Monday, October 5, 2009

Client Questions on Credit Union Safety, Interest Rate Rises, Inflation

Two Client Questions


Q1: how does a large credit union compare with a savings and loan association with regard to overall safety and vulnerability to failure?

A:Generally, there is little difference. Both lend out money obtained via demand deposits and are therefor basically illiquid.


Q2: What causes interest rates to rise?

A: interest rates rise when the demand to borrow money is greater than the supply of funds available for loan.

In my opinion, a number of things may cause this situation:

1]An increase in the general markets expectations for inflation

2] Changes in tax laws that increase the tax -saving value of interest deductions- causing many to favor borrowing ahead of saving money.

3] Sales of treasury bills or bonds by the Federal Reserve system - which "tightens" the money supply. this causes less money to become available for lending, a shortage of liquidity and an unexpected slowing of business, leading more people to want to borrow money.

Reader Question on Inflation [from a forum]:

Q: "Ok I get inflation raises prices due to the devaluing of currency...and I get that prices are set by subjective premises of individuals but how do these two come together? How do prices fluctuate due to inflation yet also do to subjective value?"

A: I have always liked Austrian economist Ludwig Von Mises' explanation, as found in his book "The Theory of Money and Credit" , because it is so simple, and makes so much sense.

He points out that money [ i.e.paper money, " fiat currencies", " fiduciary media" etc.] is merely a commodity, albeit one with a negligible , close to zero cost of production.

Just like any other commodity it is therefor subject to the laws of supply and demand [a.k.a . the subjective valuations of individuals]; therefor its actual value at any point in time [i.e real world, market value, as opposed to the denomination printed on it- $1, $5, $100 etc.], just like any other commodity, is always ultimately set by the final outcome of the interplay of the two factors, supply, and the demand for that supply.

[Nov.2010 update/clarification: the term "demand for money" on this site refers specifically to the individuals demand to hold on to $'s, or whatever fiat currency being used, and to _not _ spend them.

The desire to hold on to more, or to spend more of a currency is an ever changing factor mostly accounted for by psychological factors that are both unpredictable and individually unique - however the end result will still be a general tendency to hold on to to more, or hold on to less currency units than previously felt necessary.]


"Inflation" is the term for a result, the end result of the supply/demand equation wherein the broad mass of individuals have [individually and subjectively] decided that the paper money produced is worth less to each of them than the broad mass of other goods /commodities available to them, so they decide to hold less $'s .

"Deflation" is the opposite; the broad mass of individuals have [individually/ subjectively] increased their (e)valuation of paper currency relative to other goods/commodities [for whatever reason], and desire to hold on to more [$'s] than they did [collectively] previously.

N.B. increasing the Money supply Does not Necessarily Cause Inflation!

Although increasing the money supply may cause inflation, it is not a foregone conclusion simply because demand for that supply can never be anticipated.

For example, if demand for money consistently outpaces the increased supply [of newly created money] , deflation [i.e increased consumer valuation of paper money] , will still result.

Conversely, if the money supply is decreased [less issued], but the demand for that decreasing supply drops even faster, inflation [i.e decreased consumer valuation of each $], would still result.

Tuesday, September 1, 2009

Inflation,The Federal Reserve and The Consumer Price Index

Inflation Myths,The Federal Reserve,The Consumer Price Index 1913-2000, and How to Profit From Renewed Inflation




Click on Image to Enlarge

Above is a graph that I used in consultation with a client a few months ago to aid in our discussions concerning the safety [or not] of their then long-term savings plan. The graph shows the change in the US Consumer Price Index [C.P.I.] since the inception of the Federal Reserve system in 1913, through the year 2000.*

For the purposes of this graph, the C.P.I. changes were calculated using year 2000 value U.S.$'s . **


Introduction

As a financial safety consultant, my job is most often more psychology than anything else, involving as it does the close examination of a clients beliefs about investing, saving, economic principles etc. etc., and seeing if, for that person, their beliefs and previously unquestioned assumptions stand up to close scrutiny, or whether they are in actuality harmful to the clients long term savings plans.

As the client for whom the graph above was constructed has herself since discovered, in our numerous discussions over the past two months, there are endless numbers of myths concerning economic issues, the economy, investing, saving etc., [most of which she now assures me she has been "cured" of!] - any one of which could cause serious future damage to the overall value of your long term savings [ e.g.money saved for that "rainy day", or for retirement etc.] if consistently acted on/believed in.


