Best of the Week
Most Popular
1.BrExit Looks Set to Win EU Referendum, Final Opinion Polls Give LEAVE Lead Over REMAIN - Nadeem_Walayat
2.BrExit Morning - New Dawn for Britain, Independence Day! - Nadeem_Walayat
3.LEAVE Wins EU Referendum - Sterling and FTSE Hit Hard, Pollsters, Bookies and Markets All WRONG! - Nadeem_Walayat
4.BrExit to Save Europe from Climate Change Refugee Migration Apocalypse - Nadeem_Walayat
5.Trading BrExit - Stocks, Bonds, Sterling, Opinion Polls, Bookmaker Odds and My Forecast - Nadeem_Walayat
6.EU Referendum Latest Opinion Polls Show LEAVE Halting REMAINs Surge - Nadeem_Walayat
7.Gold And Silver – Insanity Is World “Norm.” Keep Stacking! - Michael_Noonan
8.Trading BrExit - British Pound Plunges, FTSE Stock Futures Slump on LEAVE Shock Referendum Win - Nadeem_Walayat
9.Gold And Silver: Security, And BREXIT - Michael_Noonan
10.BrExit Vote - "The Trend is Set" -- And What You Should Pay Attention to Next - EWI
Free Silver
Last 7 days
Stock Market Bounce May be Over - 28th June 16
Stock Market Meltdown Likely to Drive Gold Towards $1,500 - 28th June 16
Brexit Victory over the EU Globalists - 28th June 16
Brexit Psyop: Greenspan Falsely Blames the Brits for the Crash and Chaos to Follow - 28th June 16
Greenspan Calls Brexit a ‘Terrible Outcome’ as Euro Area Tested - 27th June 16
Stock Market SPX Below Mid-Cycle Support - 27th June 16
Best Holidays for Summer 2016 - 27th June 16
Another Stocks Bear Market? - 27th June 16
BBC EU Referendum Result Highlights - YouGov, Markets, Bookmakers, Pollsters ALL WRONG! - 26th June 16
Investors Map Post-Brexit Strategies Amid Global Market Upheaval - 26th June 16
Gold Price Weekly COT Update - 26th June 16
First the UK, then Scotland ... then Texas? - 26th June 16
Stocks Bear Market Resumes or Just More Noise - 26th June 16
Gold And Silver: Security, And BREXIT - 25th June 16
Dow, Euro & Brexit Recap - 25th June 16
Resistance Holding Gold Stocks after Brexit - 25th June 16
Venezuela vs. Ecuador (Chavismo vs. Chavismo Dollarized) - 25th June 16
Gold, Silver And PM Stocks Summer Doldrums Risk - 24th June 16
Here’s Why China “Economic Hard-Landing” Worries Are Overblown - 24th June 16
Jubilee Jolt: Markets Crash, Gold Skyrockets as Britain Takes Brexit - 24th June 16
BrExit Morning - New Dawn for Britain, Independence Day! - 24th June 16
LEAVE Wins EU Referendum - Sterling and FTSE Hit Hard, Pollsters, Bookies and Markets All WRONG! - 24th June 16
Trading BrExit - British Pound Plunges, FTSE Stock Futures Slump on LEAVE Shock Referendum Win - 24th June 16
EU Referendum Shock Results Putting BrExit LEAVE in the Lead Hitting Sterling Hard - 24th June 16
Final Opinion Poll Gives REMAIN 52% Lead, Bookmakers, Markets and Pollsters ALL Back REMAIN Win - 23rd June 16
Does BREXIT Matter? Outlook for Sterling - 23rd June 16
Keep Calm and Vote BrExit - Last Chance to Break Free of EU Superstate - 23rd June 16
Here’s the Foreign Policy Trump and Clinton Really Want - 23rd June 16
Details Behind Semiconductor Stocks Leadership - 23rd June 16
Trading BrExit - Stocks, Bonds, Sterling, Opinion Polls, Bookmaker Odds and My Forecast - 23rd June 16
BrExit Looks Set to Win EU Referendum, Final Opinion Polls Give LEAVE Lead Over REMAIN - 22nd June 16
Proof that the Gold Bears are Wrong - 22nd June 16
Here’s a Trillion-Dollar Investment Opportunity for Those Few with No Debt - 22nd June 16
BrExit to Save Europe from Climate Change Refugee Migration Apocalypse - 22nd June 16
Increase In U.S. Rig Count Will Not Cap Oil Prices - 22nd June 16
Are Copper and China Stocks Set to Rally? - 22nd June 16
SPX May Break Its Trendline - 22nd June 16
Believe it or Not: More Kids Live At Home Now than Since The Great Depression - 21st June 16
EU Referendum Latest Opinion Polls Show LEAVE Halting REMAINs Surge - 21st June 16
British Pound Outlook - BREXIT, Europe and You - Does your vote matter? - 21st June 16
Fascist Victory Behind the European Union - 21st June 16
EU Referendum Opinion Polls Analysis Shows Strong Momentum in REMAINs Favour - 21st June 16
Is It Time to Dump Gold and Buy Platinum? - 21st June 16

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

Market Volaility

Capital Controls Are Coming

Stock-Markets / Credit Crisis 2016 Jan 26, 2016 - 05:22 PM GMT

By: Casey_Research

Stock-Markets

By Nick Giambruno

The carnage always comes by surprise, often on an otherwise ordinary Saturday morning…

The government declares a surprise bank holiday. It shuts all the banks. It imposes capital controls to stop citizens from taking their money out of the country. Cash-sniffing dogs, which make drug-sniffing dogs look friendly, show up at airports.


At that point, the government is free to help itself to as much of the country’s wealth as it wants. It’s an all-you-can-steal buffet.

