On Capital Controls

Tyler Durden's picture


Submitted by Simon Black of Sovereign Man

It starts: the government’s plan to steal your money

There are consequences to being flat broke.

There are consequences to investing any level of confidence in a financial system underpinned by debt and the creation of paper currency.

There are consequences for ignoring reality and pretending that everything is normal.

This is one of them: European officials yesterday flat out admitted that they were discussing rolling out a series of harsh capital controls across the continent, including bank withdrawal limits and closing down Europe’s borderless Schengen area.

Some of these measures have already been implemented sporadically; customers of Italian bank BNI, for example, were all frozen out of their accounts starting May 31st upon the recommendation and approval of Italy’s bank regulator. No ATM withdrawls, no bill payments, nothing. Just locked out overnight.

In Greece, the government has taken to simply pulling funds directly out of its citizens’ bank accounts; anyone suspected of being a tax cheat (with a very loose interpretation in the sole discretion of the government) is being releived of their funds without so much as administrative notification.

It’s no wonder why, according to the Greek daily paper Kathimerini, over $125 million per day is fleeing the Greek banking system.

European political leaders aim to put a tourniquet on this wound in the worst possible way.

So what are capital controls?

Simply, capital controls are policies which restrict the free flow of capital into, out of, through, and within a nation’s borders. They can take a variety of forms, including:

- Setting a fixed amount for bank withdrawals, or suspending them altogether
- Forcing citizens or banks to hold government debt
- Curtailing or suspending international bank transfers
- Curtailing or suspending foreign exchange transactions
- Criminalizing the purchase and ownership of precious metals
- Fixing an official exchange rate and criminalizing market-based transactions

Establishing capital controls is one of the worst forms of theft that a government can impose. It traps people’s hard earned savings and their future income within a nation’s borders.

This trapped pool of capital allows the government to transfer wealth from the people to their own coffers through excessive taxation or rampant inflation… both of which soon follow.

The thing about capital controls is that they’re like airine baggage fees; ultimately, all governments want to do it, they’re just waiting on the first guy to impose them so that they can shrug their shoulders, stick it to the people, and blame ‘industry standards’.

Moreover, capital controls were a normal part of the global economic landscape for most of the 20th century, right up to the 1970s. It’s been a long time coming for governments to return to that model.

Since the inception of this letter, it has been a constant theme for us to talk about the increasing threat of capital controls. Your money, your savings, your livelihood are all under attack by insolvent governments, and it’s critical to take steps to reduce your exposure.

When European financial leaders all openly admit that they’re making plans to establish continent-wide capital controls, it really begs the question– what additional warning sign does one need?

The dominos have already started falling. Iceland. Ireland. Greece. Spain. Portugal. Italy. Cyprus. Soon even France and the rest of Europe. And it will come to the United States as well. There are over 15 trillion reasons why.

So what are the most critical steps to take now?

1) Buy precious metals and store in a secure jurisdiction.

Holding gold and silver overseas is a great way to (a) ensure your savings is protected against inflation, and (b) ensure that your precious metals cannot be confiscated in the event that gold ownership is criminalized in your home country.

I strongly recommend Singapore, Hong Kong, and Abu Dhabi as three potential safe jurisdictions for your gold and silver.

2) Open a foreign bank account.

For funds that need to be maintained within the financial system (as opposed to precious metals), make sure you have a safe home for your money abroad in a safe, well-capitalized bank.

3) Have a place to go overseas

Economic turmoil brought on by governments stealing people’s savings generally goes not bode well for social stability. If things get hairy, you’ll want to have a place to wait it out. And you don’t want to be deciding on the location while you’re packing your bags.

As an example, I’ve picked up an 1100-acre farm in central Chile that won’t skip a beat when the financial system implodes. The sovereign debt bubble does not affect whether or not my trees will bear fruit or my vegetables will grow.

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Tue, 06/12/2012 - 12:51 | 2518461 davinci7_gis
davinci7_gis's picture

Remember what Hirohito said lies behind every blade of grass in America!!!

