Capital Flight, Capital Controls, Capital Panic

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June 19, 2012 at 1:16 am #4085

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June 19, 2012 at 2:28 am #4086

Brunswickian

I have been wondering what happens to commerce when there is a bank run and bank holidays etc? How do business transactions take place? People are going to be reluctant to place funds in a bank when they know they may not be able to access them.

June 19, 2012 at 3:05 am #4087

Bot Blogger

Wow! I’m finding it hard to breathe.

Like a good Cassandra, TAE, you described this BEFORE it happened. I’m grateful.

June 19, 2012 at 3:36 am #4088

Reverse Engineer

Capital Controls are all the rage now. I wrote about that one a couple of days ago on the Diner. Featured your old nemesis Inflationista Speedy Gonzalo Lira in it. :D

RE wrote: …The problems with Simon’s advice should be obvious now. Exactly which Foreign Bank would you pick to safely deposit your money? In Europe for example, when those banks go Belly Up, the LAST Depositors who might see any of their money are the foreigners. Far as Gold goes, Simon himself mentions that one of the typical forms of Capital Controls is the confiscation of PMs, so I am not sure how having them protects you all that much once the Nation States are in such dire straights they have to try to keep anything worth anything insed their borders. Far as having a place to GO is concerned for the average Pigman, where do you PICK? Simon seems to think Cheeeelay is a great spot, where he is neighbors with Speedy Gonzalo Lira. Exactly why these guys think the Chilean Goobermint is so much more trustworthy and dependable than the FSofA one or any of the Eurotrash ones is beyond me. How many times has that Goobermint turned over in the last 40 years?…

RE

June 19, 2012 at 6:21 am #4092

Golden Oxen

A well written and documented account of the financial disaster the world is in. Depressing and as truthful as the article is, I still hold on to the minority view that there are ways out of this with some responsible clear thinking individuals arising from the fear and confusion, responsible intelligent leadership is needed and quickly.
Expecting the subject of Europe’s substantial Gold reserves to come out of the closet, and become a significant part of a solution. The ideas of a universal tax on all speculative financial transactions, as well as a generous tax credit for hiring new employees are also ones that have some merit. There are many others but without a trusted confident leader to restore confidence and faith in the future we face a bleak period.

June 19, 2012 at 6:57 am #4095

riesterm

While the topic rightfully addresses the crisis in Europe, I wonder how far behind the U.S. can be pertaining to capital controls and the like.

Also, has Nicole changed her opinion about the relative safety of local credit unions and has she changed her recommendation of keeping at least six months of cash on hand.

Thank-you.

June 19, 2012 at 9:37 am #4100

davefairtex

Great article, too many timely points to comment on.

One thing that struck me. I find it interesting that Switzerland is quite concerned about currency flows, but no mention is made of restricting the flow of gold into the country.

It would seem that the easy flow of international capital we’ve taken for granted for 30 years is likely coming to an end. And soon.

June 19, 2012 at 10:07 am #4101

desert_planet

riesterm,

Where did you pick up on Ms. Foss’ reversal of opinion on local credit unions?

desert planet

June 19, 2012 at 10:55 am #4104

TheTrivium4TW

Hi Nicole,

Thanks for the timely article. Please keep the analysis coming as more events “break.”

A question for you, Ilargi, Ashvin and Commentariat… If one were to keep a sizeable chunk of change at Treasury Direct (in the US, obviously), what would happen if the credit union one used was forced to “limit withdrawals?”

Wouldn’t the Treasury Direct stash of cash become be restricted to the withdrawal limits?

riesterm, I wouldn’t trust credit unions more than banks b/c I can easily see banking restrictions mandated across all institutions.

I would, however, recommend using a reasonably solvent local credit union over a criminal Big Finance Capital mega banking institution unless you like directly paying for the financial knife that will be used to slit our nation’s financial throat.

June 19, 2012 at 4:33 pm #4116

riesterm

desert_planet: I did not mean to imply a reversal of Nicole’s opinion. Rather, I was checking to see if she still felt local institutions, particularly credit unions, were a “safe” haven for cash.

TheTrivium4TW appears not to think so.

