Will Capital Controls Return?
By Daniel R. Amerman, CFA
GoldSeek.com
Friday, 12 February 2016
The average person may have no interest in capital controls, but to rephrase a well-known saying, capital controls are interested in you. The residents of Greece found this out in 2015 when capital controls were imposed, and they could not legally send the money in their bank accounts out of the country.
Like the rest of the world, they had been encouraged to move their data to the Cloud, and their software to subscriptions, each of which required small monthly payments. But if all our data is in the Cloud and we can’t pay to access it as a matter of law, because the money would have to leave the country – what can we do next?
If the software which our livelihood depends upon follows the new norm of being continuously updated and paid for by subscription – and our bank won’t pay that money because the government said it would be illegal to do so – what happens when the software won’t open because the payment wasn’t made?
These days, most people take for granted their ability to move their money and savings between different nations, whether it be to send money out and invest overseas, or to pull money back that is currently invested over the border. We also can directly buy products and services from other nations over the internet, purchase a second residence in another country – or even live in another nation in retirement.
Because the average person believes their money belongs solely to them, it is easy to see this as being the natural and only state of things. However, this perspective is not always shared by governments and economists.
For governments, the savings of the citizens are a resource for the nation, and there is a very long history of nations using capital controls on the amount and terms under which people’s money is allowed to leave – or enter – a country. These restrictions have been seen most recently on a temporary basis during crisis in countries such as Greece and Cyprus – but what few people realize these days is that long-term capital controls were the norm for the advanced economies of the West during the 1940s, 1950s and 1960s.
And capital controls may be on their way back – if some leading financial authorities get what they want. Which, in a vastly changed world, could impact our daily lives in ways which most people have never considered.
“The Hottest Idea”
“The Hottest Idea In Finance: Capital Controls Are Good”
The Rest…HERE