Tue, 06/12/2012 - 13:06 | 2518512 CrockettAlmanac.com
CrockettAlmanac.com's picture

Betty Grable?

Tue, 06/12/2012 - 13:13 | 2518515 The Big Ching-aso
The Big Ching-aso's picture



An illegal alien gardener?

Tue, 06/12/2012 - 13:09 | 2518522 DosZap
DosZap's picture

Remember what Hirohito said lies behind every blade of grass in America!!!

The Gov of Indiana just signed a bill that its legal to shoot police, if they try and enter without a warrant or just cause.

Folks are getting fed up.

Tue, 06/12/2012 - 17:24 | 2519602 Real Estate Geek
Real Estate Geek's picture

You sure about that, DZ?  I ask because of a recent ruling by the Indiana Supreme Court saying people have NO right to resist ILLEGAL police entry.



EDITED TO ADD:  Hey, you're right!!! Nice to see some good news on the liberty front.



Tue, 06/12/2012 - 15:31 | 2519108 Meatier Shower
Meatier Shower's picture

That was Yamamoto, not Hirohito.

Tue, 06/12/2012 - 15:11 | 2519043 post turtle saver
post turtle saver's picture

"Come And Take It" - Texan for "Molon Labe"

Tue, 06/12/2012 - 15:27 | 2519100 LoneStarHog
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""Come And Take It" - Texan for "Molon Labe""


All Y'all Come And Take It" - True Texan for "Molon Labe"



Tue, 06/12/2012 - 18:26 | 2519790 post turtle saver
post turtle saver's picture

I'm Texan. Trust me, my version is correct. It's what's on the flag in question.


Texas history, bitchez :)

Tue, 06/12/2012 - 19:20 | 2519907 LoneStarHog
LoneStarHog's picture

Well, pardner, ya didn't say nuttin' 'bout our first battle flag at Gonzales. Course, they didn't have all that much room on the flag for "All y'all". :)

Tue, 06/12/2012 - 19:40 | 2519953 post turtle saver
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Was fixin' to get around to that.

Tue, 06/12/2012 - 19:44 | 2519961 CrazyCooter
CrazyCooter's picture

His handle says it all! Anyone one around here know what a post turtle is? I laughed when I read it because I assume it reflect some reality of his actual profession.



Wed, 06/13/2012 - 01:51 | 2520572 StychoKiller
StychoKiller's picture

The old rancher said, "Well, ya know, Obama is a 'post turtle'."

Not being familiar with the term, the doctor asked him what a 'post turtle' was.  The old rancher said, "When you're driving down a country road and you come across a fence post with a turtle balanced on top, that's a 'post turtle'."

The old rancher saw a puzzled look on the doctor's face, so he continued to explain.

"You know he didn't get up there by himself, he doesn't belong up there, he doesn't know what to do while he is up there, and you just wonder what kind of a dumb @ss put him up there in the first place!"

Tue, 06/12/2012 - 12:40 | 2518414 fuu
fuu's picture

"1) Buy precious metals and store in a secure jurisdiction.

Holding gold and silver overseas is a great way to (a) ensure your savings is protected against inflation, and (b) ensure that your precious metals cannot be confiscated in the event that gold ownership is criminalized in your home country.

I strongly recommend Singapore, Hong Kong, and Abu Dhabi as three potential safe jurisdictions for your gold and silver."


Tue, 06/12/2012 - 12:47 | 2518448 TrumpXVI
TrumpXVI's picture

Yeah.  I especially like the suggestion, Abu Dhabi.  The last time I checked, dhimmi have NO legal rights in Islamic countries.

Tue, 06/12/2012 - 13:08 | 2518519 Uncle Remus
Uncle Remus's picture

I suspect dhimmitude is directly proportional to your net worth and/or political clout.

Tue, 06/12/2012 - 13:00 | 2518486 azzhatter
azzhatter's picture

Abu Dhabi? You must be fucking insane

Tue, 06/12/2012 - 14:18 | 2518799 twh99
twh99's picture

What about teh Isle of Man?  Or Switzerland?