June 19, 2012 at 5:43 pm #4120

Otto Matic

It’s interesting to see the ‘flight to safety’, long predicted by TAE, supporting the U.S. dollar and the TBTF U.S. banks. They knew this all along and baked it into the ‘collapse cake’. The whole Eurozone is the ‘periphery’ of the U.S. and will be cannibalized accordingly with capital flight which will be overtly AND covertly encouraged, added and abetted by the US government and their banking syndicate Owners. A few more Happy Days bought for the Zombie ‘citizens’ of the U.S.! The frogs ain’t boiled yet!

One of the newest desperation faux bailout schemes proposed in the EU (German banks) is to provide bailout funds to the PIIGS backed by the borrowing country’s own gold reserves as collateral. Fabulous idea!

Italy, as an example, has some 2500 tons of gold. They would lose it all if they failed to repay the bailout ‘loan’ from the Euro Trashcrats, a sure thing given the death spiral nature of events.

Ironically, the huge chunk of Germany’s own gold it held in NYC at the ‘Federal’ Reserve vault. The comment about how unsafe safe deposit boxes are applies here in spades for Deutschland’s gold.

Germany sucks it’s periphery dry, the U.S sucks Germany dry, thank you very much.

I wonder how Germany plans on being payed for it’s exports? Manufacturer financed payment/loans?

Charge interest to the periphery for products they can no longer afford with loans they can’t service.

The noose tightens.

June 19, 2012 at 5:57 pm #4121

linda

Hi there. I generally lurk. About a year ago I asked the best way to purchase silver. I’ve lost the response. Somewhere out west I think and the most common coin to buy. Ideas? Thanks in advance. BTW–loved the article. Keep up the good work.

June 19, 2012 at 7:34 pm #4126

scandia

Duh, I am embarassed to reveal I don’t know what an offshore account is. I hear lots of people have them. Are they purely electronic? In any case if one has one how will it be able to function under capital controls? How can money from an offshore account be transferred to a bank in the system where one lives?

June 19, 2012 at 8:57 pm #4131

seychelles

Concise and powerful summary, as always by Stoneleigh. But one would think that devotees of this site would have thought through and initiated logical…but alas perhaps not appropriate…. defensive measures YEARS ago. We will only know for sure if our protective moves have been successful in retrospect, as the monsterPonzi implodes. And flexibility will almost certainly be in order, as TPTB are likely to change game rules abruptly to squash those slow to adapt. Confiscation of gold, outlawing and /or taxation of cash transactions and selective defaulting on payment of interest and principal on foreign-held debt are nightmare scenarios that may occur. Suffocating totalitarianism will be in place if digital money becomes our exclusive legal tender. My local credit unions generally refuse to connect with Treasury Direct, probably because they do not want to be confronted with the possibility of large (even non-cash) withdrawals. Some of the megabanks, such as BNY Mellon, also will not hook up with Treasury Direct. But who here would want an “account” with them, anyway?

June 19, 2012 at 9:16 pm #4132

Anonymous

What about bitcoins?

It is of course another pyramid scheme (but isn’t that inseparable from the definition of money?) – and a very, very risky bet – but on the other hand as long as internet works they are probably the most liquid asset possible and might be a good way to workaround any capital controls.

June 19, 2012 at 10:31 pm #4135

ashvin

Otto Matic post=3752 wrote: It’s interesting to see the ‘flight to safety’, long predicted by TAE, supporting the U.S. dollar and the TBTF U.S. banks. They knew this all along and baked it into the ‘collapse cake’. The whole Eurozone is the ‘periphery’ of the U.S. and will be cannibalized accordingly with capital flight which will be overtly AND covertly encouraged, added and abetted by the US government and their banking syndicate Owners. A few more Happy Days bought for the Zombie ‘citizens’ of the U.S.! The frogs ain’t boiled yet!

Yes indeed, slaughter-house finance is alive and well:

And that’s where we return to the IMF’s little “hint” in its report from last week. The financial elites do not need anyone to buy ALL of the bonds, only those that are most important to maintaining their wealth extraction operations. The weak players? Well, they can all fight over the scraps and devour themselves in the financial marketplace. The truly significant capital will be transported towards a few central locations by natural forces and by human design, like lambs to the inevitable slaughter. Of these locations, the most critical are surely the U.S. Treasury market, which can be used to support major U.S. banks, and the U.S. currency market.

