Capital controls: here we go

On Capital Flight and Forced Repatriation - Bruce Kasting → … patriation

A bit behind the curve.

Increasing dirt to the marginal tax rate is not a bad idea.

It is income after all;)

and how about those who are on the standard rate for the rest of their income? should they get a reduction?

But would it not send the wrong message given that paying tax on interest a the DIRT rate instead of the marginal rate is one of the few benefits of keeping your funds within the Irish bank system instead of in another jurisdiction?

Clueless politicians.

Do they not realise that savings are the life blood of an economy?

I presume that’s why they’re repatriating them. This was/is inevitable.

Why is that then? Do you feel hard done by because rental income is a Schedule D tax and can be liable at the marginal rate and not DIRT?

That’s a very old fashioned view of how the financial system works.

Spending is the life blood of the economy.
Borrowing fuels spending.

The problems start when people stop borrowing, not when they stop saving.

As the current economic system works.

We need to get it to a point where savings are the life blood of the economy, but right now they’re not.

Gimme a break!

The lifeblood of an economy is the lifeblood.

Investing our sympathy and aspirations in monetization is a sure fire bet to blood on the streets as we have seen.

Draw out the logical conclusion of this economic gameplan and what do you get… well you know the answer, nothing. Thankfully a greater force may still express itself through the lifeblood to mitigate other mitigating agendas.

You are supposed to anyway if you have significant interest income (declare it on a tax return).

The self-employed already do.

Really? In case you haven’t noticed people are maxed out when it comes to spending.

Besides, if the banks have no deposts, they would collapse.

That’s what my window doctor said to me.

And could you please be more precise in your posts?

did you mean if the banks have no deposits or if the banks have no despots?

Precisely how precise?

Savings are simply deferred consumption stored as an asset for later consumption. In most cases we accept ‘money’ as a token of our savings. We then give this money to the banks who give us a warehouse receipt in exchange.

Banks originally started out as a secure place to store valuables and they charged for this service, they they evolved so you could deposit your valuables in one bank in exchange for a receipt, travel to another area or country, and exchange that receipt for money (gold/silver/or other commodities) in another location rather than have to haul gold around with you and risk being robbed. The business model developed further in Venice where banks put up the funds to support trade ships to the middle east, soon people got in on the act and deposited their money for a share of the profits.

The payment of interest (usury) developed as a way of monetising time and goes back to Babylonian times and probably before any of the surviving historical records. Muslim countries banned usury and banks in these countries used derivatives instead.

With the development of double entry booking (Italy), it became possible to engage in fractional reserve banking on a large scale. A depositor could deposit 10 units of ‘money’ and the bank could create and entry in the debit column, he could then lend that 10 units to a borrower and add it to the credit column. What they discovered over time was that maybe 8% of customers ever came into the bank to withdraw their ‘money’, and that people would exchange the warehouse receipts they issued instead of ‘money’, so they figured they could issue 12.5 times more warehouse receipts for a claim on the money in their vaults. This works for periods until a panic develops and more people that usual want to claim their money at the same time.

This is where the central bank and regulators come into the picture, the model on which banks operate is fraudulent, and it does not survive long in a free market. The kings, governments and bankers saw advantages in being able to create receipts out of thin air and lay claim to resources without having to produce anything in return for exchange or alternatively not having to maintain an expensive army to plunder the people. The central bank produces the currency and tries to fix the interest rates, this currency is then given/loaned to the commercial banks who use it as a deposit and loan it into existence to people willing to borrow, as long as people keep borrowing the system keeps ticking over.

There are several problems with this system, who produces the money to pay the interest on the loans?

Originally when commodity based money developed as a means of exchange, people had to go dig it from the ground and process it. They were regulated in how much they could produce by time and energy required to obtain and process the commodity money. This is why such systems tend to be stable over long periods of time (e.g. Byzantine empire), however if a new source of the commodity is discovered like happened to the Spanish empire it can destabilise the system relatively quickly by inflating the money supply with no matching production. There is also the constant interference by rulers and coin clippers to debase the currency for gain without effort so over time even commodity money looses value. The effects of inflation are well known, the money does not hold it’s value relative to other goods and more or it is demanded until in extreme cases such as hyperinflation it is rejected in favour of another currency (Russians in the 1990s switched to the $) or barter as a means of exchange.

Modern fiat money is created on a computer, it is entered on a balance sheet at the click of a mouse button. In order to circulate it most be loaned into existence (or alternatively dropped from a helicopter). So what happens when the banks crash or are unwilling to loan?

Another issue is that central banks have engaged in zero interest rate policy (ZIRP), there is very little reward compared to the risk of holding your money in banks. So money flees the riskier banks for a safe haven or finds it’s way into the exchange for commodities such as gold, oil and food. This is why repatriating the money will not work, people have no confidence in the banking system and will withdraw it and exchange it for something else.

The question is are there any real savings in the Irish banking system, or are they all locked up in NAMA or section 23s in Longford?

There are plenty of narratives of one slant or another about money lately. Particularly, the libertarians are currently pushing their particular view.

As I see it, the money we have now gets its value by social convention (nomw). It is a different paradigm (perhaps one that we may return to again in the future) to the one where money has a value in and of itself (creiva).

If money has a value by social convention, then, what becomes important is ensuring that the social contract that underlies it is lived up to. No doubt, this has gone wildly astray due to the antics of the financial industry.

But if you put this aspect aside (because it is systemic, or for whatever reason), then it behoves politicians to try and ensure the ‘greater good’ is upheld with regard the other stakeholders in the economic system.

As I said in another thread with regard Greece:

As well as our living in a globalised world where money can be tracked across borders and databases easily searched and exchanged, we also live in an economic system that has layers of ‘castes’. Large bottom layers are required to feed those above… Now it is ok for a small (sustainable) amount of movement between castes. But it is unacceptable for large numbers to move up through it (and that entails pushing others downwards too) simply by avoiding a forced currency conversion whose whole intent anyway is to ‘balance the system’ by a type of confiscation of every single member of a particular nation. If large numbers of people are allowed to escape it, it does not achieve this equilibrium.

‘Repatriation’ it will be. You can be sure the Orwellian slant implicit in this term (with a view to its intent) will also have an Orwellian running commentary running alongside it. Here’s where it starts to get interesting.

Or, we could put it like this:

The essential problem of our economic system is that the boom created too many lords and not enough serfs (that’s a simplification because there are ‘layers’ of serf and lords).

But what is needed now is to create more serfs and less lords. That is all that is required to fix things. To regain an equilibrium. So you cannot possibly allow a situation that goes against this intent. It will only make things worse.

How likely are capital controls and how implementable are they? Is the EU and EMU’s purpose not the exact opposite? Say i want to Germany next year and all my money is teied up in Irish banks - what to do?

I think that is why is the eurozone fails then the EU fails because free movement of capital is a cornerstone of the founding treaty - take that away and you don’t have a european economic community - where will all the european civil servants then get jobs - so it will survive at almost any cost