Here It Comes - More Leading Economists Call For Capital Controls

Tyler Durden's picture




 

Submitted by Simon Black via Sovereign Man blog,

As the saying goes, ‘desperate times call for desperate measures.’

The phrase is bandied about so frequently, it’s generally accepted truth. But I have to tell you that I fundamentally disagree with the premise.

Desperate times, in fact, call for a complete reset in the way people think. Desperate times call for the most intelligent, effective, least destructive measures. But these sayings aren’t as catchy.

This old adage has become a crutch– a way for policymakers to rationalize the idiotic measures they’ve put in place:

  • Inflation-adjusted interest rates that are… negative.
  • Trillion dollar deficits.
  • Endless wars and saber-rattling
  • Unprecedented expansion of central bank balance sheets.
  • DIRECT CONFISCATION of people’s bank accounts.

But hey… desperate times call for desperate measures. I guess we’re all just supposed to be OK with that.

One of those desperate measures that’s been coming up a lot lately is the re-re-re-introduction of capital controls.

It started in late 2012, when both the European Central Bank and the International Monetary Fund seperately endorsed the use of capital controls.

For the IMF, it was a staunch reversal of its previous position, and Paul Krugman lauded the agency’s “surprising intellectual flexibility” a few days later.

The IMF then followed up in 2013 with another little ditty proposing a global wealth tax. The good idea factory is clearly working ’round the clock over there.

Lately, two more leading economists– Harvard professors Carmen Reinhart and Ken Rogoff– have joined the debate.

In a speech to the American Economic Association earlier this month, the pair suggested that rich economies may need to resort to the tactics generally reserved for emerging markets.

This is code for financial repression and capital controls.

The idea behind capital controls is simple: create barriers to restrict the free flow of capital. And if you’re on the receiving end, capital controls can be enormously destructive.

But for politicians, capital controls are hugely beneficial; once they trap funds within their borders, the money can be easily taxed, confiscated, or inflated.

Historically, capital controls have been used in ‘desperate times’. Too much debt. Too much deficit spending. Wars. Huge trade deficit. Intentional currency devaluation. Etc.

Does any of this sound familiar? It’s no surprise that policymakers have once again turned to this ‘desperate measure’. They’re already here.

Iceland has capital controls, over five years after its spectacular meltdown. We can also see capital controls in Cyprus, India, Argentina, etc.

I’ve been writing for years that capital controls are a foregone conclusion. This is no longer theory or conjecture. It’s happening. And every bit of objective evidence suggests that the march towards capital controls will quicken.

This is a HUGE reason to consider holding a portion of your savings overseas in a strong, stable foreign bank where your home government won’t as easily be able to trap your savings.

Other options including storing physical gold (even anonymously) at an overseas depository. Or if you’re inclined and tech savvy, you can also own digital currency.

But perhaps the best way to move some capital abroad is to own foreign real estate, especially productive land.

Foreign real estate is not reportable. It’s a great store of value. It generates both financial profits and personal resilience. It’s a LOT harder to forcibly repatriate. And it ensures that you always have a place to go in case you need to get out of Dodge.

Even if nothing ‘bad’ ever happens, you won’t be worse off for owning productive land in a thriving economy.

Like I said– desperate times don’t call for desperate measures. More than ever, it’s time for a complete reset in the way we look at the most effective solutions. These options are certainly among them.

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Thu, 01/23/2014 - 15:30 | 4359879 krispkritter
krispkritter's picture

The best place to be 'Leading Economists' is over a cliff...

Thu, 01/23/2014 - 15:32 | 4359891 Canadian Dirtlump
Canadian Dirtlump's picture

I was going to say to the bottom of a lake, but the assholes may find my silver so I'll go with your plan.

Thu, 01/23/2014 - 15:33 | 4359898 fonestar
fonestar's picture

The economedians can bring it!  My funds are with Satoshi now.

Thu, 01/23/2014 - 15:38 | 4359916 Doña K
Doña K's picture

Satoshi already cashed his stash. You are on your own at the mercy of .gov's when they find out they can not tax it or control it.

Thu, 01/23/2014 - 15:47 | 4359943 fonestar
fonestar's picture

It would be a pretty big deal if Satoshi tried to cash out.

Thu, 01/23/2014 - 15:52 | 4359963 Papasmurf
Papasmurf's picture

Satoshi is in bubble phase now.  I just received an email from Tiger direct, offering to exchange bitcon for computer stuff.

