Capital Controls Are Coming
Capital Controls Are Coming by Nick Giambruno for International Man
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.