Last Call.

I would like to take this opportunity to address the questions being asked about my last post, to hopefully put the issues to rest, so I can move on to progress reports on my project here in Ecuador and a new project coming up in November this year.

I am not the guy, who if you fill out the form on the inside flap of a match book, will let you in on the secrets of success. Anyone who professes to know how to beat inflation or has the secrets of success is an out and out liar. If they knew they wouldn't tell anyone.  I own the copy rights to several of those kinds of books and they are worth exactly nothing. I own them so I can use the contents in unintended ways and not get sued - I have done a certain amount of motivational speaking in my day. I know what I am going to do but for me to suggest what you should do has a 80% chance of sending you straight into bankruptcy. I didn't help you make what you have so why would you listen to me or  anyone about how to invest it, your smart enough to figure it out. This is not about doom and gloom ( although I did say that in a previous post ) if you do nothing you won't go broke, you'll just have less than you do now.

The numbers and facts I cite in what I write are absolutely accurate, the forcast I derive from those numbers and facts could be wrong by a little or a lot but I risk everything I own on what I perceive to be the way things will unfold. I am better off than most but not as well off as some. I am the most hard headed person I know - just ask my wife - and I refuse to let things I have no control of control me. A gambler with high internal locus of control is the diagnosis - I asked my wife.

Now on to the H.I.R.E. act. Back a few years ago ( March 18th, 2010 ) the H.I.R.E. act was passed which gives employers some kick backs on hiring certain groups of people but tucked into the act was a piece of pork called F.A.T.C.A.. Foreign account tax compliance act. This was a big deal for us when we decided to move here back in 2010. We were planning to be here for several years and the enactment date for F.A.T.C.A. is June 2013. None of the U.S. banks could tell us anything about it and in Ecuador no one knows anything about it. From 2010 to today the amount of information is the same, some opinions but no facts about how any of this is going to work. Here is what the law says : Any foreign bank that has U.S. account holders is required to report to the U.S. Internal Revenue Service and disclose their balances, receipts and withdrawals or be subject to a 30% withholding
tax on U.S. financial assets held by the foreign banks. All U.S. citizens with a foreign bank account and assets in that foreign country have to report the value of the assets if it's over $50,000.00 or be subject to a 30% penalty on their foreign or U.S. account balance. In addition, any transfers of money to the foreign country from U.S. sources will have a 30% withholding.

Here is how I see it. Ecuador has to agree to do this and I don't think they will, a bunch of European banks have already refused. This will just give Ecuador a reason to sever the remaining few ties it has to the U.S. since the U.S. will be threatening Ecuador with a 30% withholding on any U.S. assets they hold. There are about 6 million Americans living in foreign countries, so there will be a stink about this but in the mean time the I.R.S. will start withholding 30% of any money leaving the U.S. from individual accounts - Social Security, IRA's, 401K's, retirement accounts, union pensions, checking accounts and savings accounts. Electronic transmissions, direct deposits and ATM transfers. I have been trying to keep an eye on this situation for the last 2 years, hoping some kind of agreement can be reached between Ecuador and the U.S. but so far neither side wants to talk about it. The enactment of this law won't take effect until June, 2013 so there is hope that something can be done about it. I personally don't see how the U.S. thinks they can get away with telling other countries what to do. Maybe that is the intent, to give the IRS more power to seize your assets with assumption, heck they are making you buy health insurance you don't want and will never use.

What this means to us living in Ecuador is that we are supposed to claim our assets in Ecuador because they are over $50,000 on our U.S. tax return. There is a special form for this and they will assess a new tax. Since Ecuador won't comply the government in the U.S. will withhold 30% of our transfers to Ecuador which is about $520 a month into a holding account until our tax liability can be determined but ofcourse it will be more to make up for the withholding. There is nothing ambiguous about the 30% withholding figure, that is the tax we will have to pay. So it will cost us an extra $600 a month to live in Ecuador just from transfers, who knows how they will manipulate foreign assets.

It ain't looking good. Even if it never happens the harm will have been done and the economic impact on Americans living in Ecuador will make it a less inviting place to live. Isn't that how life works, just about the time you figure you got a good thing going someone does something stupid and messes it all up.

Guy's this is the end of the series, there are lots of folks who know a lot more than I do. I have to make decisions on what I do to stay ahead of the curve just like you do. This stuff is just how I see things, right or wrong. In reality it's just one opinion in a world full of opinions.