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Guest Post: Is The IMF Now Recommending Capital Controls...?

Tyler Durden's picture




 

Submitted by Simon Black of Sovereign Man blog,

It takes all of three seconds on the ground in Spain to realize that this country is hurting. Big time.

I was just here three months ago, eight or nine months before that. Each time it seems worse– more strikes, more homeless, more unemployed, more unrest, more storefront vacancies. It’s amazing what the combination of debt, deceit, and a bona fide banking collapse can do to a nation.

In a most intellectually disingenuous statement, European leaders recently announced that Spain is A-OK and would not require a bailout. I suppose it’s true to a degree. Spain doesn’t really need a bailout. More like an exorcism. Or at least last rites.

After all the debt, austerity, government collapse, riots, etc., there’s a new crisis du jour here: the banking system. Individuals, businesses, and institutions are all predicting a breakup of the eurozone, and nobody wants to have cash in this country on the day they introduce a new currency (and then immediately proceed to devalue it.)

Consequently, depositors are moving money out of the country en masse, often to the tiny principality of Andorra next door– a highly capitalized, low tax banking jurisdiction. This leaves the already thinly-capitalized Spanish banks in an even weaker position.

As you probably know, the way the banking system works in most of the world is a complete fraud. Most banks only hold a tiny percentage of their customers’ deposits in cash. The rest is ‘invested’ (gambled) or loaned to a bankrupt government.

This is a high-risk model that only works well when people have tremendous confidence in the system. The moment there are more than a handful of depositors wanting their money back, the bank has a big problem.

This is happening nationwide in Spain, so the entire banking system has a problem. Nearly every bank here is technically insolvent… and yet they have droves of customers trying to withdraw funds that aren’t there.

As such, the IMF is now recommending that Spain (and other nations in the eurozone periphery) take action “at the national level” to stem this flight of funds and prevent people from moving money abroad.

Of course, they won’t come right out and say it, but there’s a name for ‘national level’ action to stem the international flight of funds. It’s called capital controls.

This is when governments restrict the free-flow of funds across borders, often -requiring- that citizens hold a rapidly depreciating currency at sub-inflation rates.

It’s one of the worst forms of theft imaginable– robbing the purchasing power of people’s savings and incomes, all to meet some unachievable objective, or for ‘the greater good’ as defined in the sole discretion of the ruling elite.

Over the summer while in Europe, I saw early signs of capital controls being rolled out.

In Italy, for example, the government imposed bank withdrawal limits… essentially holding people’s savings captive. Then they initiated strict border controls with Switzerland in an attempt to thwart citizens trying to sneak cash out of the country.

It’s going to happen here in Spain as well. And unfortunately, the people who didn’t see the writing on the wall and take action early are going to find the door shut in their faces by the next wave of regulation.

Moving some savings abroad isn’t the sort of thing where you want to run with the crowd. As with anything, the dynamics change quickly when the idea becomes mainstream. Smart, thinking people ought to recognize the signs early and be well ahead of the crowd.

 

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Wed, 10/10/2012 - 14:42 | 2875699 malikai
Wed, 10/10/2012 - 14:51 | 2875733 pasco35
Wed, 10/10/2012 - 15:12 | 2875810 Ratscam
Ratscam's picture

can you please stop your spam shit?

Wed, 10/10/2012 - 15:25 | 2875842 redpill
redpill's picture

Recommending?  More like propagating, like hair across the back of a old fat Greek pensioner in a speedo.  In the end, all the IMF ever was is just one big gigantic hairy butthole of a capital control, so this is essentially evangelizing.

 

Wed, 10/10/2012 - 15:45 | 2875913 CloseToTheEdge
CloseToTheEdge's picture

but how can this be?

BOSTON, Aug 13 (Reuters) - Sponsor support likely kept at least 21 money market funds from "breaking the buck" during the financial crisis, the Federal Reserve Bank of Boston found in a study issued on Monday, adding fuel to a debate over the need for additional regulations.

