What Obama's New ‘Soviet-Style’ Capital Controls mean for the Near Future

New Obama Law Places ‘Soviet-Style’ Capital Controls on Americans

By 21stcenturywire

By Patrick Henningsen
21st Century Wire Managing Editor

Americans’ ability to move their money across international borders may become restricted thanks to new legislation passed last week. Buried within Obama’s recent $17.5 billion “H.I.R.E.” Hiring Incentives to Restore Employment Act (H.R. 2487) is a new U.S. Federal restriction on any foreign holdings which exceed the meager amount of $50,000 and leaves the door open for a new 30% transaction or ‘holdings’ tax to be enforced by the IRS. The new law amounts to an unprecedented extension of the US Government into the global sphere.

Why has the White House and its Federal Government decided passed such a law now? We should start by considering the big picture. The ramifications of this new under-the-radar federal move are large and far-reaching. Concerned readers would do well here to question both the fundamental and practical aspects of such a law. Consider for one moment the letter of the law- or the figure of $50,000. For extremely high net-worth individuals, this new regulation over their personal freedom amounts to a mere ’speed-bump’ in financial terms. With their money buried securely into property, foreign investments and strings of shell companies and complexed funds, financial elites will find this new super socialist state control affects only minor liquid cash amounts, or ‘pocket-money’. For the middle class or small investor, the picture is quite different. Fast-forward 12 or 18 months into the future where rising inflation and a severe devaluation of the dollar may occur. The ability for a middle class American to migrate his or her savings into the relative safe haven of a foreign currency or overseas investment is now controlled by the United States Federal Government.

Economists and historians will note that such “Capital Controls” are part and parcel of super-socialist states like the Soviet Union and its former satellite states. Even today, it’s common practice for struggling socialist governments located in regions like South America, Central America and Africa to impose periodic restrictions on cash leaving those countries- a sure sign of a currency and economy in decline. This practice also characterizes foreign states who are under the economic restructuring administration of the International Monetary Fund (IMF). One could also speculate that such restrictions imposed on Americans would certainly pave the way for a future IMF-type administration of the USA, making it markedly easier to manage for the World Bank.

Putting all speculation aside though, this new law amounts to a dangerous precedent where the Federal Government can, with the full enforcement of the IRS, lay down Capital Controls on any dollar amount- regardless of its size. In the event of a US currency devaluation(see US ‘Bank Holiday’) of the dollar, the said figure in the new bill- $50,000, could become a rather nominal sum amounting to only 2/3’s or 1/3 of it’s previous value. Do not count on the Federal Government to adjust its printed figure of “$50,000″ for inflation or devaluation, leaving a Capital Control on relatively smaller holdings, leaving no safe haven for the average American.

Throughout history, in countries where such Capital Controls are administered by the state, large black market cash courier industries have thrived. When a foreign currency is difficult or illegal for local citizens to acquire, they will either pay a tax to the government or a smaller black market premium to acquire it. If government transaction taxes are high enough(like the new 30% tax set by US law), punters may opt the black market. This certainly was the case in fledgling socialist countries like Italy in the 1960’s where organized networks of independent couriers amassed large fortunes by smuggling cash over the border. Of course, new border restrictions and TSA surveillance technologies will make it almost impossible for an individual to move substantial amounts of cash through airports. Through color of law, such activities might already be considered illegal and deemed as tax evasion by the IRS. Read a full analysis on Obama’s new law here, courtesy of our friends at Zero Hedge: