Fiscal Crises

Wealth also can be attacked by ill-conceived political and fiscal policies, which weaken the local currency and devalue the accumulated wealth of the population. In Indonesia, Thailand, and South Korea, as a result of entrenched corruption and a badly mismanaged economic system, the value of the currency has recently declined up to 80 percent. The cumulative savings of much of the citizenry have been obliterated. Strict exchange controls, forbidding the movement of assets out of the country or into a stronger currency, has disproportionately penalized that portion of the population without sufficient resources or ingenuity to successfully avoid these laws.

Political instability, potential devaluation of the currency, and the threat of exchange controls pose dangers to individuals in almost every country around the world at one time or another. At this moment, the Asian economies are in turmoil—prompting severe political and social change. Not long ago, these countries were among the strongest in the world. In the United States, the massive inflation of the 1970s and early 1980s resulted in wage and price controls, limited exchange controls, 20 percent interest rates, and a critically devalued dollar. The Russian ruble has become nearly worthless since the collapse of the Soviet Union. The German mark has suffered under the weight of the obligations created by the unification of East and West Germany. In Indonesia, millions of ethnic Chinese, long the most prosperous group in the country, are preparing to flee to avoid the violence and scapegoating which inevitably follow an economic collapse.

To protect against the financial consequences of a shift of political power and to avoid controls on the flow of funds, those who have accumulated wealth rely on financial privacy to ensure their livelihood and their physical safety. The universal strategy for those who can afford to do so is to keep what they own well-protected and hidden—outside the country—in a jurisdiction that specializes in providing these services.