ALLIANCE FO§ DEMOCRACY

Flight of capital

When inflation rates rise far above the normal level, and the corresponding actual or feared loss of buying power can no longer be compensated for by real net interest, some smart Germans try to protect their savings against devaluation, not only in the current times, but also in earlier years when Helmut Schmidt was still Chancellor.
Flight of capital has been a fact of life at all times. The rescue for the reserves was always firstly the conversion into material assets, but if the funds were to be invested in currencies, they would be transferred to accounts in other countries. This was not a case of money obtained by tax evasion (that depended on how the reserves had been acquired), nor of flight out of the local tax area due to the taxation of capital earn-ings, but by accepting the taxation of capital earnings and opening accounts abroad in countries such as Switzerland, Liechtenstein, Luxembourg, the Channel Islands, Cayman Islands, Bahamas or Monaco.

The flight of capital to these countries has increased due to various changes brought about by politics, either in connection with obligatory contribution deductions also from interest and rental income, for persons voluntarily insured under statutory health insurance up to the relevant contribution assessment ceiling or similar. In connection with the obligatory contribution deductions from interest and rental income, many people, and particularly pensioners with low to medium pension income, tried to avoid domestic interest income in their home countries, in order to influence the contribution level to statutory health insurance. It remained incomprehensible why employees and pensioners paying compulsory contributions remained liable for such contributions if they obligated themselves further voluntarily, and thereby earned capital income, in comparison to those who undertook no obligation in this respect. There could never be any insight into such unequal treatment in the form of obligatory contribution deductions.

For this reason, many of those lacking this insight at the time closed their accounts, and moved their savings from Germany over the border, for example to Austria or the tax havens mentioned above. In terms of taxation however, this provided no benefit for the normal citizen or pensioner with his savings and the resulting income, since such capital earnings are also subject to taxation in Germany.
The clever ones moved their savings in small packages to countries such as Switzerland or also to Asia, because in this way the funds are subject to much lower devaluation. Germans are thought to have deposited around € 100 to 300 billion in Switzerland alone, in order to protect themselves against the uncertainty of financial developments in Germany.

It has been clear, not only since the derailment of the Euro, that mismanagement perpetrated by politics leads to bankruptcy, and has previously also led to the postponement of insolvency and complicity in delaying insolvency. Because of the Euro crisis, every small saver, who in addition to income and pension is forced to rely on additional income, must have made every effort to rescue their savings, however small they might be. It is thanks to the indiscretion of bank employees that there are figures which confirm this. For example, the € 100 to 300 billion in "flight" funds deposited by Germans in Switzerland so far is increasing, irrespective of the funds of other savers from other countries. Billions in funds are being moved out of many countries which until now have been regarded as safe. An increasing role has also been played lately by countries such as Norway and Sweden in particular, which are considered to be safe particularly since they are not members of the European Currency Union and are not included in the Euro support measures. The economic press even go so far as to recommend moving investments to safety outside Germany, and outside the European Currency Union. Various magazines and newspapers further recommend investing available savings, if they are to remain in the country, in property and raw materials, particularly metals such as aluminium, copper, nickel or precious metals.
The recommendations of the rating agencies should no longer be considered by investors, since ratings such as AA+, which still apply for the bankrupt USA (and should also apply for Germany, Italy, Spain, France etc.), have long since only been valid on paper.

Top rating investments for the USA and Germany face the same fate as the investments of the US investment bank Lehmann Brothers, which until one day before its crash (2008) enjoyed the top rating of AAA from the rating agencies. The USA is also bankrupt, as was an-nounced months ago by Treasury Secretary Timothy Geithner. Since then, the powers in the country have been jockeying to get further loans approved in order to delay the inevitable crash. A riskconscious saver or investor will therefore only invest in countries such as Switzerland, Liechtenstein, Luxembourg, the Channel Islands, Cayman Islands, Bahamas or Monaco.

Such developments can only be avoided in future by the long-overdue introduction of direct democracy. In countries such as Switzerland, which holds frequent referenda, with the possibility of controlling and influencing politics, it has been shown that economic and financial stability also prevails. This must finally also be applied in Germany; it must be applied for the whole of Europe. Only then will a genuine financial union be possible.