Thu, 01/23/2014 - 16:09 | 4360005 superflex
superflex's picture

I hear Pets.com is also taking BTC

 

Thu, 01/23/2014 - 17:04 | 4360200 fonestar
fonestar's picture

Bitcoin has nothing to do with the .com bubble.  But Bitcoin will help enable some of the bold proclimations to come out from that era.

Thu, 01/23/2014 - 17:41 | 4360301 Son of Loki
Son of Loki's picture

It's no wonder the Chinese are sneaking Billions of dollars out of China.

Thu, 01/23/2014 - 19:49 | 4360734 boogerbently
boogerbently's picture

I'm in favor of higher taxes for everyone but me !

Fri, 01/24/2014 - 03:03 | 4361854 John_Coltrane
John_Coltrane's picture

An old campaign slogen:  "Dont' tax you, don't tax me, tax that fellow behind that tree"

Thu, 01/23/2014 - 15:55 | 4359968 0b1knob
0b1knob's picture

"This is a HUGE reason to consider holding a portion of your savings overseas in a strong, stable foreign bank where your home government won’t as easily be able to trap your savings."

There is a HUGE reason not to.   FATCA.  Its already so difficult that no overseas banks will take an account from the US.

Thu, 01/23/2014 - 15:58 | 4359981 fonestar
fonestar's picture

There's no reason to use traditional banks anymore (besides transfering to someone who has BTC, LTC, etc...).

Thu, 01/23/2014 - 16:25 | 4360059 NidStyles
NidStyles's picture

Fuck man, you're stupid.

Thu, 01/23/2014 - 17:01 | 4360186 fonestar
fonestar's picture

Banks love dipshits like you.  Brand loyalists, cradle-to-grave linear thinkers.

Thu, 01/23/2014 - 19:50 | 4360738 boogerbently
boogerbently's picture

Spoken like a true "progressive".

ALL change is good.!?

Fri, 01/24/2014 - 00:40 | 4361660 NidStyles
NidStyles's picture

Get over it, I haven't stepped foot in a bank for almost 10 years. You don't seem to understand much do you? It is amazingly easy to work around the banks in the US and do so with a rather comfortable standard of living.

Fri, 01/24/2014 - 00:35 | 4361653 Blano
Blano's picture

Kroger doesn't take BTC, kid.

Now back to the basement with you.

Thu, 01/23/2014 - 16:29 | 4360065 kchrisc
kchrisc's picture

In some extraction zones one can get around FACTA by setting up a shell corp.

Check into it.

While in the US, the way around it involves calibers and guillotines.

 

"...it is your right, it is your duty..."

Thu, 01/23/2014 - 22:48 | 4361321 RaceToTheBottom
RaceToTheBottom's picture

That is the reason for dual citizenship.  At least for the ultra wealthy. 

Sat, 01/25/2014 - 09:44 | 4366359 Oracle of Kypseli
Oracle of Kypseli's picture

<<<<< FATCA.  Its already so difficult that no overseas banks will take an account from the US. >>>>

FATCA has been delayed until July 2014. By then it may be repealed at least the one about reporting up to $10k. the one that you submit with your taxes must be more than $50k and $75k for couples. And it's not against the law. It also does not get taxed as long as there is no interest earned.

If you want to hide, you need to have another passport and proof of residence outside the states. Proof of residence you can buy for a few dollars in several countries with the water and electricity bill in your name.

Come on guys, you read zerohedge. You should know these by now.

 

Thu, 01/23/2014 - 15:57 | 4359977 css1971
css1971's picture

Major Seniorage.

Thu, 01/23/2014 - 15:44 | 4359917 Canadian Dirtlump
Canadian Dirtlump's picture

dwaynestar my good man, if you're ever in calgary I have a white cowboy hat for you ( as I do for all other zerohedgers ). If you ARE in calgary drinks are on me tonight. Your bitcoins are no good here.

Thu, 01/23/2014 - 15:45 | 4359940 fonestar
fonestar's picture

My brother lives in Calgary.

Thu, 01/23/2014 - 15:47 | 4359942 Canadian Dirtlump
Canadian Dirtlump's picture

drinks on me if you visit. srsly.

Thu, 01/23/2014 - 15:49 | 4359956 fonestar
fonestar's picture

I'm retired now, but I will try making it to the stampede this year.

