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The Coming Capital Controls Are Designed To Protect The Banks From You

Tyler Durden's picture




 

Submitted by Simon Black via Sovereign Man blog,

Of all the peculiarities about human nature, one of the most interesting in my opinion is that we’re so resistant to change.

Humans simply don’t deal with it well. We tend to root. We find comfort in familiarity.

And, even when the familiar becomes unpleasant, we still put up with it. We prefer to suffer through something that we know rather than change things and risk the unknown.

This is why people stay in bad relationships. Or why they continue working for bosses they dislike at jobs they despise. It’s the fear of change.

But everyone… absolutely everyone… has a breaking point. It’s a point where the status quo becomes so uncomfortable, so painful, that we snap. And walk away.

It’s the same in finance. People stick with what they know, even if they have to endure a little pain and suffering.

Today’s current banking environment is the perfect example. In the US, interest rates for most bank accounts are so low that they fail to keep up with inflation.

You are doing very well if you can generate a whopping 0.5% interest. In Canada rates can be a bit higher.

But when you compare these rates to even the official rates of inflation, it’s clear that savers are guaranteed to lose money.

In Europe it’s even worse. Interest rates at many banks are negative… so savers are actually paying the banks.

In theory there’s nothing wrong with paying your banker, presuming that they’re providing a real service.

Traditionally, banks were no different than a secure storage facility: depositors would pay a fee in exchange for the bank safeguarding their savings.

These days a lot of people might pay 50 bucks a month at a U-Store-It place to store $10,000 worth of junk. So why not pay a small fee for a banker to store $10,000 worth of cash?

The reason is that banks don’t operate like a storage facility.

It’s not like the proprietor of the U-Store-It is loaning out your sofa to make a few bucks on the side. If he were, it would be called fraud, and he’d go to jail for it.

Banks, on the other hand, are actually ENCOURAGED to take your hard earned savings and make a few extra bucks on the side.

In fact they have a history of making often absurd loans and wild, overleveraged bets using your money. Not theirs.

So just consider how insulting this is to actually to pay them interest; paying for the privilege of them gambling with your savings. It’s obscene.

But like I said, we all have a breaking point. And there will reach a level where rates get so low (or negative) that no rational person would continue holding money at a bank.

Why bother? You could just withdraw most of your balance, then pay a small fee for a safety deposit box that you stuff full of cash. Cheaper. Easier. Better.

Cash in your hand might pay 0% interest… but at least it doesn’t cost you.

But there’s a huge problem with this approach: there’s very little physical cash in the system.

According to the Federal Reserve, the amount of physical US currency in circulation is about $1.3 trillion. Yet the amount of “M2” money supply is nearly ten times that amount.

So just imagine if even 10% of people hit their breaking points and withdrew their money in cash– there wouldn’t be enough cash in the system to support this demand. And the banks would subsequently collapse.

If governments have proven anything to us over the last seven years, it is that they will do anything to keep the banks from going down.

This is a major reason why they’re trying to get rid of cash, and in some cases even criminalize it under the ridiculous auspices of the war on terror.

In the US, some of the more prevalent names in finance have started calling for an outright ban of cash, including a prominent economist from Citigroup.

(This is a rather convenient position for Citigroup.)

Greece is another great example– they’ve already implemented a tax on cash withdrawals and wire transfers. And further restrictions will inevitably follow.

These measures are all different forms of capital controls, designed to prevent you from taking your money away from such a destructive system.

In fact, I expect the next round of capital controls will be designed to protect the banks… from you.

When a government is bankrupt, the central bank is nearly insolvent, the banking system is illiquid, and an entire population suffers from interest rates that are either negative or below the rate of inflation, capital controls are a foregone conclusion.

They’ll hit just as soon as enough people reach their breaking points… when they say ‘enough is enough’ and they take their money out of the banking system.

Governments have done it before: they’ll declare a ‘bank holiday’ and then impose some sort of freeze on withdrawals. Just like we saw in Cyprus in 2013. Or the US in 1933.

The data and history are very clear on what will likely happen. We just can’t pinpoint the date.

