Back in the day, when a pathocratic regime of paranoid, inept, remorseless psychopaths wanted to isolate their country, they just closed the borders. This had the benefit of keeping external enemies out as well as keeping anyone who might want to leave in. The biggest threat to a pathocracy, of course, comes from within: from the people who suffer under the control of oligarchs who couldn't care less about their people's well-being. Nowadays, however, the battle on the 'internal front' isn't so involved or overtly totalitarian in nature. (However, it can be just as brutal: the U.S. police kill civilians with impunity.)

Take FATCA for example.

Obama signed into law this ridiculous piece of legislation -- the Foreign Account Tax Compliance Act -- in 2010, when it was slipped in with an unrelated bill without legislative review or analysis. It supposedly exists in order to increase U.S. tax revenues by cracking down on the foreign investments and sources of income of U.S. citizens outside of the USA. It demands financial information returns from virtually every existing foreign financial institution (FFI) that has a 'U.S. person' on their books and any foreign company that benefits American owners. FATCA is enforced at a governmental level via an intergovernmental agreement (IGA). As one expat blogger put it:
Under FATCA, as enacted, foreign financial institutions are generally required to provide directly to the IRS, information about accounts held by US persons. Reporting will include the name, address and taxpayer identification number of each US account holder; the account number; account balance and value; the account's gross receipts and gross withdrawals or payments; and other account related information requested by the IRS. If the institutions do not comply, they will be hit with a 30% withholding tax on all payments from US-sources, including proceeds on sales of US stocks and securities (effectively cutting the institution off from any profitable US investment opportunities).
Just think of it as an overly complex, prohibitively expensive, time-consuming, self-destructive patch-up of a solution to the current U.S. tax laws, which are bad enough already. A flat tax would not only be simpler; compliance would be higher, and revenues would probably increase, as the Russian Federation found out when Putin reformed existing tax laws by implementing a 13% flat tax in 2001, resulting in a 25% increase in tax revenue in the first year alone. But no, rather than put the dying dog that is the U.S. tax system out of its misery, the U.S. government tries to solve idiotic tax law issues by increasing the idiocy of the laws.

FATCA came into full effect in July of this year, after the deadline for foreign countries to sign on, thus ratifying the agreement for FFIs to provide information to the IRS regarding their American clients. It's important to note that these 'intergovernmental agreements' are not even legal. They're just one more example of President Obama's overreaching 'executive action'. FATCA provides two 'models' from which other countries can (i.e. 'have to') choose. Model 1 requires the foreign financial institution to report on U.S. persons holdings to the domestic tax authorities who then pass on the information to the IRS. Model 2 tasks the foreign financial institution itself with reporting U.S. customer information to the IRS directly, and, notably, the foreign government must agree to lower any legal barriers to that reporting.

FATCA effectively forces every foreign government and financial institution to act as an extension of the IRS under threat of financially damaging the foreign financial institutions by withholding payments from the USA. Basically, it's financial terrorism by the U.S. government that forces supposedly sovereign states to weaken, if not destroy, foreign citizens' financial privacy rights. The U.S. Dept. of the Treasury appears to confirm the real goal of FATCA by attempting to dispel some 'myths' about the draconian legislation:
Myth No. 2: Some claim that U.S. citizens living overseas will become outcasts in the international financial world.

FACT: FATCA withholding applies to the U.S. investments of FFIs whether or not they have U.S. account holders, so turning away known U.S. account holders will not enable an FFI to avoid FATCA. We expect that many, if not most, of the governments implementing FATCA through IGAs will require their financial institutions to identify and report on all non-resident account holders, not just U.S. account holders.

Those governments agree with FATCA's policy objectives, and want to facilitate the collection of information about the offshore accounts of their own residents. For example, 19 countries have already announced a pilot project to exchange account information about each other's residents that will be collected by the governments in line with FATCA's due diligence and reporting procedures
This may explain why the legislation, as aimed at U.S. citizens living abroad, is so ineffective. It's as if it was designed to fail in that respect.