Would anyone consider those safe places to store gold?

Tue, 06/12/2012 - 14:50 | 2518944 Ratscam
Ratscam's picture

yap but only in vaults of private banks, Reichmuth, Bär, Rothschild, etc or as an exception the Kantonalbanken, banks of the various cantons. However make sure how high the insurance coverage on your litlle vault is, mostly it is way to low.
Ou can book a flight via ZRH and deposit it at the airport, however only UBS and Credit Suisse. Then again the vault treasures do not belong to the debtholders of UBS nor CS.
If you are a US citizen, no chance to open anything in Switzerland, then rather rent a f24h accessible reezer box in Switz and store it in there.
There are some private companies that store it for you in the mountains. not sure if that,s a safe proposition. do your own reapsearch.

Tue, 06/12/2012 - 14:51 | 2518948 Ratscam
Ratscam's picture

guernsey, Jersey is another option for US citizens

Tue, 06/12/2012 - 15:56 | 2519224 jonan
jonan's picture

is he implying we can't trust the swiss?

Tue, 06/12/2012 - 12:40 | 2518416 CommunityStandard
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People controls are just as easy as capital controls.  Good luck getting to your farm in Chile when you can't board a plane.  It's also hard to pay for extended ground/sea travel and Mexican bribes because your gold is in some vault in Abu Dhabi.

Tue, 06/12/2012 - 12:43 | 2518428 The Big Ching-aso
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Yeah, watch for this guy 2 be stuck on a NJ turnpike when the SHTF reporting from his cell on his next move.

Tue, 06/12/2012 - 12:46 | 2518445 Pladizow
Pladizow's picture

TSA: Oh you're Simon Black, sure come right on through!

Tue, 06/12/2012 - 14:52 | 2518953 Ratscam
Ratscam's picture

No TSA when you fly private on a G5

Tue, 06/12/2012 - 15:16 | 2519049 post turtle saver
post turtle saver's picture

Chartered flights are for smugglers and will be recognized as such. Remember, your seat can also act as a floatation device.

Tue, 06/12/2012 - 14:10 | 2518752 tocointhephrase
tocointhephrase's picture


Tue, 06/12/2012 - 12:42 | 2518423 disabledvet
disabledvet's picture

There is a "slight logistical issue" as well...which is why Bank Nationalizations must pre-cede any move towards re-establishing not just capital but border controls as well. Right now there are a multitude of "war departments" on Wall Street war gaming this now very real scenario with the goal of maximizing advantage for themselves and their clients. When your clients are "Exxon Mobil" and "IBM" and "Boeing" there is much to be and IS BEING done. Since leverage given the Fed's zero bound policy is theoretically unlimited there is a lot of "more than mere assets" that can be had...basically "for free." again "do not short this thing." the amount of firepower the Pentagon can toss in here must now be included in every and all financial analysis as well.

Tue, 06/12/2012 - 12:58 | 2518482 Winston Churchill
Winston Churchill's picture

Not how it was in the UK .

We had capital controls right up until Thatcher I think.

You could export capital,but had to pay the 'dollar premium'.

In effect a devaluation without an official devaluation.

Doesnt really matter,the Govt is coming for any money the banks haven't

alreasy stolen

I do not suggest keeping PM's in any bank anywhere.

If you can't see it and protect it yourself,it will be Corzined for sure.

Tue, 06/12/2012 - 17:45 | 2519674 prole
prole's picture

We shall never surrender! (the precious)

Tue, 06/12/2012 - 23:56 | 2520386 Bringin It
Bringin It's picture

France had capital controls, when? ... in the 70's?  Anyhow, I knew this French guy who bought sailboats, sailed to the BVI  and sold them.  Voila!

Tue, 06/12/2012 - 12:43 | 2518427 the 300000000th...
the 300000000th percent's picture

I hope i am far gone before i hear the speech by Obama on how capital controls are patriotic

Tue, 06/12/2012 - 12:45 | 2518443 Tirpitz
Tirpitz's picture

'patriotic' was rather the talk of a pOr - a pre-Obama rascal. Hang 'em all, family and siblings included.