What are the chances that the majority of people who find themselves invested in U.S. government bonds and the dollar will get anything close to a return on their investment over 10, 20 or 30 years? The answer to that is probably a massively negative percentage, because the psychological pain of holding on for that long will be even worse than the total wipe out itself. However, the herd typically doesn’t figure out how close they were to the edge of the cliff until after they are tumbling down the other side.

Stoneleigh at The Automatic Earth has repeatedly pointed out that people in such fearful environments tend to discount the future by an increasing rate, which means they care less and less about what will happen several decades, years or even months from the present time. The discount situation of financial elites is similar because they know how precarious the dollar-based financial markets are, so their concern is over whether they can corral all of the lambs into one or two places over a relatively short time period. So far, most of the evidence says that not only is it possible, but the process is already well under way.

The cities of Greece continue to erupt in violence as its citizens are forced to bail out European banks, and, meanwhile, Americans continue to mistake their own reflections in the global mirror. Earlier this year, Standard & Poor’s rating agency downgraded the outlook for the triple-A rated status of Treasury bonds (from “stable” to “negative”), in what was nothing less than an act of aiding and abetting the politicians, bankers and major corporate executives who strive for the imposition of austerity on everyone but themselves. The only difference between Greece and the U.S. is that the latter is not a “weak player” in the eyes of elite institutions, such as the IMF. Which means that, while the Greek taxpayers may soon be put out of their misery, we will die a much slower death, choking on our own debt for years to come.

June 19, 2012 at 10:46 pm #4136

ashvin

riesterm post=3748 wrote: desert_planet: I did not mean to imply a reversal of Nicole’s opinion. Rather, I was checking to see if she still felt local institutions, particularly credit unions, were a “safe” haven for cash.

TheTrivium4TW appears not to think so.

I think these questions really come down to what level of risk are you willing to be exposed to and for how long, because there will always be numerous uncertainties involved over the upcoming years. Nothing is completely safe, and that includes your local credit union (and your TD account for that matter). But neither is stashing tens of thousands of dollars under your mattress, or even in a well-built safe. So you’re going to have to make some decisions that are based on guesstimates of the risks involved, which will depend on the macroeconomic situation as well as your personal circumstances (and, of course, any ethical issues you may have).

As long as the markets are fixated on the Eurozone, it is unlikely that people will be frozen out of their bank deposits over here. The fact that contagion from an event over there could potentially spread over here at a very rapid pace, though, makes it unwise to keep a lot of your cash wealth in TBTSTD (too big to save the depositor) banks. And that applies to allegedly “allocated” gold accounts just as much. Beyond that, one has to make a judgment call about how best to distribute surplus cash resources (above and beyond what’s required for weekly/monthly spending) between local banking institutions, your home and physical assets.

But, no, there are no truly safe “safe havens”.

June 19, 2012 at 11:51 pm #4139

Otto Matic

@davefairtex

“…One thing that struck me. I find it interesting that Switzerland is quite concerned about currency flows, but no mention is made of restricting the flow of gold into the country.”

Check this out:

Italian Police Seize Gold Worth €2m at Swiss Border

Cool :>)

Italian police seize gold worth €2m at Swiss border

Businessman and his daughter charged with smuggling after haul is found in hidden compartment of his car

“…Italian tax police have seized 50kg (110lb) of gold from an Italian businessman at the Swiss border….”

http://www.guardian.co.uk/world/2012/jun/19/italy-gold-seized-swiss-border

June 20, 2012 at 12:41 am #4141

draego454

>> Where national interest become paramount, and the interests of the collective are lost

And this is the great failure of globalism. To allow any critical activity to be offshored to another nation who is supposedly more “efficient” at that activity is begging for catastrophic failure. Nations who once could feed themselves were facing starvation a few years ago during the grain shortages (wheat, corn, rice, etc.). The nation that INVENTED the semiconductor, who relies on this technology for its military defense (and innumerable other critical activities) has allowed primary mfg of semiconductors to be offshored. What happens if there is a disagreement between these two parties??? The examples go on. The only thing that globalism does is make rich people richer and destroy the middle class.

