Talk:Capital control

Notability

Capital Controls, or Controlled Capital Accounts, are a fundamental component of modern monetary policy. The IMF exists to surveil and assist countries in their management and/or transition of their capital account regimes.

Extensive research on this topic has been done by the world's top economists, at the the world's leading institutions...

Normalsynthesis 19:45, 5 May 2006 (UTC)

You must mean such people as Richard Wolff, Joseph Stiglitz, Thomas Piketty, etc. ---Dagme (talk) 15:10, 22 June 2015 (UTC)

This article needs help

You get the impression from this article that opinion against capital controls began in the 1990s. Actually, most developed markets removed their own capital controls in the 1970s, after the controls they imposed earlier proved so damaging to their markets. Also, there is no widespread view today that capital controls are a good thing for developing markets. On the contrary, I strongly suspect that most economists would view them as detrimental, notwithstanding the 1997 Asian Crisis. Epstein's Mother 06:43, 8 July 2007 (UTC)

I am not an economist but my gutt tells me that if the Economist supports state intervention in a field (look here), there has to be some reason for it (in case you don't know: the Economist is a pretty hardcore liberal paper). I was also surprised that Jagdish Bhagwati is supporting them in his book on globalization ("In defense of globalization", 2004). Also not a usual suspect in the field. But it is of course hard to say if "most" or "some" argue, guess we have to leave it as you wrote it. Maybe look at the IMF and find out what their oppinion is today? If even they have changed I would tend to write most, if the didn't, well, let's settle with "some". Don't have the time for research right now, though. --Lamme Goedzak 20:50, 8 July 2007 (UTC)

"hardcore liberal" --- an oxymoron. ---Dagme (talk) 15:13, 22 June 2015 (UTC)

I wouldn't consider the IMF to be a bellweather of economic thought. They adhere to a lot of economic policies that academic theorists object to. On the other hand, the Economist's views on capital controls are quite nuanced, far more than this article. Basically, it believes that certain types of rapid investment (primarily bank accounts used for currency speculation purposes) should be controlled, but that broader capital controls (basically tying investor assets in a country or prohibiting domestic investors from investing abroad) are deeply problematic. "Capital controls" cover all of this. Epstein's Mother 23:26, 10 July 2007 (UTC)

Probably there should be a differentiation between FDI and portfolio-investment, that is as I understand it what the Economist is doing. FDI is good, portfolio is problematic, if institutions are not mature.

One thing that would be interesting here and is right now being debated in Germany is direct investment of state-controlled funds or companies, that have a purpose that goes beyond economics. People are thinking about defining a few industries that would be protected from takeover (weapons, high-tech, energy etc.). The IMF is also viewing that kind of investment sceptically. I unluckily only have a German source [1]. Another example of this is here: [2] (in case you cannot see the full articles tell me, I can put them on your talk page). --Lamme Goedzak 13:38, 11 July 2007 (UTC)

PS: In the US there is the Committee on Foreign Investment in the United States, CFIUS, it stopped Dubai Ports World from buying some east-coast ports and the Chinese CNOOC from buying Unocal.

I think the confusion is that "capital controls" is being thought of as control over the out-flow of money. What has been recommended for developing economies is control over the in-flow, so that "hot" money has a more difficult time getting in, but legitimate investors don't worry about being able to get their money out. DOR (HK) (talk) 06:06, 6 April 2009 (UTC)

Thats right, much of the current advice concerns limiting inflows, which helps prevents the bubble like conditions that can spark capital flight. Very few are talking about stronger controls against outflows, and in fact the movement their is in the other direction with countries that control outflows especially for residents like China and India set to slowly liberalise. However, going back to the pivotal 1997 Asian financial crisis, nations that weathered the storm well like India, china and Malaysia did so in part to controls that prevent out flows. Anyhow, if there's no objections in the next few days im planning to further re-write this article to give it a complete over haul as I did with Capital account. As well as tidying up i plan to flesh out the history through the different key periods, add more about the changing theorectical debate among economist as well as changes in praxis, and give more specific examples of the various types of captital control. FeydHuxtable (talk) 14:42, 24 May 2010 (UTC)

This article still needs serious help

Another point this article should cover is that capital controls are not nearly as prevalent as they used to be, notwithstanding the opening sentences. Capital controls used to be a vital part of the Bretton Woods post-war economic environment, since they were necessary to ensure that everyone's currency was linked to the dollar at a set rate, and the US dollar was linked to gold. Once currencies became free-floating with the end of the Bretton Woods system, the need for capital controls diminished and most major markets eliminated them by the 1980s. [[User:Epstein's Mother|]] (talk) 17:51, 19 August 2009 (UTC)

Examples of capital controls

This article needs examples of capital controls and the types of restrictions that governments typically put in place to restrict capital flows. Finnancier (talk) 07:47, 2 February 2008 (UTC)

I agree, but the examples cited -- particularly China -- are horrible. DOR (HK) (talk) 06:04, 6 April 2009 (UTC)

I also agree. I keep wondering "what capital controls"?? Its ridiculous to just say "capital controls were put in place". Its borderline meaningless. Fresheneesz (talk) 03:27, 20 September 2022 (UTC)

It's a little disheartening that you're agreeing with those 2008 & 2009 comments. Since 2010 I've put a couple of dozen hours into improving this page with many good examples. Bah, I remember the days when we had WP:AFT and I used to get a near perfect score on all my Finance articles. But now it's just left to manual talk page posts, most of the feedback seems to be -ve. I'll have a think about how the examples can be made clearer. It's not an easy thing to address though - the article already gives examples to about the same level of detail as sources.

