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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krispkritter's picture

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

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.

fonestar's picture

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

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.

fonestar's picture

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

Papasmurf's picture

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

superflex's picture

I hear is also taking BTC


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.

Son of Loki's picture

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

boogerbently's picture

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

John_Coltrane's picture

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

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.

fonestar's picture

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

NidStyles's picture

Fuck man, you're stupid.

fonestar's picture

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

boogerbently's picture

Spoken like a true "progressive".

ALL change is good.!?

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.

Blano's picture

Kroger doesn't take BTC, kid.

Now back to the basement with you.

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.


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

RaceToTheBottom's picture

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

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.


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.

Canadian Dirtlump's picture

drinks on me if you visit. srsly.

fonestar's picture

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

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.

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.

RaceToTheBottom's picture

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

RafterManFMJ's picture

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

fonestar's picture

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

Canadian Dirtlump's picture

dear friend i would be honored.

Mercuryquicksilver's picture

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

fonestar's picture

How many BTC do I have?  How many LTC?

BigJim's picture

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

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.

joego1's picture

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

fonestar's picture

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

NidStyles's picture

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

Spanky's picture



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

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

wallstreetaposteriori's picture

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

Rider's picture

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

Are you feeling lucky... punk?

CPL's picture

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

It's called inflation.

pods's picture

I drink your milkshake.


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)

johngaltfla's picture

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

jerry_theking_lawler's picture

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

OldPhart's picture

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

imbtween's picture

I'm shocked. SHOCKED.

Ignatius's picture

Long duct tape and bailing wire.

What a fucked up financial system.