Will We Be Able To Take It With Us When We Leave for Pastures New?

What do these countries have in common? There are a few possible answers, so take a moment and come up with a few possibilities.

Argentina

Armenia

Bahamas

Barbados

Belize

Brazil

China

Cuba

Egypt

Fiji

Georgia

Iceland

India

Iran

Israel

Libya

Malaysia

Mauritius

Morocco

Myanmar

Namibia

Nepal

Nigeria

North Korea

Pakistan

Papua New Guinea

Russia

Samoa

Sri Lanka

Seychelles

South Africa

Sudan

Tunisia

Ukraine

Uzbekistan

Venezuela

Zimbabwe

What did you come up with?

Weak bonds? Past debt defaults? All non-western nations? Third world developing nations? Low democracy locations? High inflation at some point in times past?

The answer I’m looking for is that these are all countries with Foreign Exchange Controls of some sort (according to Wikipedia : https://en.wikipedia.org/wiki/Foreign_exchange_controls ). Wiki conveniently define Forex Controls as:

>>>Foreign exchange controls are various forms of controls imposed by a government on the purchase/sale of foreign currencies by residents or on the purchase/sale of local currency by nonresidents.

Common foreign exchange controls include:

  • Banning the use of foreign currency within the country

  • Banning locals from possessing foreign currency

  • Restricting currency exchange to government-approved exchangers

  • Fixed exchange rates

  • Restrictions on the amount of currency that may be imported or exported

  • Countries with foreign exchange controls are also known as "Article 14 countries," after the provision in the International Monetary Fund agreement allowing exchange controls for transitional economies. Such controls used to be common in most countries, particularly poorer ones, until the 1990s when free trade and globalization started a trend towards economic liberalization. Today, countries which still impose exchange controls are the exception rather than the rule.<<<

    So now look at these countries again, and with their common economic features in mind. If you had to consider who will be the next additions to the above list, which country would you pick?

    There are a few issues which are pertinent:

    Generally speaking the western nations are the ones that “believe “ in free world trade, after all it usually works in the favour of “their” large global or multinational corporations interests.

    Historically, the International Monetary Fund (IMF) held the view that foreign exchange controls, or capital controls on a country’s citizens and businesses would reduce economic output. So the IMF, World bank, etc were “against” such controls.

    The truth is that these kind of restrictive laws are used by weak trading nations to conserve currency from leaking away, so heavily indebted countries, or countries with weak developed economies tended to impose them. This was of course opposed by the developed nations who had big business exporting into the less developed, and often smaller country.

    Well, that was then .... a time before the western nations got themselves deeply in debt. All of a sudden the arguments change, and new views seem to be emanating from the think tanks of the west. By a strange coincidence, as the west’s nations debts grow, their interest in capital controls increase. Aaah, watch how the accepted economic religions can be changed so easily. All that is required is shortage of money "need" and the justifications all shift accordingly. Then a new economic philosophy/religion appears to provides validation for rules to protect money. Protectionism is bad .... but only when the other guys are doing it.

    So after decades of IMF (and western) pushing free trade, free movement of capital policy to trade on the world, their giant corporations trading with (predating upon) weaker trading nations we see new economic papers being published, and new supporting stories in the media. Stories like these are in the news:

    Guardian: The IMF's welcome rethink on capital controls

    Bloomberg: IMF Officially Endorses Capital Controls in Reversal

    And they are describing recently published IMF Papers like this one below:

    IMF: Fiscal Monitor Oct 2013 : Taxing Times

    It's an evolution away from the opposite view which was held more or less since Bretton Woods.

    Here are some words from the Executive Summary of the recent IMF Paper:

    >>>Broadening the base of the value added tax ranks high in terms of economic efficiency .....

    ....improving compliance remains a central challenge

    There is a strong case in most countries, advanced or developing, for raising substantially more from property taxes ..... their past performance is far from encouraging, but this could change as increased public interest and stepped-up international cooperation build support and reduce evasion opportunities.<<<

    Now we know from experience that taxation of property holdings is aimed at the wealthy, but they're too few and the numbers don’t add up, and with the amounts they need to get out of a hole, those property taxes will be applied to everybody, and as for VAT, well that’s for everybody too, though it hits poorer people harder per capita.

    So what do you think big money thinks about ideas like these? The answer is they don’t like it at all, not a tiny little bit. Here is a story in Forbes on this matter:

    The International Monetary Fund Lays The Groundwork For Global Wealth Confiscation

    Now I seem to have this dim memory that a certain Dominique Strauss Kahn mentioned taxation of big money in the past. big money disapproved apparently. He wasn’t around for all that long in his IMF job afterwards before he had to resign for some strange reason.

    So here we have the political masters looking for extra cash, and beginning to turn towards their sponsors (and lobbyists) to get some. Let me see .... how many trillion$s are sitting on those multinationals' balance sheets, that would solve a lot of problems for the western governments? Is it seven $T? Somebody has undoubtedly checked and reported back to the bosses. "Levelling the taxation playing field" is a nice way of saying "removing safe areas for expatriates and multinationals".

    I assume deals will be made with the most favoured parties which the average man in the street will eventually pay dearly for. But that’s life I guess. However policy will definitely move that direction in coming years. Homes as hard asset inflation hedges? Hmmmm. That property tax will only rise, but the tenants can pay a higher rent, right? House owning is soooo twentieth century!

    As Dylan wrote all those years ago, and it definitely applies today: The times they are a changing.

    Now if only the western governments could turn on the banksters so promptly. Ah but I dream and am getting too far ahead in the future. In the currency war we are living through the banks are weaponized, and they therefore enjoy similar status and protection as, say, a vital Pentagon Department, or Special Services Regiment. I’m sure we’ll have to wait a good bit longer for that particular event to come due.

    In the meantime - or as Monty Python once said "During the Meanwhile" - I appreciate that precious metal owners are waiting for the inevitable inflation to appear. It seems to be taking so long. But you have to wait until all the dominos are lined up, and that takes time. Setting up the Capital Control Laws, and policies to make a reversal of the Free Trade Doctrine acceptable is one such domino in my humble opinion. That list will look so much more ... complete ... with UK, USA, Japan and various EU countries added, don't you think.

    Kicking and screaming with every step, that's how they're being dragged to eventually acknowledge reality!

    Argentus Maximus

    The author posts daily commentary on the gold and silver markets in the TFMR forum: The Setup For The Big Trade. More information about the author & his work can be found here: RhythmNPrice.

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    Key Economic Events Week of 5/28

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    5/31 9:45 ET Chicago PMI

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