This story has recently played out in Greece, Cyprus, Argentina, and Iceland. And those are only a few recent examples. It’s happened in scores of other countries throughout history. And I think it’s inevitable in the U.S.

I believe the U.S. dollar will lose its role as the world’s premier reserve currency. When that happens, capital controls are sure to follow.

This is why it’s crucial to your financial future to understand what capital controls are, how they are used, and what you can do to protect yourself.

Why Governments Impose Capital Controls

Think of the government as a thief trying to steal your wallet as you (understandably) try to run away. With capital controls, the thief is trying to block all the exits so you can’t reach safe ground.

A government only uses capital controls when it’s desperate…when it can no longer borrow, inflate the currency, tax, or steal money in one of the “normal” ways.

In most cases, governments use capital controls in severe crises. Think financial and banking collapses, wars, or chronic economic problems. In other cases, they’re just a way to control people. It’s much more difficult to leave a country when you can’t take your money with you.

Regardless of the initial catalyst, capital controls help a government trap money within its borders. This way, it has more money to confiscate.

As strange as it sounds, capital controls are often politically popular. For one, they are a way for a government to convince people it’s “doing something.” The average person loves that.

Two, a government can usually convince people that moving money offshore or investing in foreign assets is only for rich tax evaders or the unpatriotic. If freedom and private property matter to you at all, you know that’s obviously false.

How It Happens

For the unprepared, it’s like a mugging…

To be effective, capital controls have to be a surprise. Alerting people in advance would defeat the purpose. Weekends and holidays are the perfect time to catch people off guard.

Here are the four most common forms of capital controls:

1. “Official” Currency Exchange Rates

The government’s official rate for converting foreign currency to local currency is always less favorable than the black market rate (more accurately called the free market rate).

This applies to official prices for gold, too.

Getting the more favorable black market rate usually involves informal transactions on the street. Of course, this is technically illegal.

However, should you follow the law and exchange money at the official rate, it amounts to a wealth transfer from you to the government. The wealth transfer equals the difference between the free market rate and the official rate. It’s a form of implicit taxation.

2. Explicit Taxation

A government might impose explicit taxes to discourage you from buying foreign investments, foreign currencies, or gold. India tried this a few years ago by imposing a 10% tax on gold imports.

Another tactic is taxing money transfers out of the country…say 20% on any amount transferred to a foreign account. In this case, you could still move your money, but it would cost you.

Governments want you to hold your wealth inside the country and in the local currency. Ultimately, this makes it easier for them to tax, confiscate, or devalue with inflation.

3. Restrictions and Regulations

A government might restrict how much foreign currency or gold you can own, import, or export. It might require you to get permission to take a certain amount of money out of the country. The cap is often only a couple thousand dollars.

4. Outright Prohibition

This is the most severe form of capital control. Sometimes a government explicitly prohibits the ownership of foreign currencies, foreign bank accounts, foreign assets, or gold, or the moving of any form of wealth outside the country.

Capital Controls in the U.S.

The U.S. government has used capital controls before. In 1933, through Executive Order 6102, President Roosevelt forced Americans to exchange their gold for U.S. dollars. It’s no surprise that the official government exchange rate was unfavorable. The U.S. government continued to prohibit private ownership of gold bullion until 1974.

Today, with no conceivable end to the U.S. government’s runaway spending, sky-high debt, and careless money printing, I think it’s only a matter of time until the government decides capital controls are the “solution.” There’s no doubt statist economists like Paul Krugman would cheer it. All it would take is the stroke of the president’s pen on a new executive order.

Whatever the catalyst, it’s critical to prepare while there’s still time.

What Could Happen if You’re Too Late

Capital controls are almost always a prelude to something worse. It might be a currency devaluation, a so-called “stability levy,” or a bail-in.

Whatever the government and mainstream media call it, capital controls are a way to trap your money so it is easier to steal. Anything they don’t steal immediately, they box in for future thefts.

What You Can Do About It

The solution is simple.

Place some of your savings outside your home country by setting up a foreign bank account.

That way, no one can easily confiscate, freeze, or devalue your savings at the drop of a hat. A foreign bank account will help ensure that you have access to your money when you need it the most.

Doug Casey and I visited Cyprus a few years ago, right after the government imposed capital controls. We met numerous Cypriots who had seen the writing on the wall and had chosen to take action before the crisis.

By doing so, they kept their money safely out of the hands of a thieving government. While everyone else was forced to keep their money in the country, those who had moved their money ahead of time were free to do as they wished and were spared from the bank deposit confiscation.

There’s an important lesson here.

Despite what you may hear, obtaining a foreign bank account is completely legal. It’s not about tax evasion or other illegal activities. It’s simply about legally diversifying your political risk by putting your liquid savings in sound, well-capitalized institutions.

It’s becoming harder and harder to open a foreign bank account. Soon, it could be impossible. It’s important to act sooner rather than later - even if you don’t plan to use the account immediately.

Even without capital controls, it still makes sense to move some of your savings to a foreign bank where it can be kept safe.

Be sure to check out our comprehensive video on foreign bank accounts, where we share our favorite banks and jurisdictions. The video includes crucial information on the few jurisdictions that still accept American clients and allow them to open accounts remotely with small minimums.

The New York Times best-selling author Doug Casey and his team describe how you can do it all from home. And there’s still time to get it done without extraordinary cost or effort, but you need to act quickly.

This is an A-Z video with information you won’t find anywhere else. Click here to watch it now.

The article Capital Controls Are Coming was originally published at caseyresearch.com.
Casey Research Archive

© 2005-2016 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Catching a Falling Financial Knife