Blog Posts, Free Time, Clients and Responsibilities

As previous clients are usually aware , when I accept a client, in order to really help them, I feel obligated to fully concentrate on their questions, fears , and my answers, for as long as it takes. This can be very time consuming, leaving little time for casual "blogging" [or anything else for that matter!] .

Having just recently finished up with a client, and with none on the horizon for a month or so, I have more free time temporarily and as long as this situation lasts I can devote a little more time to the blog - hence this fairly long new post.

Two Common Myths About Inflation For You to Consider

Briefly examined below are two of the most common myths [and potentially most damaging] regarding the economic scenario labelled " inflation"- a condition which was last of serious concern to US savers and investors in the late 1970's and early 1980's when interest rates on 20 year plus U.S. Treasury bonds peaked at around 15% and gold briefly reached more than $800 per ounce.

What Is Inflation?

For the purposes of this article, inflation is a term used to describe a specific economic state of affairs- that is, a condition which results in a steadily occurring increase in the general price level [i.e. the cost of most goods and services in an economy, as measured by units of the government issued legal tender in use], so that overall, more units of the legal currency [$'s in the U.S.] are required to buy the same mount of goods and services than were required 3 months, 6 months, or a year or more ago.

Cause [a] Versus Effect[b]

Effects of Inflation [b]

The effect of inflation is to make most everything you buy on a day to day basis appear to cost more . You need more dollars and consistently higher wages in order to keep up with the rising cost of living- to buy that bar of soap, see that movie, rent that car, buy gas, light bulbs etc. etc., than you did last week, last month or last year.

I used the word "appear" because appearances are deceptive here.

Cause of Inflation[a]

Actually what has happened is that each dollar [or whatever legal currency you happen to be using], has lost value relative to it previous value, so that now more of them are needed to buy the exact same amounts of goods and services than were previously needed in the past[e.g. last month, or last year]. Each dollar is actually now worth less than it was worth previously.

Obviously this situation can cause considerable anxiety to the average consumer, even without long term savings- this anxiety will increase even more for a person with substantial long term savings which are not sufficiently protected against the withering effects of the inflation - for example, a person with most of their life savings held in municipal, corporate, or government bonds, or even in stocks.

Why?

As to exactly why this [loss of per $ value] occurs, brings us to our first inflation myth:

Inflation myth [1]: "Inflation is caused by increases in the money supply".

Actually, just like everything else, the value, or price of money [i.e. its per unit value, or purchasing power] is subject to the laws of supply and demand, therefor it is more accurate to say that inflation[i.e. a lower value or "price" for each $] is caused by an increase in the supply of money above and beyond the demand for it, with the result that each $ unit loses value.

[Nov.2010 update/clarification: the term "demand for money" on this site refers specifically to the individuals demand to hold on to $'s, or whatever fiat currency being used, and to _not_ spend them.

The desire to hold on to more, or to spend more of a currency is an ever changing factor mostly accounted for by psychological factors that are both unpredictable and individually unique - however the end result will still be a general tendency to hold on to to more, or hold on to less currency units than previously felt necessary.]



Half Truth?

Inflation myth [1] is a half truth at best because logically, using the supply /demand principle, if the supply of money increases, yet the demand for money (i)keeps up with or (ii) surpasses that increased supply, inflation will not result - in fact, if demand consistently outstrips that increased supply (ii), deflation [i.e an increase in the per unit buying power of each $] will inevitably occur!

Impossible To Be More Specific

Despite what you may have heard or read, it is impossible to more specific about the cause of inflation than what I have just outlined : ultimately, inflation is nothing more than a "mismatch", or differential, between the supply of money and the demand for that supply - a mismatch that might occur for any number of reasons.

Inflation Myth [2]: "inflation can be predicted" [perhaps the most damaging myth of all]

Despite my graph [above] that shows a seemingly irrefutable link between the creation of the Federal Reserve system in 1913 and a persistent, historic decline [an almost 100%+ loss in the relative value of the $U.S.from 1913-2000, when measured in year 2000 $'s], Financial Safety Rule #1 says that no economic future event can be predicted with certainty - including inflation.

Therefor, although in my graph inflation appears to be a historical constant and future certainty, realistically there is no hard guarantee or economic rule that says that rampant, incessant ,damaging, inflationary effects and conditions must definitely occur in your own lifetime. It might, but then again, it just might not, it is impossible to know one way or another for certain.

How To Profit From Inflation - Got Money You Can Afford To Lose?

However if you have divided your holdings into 2 groups: [1] money you cannot afford to lose, and[2] money you can afford to lose, I can see no harm in using some, or possibly all of the money you can afford to lose to speculate in certain investments [such as gold bullion] should you believe, for whatever reason, that inflation is about to make a serious comeback. [ newly revised/edited copies of my 17 page guide "Onebornfree's Guide To Safe Speculations" are available free to current clients, and for $250 [Nov.2010 price, subject to change] to non-clients].

Financial Safety Rule #1: Nobody Can Consistently Predict the Future of Inflation

To be clear, neither you, nor I, and no financial graph, no economist [regardless of which "school" of economic thought they adhere to], no investment advisor, no banker, no financial speculator, no "investment portfolio manager", no financial "expert" of any description ,and no other fortune teller of any description can consistently and accurately predict future economic events, including the likelihood or unlikelihood of inflation.

Conclusion

A realistic long term savings plan must protect against the effects of unexpected inflation at all times. Therefor it must always contain elements/ vehicles that easily and safely accomplish this task.

However,putting all of one's long term savings in "inflation proof" investment vehicles is both dangerous and makes little sense in light of inflation myth [2], as it leaves your savings open to large losses in value through the occurrence of other unexpected future economic scenarios [such as deflation], and also does not contain any way of profiting should "good times"[i.e. rising stock markets] make an unexpected comeback.

Notes

* Consumer Price Index general information: http://en.wikipedia.org/wiki/Consumer_price_index

** Log versus Linear Scales

The vertical [y] scale axis uses a log [i.e "logarythmic" or "ratio"] scale of value [see also: http://en.wikipedia.org/wiki/Log_scale ] as I feel that often such a scale gives a more accurate visual representation of change , as changes over the length of time scale [ x- horizontal axis] at any point can be viewed and compared, percentage wise, to any other point in time.

In other words, the viewer may pick any point in time and then quickly measure/compare its percentage increase or decrease relative to a previous point in time.

This is not possible with the more widely used linear vertical scale, which necessarily gives equal weight/value to any point on the vertical [y]axis, for any movement from left to right along the horizontal [x] time axis.
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More About Financial Safety Services

Financial Safety Services is a private , mostly off-line consulting service that attempts to show its real-time [i.e. non-internet derived] clients how to speculate safely with money that they can afford to lose. Money that the client cannot afford to lose should never be risked in these speculations

Nearly all of Financial Safety Services clients to date have been found via direct [i.e off-line, in-person] referral from previously satisfied clients only.

No attempts are made to procure clientele via the selling of the sporadic, incomplete online information posted at this site. All valuable information is sold to clients, via e-mail, or preferably in person, on a "need to know" customized basis, depending on their specific speculative wants/needs.

Therefor any/all posts at this site are for the reference and possible benefit of pre-existing , real-world, paying clients only as part of my services [and to perhaps help emphasize a particular point I make to them in private], and never for the benefit of the general reading public and casual internet reader at large. Internet posts are therfor not made on a regular schedule in order to build an on-line audience; only when I feel that so doing is beneficial to my actual existing clientele.

I likewise have no interest in gaining clients first hand from any posts made either here or elsewhere [if it happens, it happens!] - to date [20 years+], nearly all of my previous clients have come to me via direct, in-person referral from other satisfied clients- that is, [1]an existing client personally recommends my services to a close friend, [2] the friend contacts me, [3]we discuss their wants/needs, [4] I make a decision as to whether or not I can really help them, [5] We come to a financial agreement- or not :-) .

None- Client Questions?

Should a casual reader/none client have a serious question about an assertion I make at this site they must write to me at: onebornfreeatyahoodotcom and I will do my best to answer their question. Their first question will usually be answered for free. After that, fees may apply.

Current Client Questions.

All existing, paying client questions are of course, answered for free [usually via private e-mail]- it is part of the service!
onebornfreeatyahoodotcom

Tuesday, June 2, 2009

Recession-Plagued Nation Demands New Bubble To Invest In

WASHINGTON—A panel of top business leaders testified before Congress about the worsening recession Monday, demanding the government provide Americans with a new irresponsible and largely illusory economic bubble in which to invest.

"What America needs right now is not more talk and long-term strategy, but a concrete way to create more imaginary wealth in the very immediate future," said Thomas Jenkins, CFO of the Boston-area Jenkins Financial Group, a bubble-based investment firm. "We are in a crisis, and that crisis demands an unviable short-term solution."

