Wednesday, June 13, 2012

Bring back capital controls? It’s already happening!

You may have noticed in recent months a growing chorus of economic morons, from Jane Kelsey to Bernard Hickey to NZ Manufacturers and Exporters Association CEO John Walley, calling for the imposition of capital controls—or to put it in real English, for the government to put bans, restrictions and prohibitions on the use, storage and movement of your money and valuables.

What would that be like?  Don’t just wonder: look. Look at the places where capital controls have already been imposed—in Italy, in Greece, in Ireland, in Iceland, in Portugal, in Spain…

Simon Black from the Sovereign Man blog summarises today’s frightening re-impositions of what we thought we’d seen the last of in NZ in 1985 (and in rest of the developed world in the late 70s), before which we “enjoyed” fixed exchange rates, extensive controls on capital flows … and the “Polish shipyard” economy presided over by Robert David Muldoon.

It starts: the government’s plan to steal your money.
    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 withdrawals, 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 relieved 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 airline 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 New Zealand as well. There are well over 50 billion reasons why—and know-nothing cheerleaders like Hickey, Kelsey and the well-named Walley to talk it up.

If you don’t start fighting back now, it might be too late.

PS: In that same article linked to above, Simon Black concludes with things you can do when the government comes for your money.

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3 Comments:

Anonymous Pro-Capitalist said...

I thought that Jane Kelsey is lesbian. Is she is then she's definitely an economic moron. Lesbians are known to be simply dull when it is a discussion about economics.

6/13/2012 01:51:00 pm  
Anonymous Dolf said...

His analysis might be good, but his advice is terrible.

Point 1:

Buy precious metals and store in a secure jurisdiction... [eg] Abu Dhabi


So your gold can be confiscated my an even less democratic government.

Point 2: Open a foreign bank account.

Where? Switzerland sounds like a good Idea, except for the whole, smack bang in the middle of europe problem.

Point 3: Have a place to go overseas ... a 1100-acre farm in central Chile

Ever heard of nationalisation of property? Third world countries are well known for it. "Kill the british/boers/settlers/gringos/... (your racist term here) and take their land!"

6/13/2012 02:16:00 pm  
Blogger Peter Cresswell said...

@Dolf, yes his advice should be take with a grain of salt. Unless perhaps you're an American, which does have a history of gold confiscation.

@Pro-Capitalist: You don't need to search for any further evidence she's an economic moron than everything she says on economics.

6/14/2012 09:35:00 am  

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