Very few people will guess correctly and withdraw their cash the day before capital controls are imposed.

That’s why it makes sense to take certain steps now.

Consider holding some physical cash, including some healthier currencies like the Swiss franc or Singapore dollar, as well as precious metals.

More importantly, consider moving a portion of your savings to a rainy day fund at a well-capitalized bank overseas in a jurisdiction that isn’t bankrupt.

After all, it’s hard to imagine that you’ll be worse off for having some savings at a strong, healthy bank that actually pays a reasonable rate of return.

 

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Tue, 05/26/2015 - 17:39 | 6133854 kliguy38
kliguy38's picture

the sheep will be slaughtered by the tens of millions. the blood lust must be satisfied.

Tue, 05/26/2015 - 18:33 | 6134032 espirit
espirit's picture

Haha, ok I'll bite.

Willing to offshore my lifesavings to a 'well capitalized banking establishment'.

Do I look like I just fell off the turnip truck, Simon?

Tue, 05/26/2015 - 18:50 | 6134085 messymerry
messymerry's picture

I called a 2150 top last year, but it's taking longer than anticipated for the software developers to get everything working. All the stops will be pulled out until the mechanisms for bail ins are in place and tested, then when the exits can all be locked at the flip of a switch, the markets will be allowed to crash and in the turmoil, all the debt documentation will magically disappear. Due I'm sure to various and sundry server crashes and massive bungling by certain organizations and TLAs which I needent name here...

I love being part of the lunatic fringe,,,

;-D

Tue, 05/26/2015 - 20:09 | 6134327 gdogus erectus
gdogus erectus's picture

I have tried opening bank accounts when traveling is Asia over the last few years. I have bad news for you: They won't let you.

Tue, 05/26/2015 - 19:56 | 6134202 SpiOpsChiwowwow
SpiOpsChiwowwow's picture

In Costa Rica you store it at the local Hardware store.

It works, try it sometime.

Tue, 05/26/2015 - 18:25 | 6134000 swmnguy
swmnguy's picture

Oh, I well remember the great Muffin Disaster of '37.

Tue, 05/26/2015 - 18:39 | 6134051 Oscar Mayer
Oscar Mayer's picture

Here's an interesting read on the subject:

The Ban on Cash - Part II

Thu, 05/28/2015 - 15:31 | 6140902 Oscar Mayer
Oscar Mayer's picture

People seriously need to think about this:

It is a FIAT Currency System!  The government can Print whatever it wants to spend!

What's this "borrowing" bullshit?  The government doesn't need to "borrow" or "tax", it's FIAT!.

Without skipping a beat, they took the old "Gold Standard" accounting practices (where governments borrowed or owed gold and went into debt) and applied them to the Fiat.

82 years later and not a hint that anyone has caught on to this scam!

And now they have you convinced that the "Credit" the Fed and the banksters are creating is Fiat too!  

How stupid can you get!!!!

Tue, 05/26/2015 - 19:15 | 6134179 logicalman
logicalman's picture

That's how it all works.

It's not that there's one born every minute, it's more that generations rarely communicate well and the lessons learned by the old are mostly ignored by the young.

(Guilty as charged, by the way, but I'm old now and looking at it from the other end!)

If you can, would be worth an edit.

I'm pretty sure you're not referring to those supplying pastries.

 

Tue, 05/26/2015 - 17:44 | 6133867 Right-on Left-off
Right-on Left-off's picture

What's really funny about this is the neither the 99% nor the 1% and in most cases the .01% will be spared.  In such an instance ... who are the ill informed and osterich characters then?

Tue, 05/26/2015 - 17:44 | 6133868 Peter Pan
Peter Pan's picture

And the day is fast approaching when we will realise why the banking system is known as the fractional reserve banking system when we all receive just a fraction of our savings back from the banks.

And if we are lucky the government might issue a special credit card for the balance which we can draw down upon like a pension fund over the next 25 years.

