Saturday, January 7, 2012
Capital controls coming to Italy..US next?
Ever thought capital controls were just for Banana Republic nations? Never thought you'd see it in a modern western country? Italy becomes the first with this little gem:
* An extraordinary edict making cash transactions of more than Euro 1,000 illegal (not subject to reporting – just plain illegal). Following Prodi’s own desire, the existing regime has indicated that this level will be progressively reduced to a limit as low as Euro 300. Hence cash is maybe for the first time in history no longer legal tender (over Euro 1,000, for now);
* A requirement that credit card companies report all transactions carried out by Italians, in Italy and abroad to the fiscal authorities;
* Delays and refusals by banks in allowing customers to withdraw cash balances of as little as Euro 10,000;
* Finance Police has placed cameras at the physical borders with Switzerland (see below) to register all license plates. In addition, currency-sniffing dogs have been deployed at the border.
You may recall that when Obamacare was passed there was a similar measure that had been stuck into the legislation here in the US to control cash spending by making businesses document transactions above $1,000. Its was removed in an "Oooops, too soon?" moment but was likely a foreshadowing of what we may see in the future. People have posted on other blogs that when they attempted to close out their checking accounts to protest banks they were limited to just $4,000 per day and told the bank does not keep "large" amounts of cash at branches. Demand deposits, apparently, are not available on demand. So to some extent we already have capital controls here in the US without even knowing it.
Imagine then, what it will be like if we have a "Bank Holiday". Be prepared.