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.

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Ratscam's picture

can you please stop your spam shit?

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.


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

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




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-

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.



PUD's picture


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.

Jolly.Roger's picture

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

noses's picture

Are you still beating your wife and fucking your daughter?

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. 

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.

fonzannoon's picture

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

MiltonFriedmansNightmare's picture

I gotta say, my favorite line in the movie.

youngman's picture

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

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

ATM's picture

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

Cognitive Dissonance's picture

"Capital controls?"

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

davidsmith's picture


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


  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.






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).

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)

fuu's picture

Learn to cut-n-paste spam bot.

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.

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.

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.

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.  

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.


CPL's picture

None of the above

All of the above

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

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!

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?

flacorps's picture


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.

debtor of last resort's picture

You go choke in your own plastic WallMart bag IMF.

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.

no life's picture

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

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. 


Poor Grogman's picture

Details shme-tails

Let's play simon says...

Clowns on Acid's picture

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

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.

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.

Urban Redneck's picture

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

Catullus's picture

IMF recommends fuvking everything up; Calling in IMF.

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.  

Things that go bump's picture

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

Mr. Magniloquent's picture

Emboldening text is subject to diminishing returns.