A system that works 99% of the time but blows your brains out the other 1% can not be considered successful.

Steven in Dallas

June 20, 2012 at 1:27 am #4145

riesterm

Thank-you, Ash for your “no truly safe “safe havens” reminder. However, moving right down the supposed “safe haven” list, the one that may be safer than the rest is productive land.

The question(s) I wrestle with are “do I spend my cash on land now — before my cash loses its value? Or, do I wait for deflation and take advantage of the “cash is king” adage?

Thanks to all who are willing to share their perspective.

June 20, 2012 at 4:34 am #4149

Hircus

riesterm post=3777 wrote:
The question(s) I wrestle with are “do I spend my cash on land now — before my cash loses its value? Or, do I wait for deflation and take advantage of the “cash is king” adage?

Buying productive land now might be a wise choice. As long as you have enough capital to pay for it and living expenses (including property taxes on said property) for a few years after. I imagine tax collection and loan collection may be much more draconian as finances become tighter.

Also, what type of land makes a big difference on if it’s a good idea for you — farmland, wooded hills, desert, suburban homes, and frozen tundra all have different utilities, and my depreciate at different rates and absolute amount over the next few years.

So yeah, no easy answers I can see.

June 20, 2012 at 8:09 am #4155

sangell

Excellant article but, they say the only things you can really own are the things in your head. Next to that I’d suggest the next best ‘doomsday’ survival asset is an ocean going sailboat. It is both a secure home, an escape option and something that is intrinsically valuable in any medium of exchange. 5 acres in the woods isn’t going to protect you if a SWAT team shows up and gold buried in the backyard is worthless if 9 grams of lead hits you at 1000 feet per second but being able to stay offshore and cross an ocean without going through an airport just might.

June 20, 2012 at 8:35 am #4156

Golden Oxen

Reply to sangell. Your posting brought back fond images of Captain Nemo and the Nautilus. James Mason was a great actor who played the part perfectly. A nice vessel to own in these times sangell, even if it was fictional.

June 20, 2012 at 1:47 pm #4167

davefairtex

otto matic -

You know, it seemed only hours after I posted my note, I saw that exact same news article! :)

June 20, 2012 at 3:00 pm #4168

Reverse Engineer

Hircus post=3783 wrote: [quote=riesterm post=3777]
The question(s) I wrestle with are “do I spend my cash on land now — before my cash loses its value? Or, do I wait for deflation and take advantage of the “cash is king” adage?

Buying productive land now might be a wise choice. As long as you have enough capital to pay for it and living expenses (including property taxes on said property) for a few years after. I imagine tax collection and loan collection may be much more draconian as finances become tighter.

Also, what type of land makes a big difference on if it’s a good idea for you — farmland, wooded hills, desert, suburban homes, and frozen tundra all have different utilities, and my depreciate at different rates and absolute amount over the next few years.

So yeah, no easy answers I can see.

Buy nothing you cannot Carry with you and Protect and Defend. Ownership of Land is a Chimera, always has been.

Have as little as possible to defend, so you are not a Target. Anyone purporting to OWN the land is a Target.

Go as far out as you possibly can from the center of the collapse, hopefully past the Event Horizon. Lowest population zones are best. High population zones are DEATH TRAPS.

Join with others, make a Tribe, Clan, Gang or Community. Do not try to suvive on your own. You cannot.

Depend on NO form of “money”. Barter only. Reject all forms of money pitched out by the elite to “Save the Day”, PMs or otherwise As any have ever been constructed through all of history, all are lies.

All the “wealth” constructed here from the Age of Ag and the Age of Oil is going down now, and depending on any of that is a mistake. Only your Wits, your Skllls and your Connections to others now represent true wealth. Build all of them as best you can, and GTFO of the Big Shities as fast as you can.

The Big Show is Coming Soon to a Theatre Near You.

RE

June 20, 2012 at 9:45 pm #4176

Hircus

Reverse Engineer post=3802 wrote:
Buy nothing you cannot Carry with you and Protect and Defend. Ownership of Land is a Chimera, always has been.

