Capital Controls

Discuss this Post at the Economics Table inside the Diner

 

Simon Black’s “Sovereign Man” Blog gives me tomaine poisoning anytime I go over there to Dine, so mostly I avoid it. However, one of his posts appeared a couple of days ago on Zero Hedge on the topic of Capital Controls, which with the current insolvency of about all nations and banks are likely to be implemented in force in many places quite soon.

Simon lists a few forms of Capital Cotrols you can expect to see coming down the pipe here

– Setting a fixed amount for bank withdrawals, or suspending them altogether
– Forcing citizens or banks to hold government debt
– Curtailing or suspending international bank transfers
– Curtailing or suspending foreign exchange transactions
– Criminalizing the purchase and ownership of precious metals
– Fixing an official exchange rate and criminalizing market-based transactions

Why do countries drop down CCs? Basically because when a monetary system is crashing and banks are going insolvent in a given country, anybody who HAS any money is trying to GTFO of Dodge and take their money with them on the way out the door.

Who does this generally apply to? Not J6P who has little saving to take out of the country anyhow. It’s the wealthy who make this run for the fire exit. Shipping Magnates in Greece, Real Estate Developers in Spain, yadda yadda.

Simon characterizes CCs as the one of the worst forms of Goobermint Theft imaginable:

Establishing capital controls is one of the worst forms of theft that a government can impose. It traps people’s hard earned savings and their future income within a nation’s borders.

Simon is trying to make this sound like a Common Man’s Problem, but it’s not, it’s a Simon problem. See, Simon likes to run around the world extracting what wealth he can everywhere he goes, and he wants to be able to keep all the money regardless of WTF happens in any given country he is running a Biz in.

These days, Simon is no doubt quite worried about Assets and Bank accounts he has over in Eurotrashland, though one suspects most of the Bank Accounts are in Switzerland where they are slightly safer than they are in say BNP Paribas.

He ALSO is investing much of his hard earned Cash in Chile, where he just “picked up” an 1100 Acre farm, no doubt for pennies on the dollar from some poor farmer behind on his mortgage.

Besides this, Simon recommends having money in a foreign bank account, having PMs in a secure jurisdiction and have a place to GO overseas with your loot when things swirl down the toilet in your neighborhood.

The problems with Simon’s advice should be obvious now. Exactly which Foreign Bank would you pick to safely deposit your money? In Europe for example, when those banks go Belly Up, the LAST Depositors who might see any of their money are the foreigners. Far as Gold goes, Simon himself mentions that one of the typical forms of Capital Controls is the confiscation of PMs, so I am not sure how having them protects you all that much once the Nation States are in such dire straights they have to try to keep anything worth anything insed their borders. Far as having a place to GO is concerned for the average Pigman, where do you PICK? Simon seems to think Cheeeelay is a great spot, where he is neighbors with Speedy Gonzalo Lira. Exactly why these guys think the Chilean Goobermint is so much more trustworthy and dependable than the FSofA one or any of the Eurotrash ones is beyond me. How many times has that Goobermint turned over in the last 40 years?

What about for J6P though? Are Capital Controls really that bad for him?

Not really, because he isn’t leaving the country anyhow, and preventing Pigmen from leaving with their wealth is good for him. Since he has no Gold in the basement safe, its no skin off his nose if Gold is confiscated from Pigmen. You also prevent foreigners from taking wealth out of assets they “own” in a country, like say farmland. If the Chinese say bought up all of Iowa, without Capital Controls they could just take “their” corn and ship it over to China.

Who does the Wealth of a Nation really belong to? Does it belong to individuals who sieved out wealth over the years from a Nation into their own Bank Accounts, or does it belong to all the people of the nation from whom the Wealth was sieved to begin with? The wealth came from THEIR labor and the resources of the land THEY live on. Why should some foreigner be able to remove this wealth with no control on it by the Nation?

Of course, it remains quite unclear just how much “wealth” is left anywhere under the conditions of extreme overshoot, and equally unclear where a Pigman should go to escape the oncoming Capital Controls likely to spring up everywhere.

The carefree life of Simon Black jetting around the world First Class, holding multiple passports and not paying Taxes in ANY jusrisdiction is coming to a close here, but Simon doesn’t want to see this end. He really doesn’t want to farm the 1100 Acres he bought in Chile, and if he HAS to move there permanently he likely hopes Da Chilean Goobermint will recognize his Title and will allow him to run his Estate as a Feudal Kingdom, hiring poor Chilean Peasants to plow HIS land.