There's reasons why WP:RSs normally only give examples in somewhat vague terms. If one tries to be too precise, that can create all sorts of issues. For example, the article already gives the example of holiday makers at once time being restricted from taking more than £50 out of GB. Even if you look at the book I cited that to, it confirms its a capital control but doesnt go into more detail. Right now, the limit for taking physical cash out of UK or US is 10k - and that's just when you're supposed to declare to customs, not a hard limit as such. So the 'capital control' in this case is an obligation to declare to customs, and to an extent the fact that customs will sometimes detect times when a traveller dosent comply - e.g. due to their x-ray scan. So here's the thing - both the obligation to declare & the x-ray scans etc aren't just capital controls. Cargo scanners are mostly there to enforce all sorts of other laws, and even the obligation to declare is partly for anti laundry & anti terrorism reasons.

Let's take an electronic example – as of 2022 the vast majority of capital controls are now implemented by computer code. When I use the HSBC banking app on my fone to set up a new payee who is also in UK, it takes me just 30 secs, and then once I hit 'confirm', the payee receives the funds in 3-10 mins. But if I want to send to someone in Brazil, as happened a few months back, I first have to logon to regular online banking where it takes me 10 mins to setup the payee as there is a quite long form. Then once I hit confirm, it takes them about 8 working hours to get the funds. That extra delay is due to capital controls. But not just capital controls - the same process causing the delay is again partly for anti laundry & anti terrorism reasons.

OK, so we could home in just on examples relating to someone trying to buy shares in a company that is only listed on a stock exchage in a foreign company. That's definitely a capital account transaction, not possibly a current account like in the examples above. But even here, there are countless ways the control could be implemented. And the exact concrete implementation could change any minute. Huh, possibly there's not a single 10 second period that goes by without a bank or fintech firm somewhere in the world tweaking the code it uses to implement a capital control. I hope all this partly helps explain why sources don't generally give especially precise examples of what a capital control is? PS - if you or others know of a source that gives a better example to the ones already in the article, please add it or even just list it here and I'll probably get to it later.FeydHuxtable (talk) 16:41, 20 September 2022 (UTC)

nazi germany, not quite true

Quote: "* Nazi Germany attempted to prevent capital from leaving by imposing the Reichsfluchtsteur Reich Flight Tax or Escape Tax.[3]"

The Reichsfluchtsteuer was actually already put in place by the weimar republic in 1931, 2 years before the nazis came to power. It was applied the most to fleeing jews during the nazi period. BUt even after WWII it stayed in place in the bonner republic until 1953

Confer de:Reichsfluchtsteuer. --Alex1011 (talk) 15:50, 12 December 2008 (UTC)

Capital Mobility Freedom

It was said that IMF has a well classified items to measure the degree of freedom of capital mobility. It will be good to talk about it in the article. And, it will be nice to compare different countries' convertability. Capital account convertibility Jackzhp (talk) 05:49, 12 March 2009 (UTC)

Section on Capital Controls in the United States

Someone (who doesn't bother signing in) keeps inserting an editorial piece arguing that US taxation law is an example of a capital control. I know you must be upset that you live abroad and Uncle Sam still wants your money, but the example you give is clearly not the type of capital control this article discusses. Make your argument here, if you like -- but these tax laws clearly do not prevent US citizens or companies from investing abroad, nor do they (very very clearly) prevent foreign investors from investing in the United States. The evidence against your argument can be measured in the trillions of dollars each year (and by the fact that the US dollar is fully convertible). [[User:Epstein's Mother|]] (talk) 17:43, 19 August 2009 (UTC)

