I’ve read/heard a lot about the following lately:
Wealth confiscation. The War on Cash. Capital controls.
But after reading two articles by Doug Casey and Ted Bauman the other day, I’m wondering if a War on Gold related to capital controls has begun as well.
From Doug Casey on his International Man website recently, concerning his experiences with transporting silver coins outside various jurisdictions:
I’ve gradually accumulated about a dozen one-ounce silver rounds in my briefcase, some souvenirs issued by mining companies, plus others from Canada, Australia, China, and the US. But when I left Chile a couple of months ago, the person monitoring the X-ray machine stopped me and insisted I take them out and show them to her. This had never happened before, but I wrote it off to chance. Then, when I was leaving Argentina a few weeks later, the same thing happened. What was really unusual was that the inspector looked at them, took them back to his supervisor, and then asked if I had any gold coins. I didn’t, he smiled, and I went on.
What really got my attention was a few weeks later when I was leaving Mauritania, one of the world’s more backward countries. Here, I was also questioned about the silver coins. A supervisor was again called over and asked me whether I had any gold coins. Clearly, something was up.
I haven’t seen any official statements about the movement of gold coins, but it seems probable that governments are spreading word to their minions. After all, $10,000 in $100 bills is a stack about an inch high; it’s hard to hide, and clearly a lot of money. But even at currently depressed prices, $10,000 is only nine Maple Leafs, a much smaller volume. Additionally, the coins are immune to currency-sniffing dogs, are much less likely to be counterfeit, and don’t have serial numbers. And if they’re set aside for a few years, they won’t be damaged by water, fire, insects, currency inflation, or the complete replacement of a currency. Gold coins are in many ways an excellent way to subvert capital controls. And I think they’ll become much more popular in that role…
(Editor: Bold added for emphasis)
Then there was this from Ted Bauman over on The Sovereign Investor Daily website (a publication of The Sovereign Society) just this Monday:
Recently, however, I’ve been hearing reports that some foreign countries are starting to ask more questions, and require more searches, when someone declares that they are transporting gold or other precious-metal coins. For example, some countries in Latin America — including financial basket-case Argentina — are reportedly quite interested in any unusual coins you’re carrying — even if they’re under the limits and therefore not declarable. Seeing them in an X-ray of your bag may be enough to trigger a search and interrogation…
(Editor: Bold added for emphasis)
Think he’s read/heard about Casey’s experiences too? Bauman went on to surmise:
What’s going on? My guess is that the U.S. and other governments are starting to put in place the elements of a capital controls system. We already know that the Foreign Account Tax Compliance Act (FATCA) is building the infrastructure for capital controls in banking. That leaves cash and precious metals as the two remaining methods to transport value physically. Transporting large amounts of cash is already heavily regulated, leaving one more — gold and other precious metals. It’s not paranoid at all to think that the U.S. government is quietly working with other customs agencies to increase “awareness” of the gold-movement “problem.”
(Editor: Bold added for emphasis)
Bauman is not alone here on his thoughts concerning U.S. capital controls. Others- including financial writer/publisher/filmmaker Addison Wiggin and senior editor of International Man Nick Giambruno– also suspect Uncle Sam is already implementing capital controls in anticipation of a coming major financial crisis. I addressed this subject shortly after launching Offshore Safe Deposit Boxes. I wrote on April 3, 2014:
Should Americans really be concerned about capital controls?
I think it’s a legitimate concern.
Why? Because the idea that it’s permissible for government to restrict the free movement of an individual’s money is no longer taboo among monetary researchers and policymakers.
Two examples illustrate this.
First, back on December 3, 2012, an IMF Survey online piece entitled “IMF Adopts International View on Capital Flows” appeared on the International Monetary Fund website. The subject of the article was capital flows, and the IMF developing “a comprehensive, flexible, and balanced view on the management of global capital flows to help give countries clear and consistent policy advice.” Stated within the piece was the following:
For countries that have to manage the risks associated with inflow surges or disruptive outflows, a key role needs to be played by macroeconomic policies, as well as by sound financial supervision and regulation, and strong institutions. In certain circumstances, capital flow management measures can be useful…
(Editor’s note: Bold added for emphasis)
I read that last part as saying, “In certain circumstances, capital controls can be useful.”
Then there’s this from the Federal Reserve. Scott Davis (Dallas Fed) and Ignacio Presno (Boston Fed) published a Federal Reserve Bank of Dallas Globalization and Monetary Policy Institute Working Paper entitled Capital Controls as an Instrument of Monetary Policy in February. From their abstract:
Large swings in capital flows into and out of emerging markets can potentially lead to excessive volatility in asset prices and credit supply. In order to lessen the impact of capital flows on financial instability, a number of researchers and policy markers have recently proposed the use of capital controls. This paper considers the benefit of adding capital controls as a potential instrument of monetary policy in a small open economy.
(Editor’s note: Bold added for emphasis)
Their conclusion?
Traditionally, capital controls have been thought of as one leg of the Mundell-Fleming “trilemma of international finance”. Capital controls were necessary for macroeconomic stabilization since they provided a degree of monetary independence for a country with a fixed exchange rate, but if the exchange rate was allowed to float, capital controls were unnecessary and stabilization could be achieved through monetary policy. However, recent experience has shown that surges in capital inflows and outflows can lead to financial instability even in countries with a floating exchange rate and an independent monetary policy. In a DSGE framework, this paper shows that the benefits of capital controls are present even when monetary policy is determined optimally. Due to the financial instability caused by fluctuations in capital inflows and outflows, there may be a role for capital controls to exist side-by-side with conventional monetary tools as an instrument of monetary policy.
(Editor’s note: Bold added for emphasis)
Granted, the United States is not a “small open economy.” But notice how the idea of implementing capital controls is no longer shunned. It’s even prescribed by “a number of researchers and policy makers” to tackle the above scenario, where financial instability is brought about by large swings in capital flows.
Once again, I feel Americans should be concerned about capital controls being implemented in a future period of financial turmoil.
And then along came FATCA. After digesting an Addison Wiggins July 8, 2015, Daily Reckoning piece arguing FATCA’s real goal is “keeping you trapped in U.S. banks and the U.S. dollar if a Cyprus-like crisis comes America’s way,” I added on July 15:
So is FATCA part of some larger capital controls scheme being carried out by the U.S. government? Maybe. I wouldn’t be surprised if that’s the case.
I can’t say definitively that a capital controls program currently exists in the United States. However, considering I’m in the camp that believes significant economic upheaval is on its way, I suspect the foundation for such a scheme is very likely being constructed.
As for a War on Gold both in the U.S. and abroad as part of a capital controls program, I have my suspicions here as well something might already be in place.
By Christopher E. Hill
Offshore Safe Deposit Boxes (www.offshoresafedepositboxes.com)
Sources:
Casey, Doug. “Crossing Borders with Gold and Silver Coins – a Glimpse of Things to Come.” International Man. (http://www.internationalman.com/articles/crossing-borders-with-gold-and-silver-coins-a-glimpse-of-things-to-come). 1 Oct. 2015.
Bauman, Ted. “It’s Time to Get Your Gold Out of the U.S.” The Sovereign Investor Daily. 28 Sep. 2015. (http://thesovereigninvestor.com/gold/time-to-get-your-gold-out/). 1 Oct. 2015.