The world united in response to news of FATCA: one of Asia's largest financial groups mulled over ways of dumping U.S. Treasury investments to avoid it; banks in Taiwan announced they would reduce their holdings in American bonds; financial officials in India, Australia, Canada, Germany, Hong Kong, Singapore and elsewhere were irate. As if the U.S. couldn't see this coming! If there's one thing Obama is good at (besides being a decent teleprompter reader), it's getting the world to hate the United States. In other words, sure, foreign countries will agree to comply. But it's much easier for FFIs to just wipe their hands of FATCA altogether by refusing to deal with Americans in the first place. And that's exactly what has happened. Former U.S. diplomat and Senate staffer James George Jatras writes for Forbes:
FATCA supposedly is aimed at "fat cat" American tax cheats with money stashed abroad but includes not a single provision targeting actual tax evasion. Instead, FATCA creates an indiscriminate NSA-style information dragnet requiring - under threat of sanctions - all non-U.S. financial institutions (banks, credit unions, insurance companies, investment and pension funds, etc.) in every country in the world to report data on all specified U.S. accounts to the IRS. No proof or even suspicion of wrongdoing is required.

Hoping to avoid sanctions threats and crushing compliance costs, institutions around the world are dumping Americans' accounts and divesting from the U.S., thus undermining American jobs. Experts have called FATCA "hare-brained" (Jim Rickards) "sheer idiocy" (Henry Bouma) the "worst part of the internal revenue code" (Dan Mitchell) "an act of economic strangulation" (Richard Rahn) "heavy-handed, inequitable and hypocritical" (The Economist) and "a hammer blow for American jobs and the broader U.S. economy" (Nigel Green).
The owners of Sott.net experienced this firsthand when our French accounts were summarily closed this July. We have yet to find a French bank willing to open a new account. And we're not the only ones. American expats around the globe are being treated like lepers by FFIs, ostensibly afraid of the 30% penalty, and having their accounts summarily closed and being told to find another bank, which is proving impossible to do. There is clearly something very wrong here with the way in FATCA is described by the U.S. government and the way in which it is being responded to by FFIs. The U.S. Dept. of the Treasury states that "the final regulations exempt all preexisting accounts held by individuals with $50,000 or less from review", yet the owners of Sott.net and many other disaffected U.S. citizens have been repeatedly refused access to European bank accounts simply because they are U.S. citizens residing legally in EU countries. If, as the U.S. Dept. of the Treasury states, "turning away known U.S. account holders will not enable an FFI to avoid FATCA", then why are they doing so, en masse?!

There's around $21 trillion in foreign investment in the U.S. If just a fraction of this was pulled out, it could be devastating for the American economy, vastly overtaking the projected $1 billion or so of additional annual revenue FATCA could take in for the IRS. Compare that $1 billion to the U.S.'s annual $2 trillion tax revenue to get an idea of how ridiculous it is to believe this legislation is actually designed to make money.

Simon Black, founder of Sovereignman.com states:
"The US is the number one tax haven in the world, yet goes around and terrorizes all these places (through FATCA); the biggest culprit in this charade is the US. If they want to solve the problem, why not make the tax code more attractive? And the funny thing is that most of the money sitting offshore is from the big companies, the Fortune 500, and offshore is permissible under the US tax code."

Indeed, there is a degree of hypocrisy by the US on clamping down on US tax evaders globally, and requiring FFIs to do so, while still letting it happen within the US and for anyone globally to do so on US territory, such as in Delaware, the top tax haven on the planet. This is preventing the US from being reciprocal when it comes to tax sharing with other countries and, moreover, undermines initiatives for a global move to tackle tax evasion.

"Delaware is highly protected by political lobbies in the US. A huge number of Fortune 500 companies use Delaware, and that is why it will be so hard to push through reciprocity in Congress," said John Christensen, director of the Tax Justice Network in London. "Perhaps some of the most extraordinary discussions I've had have been in (the state of) Wyoming, where service companies and trust companies seem to compete with one another on being devastatingly secret and illegal."
It's no secret that several U.S. intel agencies (and the IRS of course) collect data on virtually every aspect of U.S. citizens' lives. The global reach of the NSA notwithstanding, it seems that the Obama administration is using financial terrorism to force foreign governments and financial institutions to become branches of the NSA and collect financial data on both U.S. citizens abroad and foreign nationals in their own country, while protecting US politicians and their corporate cronies who, generally speaking, pay no tax at all. If all of that results in U.S. citizens living abroad becoming "outcasts in the international financial world", then so be it. Collateral damage was never a problem for any U.S. government.

US citizens, former U.S. citizens or green card holders can petition congress to repeal FATCA here. Yeah, we know, fat chance! But it's better than doing nothing!