Tue, 06/12/2012 - 13:12 | 2518528 DosZap
DosZap's picture

I hope i am far gone before i hear the speech by Obama on how capital controls are patriotic

I PRAY HE is far gone before the idiot gets the chance.

Tue, 06/12/2012 - 12:46 | 2518431 Tirpitz
Tirpitz's picture

People get controlled at the borders all the time, thanks TSA thugs & Cons. Why should capital, which is to serve the people, travel more freely?!?

Tue, 06/12/2012 - 12:44 | 2518434 exiledbear
exiledbear's picture

One word: Bitcoin.

Tue, 06/12/2012 - 12:53 | 2518457 Pladizow
Pladizow's picture

So they will set up some form of EMP device that targets thumb drives and other storage devices!

Or, sorry sir it is a matter of national security that NO computer devices of any sort, leave the country!

Or they throw the internet kill switch!

Tue, 06/12/2012 - 13:15 | 2518539 JackT
JackT's picture

Bitcoins are great in a world with eletricity..oh and other people actually using them.

Tue, 06/12/2012 - 15:21 | 2519074 aphlaque_duck
aphlaque_duck's picture

Yes, well, for now we still have electricity, so Bitcoin remains the perfect solution to evade capital controls.

Write your private key on a piece of paper, laminate paper, eat. Then poop your wealth out at your destination. Or memorize it if you're not into picking through your fæces.

You can move a billion dollars this way if you want to. Just 64 hex digits is all you need to transmit.

Like gold, Bitcoin does not require people willing to trade goods directly for it to serve as portable store of value. All you need is an exchange to convert it back to the local currency at your destination.

There are quite a few exchanges now, in several countries.  https://en.bitcoin.it/wiki/Trade

Tue, 06/12/2012 - 14:43 | 2518910 Papasmurf
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Tue, 06/12/2012 - 12:45 | 2518441 Dorky
Dorky's picture

Capital control, another name for bank holiday?

Tue, 06/12/2012 - 12:47 | 2518446 tomAsss
tomAsss's picture

selling Bitcoins for food stamps ..guns ..etc :)

Tue, 06/12/2012 - 13:00 | 2518450 Dr. Engali
Dr. Engali's picture

Good Lord sovereign man. I am glad you have the luxury of traveling the globe, opening bank accounts where ever you choose, and buying property in any nation you find safety (until it strikes there too). But most of us are of modest means and apart from the precious metals recommendation, I might as well be reading Teen Vogue. 

Tue, 06/12/2012 - 13:06 | 2518513 Overfed
Overfed's picture

Yeah, no shit. I'm lucky to have two-months living expenses in the bank (credit union, actually). Even with no debt to speak of, times are pretty tight for a lot of us.

Tue, 06/12/2012 - 13:19 | 2518553 Tinky
Tinky's picture

To be fair, and like every business, Black has a natural clientel, and they are mostly relatively well-off. It isn't realistic to expect him to be giving advice to those who have very little free capital, as how could they rationalize spending hundreds to become "insider" or premium subscribers?


Wed, 06/13/2012 - 00:07 | 2520406 Bringin It
Bringin It's picture

Re. times are pretty tight for a lot of us.

yeah well ... I have no money in the bank and have to grow my own stuff just to survive.  We don't have to play if we don't want to.




Tue, 06/12/2012 - 12:48 | 2518451 Monk
Monk's picture

Unfortunately, what led to the 2008 crisis was the near-absence of capital controls, leading to over a quadrillion dollars in unregulated derivatives.


Tue, 06/12/2012 - 12:54 | 2518470 Tirpitz
Tirpitz's picture

plus the absence of (real) capital.

Tue, 06/12/2012 - 13:15 | 2518540 CrockettAlmanac.com
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Legal tender laws are one of the most restrictive capitol controls. It is government regulation which gives a monopoly on money creation and distribution to the banks. Without that ability and the government guarantee of bail outs for the TBTF entities 2008 would never have happened. In other words, it's the regulators fault.

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