The study's authors reviewed filings from 341 prime money market funds from 2007 to 2011 and found at least 21 that received support worth more than 0.5 percent of their assets. That amount was large enough to suggest that, without it, the funds would not have been able to maintain the $1 per share net asset value investors expect, they wrote.

 

todays shit book reads we show 'moderate growth' in regions up their ass

Wed, 10/10/2012 - 17:39 | 2876240 LMAOLORI
LMAOLORI's picture

 

 

 

That wasn't the subject at hand but since you brought it up

A Regulator’s Key Role in Failed Mutual Fund Reform

 

The hidden cost of bailouts: The money market mutual funds and moral hazard

 

Financial trial of the century? Nah

 

Next one really cracks me up geithner's hahaha punishment would be designating them as too big to fail he obviously thinks the public is so easy to fool

Time to brace for new money fund rules

And last a way to make some money there is a contest offering $5,000 if you can prove shapiro's claim that the money market funds are risky

A TruthMarket Member Campaign Offers $5,000 Bounty Contesting S.E.C. Assertion that Money Market Funds are More Risky than Bank Deposits

 

 

 

Wed, 10/10/2012 - 19:57 | 2876508 The Alarmist
The Alarmist's picture

Let's dig up the corpse of Francisco Franco and install him in the Presidential Palace ... Tonight we're going to party like it's 1939-

Wed, 10/10/2012 - 17:44 | 2876271 AGuy
AGuy's picture

The US implemented capital controls under the illusion of "tax fraud banking regulations" The US created capital controls without creating a bill that prevent currency from leaving. They did it by imposing banking regulations on americans with overseas accounts. Few realized its true purpose: Capital control!

 Its odd that this hasn't happened earlier in Europe, since Europe is full of weaselly bureaucrats who dream up disguised regulations.

 

 

Wed, 10/10/2012 - 14:43 | 2875707 PUD
PUD's picture

IF YOU WANT TO CAUSE A CRASH THIS IS HOW YA DO IT..JESUS CHRIST!

Wed, 10/10/2012 - 15:41 | 2875903 TraitorsHang
TraitorsHang's picture

If this is all it takes to cause a crash, the system was a walking ghost to begin with. Let it die.

Wed, 10/10/2012 - 14:44 | 2875710 Jolly.Roger
Jolly.Roger's picture

Is it true that Simon Black PAYS zh to have his essays posted? 

Wed, 10/10/2012 - 16:43 | 2876078 noses
noses's picture

Are you still beating your wife and fucking your daughter?

Thu, 10/11/2012 - 04:42 | 2877148 Jolly.Roger
Jolly.Roger's picture

Yes I am, but I don't see the relevance to whether Black, Martenson, Middleton etc are paying ZH or not. 

Thu, 10/11/2012 - 06:01 | 2877200 malikai
malikai's picture

You sound like a real asshole. But that was a pretty good nolo contendere. I have to give you +1 for silencing the opposition.

Wed, 10/10/2012 - 14:47 | 2875716 fonzannoon
fonzannoon's picture

does Simon yell "Ma! The meatloaf!!!!" halfway through his essays?

Wed, 10/10/2012 - 15:08 | 2875798 MiltonFriedmans...
MiltonFriedmansNightmare's picture

I gotta say, my favorite line in the movie.

Wed, 10/10/2012 - 14:49 | 2875724 youngman
youngman's picture

ou can bet this will become standard procedure in the future.....whats yours.....is now mine...

Wed, 10/10/2012 - 14:49 | 2875725 The trend is yo...
The trend is your friend's picture

market down triple digits 2 days in a row but the vix is also down.  Their just is no fear out there, now that skynet has taken over

Wed, 10/10/2012 - 14:51 | 2875732 ATM
ATM's picture

Government cannot allow money to walk before they have a chance to steal it.

Wed, 10/10/2012 - 14:57 | 2875737 Cognitive Dissonance
Cognitive Dissonance's picture

"Capital controls?"

Yup, looks about right to me. Nice to see Fascism is running the train (wreck) on time.

