Capital Controls

The writer that calls himself Tyler Durden wote this piece yesterday on capital controls, which are often a part of a banking crisis. In 1994 during the Mexican crisis people were not allowed to ship their money out of pesos into dollars. The value of their savings in pesos went down over 90%. SW

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Submitted by Tyler Durdenon 03/19/2013 – 19:38

As is painfully clear to even the most naive observer, the biggest threat for Europe from this point on, now that Cyprus is officially “unfixed” is what happens when… if the Cyprus banks reopen – will the deluge of bank withdrawals drain 10% of the savings as the country’s central banker warned earlier today, 20%, 50% or all of it? It is certain that any and all foreign “oligarch” accounts will be promptly pulled never to be heard of again, and after being treated like third grade European citizens, we doubt the locals will care much for having their cash in a banking system that Europe has shown is equal to all the other “united” banking systems, which however also happen to be just that much more equal. And once foreign TV crews show lines of people scrambling to pull money in Cyprus to the local viewers in Greece, Italy and Spain, will those countries also get comparable ideas? That is precisely the Pandora’s box that Europe has now opened, and which it is scrambling to close. How? With the dreaded “contingency plans”, among which are such last ditch efforts as capital controls, including “imposing limits on daily withdrawals from bank accounts; capping the amount of money that can be electronically taken out of the country and making these transactions slower to clear; and introducing border checks to cap the amount of cash leaving in the country,” most recently utilized in the banana-est of republics such as Argentina.