[paxys]

> In other words, FATCA turned the US into the world's largest tax haven.

Was this unintended though? Every government wants rich foreigners to park money in their shores, whether legally obtained or not. Bonus points if it is an easily seizable asset like bank accounts and property.

[huijzer]

I was just today thinking the same about FED policy. It is beneficial to not increase interests because otherwise people will do business elsewhere. In the worst case, these policies bring about a financial crisis, but as long as that will hit all the countries, no one gets better of than the US.

[rsj_hn]

No, in fact many nations make it illegal to park money in their shores, and if they don't want to make it illegal (because they are afraid of angering the IMF or other international organization), they tax it, penalize it, and go to great lengths to discourage it.

That's the most common situation in export-led economies, for example, which are trying to reduce demand for their currencies in order to run trade surpluses. The IMF and other organizations whose charter is to enable global capital flows have had to exert great pressure on these countries to allow foreigners to park money there. This is often called "opening up your economy" and is viewed as a shibboleth for the global capitalism movement. It's still an ongoing battle.

The reason for this is we do not live in a world of specie flow where a nation that wants to build a bridge needs a few tons of gold to pay for it, and then they have to lure foreigners to ship their gold over to the country so the bridge can be built. In such a specie flow world, nations are at the mercy of foreigners to give them gold so they can use it.

But in the modern world of sovereign fiat currencies, nations make their own fiat currency and it is impossible for a foreigner to provide money to a government even if they wanted to. Instead the foreigner has to go to the forex market and switch their dollars for Won/Yen and then they have an account in Korea or Japan. They are effectively buying Yen for dollars with a local who wants to buy dollars and sell Yen. By bidding up the exchange rate, this can make yen a bit higher valued vis-a-vis the global basket. That makes exports more expensive and import cheaper.

Sometimes that is welcome, but in exporting nations it is very much unwelcome and so those nations discourage capital inflows. There is a funny story when it was illegal for foreigners to hold any assets in South Korea with the exception of golf courses. For some reason, they allowed foreigners to own those. So a hedge fund bought a golf course in Korea and then used that ownership structure to go on a spending spree of purchasing bonds, land, equities, basically anything Korean they could get their hands on. It was the most well capitalized golf course in the history of the world. Other hedge funds followed and Korean golf courses became an asset class in and of themselves. That was a while ago, so I'm not sure what the status is of Korean investment.

Those are the great lengths that foreign investors had to go to in order to park their money in foreign nations that had an economic policy of export led growth. This was also what the IMF went to war to prevent, with a combination of threats, bribes, and international pressure to try to force nations to allow capital inflows in a more or less unrestricted manner. It is rewriting history to say that every nation wanted this. Many do not want it. Malaysia is the most famous example of recently telling the IMF to go screw themselves.

Of course if you are the Bahamas or some other place that has nothing to export and requires imports, then it is welcome. But it's certainly not true that every nation wants their currency to be bid up.