Bloomberg : IMF Officially Endorses Capital Controls in Reversal
The International Monetary Fund endorsed nations’ use of capital controls in certain circumstances, making official a shift, which has been in the works for three years, that will guide the fund’s advice.
In a reversal of its historic support for unrestricted flows of money across borders, the Washington-based IMF said controls can be useful when countries have little room for economic policies such as lowering interest rates or when surging capital inflows threaten financial stability. Still, it said the measures should be targeted, temporary and not discriminate between residents and non-residents.
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IMF Managing Director Christine Lagarde has cited the shift on capital controls as an illustration of the fund’s attempts to modernize....
The guidelines are “not set in stone” and will be reviewed and updated in the light of new experience and research, Vivek Arora, an assistant director in the IMF’s strategy, policy and review department, told reporters on a conference call today.
The report cautions countries against substituting capital controls for policies it says are needed first, such as currency appreciation or the buildup of foreign reserves. It also says capital controls are rarely sufficient on their own.
“It could have a chilling effect on countries’ ability to put in place regulations,” Gallagher said in a phone interview. “It will be tacitly endorsed by a lot of central banks and it will have an impact.”
“It could have a chilling effect on countries’ ability to put in place regulations,” Gallagher said in a phone interview. “It will be tacitly endorsed by a lot of central banks and it will have an impact.”
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Right. This is about stabilizing the capital outflows from Italy, Spain, and Greece. It will discriminate on residency. It will not be temporary. It will not be last resort. It will help the banks.
28 comments:
This is potentially an important step in getting control of MNCs. I'm still a fan of the VAT along with the equivalent of an AMT for top1-5%'ers. Eliminate income taxes for individuals...
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I'm mow thinking the plan MUST have some merit...
Capital controls may be good for government (and their wards) but they seem inherantly dictatorial and counter to personal freedom.
I guess if you are going to raise taxes to 75% on the wealthy a government had better make them stay put.
w said...Capital controls may be good for government (and their wards) but they seem inherantly [sic] dictatorial and counter to personal freedom.
I guess if you are going to raise taxes to 75% on the wealthy a government had better make them stay put.
I don't think that living high on the hog by parasitizing and then refusing to pay their share of the upkeep of that economy is not, as I understand, a protected right under our current Constitution...
Good morning Cinco-X.
Whatever you think about the parasite status of the wealthy, my comment was a simple statement that if governments in Europe are trying to tax their wealthy with exorbinant rates (like 75% in France) then they had better keep their wealth in the country.
As far as our Constitution goes, it is hard to imagine it's writers believing that the wealthy should pay 90% taxes (75% Federal, 10% state and whatever miscellaneous taxes) to support a class of government dependents.
In fact, Thomas Jefferson was pretty sure when we reached this point it would be the end of the Republic.
w said... Whatever you think about the parasite status of the wealthy, my comment was a simple statement that if governments in Europe are trying to tax their wealthy with exorbinant[sic] rates (like 75% in France) then they had better keep their wealth in the country.
As far as our Constitution goes, it is hard to imagine it's writers believing that the wealthy should pay 90% taxes (75% Federal, 10% state and whatever miscellaneous taxes) to support a class of government dependents.
Freedom and responsibility go hand in hand, and the gubmint has the right to tax. Using capital mobility to avoid paying taxes is not a protected right. During Jefferson's days, the gubmint was funded by a property tax (IIRC), so there was no need to worry about capital flight.
As I've said elsewhere, I'm in favor of a VAT for the general populace and an income tax at the same rate as the capital gains tax rate for the top few percent of income earners. 15-20% max, but NO deductions.
Isn't the Eurozone a problem since the open borders allow for capital flight as currently constructed?
Personally, I think we need to enact capital controls here in CA. We need to tax all state goverment pension benefits at CA rates before they fly out of state.
The VAT seems at first glance to be attractive because it is hidden in the cost of goods so the proletariat does not see it explicitly. But that is it's weakness. It creates an even bigger portion of the population who do not pay income taxes and are thus benumbed by their increase. As long as politicians lie about the governments fiscal health the disinvested are prone to expect they are entitled to a bigger piece of the supposed pie. It's self-reinforcing.
As to NO DEDUCTIONS, this would have to be phased in at higher income levels. To take away all deductions for professionals in the top 2-3% of income would make them poorer than their competition who fell below whatever arbitrary point at which taxes are paid. It would incentivize people to earn only up to the point at which taxes are paid.
One more thought...
"Using capital mobility to avoid paying taxes is not a protected right"
But if you have paid all of your taxes required of you, why shouldn't you be able to mobilize your capital and take it somewhere else? What right does the state have to future profits?
w said...One more thought...But if you have paid all of your taxes required of you, why shouldn't you be able to mobilize your capital and take it somewhere else? What right does the state have to future profits?
Is that what the article above said? is that what I said? Obliviously not...
Mobility of goods and capital is IMHO indeed a right. At the very least it is a necessity for a viable economy.
