Free market economists are not going to be happy about this... A major financial news source published shocking details about a research report by two employees at the Federal Reserve Bank. The 36-page report applauds the use of capital controls in global markets. If youre unfamiliar with the term capital controls, its probably because we tend to avoid them in the United States in favor of a free market economy. Capital controls are simply laws that regulate and restrict what you are allowed to do with your money by regulating the flow of cash in and out of a national economy. The laws define such things as where you can invest your cash and how you can allocate your assets. If you take a look around the globe, youll see several recent examplesalmost always from countries experiencing a currency crisis: In Cyprus ...some citizens cannot withdraw or write checks for more than 300 per day from their own accounts. Capital controls were put in place after the Greek debt crisis of 2012 and some are set to continue until year-end. In Iceland ...capital controls imposed in 2008 have blockaded offshore investors from selling $7.2 billion in assets. In Argentina...citizens must pay an extra tax on vacations abroad. In the Ukraine ...recent tensions sparked a series of capital controls. Ukrainians must wait six working days before making any type of foreign currency purchases. In addition, they cannot exchange more than the equivalent of $5,800 USD within a given time period. You might be wondering how are these draconian laws a useful tool for managing financial stability as the recent Fed paper says? Well, the Fed research claims that capital controls would protect the U.S. dollar from the effects of rapid cash movements... Of course, the only countries that are worried about capital controls are those deeply worried about a currency crisis. According to Steve Hanke, a professor of applied economics at Johns Hopkins University in Baltimore, Capital controls signal that a country is very worried about preserving its foreign exchange....That means bad things are in the wind. SEE ALSO: Is your state as broke as these places? For more than 50 years, Americans have never really thought twice about the value of our currency. But times are rapidly changing. And most Americans dont realize that the greatest weapon in our nations arsenal is not our military might or our education system, but the simple fact that the U.S. dollar is the worlds reserve currency. As such, our money forms the basis of the global financial system. And banks around the world hold our dollars in reserve against their loans. Thats why, for the past few decades, we have been able to print and borrow trillions of dollars, with no real negative impact. We are the only country in the world that does not have to pay for imports in a foreign currency. We can rack up enormous debts and then print more money. But this exorbitant privilege could soon expire, because many of the most powerful countries around the world (including China and Russia) are looking for a new world reserve currency. And when the U.S. dollar is no longer the worlds reserve currency when we can no longer print money and borrow absurd sums without consequence we are in trouble. One financial guru, Porter Stansberry, believes this currency collapse in America is actually going to happen much sooner than most people think. He says thats how currency collapses happen gradually slowly then all of a sudden. And Mr. Stansberry has an uncanny track record of predicting some of the biggest moves in the economy over the past decade. In 2007 he announced GM would go bankrupt and then he predicted Fannie Mae and Freddie Mac would also soon go bankrupt. Both of his predictions came to fruition.
Posted on: Sat, 02 Aug 2014 18:15:51 +0000
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