Wed, 10/10/2012 - 14:53 | 2875738 davidsmith
davidsmith's picture

 

Uh, it all just ended for Barack: Romney locks down vital swing states, poll center says By Callum Borchers

 |  GLOBE CORRESPONDENT   

  OCTOBER 10, 2012

The Suffolk University Political Research Center has determined Mitt Romney is a lock to win the battleground states of Florida, Virginia and North Carolina and will not conduct additional polls there during the final four weeks of the presidential election.

The three states are generally considered to be competitive battlegrounds with uncertain Election Day outcomes.

“In places like North Carolina, Virginia and Florida, we’ve already painted those red,” David Paleologos, the center’s director, said in an interview with Fox News on Tuesday night. “We’re not polling any of those states again. We’re focusing on the remaining states.”

The announcement appeared to surprise conservative commentator Bill O’Reilly, who paused his interview with Paleologos to ask, “your polling agency is convinced that Florida, North Carolina and Virginia are going to go for Romney?”

 

“That’s right,” Paleologos replied, “and here’s why: Before the debate, the Suffolk poll had Obama winning, 46-43, in the head-to-head number [in Florida] -- a poor place to be for a couple of reasons. Number one, his ballot test. His head-to-head number was under 47 before the debate, and it’s very difficult when you’re the known quantity, the incumbent, to claw your way up to 50, so that was a very, very poor place for him to be. And so we’re looking at this polling data, not only in Florida but in Virginia and in North Carolina, and it’s overwhelming.”

The Suffolk University Political Research Center, based in Boston, is a widely respected polling agency that has conducted surveys for prominent news outlets, including the Globe. It claims to have a 96 percent record of accuracy in predicting winners since 2002.

The gap between Obama and Romney has been tightening since the strong debate performance by the Republican nominee. Polls in Michigan and Pennsylvania suggest those two states, previously thought to be strongly leaning toward the president, could be in play on Nov. 6. Also, on Tuesday night, the latest WMUR Granite State Poll showed Romney trailing the president by only 6 percentage points in New Hampshire, down from 15 points a week before.

The new poll was conducted between Sept. 30 and Oct. 6, partly before and partly after the Oct. 3 debate in Denver, suggesting the full impact of the debate might not yet be visible.

 

 

 

 

 

Wed, 10/10/2012 - 14:56 | 2875753 Vincent Vega
Vincent Vega's picture

1) What does this have to do with the article?

2) Wish in one hand, shit in the other and see which gets filled fastest. (regarding a Romney win).

Wed, 10/10/2012 - 16:04 | 2875974 Heavy
Heavy's picture

I'm gonna go ahead and bet on #2 applying no matter what happens in the election. (Pun spotted and now intended)

Wed, 10/10/2012 - 15:00 | 2875776 fuu
fuu's picture

Learn to cut-n-paste spam bot.

Wed, 10/10/2012 - 15:54 | 2875941 Nobody For President
Nobody For President's picture

Still in beta.

Wed, 10/10/2012 - 15:02 | 2875783 flacorps
flacorps's picture

Barack can get in a war with Iran.

The war with Iran can be an excuse to postpone the election.

Wartime presidents don't get dumped.

It would be over the top for sure. But stranger things have happened.

Wed, 10/10/2012 - 16:32 | 2876055 silverserfer
silverserfer's picture

and it will all come down to florida again with John Roberts leading the supreme court decesion of who is president again.

Wed, 10/10/2012 - 15:08 | 2875799 samsara
samsara's picture

Who the hell cares which of the two clowns are elected.   The effects will be identical to the man on the street. 

Corporations still a person?  Yes

Patriot act repealled?  No

Drones on order? Yes

Still in Iraq, Afhgan. and 100 other places?  Yes

NDAA repealled?  No

Jobs on the up swing?  No

Money worth what it was in '65?  No

No Change you can expect....

If you want change,  Stand on the corner of 5th and Main with your hand out.

Wed, 10/10/2012 - 15:25 | 2875846 the not so migh...
the not so mighty maximiza's picture

all the choices suck shit.  Will i even be motivated enough to vote? i don't think so.  

Wed, 10/10/2012 - 16:12 | 2875998 pods
pods's picture

If we were all motivated enough NOT to vote, none of this shit would happen.

The youth were seen as escaping the pen, and suddenly ROCK the VOTE came out.  

Can't let anyone escape the corral.

pods

Wed, 10/10/2012 - 19:24 | 2876444 CPL
CPL's picture

None of the above

All of the above

Wed, 10/10/2012 - 18:33 | 2876356 I only kill chi...
I only kill chickens and wheat's picture

samsara, Agree, but if Mittens wins won't that mean no more holder, hillary, and Janet N

Wed, 10/10/2012 - 20:34 | 2876583 Oldrepublic
Oldrepublic's picture

-100

re smith

Wed, 10/10/2012 - 14:52 | 2875740 irishlink
irishlink's picture

He may have a point. I was told that some banks atre restricting on-line banking to business hours. So if you want to transfer money after hours you cannot do so!

Wed, 10/10/2012 - 14:56 | 2875752 syntaxterror
syntaxterror's picture

"The moment there are more than a handful of depositors wanting their money back, the bank has a big problem."

Isn't this the textbook definition of a Ponzi Scheme?

Wed, 10/10/2012 - 15:00 | 2875775 flacorps
flacorps's picture

Almost.

The difference is that the banks are capitalized with some risk capital and they have a government license.

If a guy named Ponzi wanted to open a bank with four or so like-minded individuals and each of them had clean records and invested X amount of their own money, they could get a bank license and do almost exactly what Ponzi did alone and not under cover of law.

Wed, 10/10/2012 - 14:57 | 2875760 debtor of last ...
debtor of last resort's picture

You go choke in your own plastic WallMart bag IMF.

Wed, 10/10/2012 - 14:57 | 2875762 flacorps
flacorps's picture

I remember reading a story in the '80s about American Express helping Argentinians evade capital controls ... an Amex employee smuggled in a suitcase full of blank Amex cards so that Argentinians could spend the money that the government was trying to keep trapped.

What seems to be lacking in Europe is the recognition of the old banker's maxim: "Your earliest loss is your best loss." And so they throw good money after bad.

Wed, 10/10/2012 - 14:59 | 2875769 no life
no life's picture

Nothing you can't fix with a few well-placed Spidey towels..

Wed, 10/10/2012 - 14:59 | 2875771 AG BCN
AG BCN's picture

It would help if you were a little more specific about where you are and what you see that makes you think the country is hurting big time after 3 seconds?

Also - Durden does the whole bold bullet point thing better than you. 

 

Wed, 10/10/2012 - 15:18 | 2875828 Poor Grogman
Poor Grogman's picture

Details shme-tails

Let's play simon says...

Wed, 10/10/2012 - 15:01 | 2875780 Clowns on Acid
Clowns on Acid's picture

Buy PM's...walk it across the Alps to Switzerland. Get some exercise ya fat bastids !

Wed, 10/10/2012 - 15:08 | 2875795 Joebloinvestor
Joebloinvestor's picture

Wait till the "transaction" tax happens.

There will be a "withdraw" charge, and if one is exchanging gold (dumb) and even bigger one.

Greece, the lamprey eel of the EU, Spain the black hole of the EU.

Wed, 10/10/2012 - 16:11 | 2875993 seek
seek's picture

This already exists in the US, it's called capital gains, and it's effectively 28% on AU (less basis) when you do the exchange for USD.

The key to situations like this is anticipating and predicting them. Knowing capital controls and withdraw restrictions are certain to occur in any country with a fiat currency, it makes sense to convert to PMs or your wealth store of choice as soon as you have savings to allow it. Nice side effect is built-in inflation protection as well.

Seriously, capital controls or financial transaction taxes shouldn't affect any appreciable percentage of your wealth if you read this site regularly and act on what you learn.

Thu, 10/11/2012 - 04:22 | 2877140 Urban Redneck
Urban Redneck's picture

In a lot of civilized countries, gold is exempted from VAT, unfortunately silver generally isn't.  

