Congress really screwed up this time
by Simon Black
There’s an old playbook that politicians have used for centuries; it contains a handful of tried and true plays to call when they’re completely desperate. History is full of examples of bankrupt nations relying on these tactics, and one of their favorites is capital controls.
Capital controls essentially restrict the flow of funds across a nation’s borders. They take different forms, but the end result is trapping money inside a country, making it very difficult to move money overseas.
Why would a government do this? Simple. Because once capital controls are imposed, the next step is to oblige individuals and businesses into buying their government debt. They force us to park our money in domestic banks, then they force the banks to use OUR money to buy THEIR bonds.
Just imagine being forced into loaning the government your hard-earned money for a 30-year stretch at less than 4% interest! You’d be eaten alive by inflation!
If it sounds far-fetched, think again… it’s happening all the time. Argentina’s socialist president imposed strict capital controls for the country’s mining companies and sought to prevent Argentines from holding foreign currency. This is after she already nationalized pension funds and seized private bank accounts.
Not to be outdone, the US government passed something called the Foreign Account Tax Compliance Act (FATCA) last year, and it’s tantamount to capital controls. Let’s put it this way— if you really wanted to screw American businesses and make it difficult for them to be competitive, FATCA is EXACTLY the legislation you would pass.
Once all the rules kick in, it will be very hard for American individuals and businesses to operate abroad. This is what capital controls are all about— make it difficult for people to move money overseas so that they’ll keep it in the United States.
Given that the US government already controls the banking system, how long will it be before banks have to start investing their depositors’ funds into the ‘safety and security’ of US Treasuries?
For all the sheep who are soundly asleep despite what’s going on around them, they’re going to wake up one day soon (once all the rule go into effect) and realize that their money is trapped as if they’re living in some third world dictatorship.
For anyone who’s aware and paying attention, the FATCA legislation poses a clear deadline for taking action.
To put it very plainly, you NEED to take action and diversify internationally before these FATCA rules kick in. It’s that simple.
