07
December
2023

Capital transfer controls?

this is what authorities do when a currency comes under pressure.

stop customsCapital Controls affect both RESIDENTS and NON-RESIDENTS. Bail-ins also will affect both.

Capital transfer control (restrictions) using a simple method of a Convertible and Financial currency will be seen again soon.. [ only €10,000/$ 10,000 in fiat cash money or money instruments may be taken with you when you cross a political border]

Those who refuse to diversify their savings/assets politically and instead blindly keep chasing Fiat Money profits will soon be in for a nasty surprise.

The advantage for the Authorities is that capital controls are simple to instate and to apply and that it demoralizes ANY speculator as it takes away the financial advantage BEFORE any expected official devaluation. [the Germans who smelled RAT and tried to flee Germany before the worst had to pay two-year taxes in advance to get an EXIT VISUM]

During the 1970s and 1980s, cross-border capital transfers were controlled and regulated by the Convertible and Financial Franc mechanisms. Payment for imports of GOODS was made using Convertible Francs. In contrast, capital transfers resulting from a sale of local francs for German marks or any other foreign currency were executed at the exchange rate for financial francs, which, as a rule, were sold at a discount to the convertible.

Because of the double exchange rate, the Financial Francs were, as a rule, worth less than the Convertible, and the spread between both rose each time the market expected currency devaluation. If the market anticipated a 15% devaluation, the financial currency traded 15% below the rate of the Convertible currency.

south africaThe former mechanism is still used in South Africa. The country has additional capital export rules where exports/sales of South African Rand by SA residents are limited to a maximum amount, and permission to do so is ONLY granted after approval by the Tax authorities.

Such legislation could be reinstated at any time. It will penalize anybody (also nonresidents) holding Euros (or Dollars in case you live and work in the USA). It would strongly limit the pressure on the Euro in case of a panic as the maximum amount of CASH Euros that may be exported is limited to €10,000.

Now is the time to act. Better be one year early than one day late. Remember what Germans had to pay to get their savings out of Germany right before the dramatic Weimar hyperinflation. Remember what happened to many Belgians after WWII during Operation Gutt and know many committed suicide after they lost it all. (ironically, Gutt became the 1st president of the IMF).


Wikipedia about capital transfer controls:


Pre-World War I

Before the 19th century, there was generally little need for capital controls due to low levels of international trade and financial integration. Capital controls remained largely absent in the first age of globalization, generally from 1870 to 1914.[2] [3]

World War I to World War II: 1914 - 1945

Highly restrictive capital controls were introduced with the outbreak of World War I. In the 1920s, they were generally relaxed, only to be strengthened again after the 1929 Great Crash. This was more an ad hoc response to potentially damaging flows rather than based on a change in normative economic theory. Economic historian Barry Eichengreen has implied that the use of capital controls peaked during World War II. Still, the more general view is that the most wide-ranging implementation occurred after Bretton Woods.[2] [4] [5] [6] An example of capital control in the interwar period was the flight tax introduced in 1931 by Chancellor Brüning. The tax was needed to limit wealthy residents' removal of capital from the country. At the time, Germany suffered economic hardship due to the Great Depression and the harsh war reparations imposed after World War I. Following the ascension of the Nazis to power in 1933, the tax began to raise sizeable revenue from Jews who emigrated to escape state-sponsored anti-Semitism.[7] [8] [9]