Wed, 10/10/2012 - 15:11 | 2875804 Catullus
Catullus's picture

IMF recommends fuvking everything up; Calling in IMF.

Wed, 10/10/2012 - 15:16 | 2875824 Roubinesque
Roubinesque's picture

This is such insanity!  Its like watching the Titanic.  We know the iceberg is sitting in the middle of the Atlantic.  But we keep accelerating the boat.

We use the term "printing money" too loosely.  Instead the banks are monetizing electronically, with the push of a button.  But its all vapor.  The money is there so long as it doesn't move.  Withdrawal limits, border controls, restrictions on gold purchases.  All will be employed to stop balances from migrating to safer havens.  Savers will ultimately pay for their prudence and watch their years of work and frugality vanish.  

The central banks are trying to dispose of the worthless assets quickly.  Trying to hide the bodies.  But the private market for debt is leaving town.  Private investors are either front-running or have long since realized that this is a galactic ponzi scheme and no return is worth the risk of locking up your money in Spanish, Italian, Greek, (or conceivably), US bonds.  

As a lifelong saver, I believe some things are worth fighting for.  The attack on our currencies is a shakedown brought on by decades of mismanagement and sclerotic bureaucracies.  I say turn off the pumps.  Let it break.  Let the markets crash.  Let the banks default.  Admit that the promises we have made cannot be kept.  Reward the prudent with the buying opportunity they deserve, during the rubble clearing aftermath.  

Wed, 10/10/2012 - 15:26 | 2875849 Things that go bump
Things that go bump's picture

That buying opportunity, for pennies on the dollar, is not intended for the likes of us.  

Wed, 10/10/2012 - 15:20 | 2875833 Mr. Magniloquent
Mr. Magniloquent's picture

Emboldening text is subject to diminishing returns.

Wed, 10/10/2012 - 15:30 | 2875867 XitSam
XitSam's picture

And they will keep doing it until the value of bolded text is zero.

Hypertextflation, bitchez!

Wed, 10/10/2012 - 15:33 | 2875876 midtowng
midtowng's picture

Great subject line for an article. Too bad there isn't any proof to back it up.

Wed, 10/10/2012 - 15:36 | 2875887 steve from virginia
steve from virginia's picture

 

Ya don't have capital controls within a currency union. You have capital controls OR a currency union.

 

Unless the controls are 100% effective immediately, they are counterproductive. Adding partial controls is an incentive to remove funds elsewhere, the bank runs intensify.

 

The real problem is the entire Western economic system is insolvent. Where does one 'run to'? Where is there safety? What is it ...? Applying monetary 'cures' to the waste-based economy is the same as putting a band-aid on a cancerous tumor.

 

People want changes ... what they want are for there to be no changes. The change that physics is imposing is less. We have endlessly more humans and more machines and diminishing material to serve these multitudes. Never going to work ...

Wed, 10/10/2012 - 16:38 | 2876069 QQQBall
QQQBall's picture

Great thinking Steve from VA. Stick all your dough ina Spanish Bank and watch them convert it to a new national currency at 1/2 the value of a Euro.  They are not getting out o0f the Euroi, they are getting theor dough out of Spain and its banking system. Could you really not understand the article?

Wed, 10/10/2012 - 19:34 | 2876460 sink critically
sink critically's picture

If you really think there are too many people I have great news! You can help fix it all by yourself affecting only yourself.

If you really think you have control of your capital even in this country I suggest you go to your bank right now and attempt to withdraw all of your cash. Let me know how that goes.

Wed, 10/10/2012 - 15:57 | 2875951 Nobody For President
Nobody For President's picture

OK, OK! I'm givin' the Spidey man beach towel back. Now give me my damn money!

Wed, 10/10/2012 - 16:05 | 2875957 THE DORK OF CORK
THE DORK OF CORK's picture

I have been to Andorra.............and it is a shithole.