The Capital Controls are coming, and every Pigman website from Zero Hedge to the Daily Capitalist will complain about them and tell you how horrible they are. They sure are horrible…for PIGMEN! They can’t go and jump ship with all the MONEY when the Titanic goes down.

RE

 

It starts: the government’s plan to steal your money
Simon Black on June 12, 2012

June 12, 2012
New York City

There are consequences to being flat broke.

There are consequences to investing any level of confidence in a financial system underpinned by debt and the creation of paper currency.

There are consequences for ignoring reality and pretending that everything is normal.

This is one of them: European officials yesterday flat out admitted that they were discussing rolling out a series of harsh capital controls across the continent, including bank withdrawal limits and closing down Europe’s borderless Schengen area.

Some of these measures have already been implemented sporadically; customers of Italian bank BNI, for example, were all frozen out of their accounts starting May 31st upon the recommendation and approval of Italy’s bank regulator. No ATM withdrawls, no bill payments, nothing. Just locked out overnight.

In Greece, the government has taken to simply pulling funds directly out of its citizens’ bank accounts; anyone suspected of being a tax cheat (with a very loose interpretation in the sole discretion of the government) is being releived of their funds without so much as administrative notification.

It’s no wonder why, according to the Greek daily paper Kathimerini, over $125 million per day is fleeing the Greek banking system.

European political leaders aim to put a tourniquet on this wound in the worst possible way.

So what are capital controls?

Simply, capital controls are policies which restrict the free flow of capital into, out of, through, and within a nation’s borders. They can take a variety of forms, including:

– Setting a fixed amount for bank withdrawals, or suspending them altogether
– Forcing citizens or banks to hold government debt
– Curtailing or suspending international bank transfers
– Curtailing or suspending foreign exchange transactions
– Criminalizing the purchase and ownership of precious metals
– Fixing an official exchange rate and criminalizing market-based transactions

Establishing capital controls is one of the worst forms of theft that a government can impose. It traps people’s hard earned savings and their future income within a nation’s borders.

This trapped pool of capital allows the government to transfer wealth from the people to their own coffers through excessive taxation or rampant inflation… both of which soon follow.

The thing about capital controls is that they’re like airine baggage fees; ultimately, all governments want to do it, they’re just waiting on the first guy to impose them so that they can shrug their shoulders, stick it to the people, and blame ‘industry standards’.

Moreover, capital controls were a normal part of the global economic landscape for most of the 20th century, right up to the 1970s. It’s been a long time coming for governments to return to that model.

Since the inception of this letter, it has been a constant theme for us to talk about the increasing threat of capital controls. Your money, your savings, your livelihood are all under attack by insolvent governments, and it’s critical to take steps to reduce your exposure.

When European financial leaders all openly admit that they’re making plans to establish continent-wide capital controls, it really begs the question– what additional warning sign does one need?

The dominos have already started falling. Iceland. Ireland. Greece. Spain. Portugal. Italy. Cyprus. Soon even France and the rest of Europe. And it will come to the United States as well. There are over 15 trillion reasons why.

So what are the most critical steps to take now?

1) Buy precious metals and store in a secure jurisdiction.

Holding gold and silver overseas is a great way to (a) ensure your savings is protected against inflation, and (b) ensure that your precious metals cannot be confiscated in the event that gold ownership is criminalized in your home country.

I strongly recommend Singapore, Hong Kong, and Abu Dhabi as three potential safe jurisdictions for your gold and silver.

2) Open a foreign bank account.

For funds that need to be maintained within the financial system (as opposed to precious metals), make sure you have a safe home for your money abroad in a safe, well-capitalized bank.

3) Have a place to go overseas

Economic turmoil brought on by governments stealing people’s savings generally goes not bode well for social stability. If things get hairy, you’ll want to have a place to wait it out. And you don’t want to be deciding on the location while you’re packing your bags.

As an example, I’ve picked up an 1100-acre farm in central Chile that won’t skip a beat when the financial system implodes. The sovereign debt bubble does not affect whether or not my trees will bear fruit or my vegetables will grow.

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