Obama Administration Putting Capital Controls Into Place
This is old news on the blogosphere, but I have been really busy with the online class and other things. For those of you who missed it, it looks like the clever cats running our government are looking a few moves ahead. They know that when they really drop the hammer, people are going to try to move their wealth offshore. Hence, they are now putting into place severe capital controls, as “Tyler Durden” explains:
It couldn’t have happened to a nicer country. On March 18, with very little pomp and circumstance, president Obama passed the most recent stimulus act, the $17.5 billion Hiring Incentives to Restore Employment Act (H.R. 2487), brilliantly goalseeked by the administration’s millionaire cronies to abbreviate as HIRE. As it was merely the latest in an endless stream of acts destined to expand the government payroll to infinity, nobody cared about it, or actually read it. Because if anyone had read it, the act would have been known as the Capital Controls Act, as one of the lesser, but infinitely more important provisions on page 27, known as Offset Provisions – Subtitle A—Foreign Account Tax Compliance, institutes just that. In brief, the Provision requires that foreign banks not only withhold 30% of all outgoing capital flows (likely remitting the collection promptly back to the US Treasury) but also disclose the full details of non-exempt account-holders to the US and the IRS. And should this provision be deemed illegal by a given foreign nation’s domestic laws (think Switzerland), well the foreign financial institution is required to close the account. It’s the law. If you thought you could move your capital to the non-sequestration safety of non-US financial institutions, sorry you lose – the law now says so. Capital Controls are now here and are now fully enforced by the law.
So I think what that is saying is this: If you put your money into any foreign bank–even money that has already been taxed when you earned it–and then you try to pull some of it out, the foreign bank’s default obligation is to send 30% of the withdrawal to the US Treasury. Then it’s up to you to prove you should get that money back.
So if your plan has been something like: “Geez, things are really getting ugly. Well, I’ll start socking money away in a few offshore accounts, and if the excrement really hits the rotating blade, I’ll just move to South America and live off my savings,” then you may need to think again. Geithner & Friends have realized you are going to do that, and they just forked you.*
* A chess reference, nothing dirty.
Where my prozac at?
Doug Casey has always said that f/x controls were the first outward indicator that you’re living in a totalitarian society. In his The International Man – the book that changed my life and introduced me to Austrian economics – the section on f/x controls is specifically the section that got me thinking seriously about economics.
Best to put your money in a sail boat, sailing lessons, gold and guns. When the SHTF, you can just shove off and wave sayonara, adieu, adios, arrivederci, auf wiedersehen, au revoir, bye, bye-bye, cheerio, good-by, goodby, good-bye, goodbye, good day, sayonara, so long.
or “In Soviet America, road forks you!”
It will be interesting to see if foreign banks allow the US to dictate to them. What can the US do if foreign banks refuse to go along? I can imagine off shore banks using that law as a promo ad. Send your money to us and we’ll tell the US government where to put its law.
Didn’t Swiss banks already acquiesce do US demands? At any rate, there is another blog where they talk about “the law of unintended consequences”. Yesterday, at WND, Walter Williams was talking about peaceful secession. When people’s options to leave are reduced could this escalate the separation movement?
Maybe I’m wrong, but this looks less like capital controls and more like a way to crack down on tax evaders. Whatever the intended purpose, it is still stupid.
I don’t know how, but I suspect that legal workarounds are being formulated by the smarter market actors. Not that this stupid law won’t cause problems for everybody, of course.
JCortez, it never matters the purpose, it matters the capability for abuse. If these clowns can’t do it with the aid of foreign banks, they can just monopolize FedACH and nail us that way. And we have exactly the demonic Congress that would do it too.