history. In the months that followed, news surfaced of local rent collectors, shopkeepers and assorted minnows being declared insolvent for millions that they clearly had never possessed. It transpired that a combination of recommendations and guarantees by bigger players, together with banks thirsty to expand their balance sheets, meant that many idiots went from fashionably poor to unfashionably bankrupt without enjoying the fruits of their lack of labour for even a day.

Prime Real Estate

Prime Real Estate

When the Financial Crisis hit in 2008, it was deja vu. Here were Ireland and Spain going belly-up thanks to property speculation, while the Greeks didn’t even make the effort to invest in property – their country just produced bankruptcy out of thin air. But, it was Iceland that really caught my eye. Igloos not being subject to the same rules of property bubbles as other countries, and Iceland not having Greece’s ability to mug the EU, they had to think of something else. And for a country that had little to offer in the form of blood, toil, tears and sweat – what better luftgesheft than Finance? When everybody was doing it, who would notice little Iceland? When Iceland unsurprisingly slipped under the ice, the whole world looked aghast at how it managed to get there in the first place.

Well, it appears Iceland is finally coming in from the cold. Earlier this month the Government announced that it is relaxing the capital controls its predecessor was forced to impose during the 2008 meltdown, meaning that investors with money tied up in frozen Icelandic assets will be able to pull it home, while Icelanders will be allowed to buy forex. The rub is that any foreigner owed money by the country’s bankrupt banks will either need to agree to a substantial haircut or pay a 39% tax.

Now, when you see an offer like that you start to understand why the Icelandic economy crashed. I was, in fact, already at the end of the next sentence of the article I was reading when my eyes did one of those  typewriter carriage returns, boomeranging back across the page for a second-take. What difference can it make to a foreign investor whether the bit of his money  lopped off by the Icelandic Government is a haircut or a tax? The only thing I could think of is that a haircut will invite a capital loss at home which the disappointed investor might be able to use against other foreign capital gains, while a 39% tax on a capital asset is meaningless tosh.

This nation of fishermen, fresh from fooling the world that they were bankers, seem to think they can do it again – you can fool some of the people all of the time. Now that the chips are down once more, investors should smell something fishy and freeze them out.

Virgin Alpine

He was surprised to discover which nunnery she belonged to.

He was surprised to discover which nunnery she belonged to.

Hamlet’s outburst at Ophelia to ‘get thee to a nunnery’ was intentionally ambiguous. In Elizabethan times a nunnery was either a convent or a brothel. Were the Danish Prince alive today, he could merrily get away with the same line aimed at Switzerland. What happened to the once VIP Escort Agency that, on its way to legitimacy, managed to skip the world’s standard hypocrisy, and within six years achieved a pose of pious humbug. ‘I knew the bride before she was a virgin’ could have been written across the Welcome Hall at Geneva Airport.

There is no need to relate the bawdy history of this mountainous paradise – it will suffice to mention the last century’s safe-haven for the loot of Nazi war criminals, and the recently exposed shenanigans of FIFA, football’s world governing body based in Switzerland (and led by a Swiss citizen – one of the most reviled people in the world not serving time for pedophilia or war crimes).

After telling the US back in 2009 that it would not allow UBS to release records of undeclared bank accounts, now, with all the zeal of the convert,  it is publishing lists of individuals subject to requests for information from other governments.

Switzerland has also joined the OECD’s global transparency initiative, according to which there will be automatic exchange of information without the need for a request from another country. And as for  that bust last month of seven FIFA officials in a Zurich hotel…..

Gentle persuasion

Gentle persuasion

Viewing all this from the comfort and security of my own lily-white country, Switzerland is less the zealous convert, and more the faceless (do you know the name of the Head of State?), small-time con who, when put under the swinging lamp, squeals loud and clear.

I wouldn’t trust Switzerland any further than the next US investigation. A leopard doesn’t change its spots – or at least not so fast. Switzerland is to be avoided, nay evaded, by individuals until such time as it settles down to some form of hypocritical normality like the rest of the world. In the field of corporate tax, on the other hand, where international populism has forced Switzerland into change,  the hypocrisy in offering new incentives to replace the old disgraced ones is Switzerland at its cheekiest best (or worst). Nothing to worry about there (other than the possibility that the rest of the world will get wise to them).

Hero with admirer

Hero with admirer

In the meantime, Switzerland will be feeling just a little more self-righteous – and deserving of the centuries-old honour of providing the Pope’s Swiss Guard.

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