That said I have no problem with extremely modest transaction taxes. If we are going to pay for the Corps of Engineers to protect port infrastructure there's no violation in charging for it.
... the plan MUST have some merit...
Obama suckered them into taking worse odds. Obama campaigned on $800b in new revenue. He opened with $1,600b. The Reps replied with with $800b. They've already lost.
Rob Dawg said...Obama suckered them into taking worse odds....They've already lost.
That's the consensus...at this point I think that Boehner is just trying to minimize the bad effects of their position. Cut-his-losses so to say...
Boehner should have called. All he had to do was say, "Fine, draft the legislation and if it agrees with what you just said I will have my side of the aisle fall in."
Now of course the bill will in no way resemble the offer. It cannot and both sides know it. That's when they spring the trap.
Whatever happened to 1:1 tax:reduce? The Reps are fighting for 6:1 instead of 10:1?
And what's this free pass on giving Treasury debt ceiling authority? This was such blatant overreach they should have negotiated several major points in exchange for not raising the Constitutional issue.
Heck, I'd personally see the writing Obama is scrawling on the walls and blow off the Executive. Present a budget as drafted by the House and dare the Senate and Executive to derail. I'm sure the Judiciary would back the House. They really don't even have any "interpretation" room to do otherwise.
Rob Dawg said...Heck, I'd personally see the writing Obama is scrawling on the walls and blow off the Executive. Present a budget as drafted by the House and dare the Senate and Executive to derail. I'm sure the Judiciary would back the House. They really don't even have any "interpretation" room to do otherwise.
I hear ya', and would agree except that I think that many of the :redteam: folks need to pass such a budget are in practice too liberal with spending to sign off on a bill that meets your criteria. I don't envy those guys in leadership positions...I've specifically asked not to be given a supervisory position since I can't deal with with hte idea of herding whiny, self centered cats...Jeez...I already have kids...
"I've specifically asked not to be given a supervisory position since I can't deal with the idea of herding whiny, self centered cats..."
Things have changed since the days when Dr. Emil held court in Building 3 on campus and occassionaly visited the mountain.
"I already have kids..."
All girls; 22 (at home), 18 (at university), and the tallest an 8th grader. Go ahead play your best card. ;-)
Semi-topical. I always confuse :red: and :blue: as the intertubes and media use them.
Bluebloods seem R.
Red seems Lib.
Half dozen other reasons for no reason to use those colors.
Is the :helmet: defending left from right or running to the right from the left?
I'd like it to be team elovution vs team revolution but I admit that would be worse as in two years the roles will be reversed yet again.
"Is that what the article above said? is that what I said? Obliviously(sic) not..."
I believe Rob's point with this post is that capital controls may be used to trap capital in failed socialist states with collapsing economies. Presumably the point of trapping that capital is for the state to find a mechanism to use it. The state could take that capital in creative ways like property taxes, currency devaluation or outright nationalization. (Maybe I am just fixated on Argentina repeating it's past little more than a decade later.)
Alluding to parasites that don't pay their fair share and then leave seems ludicrous. Either you have paid your taxes or you have not. That is a legal issue.
If a MNC is gaming the tax system to end up paying close to nothing in taxes that is another issue. Certainly a very important one.
w said... If a MNC is gaming the tax system to end up paying close to nothing in taxes that is another issue. Certainly a very important one.
That IS the issue. I'm not sure from where in his (or my) post you got that other stuff...
I thought the capital controls were meant for protecting countries like New Zealand and Iceland from speculation and interest rate arbitrage. While more commonly used in countries such as Venezuala and Argentina for government graft.
How does it allow governments to find a way to tax a MNC? Is that just the IMFs intent? That countries would now have a way to keep MNC profits from being offshored?
w said... How does it allow governments to find a way to tax a MNC? Is that just the IMFs intent? That countries would now have a way to keep MNC profits from being offshored?
:facepalm: Ya' know...I misread that conflating ECB with IMF...Never mind...
Gotta go pack for a move now...
GIVE IT UP FOLKS... we're well past the point of no return.
The best thing now is simply to hasten the endgame so's we can start working on USA 2.0
In that spirit I say we ought to abolish the debt ceiling altogether!
Forget that the Constitution delegates matters of finance to the House. Remember merely that the Constitution is a ceiling not a floor wrt Federal powers.
The folks in DC have already forgotten the Constitution.
Anyone who thinks the USA is still a Republic hasn't been paying attention. And referring to the Constitution? Erm. OK...How 'bout them Cowboys?
CalPERS wants "their" money from San Bernardino. There's all kinds of ugly in that. They risk getting classed as an unsecured creditor. heck, they are risking getting sued by the 2005 bondholders for a clawback. :popcorn:
Even worse, the US government totally ignores the fact that that the present value of future entitlements grew by $7 trillion in the past 12 months! Compare that $7 trillion growth in liabilities with $6.6 trillion in after tax income.
USGOV Guilty of Financial Fraud
Any questions??
Bear Market? What's that?
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