Have as little as possible to defend, so you are not a Target. Anyone purporting to OWN the land is a Target.

Go as far out as you possibly can from the center of the collapse, hopefully past the Event Horizon. Lowest population zones are best. High population zones are DEATH TRAPS.

Join with others, make a Tribe, Clan, Gang or Community. Do not try to suvive on your own. You cannot.

Depend on NO form of “money”. Barter only. Reject all forms of money pitched out by the elite to “Save the Day”, PMs or otherwise As any have ever been constructed through all of history, all are lies.

All the “wealth” constructed here from the Age of Ag and the Age of Oil is going down now, and depending on any of that is a mistake. Only your Wits, your Skllls and your Connections to others now represent true wealth. Build all of them as best you can, and GTFO of the Big Shities as fast as you can.

The Big Show is Coming Soon to a Theatre Near You.

RE

There’s one problem with low population zones: they have a low population for a reason. Usually that means that even in the best of situations it’s exceedingly difficult to survive/thrive there. And we’re not talking about ideal situations. Especially as others get the same idea and enter your sphere. The existing, low-density resources will be drawn down rapidly, most likely at an unsustainable rate.

Couldn’t agree with you more on building community, though.

June 21, 2012 at 6:33 am #4196

pansceptic

Hircus, it is true that rural areas are low population because life is more difficult there. That’s why there has been a century-long migration from rural agricultural areas into cities, all over the world. Permaculture-style production of your own food exposes you to the vagarities of rainfall, diseases, insect infestations, soil loss, etc, so the agricultural surpluses created by the mechanization of agriculture made it less of a struggle for people to survive in a city (or even a slum surrounding a major city).

However, the decline in available extrasolar energy will bring the mechanization of agriculture and long distance transport of food to an end, so reversing the migration into the cities. Eventually food distribution failures and impossible levels of crime in the cities will make life in rural areas more attractive for many than the cities.

I also disagree that “ownership” (subject to taxes) of productive land will necessarily make the owner a target of the authorities. If the level of production is very low-scale and remote from transportation arteries, it won’t be worth the energy of the authorities to make any real effort to seize production (a losing proposition for them). This is one of the reasons my ancestors literally headed for the hills; it really impedes the “damnedrevenoooers” (till I was 10 I thought it was one word ’cause they always came together :)

I will also suggest considering the third-world parts of the US before bugging out to a foriegn country where gringos stand out like a sore thumb. When I lived in Mississippi in the mid 1960s, that’s where the ‘third world sweatshops’ were. My father worked at the local “garment plant” as an industrial engineer (slave driver with a clipboard). A punitive, victorious Union had exacerbated the depression caused by the South’s loss of their economic system, resulting in a depression that continues in some ways to the present. Consider Alabama, Arkansas, Mississippi and West Virginia as pre-collapsed for your shopping convenience – they have a lot less far to fall!

June 21, 2012 at 7:48 am #4198

steve from virginia

More food for though by excellent superstar Nicole!

What did Yogi Berra say? “Prediction is very hard, especially about the future …”

Best to just look at what is underway now and let the future — and predictions — take care of themselves.

– Funny business in Europe as rates rise during deflation under a hard-currency regime. Europe carries a lot of debt … but they carried the same amount of debt last year and nearly the same the year before. Why a problem now?

– The real currency traps (which is what Nicole is describing) in the US is our stuff. When gas is rationed, the $50,000 SUV is worth $5,000, if that. The furniture, the swimming pools, the vacation houses all are becoming worthless. This is because they are, from the get-go! There is no need to rob peoples’ bank accounts because they are ‘auto-emptied’ for nothing by the account holders themselves.

– Actually restricting banking would be counterproductive because fewer depositors would be able to auto empty their accounts!

– As time passes and failures mount, authority breaks down rather than gets stronger. Perhaps a more effective regime would turn this around, otherwise bribery becomes the way to navigate authorities.

– An effective regime would have less problems with capital flows both to and from. Bank runs underway is foot-vote against the establishment.

– Bank runs are consequence when central banks (appear to) make unsecured loans. When done, there is effectively no lender of last resort … even when the central bank tries hardest to be one!

