Liechtenstein

frick.jpgI am not a crookAccused hedge fund fraudster Helmut Kiener certainly has a knack for hitting it off with insignificant countries.
The K1 Group founder, last seen trying to bust out of a German jail by claiming to be an attaché of the embassy of Guinea-Bissau in The Netherlands, saw something in this pretty little thing, hiring her to sell his (allegedly) worthless products. Just nine months later, Aurelia Frick is serving as minister of justice, foreign affairs and cultural affairs for the august Principality of Liechtenstein, a country so small that a 34-year-old with no previous ministerial experience can be named minister of justice and foreign affairs, with time left over to handle cultural matters.

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  • 11 Aug 2009 at 2:14 PM

Too Small To Fail(ed States)

lgtboom3.pngLiechtenstein, and its citizens, have long been more than a little strange. All microstates are a little strange, being, like Liechtenstein the, polar political opposite of failed states.
Failed states are plagued by institutions too weak to prop up the flaccid rule of law, and thereby permitting “shadow institutions” (the black market, organized crime, official corruption, non-governmental bases of power) to garner such a mass of power and influence so as to tear apart the thin threads of justice and stability merely by the centrifugal force of their motion.
Microstates enjoy an artificially stable state by virtue of their globally envied institutions. Usually, these were created during formative times in global history. Often they were augmented by the highly centralized, even imperial rule in place when the borders were drawn. In Liechtenstein, Vaduz was lorded over by no feudal subject and therefore beholden only to the Emperor (making it the early 18th century, European equivalent of North Carolina for carpet bagging). When Napoleon dismantled the Holy Roman Empire, of which Liechtenstein had officially been member, the tiny Principality, unlike her peers, dissolved into a state with no fealty at all save to its local princes.
Come World War I and World War II, the entire country is basically a big safe deposit box for Europe.
Set the way forward machine to 2008-2009. Banking is getting clobbered. In other words, the institutions (primarily Swiss) of banking secrecy and investment acumen, which permitted a country which otherwise lacked the critical mass to be even remotely interesting, much less worth using as a safe haven, to hold it together, are under siege.
The only real question is: Will Liechtenstein be annexed by Switzerland, or Austria?
UK Seals Deal To End Liechtenstein Tax Havens [Times Online]

  • 12 Mar 2009 at 1:09 PM

Something Is Rotten In The Confederation of Helvetica

swiss.pngIt was the little mouse that roared. Again. Liechtenstein, darling principality and sometime haven for revenues seeking shelter from Departments of Inland (and Outland) Revenue, neatly slid the thin blade of a double edged dagger between Switzerland’s sixth and seventh rib. The tiny country announced today that it would push through legislation to cooperate with OECD countries with respect to information sharing standards on tax data. Switzerland, which has been taking a hard line on the issue, seems to have been caught unaware and increasingly finds herself standing out alone and in the cold.
Switzerland has much to lose in this fight and is presently looking at its third major recessionary trigger. First was the significant exposure of the larger Swiss banks to toxic financial waste minted in the United States. Second, and currently beginning to unwind at a frightening pace, is her significant exposure to Eastern European debt denominated in Swiss Franc. Now this. The more pessimistic analysts believe that up to half of Switzerland’s deposits might flee the country if banking secrecy laws are badly gelded there. Considering that many of her larger institutions have been relying on their asset management divisions as the “crown jewels” of their portfolios, one wonders what lurks just around the bend.
Liechtenstein had considerably less to lose. After some rather insidious and clever espionage by German authorities to uncover the names of German citizens with deposits in Liechtenstein (in violation of Liechtenstein and, arguably, German law) Liechtenstein’s deposits have drained consistently. It was quite easy, therefore, for them to take the “high road.” Their reputation for banking secrecy was already in tatters after having been so brutally penetrated by the Germans. Leaving aside for a moment the historical irony implicit in the German intelligence apparatus snooping for names on Swiss accounts, it looks like banking secrecy in Central and Western Europe is going to be limited to Luxembourg. Where in the hell are we going to ski?