The current economic woes, brought on by the collapse of the so-called "housing bubble," are considered the worst to hit investors since the equally untenable dot-com bubble burst in 2001. According to investment experts, now that the option of making millions of dollars in a short time with imaginary profits from bad real-estate deals has disappeared, the need for another spontaneous make-believe source of wealth has never been more urgent.

"Perhaps the new bubble could have something to do with watching movies on cell phones," said investment banker Greg Carlisle of the New York firm Carlisle, Shaloe & Graves. "Or, say, medicine, or shipping. Or clouds. The manner of bubble isn't important—just as long as it creates a hugely overvalued market based on nothing more than whimsical fantasy and saddled with the potential for a long-term accrual of debts that will never be paid back, thereby unleashing a ripple effect that will take nearly a decade to correct."

"The U.S. economy cannot survive on sound investments alone," Carlisle added.

Congress is currently considering an emergency economic-stimulus measure, tentatively called the Bubble Act, which would order the Federal Reserve to† begin encouraging massive private investment in some fantastical financial scheme in order to get the nation's false economy back on track.

Current bubbles being considered include the handheld electronics bubble, the undersea-mining-rights bubble, and the decorative office-plant bubble. Additional options include speculative trading in fairy dust—which lobbyists point out has the advantage of being an entirely imaginary commodity to begin with—and a bubble based around a hypothetical, to-be-determined product called "widgets."

The most support thus far has gone toward the so-called paper bubble. In this appealing scenario, various privately issued pieces of paper, backed by government tax incentives but entirely worthless, would temporarily be given grossly inflated artificial values and sold to unsuspecting stockholders by greedy and unscrupulous entrepreneurs.

"Little pieces of paper are the next big thing," speculator Joanna Nadir, of Falls Church, VA said. "Just keep telling yourself that. If enough people can be talked into thinking it's legitimate, it will become temporarily true."

Demand for a new investment bubble began months ago, when the subprime mortgage bubble burst and left the business world without a suitable source of pretend income. But as more and more time has passed with no substitute bubble forthcoming, investors have begun to fear that the worst-case scenario—an outcome known among economists as "real-world repercussions"—may be inevitable.

"Every American family deserves a false sense of security," said Chris Reppto, a risk analyst for Citigroup in New York. "Once we have a bubble to provide a fragile foundation, we can begin building pyramid scheme on top of pyramid scheme, and before we know it, the financial situation will return to normal."

Despite the overwhelming support for a new bubble among investors, some in Washington are critical of the idea, calling continued reliance on bubble-based economics a mistake. Regardless of the outcome of this week's congressional hearings, however, one thing will remain certain: The calls for a new bubble are only going to get louder.

"America needs another bubble," said Chicago investor Bob Taiken. "At this point, bubbles are the only thing keeping us afloat."

SOURCE

Friday, May 1, 2009

Financial Safety Rule #1

Click on image to enlarge

Financial Safety and Investment Truth That You Don't Want to Hear:

[last edited: 09/25/11]

Financial Safety Rule #1 says: " despite many claims to the contrary, no one, not even your favorite economist or investment advisor, can reliably, and consistently, predict future economic events."

That being the case, in order to broadly protect your savings from unforeseen and unforeseeable economic events/scenarios, you must take two very important steps:

Financial Safety Step [1]:

divide your savings into two distinct, not to be mixed, categories:

a] money that you cannot afford to lose.

b] money you can afford to lose.

If you have no money for category [b], don't worry, it is not as important, category [a] is much more important as it will contain long term savings for retirement etc.

Financial Safety Step [2]:

having completed step [1], you must then set about constructing a long term savings plan for the money you cannot afford to lose [a], one that broadly self-protects/ insures itself against unforeseen economic events [i.e recession, deflation,hyper inflation etc.] as far as possible without you having to do any daily, weekly or monthly buying, selling or trading, and without the need for you to make predictions about future economic events,and which boasts the inflation beating results shown in the graph above for the savings plan that I have personally recommended for more than 15 years, and that is, at the same time, also able to automatically profit from those unforeseen "economic good times" if and when they occur in that unknown future.

This plan has produced annual gains averaging between 6-9% above the annual rate of inflation for 30 + years, with no buying or selling involved outside a once per end of the year buy/sell re-adjustment to restore percentage allocations for each investment class back to their original, beginning of year allocations .

If you are seriously interested in such a long term savings plan, let me know.*

Do You Have Money You Can Afford To Lose?

Also, if after taking financial safety steps 1] and 2] you find that you have money that you can afford to lose [category [b]], and need some guidelines for safe speculation, let me know.