The Bretton Woods Era: 1945–1971

bretton woodsA widespread system of capital controls was decided upon at the international 1944 conference at Bretton Woods. At the end of World War II, international capital was "caged" by the imposition of strong and wide-ranging capital controls as part of the newly created Bretton Woods system- it was perceived that this would help protect the interests of ordinary people and the wider economy. These measures were popular as, at this time, the Western public's view of international bankers was generally very low, blaming them for the Great Depression.[10] [11] Keynes, one of the principal architects of the Bretton Woods system, envisaged capital controls as a permanent feature of the international monetary system [12]. However, he had agreed current account convertibility should be adopted once international conditions had stabilized sufficiently. This essentially meant that currencies were to be freely convertible for the purposes of international trade in goods and services but not for capital account transactions. Most industrial economies relaxed their controls around 1958 to allow this to happen.[13] The other leading architects of Bretton Woods, the American Harry Dexter White and his boss Henry Morgenthau, were somewhat less radical than Keynes but still agreed on the need for permanent capital controls. In his closing address to the Bretton Woods conference, Morgenthau spoke of how the measures adopted would drive "...the usurious money lenders from the temple of international finance".[10] Following the Keynesian Revolution, the first two decades after World War II saw little argument against capital controls from economists, though an exception was Milton Friedman. However, from the late 1950s, the effectiveness of capital controls began to break down, partly due to innovations such as the Eurodollar market. According to Dani Rodrik, it is unclear to what extent this was due to an unwillingness on the part of governments to respond effectively, as compared with an inability to do so.[12] Eric Heller has argued that heavy lobbying from Wall St bankers persuaded US authorities not to exempt the Eurodollar market from capital controls. From the late 1960s, the prevailing opinion among economists began to switch to the view that capital controls are, on the whole, more harmful than beneficial.[14][15]

While many capital controls in this era were directed at international financiers and banks, some were directed at individual citizens. For example, in the 1960s, British families were restricted from taking more than £50 out of the country for their foreign holidays.[16] In their book This Time Is Different, economists Carmen Reinhart and Kenneth Rogoff suggest that capital controls in this period, even more than its rapid economic growth, were responsible for the very low level of banking crises in the Bretton Woods era.[17]

Transition period and Washington Consensus: 1971 - 2009

By the late 1970s, as part of the displacement of Keynesianism in favor of free market-orientated policies and theories, countries began abolishing their capital controls, starting between 1973 - 1974 with the U.S., Canada, Germany, and Switzerland and followed by Great Britain in 1979.[18] Most other advanced and emerging economies followed, chiefly in the 1980s and early 1990s.[2] During the period spanning from approximately 1980 - 2009, known as the Washington Consensus, the normative opinion was that Capital controls were to be avoided except perhaps in a crisis. It was widely held that the absence of controls allowed capital to flow freely to where it is needed most, helping not only investors enjoy good returns but also helping ordinary people benefit from economic growth. During the 1980s, many emerging economies decided or were coerced into following the advanced economies by abandoning their capital controls, though over 50 retained them at least partially.[2] [19] The then-orthodox view that capital controls are bad was challenged to some extent following the 1997 Asian Financial Crisis. Asian nations that had retained their capital controls, such as India and China, could credit them for allowing them to escape the crisis relatively unscathed.[17][20] Malaysia's Prime Minister Mahathir bin Mohamad imposed capital controls as an emergency measure in September 1998, both strict exchange controls and limits on outflows from portfolio investments - these were effective in containing the damage from the crisis. [2] [21] [22] In the early nineties, even some pro-globalization economists like Jagdish Bhagwati [23] and some writers in publications like The Economist[21] [24] spoke out in favor of a limited role for capital controls. But while many developing world economies lost faith in the free market consensus, it remained strong among Western nations.[2]


Heinrich Bruning and the 'flight tax'


heinrich bruningIn the late 1920s, the economy of the Weimar Republic was beset by numerous fiscal troubles. The global depression spread quickly to Germany, undermining the government’s ability to make its reparation payments from the Great War. Fearing a return to hyperinflation, many Germans decided to pack up and leave; they remembered the days when banknotes were used as wallpaper and had no desire to repeat the experience. In 1931, Chancellor Heinrich Bruning imposed a ‘flight tax,’ which levied a 25% tax on the value of all property and capital for Germans leaving the country. Total revenue collected from this tax amounted to roughly 1 million Reichsmarks (RM) in its earliest days ($56 million today). By the late 1930s, under Hitler’s rule, flight tax revenue soared to RM 342 million ($21.5 billion today) as more people headed toward the exits.