They have completly destroyed the mountains for fucking ski slopes  ...a form of winter activity for fucking lazy summer golfers.

 

www.youtube.com/watch?v=dd6P3EIwSDc

 

Wed, 10/10/2012 - 16:45 | 2876001 falak pema
falak pema's picture

 

DYLAN GRICE: This Keynes Quote Sums Up Our Worst Fears About Easy Monetary Policy

"By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. By this method they not only confiscate, but they confiscate arbitrarily; and, while the process impoverishes many, it actually enriches some.

The sight of this arbitrary rearrangement of riches strikes not only at security but [also] at confidence in the equity of the existing distribution of wealth. Those to whom the system brings windfalls, beyond their deserts and even beyond their expectations or desires, become "profiteers," who are the object of the hatred of the bourgeoisie, whom the inflationism has impoverished, not less than of the proletariat. 

As the inflation proceeds and the real value of the currency fluctuates wildly from month to month, all permanent relations between debtors and creditors, which form the ultimate foundation of capitalism, become so utterly disordered as to be almost meaningless; and the process of wealth-getting degenerates into a gamble and a lottery. 

Lenin was certainly right. There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose."

Read more: http://www.businessinsider.com/dylan-grice-keynes-quote-central-bank-easing-2012-10#ixzz28vevX9DG

Now that is what this world has evolved to become ALL about and its said by the man whom ZH despises as the Icon of our current problems; ironic how we love to shoot the messenger! 

Having debauched his NAME as that who is the luciferian agent of Oligarchy hubris, lets at least give him the merit of having forseen how runaway monetarism, the love child of Friedman, could be the death of the monetary thread. Floating rates and print to infinty... you have it all there. Read J. Rueff and "the monetary sin of western world", also "the end of the Keynesian world"... (he was an Austrian and anti Keynes!)...the day that Pax Americana ship left the gold exchange standard of BW, brain child, alas without Bancor, of Keynes et al. 

Wed, 10/10/2012 - 16:28 | 2876014 Zero Govt
Zero Govt's picture

"... to the tiny principality of Andorra next door– a highly capitalized, low tax banking jurisdiction."

you should mention Andorra's Govt is, surprise surprise, bankrupt

years of suicide socialist Govt spent their coffers into oblivion on nonsense projects like motorway tunnels through mountains that went epically over-budget and of course the essential 'me-too' property bubble now very much bust

Govt and bankruptcy, Govt and farce, Govt and spending junkies, Govt and toerags being out-of-fucking-control... these words fit well together the world over

Govt is pitiful, time to dump this garbage (forever)

Wed, 10/10/2012 - 16:56 | 2876126 Peter Pan
Peter Pan's picture

The good thing about capital controls is that we won't need them when we run out of money.

Seriously though, where has the IMF been while 30 trillion dollars has been squirrelled into safe havens? Why hasn't the alarm been sounded earlier?

Wed, 10/10/2012 - 17:40 | 2876263 exodus11
exodus11's picture

Simple fix. Buy physical silver or gold and store your money there.

Wed, 10/10/2012 - 18:07 | 2876304 Supernova Born
Supernova Born's picture

Fiat can only maintain its status at this point if freedom is destroyed.

Look at Argentina of late as one example. One can't save in another currency, can't save gold/silver, can't move your money out of Argentina, and on and on.

Freedom or fiat.

Wed, 10/10/2012 - 18:18 | 2876341 newengland
newengland's picture

Capital controls and exchange controls are coming because the world monetary system is imploding and people will be financial prisoners in their own countries, while the politicians and major banks pursue their new world order, New Feudalism.

Wed, 10/10/2012 - 18:55 | 2876398 Venerability
Venerability's picture

We don't need Capital Controls.

We need Media Controls.

Impose strict restrictions on Hedge Fund Owners and others with large stakes in Markets owning major financial media outlets.

Of course, we can't make this retroactive for the likes of - well, we all know whom. But seriously beginning to institute restrictions now, around the world, would have immediate helpful effects on reducing contrived market volatility supported by propaganda for selfish reasons. 

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