I am rebutting the prior paragraph. You are arguing irrelevant syntax. You refer to it only as a "tax", but that is does not capture the full semantics of what the HEART law changed in 2008. The new semantics of forced acceleration of capital gains upon renouncing US citizenship is thus a capital control. For example, imagine you've owned real estate and retirement investments for a long-time, intending to hold it until death except to gradually take gains in your retirement years to be in minimum tax bracket each year so as to sustain your retirement. This is precisely the situation of many of the boomers. But now the US economy is permanently bankrupted with unfunded govt retirement obligations exceeding $40 trillion and growing at $1+ trillion per year, so the government will have no choice to raise taxes excessively, perhaps to 90% on top brackets as FDR did in 1930 Great Depression. Unlike Europe and most of the world, the USA taxes it's citizens even if they reside abroad. On top of this, the USA is turning increasing totalitarian (http://financialsense.com/editorials/casey/2009/0818.html) and Americans are buying more guns in 1 month than outfits the entire Indian and Chinese armies combined. So you decide to take your human capital (yourself and future investing income) abroad to escape this mess and renounce your citizenship to be free. But instead of being able to liquidate your US assets slowly to minimize any US capital gains taxes, you are fored by the 2008 HEART low to take all the capital gains in one tax year! Which very likely will soon end up at 90% tax rates. In essense, this will make it a capital control on US citizens wanting to gain the same rights as foreigners. Non-citizens (foreigners) have no such taxes or restrictions placed on them. The US citizen is being placed in a capital control jail by his/her own federal government. I am not signing in because it is my right under the Wikipedia system, and you or other reader may be an IRS operative. 121.97.54.2 (talk) 21:22, 19 August 2009 (UTC)

You are trying to make a political point about a tax you don't like. Which is fine, but this tax has no effect on capital inflow or outflow in the United States (quite obviously, since the US is running such a large current account deficit.) If you want to put your rants into the US income tax section, feel free. But read the rest of the article (as lame as it is). Or, better yet, read up on what capital controls are from another source -- and you'll see that what you are complaining about is not a real capital control. Do not add this section in again. (And if I were working for the government, how hard would it be to track down your IP address? Go put your tinfoil hat back on and get off this page.) [[User:Epstein's Mother|]] (talk) 19:29, 7 September 2009 (UTC)

Closing down Merger discussion

While the merger suggestion seemed reasonable, if there's no objection in the next few days I plan to remove the tages for this article and Capital Account Convertibility , as the tags have been in place for over a year, attracting as far as I can see no support and one opposition. I'll also probably be substantially expanding this article as there is a lot of interesting history to add and the recent re-appraisal of controls following the crises that would be good to capture. FeydHuxtable (talk) 15:28, 20 May 2010 (UTC)

POV and cite tag removed.

I assume the POV tag was for the clause Given the American world-wide monetary hegemony at that time as the rest of the sentence is matter of fact. I agree its POV and have removed it, can discuss more if required.

I also removed the following point that was tagged for needing a cite.

• Controls would result in reduced activity in the international Interbank market, which has now overtaken deposits to become the principal source of day-to-day bank finance

Im fairly sure that statement is no longer true post crisis. Deposits have recovered as a source of finance, e.g. with broker dealers like Merryl merging with BoA in part to take advantage of the latters deep deposit base. Also inter bank funding declined much more sharply than other sources of funding like rehypothecation and loans from non bank capital market players like hedge and money funds. If we are using Interbank market to mean forex trading that is misleading as in that sense its not generally a source of finance (more a source of revenue). And finally none of the various text books and papers ive read give this point as a disadvantage for capital controls.

Impossible Trinity under Bretton Woods

This article argues that the monetary policy trilemma was important under the Bretton Woods system as a justification for capital controls ("The impossible trinity concept was especially influential during this era, as a justification for capital controls"). I find it hard to believe, as the idea was formulated in the late 1960s, when BW was collapsing. I cannot find a primary source that supports this. Hence, I tagged it as "citation needed." — Preceding unsigned comment added by Hariboa (talk • contribs) 13:36, 26 January 2012 (UTC)

Thanks for this, its good of you to explain your thinking. On Wikipedia we tend to prefer secondary sources over primary, and the statement is supported by both Gallagher and Helleiner. E.g. you can easily confirm by opening the online "Regaining Control" source which shows in Table 1 that the Imp. Trinity concept was the key economic idea for the Bretton Woods period. Just as a fyi, if youre interested in primary sources the best ones for this would be the papers and transcriptions of Lord Keynes speeches at the BW meeting. As with so many other key concepts, Keynes anticipated it well before it was formalised, clearly saying that given they were looking at establishing a system of semi fixed exchange rates, capital controls were essential if countries were to be free to pursue independent domestic monetary policies. You can find these sources on the IMF web site I think, been about 4 years since I've looked at them. PS- the concept was actually formalised in 62/63. FeydHuxtable (talk) 17:17, 2 February 2012 (UTC)

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Wikipedia is always extremely biased on economics

Anti-free market and Pro-Interventionist Extreme ideological bias only citing low quality, not prestige sources only from their favors to interventionists such as Krugman Blog, Delong Blog and Just Stiglitz's saying More empirical research indicate that Capital Control do harm than good. Here, only cited Danni Rodrick but what about Kristin Forbes and many other real capital experts' research and IGM forum Economists consensus is "Capital control is bad" around 90% of them. It's so disgusting to see wikipedia's extreme bias on economics for their political purpose. They never cite and use research against their ideological bases. Shame! Big Shame! http://www.igmchicago.org/surveys/capital-outflows Shfur0306 (talk) 06:06, 17 March 2020 (UTC)