This flight tax constitutes one of the earliest modern examples of capital controls.  They’ve evolved substantially since the days of Hitler, but the end goal is the same– governments controlling the flow of capital across borders. Bankrupt governments seek to trap capital within their borders, maximizing the amount available for subsequent taxation or other forms of confiscation. This tactic is usually employed when lost confidence has impaired the government’s borrowing capability. As one scans the headlines in the US and Europe, it’s obvious that the march towards stricter capital controls is quickening its pace.

Capital controls can take various forms– including taxation on outward remittances, restrictions on the movement of financial instruments, bureaucratic approval processes for foreign transactions, reporting requirements for foreign assets, and government control over banks. This last is important– when politicians and bankers are in bed with each other, banks can be compelled to loan a portion of their deposits to the treasury at unrealistic terms, sticking bank customers with sub-optimal yields below the inflation rate. [I remember this letter sent out by the Belgian Minister of Finance in the late 1970s where he threatened the Institutional Investors (insurance companies) if they failed to buy Belgian Treasuries].

I’ve said before– everyone must establish a foreign bank account, even with a small deposit. There are several banks where you can open an account through the mail with just a nominal deposit. This way, if you ever need to move the bulk of your funds quickly, you’ll at least have the established infrastructure to do it. I know it’s easy to kick the can down the road, but as the political and economic support for capital controls is spreading around the globe, I would urge you to take action now.


Update of February 2024.

The Western Politicians pretend we live in a Democracy. WE DO NOT!  You have no clue of how difficult the Western Politicians make life for Russian citizens. This is really crazy. See the video of a woman who has to travel via Paris to Warshow to get a visa to the USA. See how she first has to get a “Schengen Visa” to travel to France so she can get on a plane to Poland and is not allowed to bring her laptop...not even toothpaste to France (the EUSSR) on her journey.

Note: Freedom of speech?  (Me and Goldonomc) have been banned for probably over 7 years by The Financial Times, De Tijd, Wikipedia, De Standaard, Trends-Knack, a.o.


A Warning Sign Capital Controls Are Coming Soon and How to Beat Them

Weekends and holidays are the perfect time to catch people off guard…The government declares a surprise bank holiday and shuts down all the banks—mere hours after they denied they were even thinking about such actions. [During the 1060-1990s, European currency devaluations always happened during weekends.]

Screenshot 2024 02 18 at 09.01.13They impose 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 and border crossings. At this point, your money is like a lobster in a trap. It doesn’t require much imagination to see what comes next. Once a desperate government has your money within its reach, it’ll find a way to take as much of it as possible.

Don’t be surprised if your local currency suffers a massive devaluation, bank deposits are suddenly worth a fraction of what they were just yesterday, or the government imposes an emergency tax.

This familiar story has played out in many countries in recent years. The pattern is clear and should surprise no one the next time it happens. It’s all but certain governments in financial trouble will turn to capital controls as a desperate, misguided solution—with devastating consequences for ordinary people.

Argentina, Lebanon, Venezuela, Iceland, Greece, Cyprus, Turkey, Russia, Ukraine, China, India, South Korea,
and governments in countless other countries have recently imposed capital controls.

The lesson from these examples is capital controls can happen anywhere and anytime.  Remember, in 1933, through Executive Order 6102, President Roosevelt forced Americans to exchange their gold for US dollars under penalty of 10 years in prison and a $10,000 fine (or more than $235,000 in today’s debased confetti). Of course, the official government gold exchange rate was unfavorable.  It amounted to around a 41% confiscation of purchasing power.

The fiat currency system is long past its shelf life. All it would take is a crisis—real or contrived—or some other pretext and the stroke of the president’s pen on a new executive order. Expect it to happen.

Capital controls are government restrictions on how people can use their money—something that should be abhorrent to anyone who believes in property rights and a free society.

