By Marcus Brooks
Can you by legislation add one farthing to the wealth of the country?” The great classical-liberal thinker Richard Cobden asked the House of Commons on Feb. 27, 1846.
The Argentines think so. So do the Europeans. And of course, so do the Americans.
But first let us examine Cobden’s remarks:
“You may, by legislation, in one evening, destroy the fruits and accumulations of a century of labour; but I defy you to show me how, by the legislation of this House, you can add one farthing to the wealth of the country.”
The news from Cyprus has once again reminded us how cunning and treacherous the politicians can be.
Not long ago the Argentine press printed a story with the following headline: “Kirchner Government to Tighten Capital Controls.”
Turning up the heat
Europe is a different matter. Or so we thought. More sophisticated. More subtle. More careful. Run by German bankers with memories that stretch all the way back to the Weimar Republic of the 1920s.
But here’s another recent story. You will notice that the EU is contemplating the use of capital control policies that are hobbling the Argentine economy. From Reuters:
Euro zone finance officials acknowledged being “in a mess” over Cyprus during a conference call on Wednesday and discussed imposing capital controls to insulate the region from a possible collapse of the Cypriot economy.
“In detailed notes of the call seen by Reuters, one official described emotions as running “very high,” making it difficult to come up with rational solutions, and referred to “open talk in regards of (Cyprus) leaving the euro zone.”
“Some additional laws need to be passed. Overall we are in a very difficult situation,” the official said, according to the notes. “(We’re) trying to do everything within the powers to limit any unauthorised outflows.”
We hope you are paying attention, dear reader. The eurocrats are thinking about passing laws to stop “unauthorized” outflows. In other words, they will make it illegal for you to put your money where you want. You will need their permission to move it. They want it right where they can get it… if they need it.
They think they can pass laws and add to the wealth of the nation – or at least parts of it. And it won’t be too long before Americans join in. They’re already robbing savers with ultra-low interest rates. And the UK. has already passed laws to make it difficult to keep funds in foreign bank accounts.
As the UK’s financial problems mount, the Bank of England will turn the screws harder – just like the Europeans and the Argentines. A few weeks later after the 2008 G20 crisis meeting the Bank of England published a paper where they broadly welcomed the G20’s decision in favour of even greater use of capital controls, though they caution that compared to developing countries, advanced economies may find it harder to implement efficient controls. Not all momentum has been in favour of increased use of capital controls however. For example, in December 2011 China partially loosened its controls on inbound capital flows, which the Financial Times described as reflecting an ongoing desire by Chinese authorities for further liberalization. India also lifted some of its controls on inbound capital in early January 2012.