Tue, 05/26/2015 - 19:54 | 6134270 Cheduba
Cheduba's picture

Tonight's confidence-inspiring image in the reliability of the fiat fractional reserve banking system is brought to you by US Bank.

http://imgur.com/QBYnfcC

Wed, 05/27/2015 - 03:01 | 6135189 skistroni
skistroni's picture

This article is total FUD bullshit. All those libertarians who repeat ad nauseum this meme (if 10% of depositors blah-blah-blah) are completely nuts. Here in Greece, we have pulled around 35% of our deposits from Greek banks since 2012 (and over 45% since 2010) and everything is still functioning just fine. QED. 

Oh, and BTW, Draghi said that the ELA still has around 13B to go, so we could pull around 50% of our deposits and still no problem. What do you say now, scaremongers? 

Wed, 05/27/2015 - 03:03 | 6135192 Peter Pan
Peter Pan's picture

Let's see what you can pull out (other than your hair) once Greece defaults.

Wed, 05/27/2015 - 05:56 | 6135343 skistroni
skistroni's picture

LOL. Please spare my irony master.

Tue, 05/26/2015 - 17:52 | 6133874 divedivedive
divedivedive's picture

We have now moved about a third of our savings to Mexico - where we get around 3% return per annum. which is about the same return we get for a 10 year corporate bond in the US today. Just trying to diversify a little.

Edit : but the US FATCA (and such) paperwork is a real pain.

Tue, 05/26/2015 - 18:04 | 6133933 samjam7
samjam7's picture

Well if you plan on living in Mexico it's fine but do be aware the Peso is like a Dollar with higher volatility if you try to hedge your savings with the Peso in case the Dollar turns sour then I would not put my bet on Pesos at all...that economy is over 90% dependant on the US!

Tue, 05/26/2015 - 18:12 | 6133956 divedivedive
divedivedive's picture

I appreciate your concern - really. We live here full time. Personally I think Mexico has an incredibaly bright future and - although it has its problems - they are often exagerated in the press. There really isn't anything we don't like about Mexico. As I'm sure you are aware - everything is cyclical - I anticipate the peso getting stonger in the second half 2015. 

 

 

Tue, 05/26/2015 - 17:46 | 6133875 MsCreant
MsCreant's picture

If this is news to you, it may already be too late. 

Tue, 05/26/2015 - 17:55 | 6133905 Rainman
Rainman's picture

yes ... so many have fallen prey to the FDIC con .

Tue, 05/26/2015 - 17:56 | 6133907 CrazyCooter
CrazyCooter's picture

Simon Black articles remind me of "Old Blevins" ...

http://www.austinlizards.com/audio/03_Old_Blevinsmp3_hifi.mp3

Regards,

Cooter

Tue, 05/26/2015 - 18:46 | 6134070 MsCreant
MsCreant's picture

LOL!!

Blah, blah, blah, blah, and he would not leave me be!

Tue, 05/26/2015 - 18:54 | 6134102 Winston Churchill
Winston Churchill's picture

$600 per day from the ATM since Cyprus.

Like eating an elephant, one bite at a time.

Tue, 05/26/2015 - 19:12 | 6134169 greenskeeper carl
greenskeeper carl's picture

It has come to the attention of zee ameristatspolicei that you have been making some unusual cash withdrawals , herr Churchill. I suspect you to be a criminal, therefore we are confiscating your possessions for the good of the fatherland...

Tue, 05/26/2015 - 18:03 | 6133914 Clesthenes
Clesthenes's picture

“… a safety deposit box that you stuff full of cash… banks would subsequently collapse [if] 10% withdrew their money in cash”?

You need to re-consider such advice.

It is routine during financial crises for criminal and useless classes to post soldiers at entrances to safety deposit boxes.  Their purpose is to watch over shoulders of bank customers as they open their boxes.  If the soldier spots stocks, bonds, jewelry, precious metals or cash, he takes it and may or may not give a receipt for it.  In very serious times the box holder is arrested, paraded thru a Revolutionary Tribunal before carted off to the guillotine or metal shack to receive the shot in the nape of the neck.  This is what happened during the French Terror (1792-4) and the Russian Terror (1917-85).  And the Department of Homeland Security is poised to do the same when the time is right: it is modeled after those French and Russian Terrors.