Screenshot 2024 02 18 at 09.04.08Here’s how capital controls work

  • Governments might allow people to buy foreign currency (or gold) only at an "official" rate that they set, which is always less favorable than the free-market rate. The difference between the fake official rate and the real free-market rate amounts to a wealth transfer to the government.
  • Another form of capital control is steep taxes on international money transfers or purchasing foreign assets. Governments could also flat-out prohibit ownership of foreign assets or moving any form of wealth outside the country. No matter what flavor they come in, capital controls always help a government trap money within its borders so it’s easier for them to take.

We had Capital controls in Cyprus and Lebanon only a few years ago.

Worse Happens After Capital Controls

That’s why you must act BEFORE they impose capital controls.  Capital controls are always a prelude to something worse. That’s because once governments trap money inside a country, it’s probably only a matter of hours before there is wealth confiscation. Anything they don’t steal immediately, they box in for future thefts. That is also a reason WHY they like to CHAIN their subjects to Real Estate. These landlords are easy prey.

How much time do you have?  While it’s impossible to know, acting well in advance is advisable. Better a year early than a minute late. There is one common feature I’ve noticed when countries impose capital controls that indicates the situation is imminent. It’s like someone waving a big fat red flag. That warning sign is a government official denying that they are considering imposing capital controls.

Whenever you hear a central banker or politician say something won’t happen, you can almost be sure it will happen. And probably soon. Coming from a bureaucrat, the real meaning of "no, of course not" is "it could happen tomorrow." It’s like the old saying: "Believe nothing until it has been officially denied." These deceptions have a purpose: Politicians and central bankers must surprise the public for the desired results.

When you hear the official denial, you probably have only a matter of hours before they impose capital controls.

What is the best way to Beat Capital Controls? The solution is simple. Place your savings outside your home country so it’s not trapped when the government imposes capital controls. It will be waiting for you safely on the other side. Repatriating funds has always been and will always be possible. Argentina is an excellent example. People who brought their savings in time out of the country can now bring these back. They are guaranteed to have NO fiscal or other problems and receive a 15% premium on the amounts they bring back.

If you want to be smarter than the average "Joe," you will keep your physical metals with a Lloyds-insured vault in a tax-free zone that offers a concierge service. By doing this, you can ship and, if required, sell your metals and have the funds wired to whatever bank you decide.

Below are four ways you can do that.

  1. First, get a second permanent residency/passport.
  2. Second, obtain a foreign bank account. Capital controls imposed in your home country are unlikely to affect a bank account in another country.
  3. Third, real estate in a foreign country is an excellent way to store significant capital abroad. Your home government won’t be able to seize it without a literal act of war. However, don't buy any Real Estate as long as the market is overbought (like today).
  4. Fourth, one of today's best solutions is physical gold & silver bullion coins held in a non-bank vault in a wealth-friendly foreign jurisdiction. However, it’s crucial to emphasize that you should NOT put gold in a bank’s safe deposit box. They will be among the first targets if and when governments decide to declare a bank holiday and confiscate private wealth. Holding the physical gold bullion in your own possession or a private non-bank vault in a wealth-friendly jurisdiction like Singapore or Panama is a good idea. Switzerland has become a NO GO, and Singapore is far, far away in the East...close to China.  Last, you MUST use a vault offering a CONCIERGE SERVICE.  We know of stubborn people who thought their name was Albert Einstein and had their physical gold frozen in some faraway country.

The current dollar-based monetary system is on its way out.  The Euro will probably go under together with the Dollar. Even the central bankers running the system can see that. They prepare for what comes next as they attempt to "reset" the system (CBDC is only part of the process). It’s a virtual certainty they will impose capital controls. I suspect it could all go down soon… and it won’t be pretty for most people. We are likely on the cusp of a historic financial earthquake…One that could mark the biggest economic event of our lifetimes. Yet few people are aware of what is happening. Others are still in denial. And even fewer know how to prepare and are willing to do what a man has to do.

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Categories: Will the EU survive? , Money, News, Euro and €-Gold, Investing for dummies

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