For more truth that you probably don't want to know, stay tuned to this blog!

Regards,Onebornfree @ yahoo dot com

***********************************************************************

More About Financial Safety Services

Financial Safety Services is a private , mostly off-line consulting service that attempts to show its real-time [i.e. non-internet derived] clients how to speculate safely with money that they can afford to lose. Money that the client cannot afford to lose should never be risked in these speculations

Nearly all of Financial Safety Services clients to date have been found via direct [i.e off-line, in-person] referral from previously satisfied clients only.

No attempts are made to procure clientele via the selling of the sporadic, incomplete online information posted at this site. All valuable information is sold to clients, via e-mail, or preferably in person, on a "need to know" customized basis, depending on their specific speculative wants/needs.

Therefor any/all posts at this site are for the reference and possible benefit of pre-existing , real-world, paying clients only as part of my services [and to perhaps help emphasize a particular point I make to them in private], and never for the benefit of the general reading public and casual internet reader at large. Internet posts are therfor not made on a regular schedule in order to build an on-line audience; only when I feel that so doing is beneficial to my actual existing clientele.

I likewise have no interest in gaining clients first hand from any posts made either here or elsewhere [if it happens, it happens!] - to date [20 years+], nearly all of my previous clients have come to me via direct, in-person referral from other satisfied clients- that is, [1]an existing client personally recommends my services to a close friend, [2] the friend contacts me, [3]we discuss their wants/needs, [4] I make a decision as to whether or not I can really help them, [5] We come to a financial agreement- or not :-) .

None- Client Questions?

Should a casual reader/none client have a serious question about an assertion I make at this site they must write to me at: onebornfreeatyahoodotcom and I will do my best to answer their question. Their first question will usually be answered for free. After that, fees may apply.

Current Client Questions.

All existing, paying client questions are of course, answered for free [usually via private e-mail]- it is part of the service!
onebornfreeatyahoodotcom

Friday, March 27, 2009

The F.D.I.C., or “Fantasy Deposit Insurance Corporation”

[The article reprinted below outlines a problem with US banks that I have been personally aware of for 20+ years, but which few who I have ever talked to have ever understood or acknowledged.

However the current systemic crisis has forced some of the newly nervous to reconsider my warnings and to look a little closer at what I have always maintained vis a vis US banks, and to perhaps take those warnings a little more seriously.

Simple Steps For Your Banking Safety

There are several steps that can be taken to ease concerns over US bank deposits, ranging from the simple and straightforward to the more esoteric and complex.

If you would like to discuss steps that you yourself can take to protect/ insure your own deposits, please let me know.]

Selling Certainty in Uncertain Times

"If there’s one thing that constitutes a bankers’ worst nightmare, it’s a bank run.

Because – as we can see in today’s markets – banks are more than happy to carry on the illusion of “solvency” as long as it’s in the banker’s best interest.

But a run? Well, with a run…all bets are off. Depositors cry “Show me the money!” and the jig is up. The bank doesn’t have time to wait for loans to be repaid. They suddenly can’t fulfill the massive demand from their depositors and everyone loses (except the lucky few that reach the teller’s window first).

That’s why the Federal Deposit Insurance Corporation (FDIC) is one of the greatest achievements in the history of bank regulation; because it prevents bank runs.

How? Not by actually insuring all deposits, but by assuring depositors’ peace of mind.
Uncle Sam Says: “Don’t Worry…The Money’s There”

You see, the FDIC’s dirty little secret is that they don’t really have enough money to back all the deposits they’re insuring.

They didn’t even receive the authority to collect their insurance premiums until 2006…shortly before Sheila Bair took office. Even more shocking is the fact that the FDIC collected no insurance premiums whatsoever from most banks in the decade between 1996 and 2006, according to the Boston Globe.

Why hasn’t this mattered? Because the FDIC is a security blanket…and it’s actual functionability is secondary to the psychological effect it has on the depositors it insures.

Step back and think about it for a second. Have you been watching the evening news lately? How many times have your local news anchors reminded you that the FDIC insures all bank deposits? Likely more than once.

Or perhaps you caught CNBC’s “Special Town Hall Event: Who’s Protecting Our Money?” featuring Jim Cramer and Erin Burnett. Did you feel like you were being “sold” on the legitimacy…the credibility of FDIC insurance?