The short form: safety deposit boxes… bad idea.

Furthermore, withdrawing cash from banks hardly affects them; they can instantly get replacements from the Federal Reserve.  No big deal.

If you want to hasten the collapse, physical gold is the instrument.  The more it is demanded, the faster the value of the dollar is diminished.  And, it is nowhere near a price that would account for all bank notes and bank reserves that have been issued into existence using gold, gold receivables, gold swaps and gold certificates as collateral. (Anatomy… part 2 and What Price Gold…)  When we examine financial statements of central banks (domestic and foreign) and the US Treasury, we have good reason to believe that the US Treasury possesses more “gold swaps” than “gold”; more bad paper than physical.

 

Tue, 05/26/2015 - 19:23 | 6134196 logicalman
logicalman's picture

When we examine the financial statements of central banks, we first.....

Take a long, deep breath...

Shake our heads....

laugh out loud....

realise we are being fucked and get really angry.

Next, we realise that there is little those who see this can do, when surrounded by brain-dead idiots.

>Sound of beer can opening<

>Sound of beer can opening<

>Sound of beer can opening<

Ahhh .... I'm OK now.

 

 

Tue, 05/26/2015 - 18:00 | 6133920 gatorengineer
gatorengineer's picture

Another Mostly BS article common Tyler.  50% or more of the people in the country dont even have a grand in the bank.  When the level of rehypothecation is fully understood, if ever it will be realized that the banks are likely leveraged 100 to 1 or more.  If Mark to Unicorn unravels well....  Formerly middle class retirees may have a few T-bills and they will be truly F'd.  Other than that, will this affect the top 1 percent? top 10 percent?  hardly. 

Wed, 05/27/2015 - 03:44 | 6135237 zhandax
zhandax's picture

I will be a small bit less harsh, but where this article, as well as all the 'Greek bank run' articles fall flat is the fact that the retail depositor does, indeed, hold relatively small balances in the banks.  There either is enough cash for retail to withdraw, or it can be transferred fairly promptly.  If you want $10k on Friday afternoon, you will undoubtedly have to wait for it to be transferred from the regional fed.  But the fact remains, that the majority of demand deposits at banks, are larger non-corp businesses, corps, municipalities, and other institutional depositors.  It is simply a matter of scale.

Tue, 05/26/2015 - 18:02 | 6133926 sudzee
sudzee's picture

Filled my tank today. Handed over 62.00 cash and the owner gave me back 2.65. He said the cost of handling debit cards and credit cards was more what he was dicounting for cash payment. 

Tue, 05/26/2015 - 18:06 | 6133937 WTFUD
WTFUD's picture

Filled my condom today and handed over £120 with no change back. Honey boo boo said no credit cards.

Wed, 05/27/2015 - 00:20 | 6135001 PhoQ
PhoQ's picture

Be glad that you were able to fill a condom. In these troubled times, so many are coming up short.

Tue, 05/26/2015 - 18:16 | 6133972 bankonzhongguo
bankonzhongguo's picture

The US capital control program is already being tested.

http://www.washingtonpost.com/opinions/kansass-welfare-madness/2015/05/2...

The case in Kansas is EXACTLY what is coming down the pike.

The way the "top" sees it is "the poor" uses cash to operate in the grey and black markets.

By making extremely expense to use cash cash they drive the poor to more electronic POS transactions. JPM has deep research on this considering they have been administrating EBT for years.

Kansas is a very very very interesting state when it comes to banking.

It has one of the highest per capita rates for banks in general (as does Missouri). Historically this is from the use of ag banks to launder money for Las Vegas back in the day, but this went into overdrive once the Italians were out of the picture and everything went corporate. Kansas City is a proxy for Chicago. Johnson County in particular. You think its not possible yet George Soros nearly got Greg Orman to beat Roberts in the last election. Little ol' Kansas.  Who would have thunk it.

Very small group of people run that state and most of them are good ol' boy country yucks just carrying water for bigger polices they do not really understand.

Capital controls are already being rolled out in America.