Thu, 01/23/2014 - 16:19 | 4360038 FrankDrakman
FrankDrakman's picture

what benighted fools down arrow you for this? If native Canadians celebrate their culture by killing a seal with clubs, it's a glorious reminder of their ancient past. White people celebrate their culture and it's a sin. Feh.

Thu, 01/23/2014 - 17:01 | 4360192 fonestar
fonestar's picture

I'd love to go baby seal bashing but that's further north.  They only have coyotes in my neck of the woods and my .22mag does a number on them.

Thu, 01/23/2014 - 22:52 | 4361339 RaceToTheBottom
RaceToTheBottom's picture

I would bet that the group has a high correlation to the Putin Man-Crush group here at ZH.....

Thu, 01/23/2014 - 16:12 | 4360013 RafterManFMJ
RafterManFMJ's picture

I've never been down to Canada but if so I'll look you up.

Thu, 01/23/2014 - 17:14 | 4360223 fonestar
fonestar's picture

"down" to Canada?  Where do you live?  The North Pole?

Thu, 01/23/2014 - 22:37 | 4361257 Canadian Dirtlump
Canadian Dirtlump's picture

dear friend i would be honored.

Thu, 01/23/2014 - 15:54 | 4359970 Mercuryquicksilver
Mercuryquicksilver's picture

Your "funds" are 2 bitcoin. At least walk the talk.

Thu, 01/23/2014 - 17:03 | 4360196 fonestar
fonestar's picture

How many BTC do I have?  How many LTC?

Thu, 01/23/2014 - 19:36 | 4360697 BigJim
BigJim's picture

We have been wondering. You must be up to a couple of each by now.

Thu, 01/23/2014 - 20:06 | 4360781 fonestar
fonestar's picture

How many wallets do I manage?  On how many machines?   It should be easy for you to determine, since according to you this is a totally trackable system?

Here's a tip... stick to the 20th century, it's a simpler place.

Thu, 01/23/2014 - 22:56 | 4361358 joego1
joego1's picture

What if you go blind and your dog eats your bitcoin charger?

Thu, 01/23/2014 - 23:34 | 4361498 fonestar
fonestar's picture

I would continue seeing the white light and my dog would become extremely rich and blessed of Satoshi.

Fri, 01/24/2014 - 00:41 | 4361666 NidStyles
NidStyles's picture

You sound like a NAZI dude, no shit. You should learn to relax a bit, before you start going loony.

Thu, 01/23/2014 - 22:40 | 4361281 Spanky
Spanky's picture

-1

For...

How many BTC do I have?  How many LTC? -- fonestar

Frankly my dear, I don't give a damn.

Thu, 01/23/2014 - 21:58 | 4361136 wallstreetapost...
wallstreetaposteriori's picture

Mt Gox bitcoins charts looking pretty weak..... what happens to Satoshi when it all crashes?  

Thu, 01/23/2014 - 15:36 | 4359907 Rider
Rider's picture

If one of those punks takes my money, I will take his a$$ in exchange.

Are you feeling lucky... punk?

Thu, 01/23/2014 - 15:48 | 4359953 CPL
CPL's picture

Dude, they've been taking it for years and you didn't even notice them doing it. 

It's called inflation.

Thu, 01/23/2014 - 16:15 | 4360021 pods
pods's picture

I drink your milkshake.

 

Thu, 01/23/2014 - 16:15 | 4360024 Kirk2NCC1701
Kirk2NCC1701's picture

Why so "final"?  Allow them a chance at redemption.  Instead, lead them to...

A labor camp.  Motto:  Arbeit Macht Frei (Work is Liberating)

Thu, 01/23/2014 - 19:48 | 4360731 johngaltfla
johngaltfla's picture

"Leading Economists" need blindfolds, cigarettes and a .30-06 head shot.

Thu, 01/23/2014 - 23:23 | 4361461 jerry_theking_lawler
jerry_theking_lawler's picture

why waste the lead/copper on such a large bullet... a .22 will do the job handily.

Fri, 01/24/2014 - 04:37 | 4361914 OldPhart
OldPhart's picture

A fuck wasting a good smoke on shit like that...

Thu, 01/23/2014 - 15:30 | 4359881 imbtween
imbtween's picture

I'm shocked. SHOCKED.

Thu, 01/23/2014 - 15:48 | 4359951 Ignatius
Ignatius's picture

Long duct tape and bailing wire.

What a fucked up financial system.

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