– Even in Greece there is no sign that civil society has collapsed, however people are more poor than they were a year ago. Americans have agonies about doing without. Poverty by itself is not collapse, it means the absence of consumer goods and wastefulness. What is taking place right now is conservation by other means. The outcome of this process is decreasing utility of the stuff we populate our lives with. These junky items represent a (very large) cash investment. In a way, the US has been throwing its money away since the end of World War II.

– Mad Max isn’t happening so far but Woodstock might not be out of the question …

:cheer:

June 21, 2012 at 7:56 am #4199

deflationista

panseptic:

excellent analysis…

June 21, 2012 at 7:59 am #4200

Reverse Engineer

steve from virginia post=3834 wrote:
– Mad Max isn’t happening so far but Woodstock might not be out of the question …

:cheer:

Depends a whole lot on your Location there Steve. Mad Max has hit Somalia and Syria here already, Egypt is well into it and Greece is on the way. How long to project before MM comes to a Theatre Near You?

RE

June 21, 2012 at 2:34 pm #4204

Hircus

Panseptic,

I agree with you about rural areas having huge plusses as our economy falters. My thoughts on low-population areas is more toward the really remote places — Alaskan bush, the great Northern Woods of Maine, the Rocky Mountains, and the Great Basin.

I’m a bit more wary of the tax-man than you, still. Local and State government has grown a lot since the 1960′s, and they might be more likely to come after your assets than the national/global folks.

June 21, 2012 at 5:24 pm #4205

steve from virginia

Yr not paying attention, RE: the disorder in countries such as Syria and Somalia is the outcome of direct policy actions by the US (primarily) and others; military and foreign affairs agencies.

It’s clear the US public isn’t interested in disorder, most Americans are too old, the young peoples’ employment is held hostage. Even when provoked the younger citizens are uninterested in fighting in the streets.

There is nothing to gain by disorder, only acting out.

When Americans get serious there will be strikes and debt repudiation.

June 22, 2012 at 12:04 pm #4221

snuffy

I have been going at a dead run for about a week,and just now have caught up with my reading and chores.Having 2,high-energy kids for 3 days…a “grandsitter”is both wonderful and exhausting…trying to deal with the vagaries of weather,as well as 2 broke tillers has delayed my garden a couple of weeks,but steelhead fishing with a 7 year old girl,and her 12 year old brother has made up for most of my headaches.They are both hooked now.(always start fisherfolk young.)

I knew,in my heart of hearts,that Nicole’s call,back in the day,was a well thought out,reasoned,Damned-savvy analysis of the how and why of this. .
We have had many,many folks attempts to shoot holes in her and Ilargi take on the way this is going to play out,but her call/predictions have been on the money,or at least close enough to make me some money when I was still forced to own stock.[I Have none now]

The next stage is where I think this S#%t will get real.There will be actions taken by “entities” that will rip the mask off,for the rest of those who think this is just a regular business downturn,and point out we are on a toboggan picking up speed fast on its way to hell.How many will react to having their blinders torn off is anyones guess.

Were the truth of the unemployment,job loss and “REAL”numbers out,as well as the reality of coming events..like what I have had some very bad dreams about lately.

I see some here still talking about heading for the high country as a survival ploy….Good luck.I have always thought of folks like that as “refugees”My home is relatively secluded,at the end of a dead end road,and I have had few,non-family members by the last 10-15 years.With fruit trees,a spring[soon to have a sand filter]garden, ect.,It would take a lot to make me pull stakes.Yes,I am a stationary target,but not a foolish one.

If the thought is gangs of screaming mutant biker gangsters…most of my neighbors are quiet,retired older WW2,’Nam,Sandbox Hardcases that should scare hell out of any one foolish enough to get crazy up here.

I saw up close and personal how fast this community self-organised and became a effective,for lack of a better word “Village”during the Y2K non-event.When the area was threatened…it reacted,and I think the same type of reaction will occur if/when law and order breaks down.

I know the place will feed me and whatever tribe we gather.I also know some VERY bad times are ahead ..so…

Get the rest of the garden in,do what you need to do,and take the kids fishing…

Bee good,or
Bee careful

snuffy

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