Tue, 05/26/2015 - 18:30 | 6134020 swmnguy
swmnguy's picture

Here in Minnesota various welfare benefits are distributed using USBank debit cards.  These cards carry outrageous fees.  ATM fees, fees per service rendered at the bank, cash-out limits, etc.  I've heard USBank can easily take half the money, if the benefit recipient isn't cautious.  And, of course, we're not talking about financial masterminds usually, when we're talking about recipients of welfare benefits.

Tue, 05/26/2015 - 18:43 | 6134042 kchrisc
kchrisc's picture

Keep as little in the grifting banksters' banks as possible.
As able, quit paying on the grifting banksters' fiat-loans to you, as they were funded from wealth stolen from you, and the rest of the American country.
Build a guillotine for ultimate collection of what the banksters owe you, and the rest of the American country.

Liberty is a demand. Tyranny is submission..

 

"The banksters need to repay us."

Tue, 05/26/2015 - 19:04 | 6134109 essence
essence's picture

We, we, we, we, Simon's article is peppered with "we's".

As in sheeple. Or, in Simon's targeted case .... well off sheeple. His livestock & livelihood, evidently.

 

Sheeple (err, excuse me), ... people!  You don't need a mercenary such as Simon as an intermediary between you and an escape route. Educate yourself, learn a little of your plan B's language. Do that and things will fall into place.

Be brave, break away from the herd (and sheep herders working for a cut). You'll be stronger and better prepared for what lies ahead. Cast off the crutch.

 

Tue, 05/26/2015 - 18:59 | 6134116 Budnacho
Budnacho's picture

HA!..."Protect the Bankls from YOU!".....

 

I've yet to see the legislature that stops bullets coming at you......If/when this thing goes to the scale thats being discussed...I sincerely doubt people will be quietly accepting their losses.

 

Im thinking more "Horrific snap judgements and drumhead justice from a pissed public" will be the norm for a few months.......

 

Tue, 05/26/2015 - 18:59 | 6134120 CHC
CHC's picture

I despise those that speak the truth - damn - gives me the ibbie jibbies.

Tue, 05/26/2015 - 19:06 | 6134149 will ling
will ling's picture

it'll never stop until there's blood - and lots of it. get your heads straight ZH'ers.

Tue, 05/26/2015 - 19:27 | 6134203 philosophers bone
philosophers bone's picture

Canada's proposed bank bail-in laws  - you can make a deposit, but not a withdrawal.   Canada's Prostitution Laws - the whore can legally suck, but you can't legally blow.

Tue, 05/26/2015 - 19:43 | 6134239 scatha
scatha's picture

I hate to tell you but capital controls are already here in US as in many places all over the world. Try to withdraw over $10k cash from your bank or just try to deposit it. Police will pick you up and rob you promptly, civil forfeiture.

It became so bad that legal Las Vegas prostitutes  want you to pay their credit card bill via IPay and they won't touch your cash.

Wake up and move people for Christ sake they attacked our brothels!!! Is any true american patriot left out there?

After they remove all cash from peoples pockets banksters will press delete button on US population sending all of us strait to third world shit while clutching to cross and kissing US flag.

Interesting readings on the subject:

https://contrarianopinion.wordpress.com/2015/01/19/property-of-none/

and

https://contrarianopinion.wordpress.com/2015/01/28/slaves-of-wage/

 

Tue, 05/26/2015 - 21:05 | 6134501 q99x2
q99x2's picture

Maybe banksters read comments on ZH and that scared them.

Tue, 05/26/2015 - 22:50 | 6134784 Blopper
Blopper's picture

With today's fractional reserve banking system where banks create credit first and then look for the reserve from the depositors and central bank, depositors withdrawing their savings should not be an excuse for causing bank run. Any gap in the reserve can be filled with borrowing from the central bank. And at close to zero rate, more borrowing from the central bank is not a big problem.

This accusation that withdrawing savings causes bank run is a public misinformation.

Wed, 05/27/2015 - 02:23 | 6135147 farmboy
farmboy's picture

In Europe any amount of 1000 Euro or more that you want to change you have to show a passport or ID at the bank.

Do NOT follow this link or you will be banned from the site!