If you can be convinced that the FDIC will protect your deposits, then it’s essentially served its purpose. Because it will keep you – and the rest of America – from rushing to the bank to collect your deposits in the case of an emergency. As such, it guarantees that banks won’t face the imminent demise of a run…giving them time to rebuild their balance sheets and muster the funding to make their depositors whole.

And the FDIC has had a massive impact, even on today’s crisis.

Think about it. If the FDIC didn’t exist, who would still have any money with Citigroup? Normally speaking, depositors would be extremely concerned by the fact that Citi (or indeed any bank) is – for all intents and purposes – currently insolvent.

What beyond the FDIC’s guaranteed insurance could possibly compel a depositor to trust that institution with his or her continued business?
Competing for the Title “Worst Insurer on the Planet”

Now we’re not saying that the FDIC is insolvent. We’re not saying that they’re likely to fail at their obligations. If worse comes to worst, Congress will back them and print fresh dollars to satisfy their obligations.

But inquiring minds want to know…just how deep in the hole are they?

The answer; pretty deep.

According to a Bloomberg report from September of last year (my, what a difference a few months can make) the FDIC had assets of US$45.2 Billion, and a US$70 Billion dollar line of credit, bolstered by promises of more credit being made available when it becomes necessary.

Behind that limited pool of assets, the FDIC was – as of Bloomberg’s report last year – guaranteeing some US$4.5 trillion in deposits (under the US$100,000 rule). And after expanding coverage to all deposits under US$250,000, that pool of deposits nearly doubled (see here for our full exposé). Either way, their coverage works out to 1% or less of the deposits in question.

And adding more fuel to the fire is the FDIC’s own “troubled bank” list. After 25 bank closures in 2008 and 17 so far this year, the list has ballooned from 171 to 252 banks, and the pool of associated “troubled bank” assets from US$115.6 Billion to US$159 Billion…roughly matching the FDIC’s pool of assets.

Facing a list of “troubled banks” that could wipe out the FDIC’s reserves, it’s no wonder that they’ve stepped up the PR campaign to sooth the public.

But the harsh reality is that they – like their long-forgotten sister organization, the “Federal Savings and Loan Insurance Corporation” – face a problem that’s too big for them to handle. They may, like the FSLIC, face several bouts of insolvency in the coming years. And the face of the organization might even change drastically before it’s all said and done.

But what if the FDIC takes over your bank? And what if they’re busy scheduling “emergency funding” when they do so?"

Article reprinted from : The Sovereign Society Offshore A-Letter
Thursday, March 12, 2009 - Vol. 11, No. 65

Monday, March 23, 2009

UBS Bank- A Swiss or an American Bank?

U.B.S., a "Swiss Bank" in Name Only

Because of the troubles/ travails that UBS bank and its US clients have encountered with the US government, it has been assumed, by some people who really should know better, that this means that Swiss banks in general are no longer safe for US law-abiding depositors demanding financial privacy, and that their accounts are no longer shielded from the prying eyes of the US government.


As usual, nothing could be further from the truth.

Surprise! UBS is Subject to US Banking Regulations and Tax Law.!

Even though UBS originated in Switzerland, and even though it has many branches worldwide, merely by maintaining branches in the USA [even just one], legally speaking, as far as any U.S citizen depositor is concerned ,U.B.S. is NOT a Swiss bank subject only to Swiss banking law , Swiss tax law [tax evasion is not a crime in Switzerland] , and Swiss courts, but effectively a US bank subject to US banking law, US judges and courts.


The negative publicity that the UBS case has generated about Swiss Banks in general is, as well as being the product of ignorance about the subject, most likely primarily designed to:

[1] scare US citizens into staying within the establishment US banking system [UBS is a foreign intruder/competitor on a domestic market dominated by B of A, Chase, etc.], and...

[2] to discourage thoughts of tax evasion by US taxpayers. Notice how the story has been built up post Christmas, in the New Year, before tax filing deadline of April 14th 2009. Expect this story, plus others in a similar vein [i.e. "B.B.B." or "basic bush-beating] to increase in frequency through 04/14/09.


If you want financial privacy via an offshore bank account [for whatever reason], and while it is still legal to do so, do not open such an account with any bank that has ANY branches in the US, or even has branches in an overseas territory at the mercy and influence of the US government..

Confiscation/ Seizure of US Citizen Depositors Funds

Remember also, any bank account held in the US or overseas that is subject to US law , in any US regulated domestic or foreign bank branch [ie still subject to US law], can be easily frozen, or even confiscated ", merely on suspicion", pre-trial, even pre-sentencing, by virtually any federal agency or by any federal judge, literally on a whim.