“Can you
by legislation add one farthing to the wealth of the country?”
The great classical-liberal thinker Richard Cobden asked the House
of Commons on Feb. 27, 1846.

The Argentines
think so. So do the Europeans. And of course, the Americans.

But first let
us continue with Cobden’s remarks:

“You may,
by legislation, in one evening, destroy the fruits and accumulations
of a century of labour; but I defy you to show me how, by the legislation
of this House, you can add one farthing to the wealth of the country.”

Two news items
yesterday reminded us how vain and treacherous the politicians can
be.

Uh Oh!

First, from
the Argentine press came a story with the following headline: “Kirchner
Government to Tighten Capital Controls.”

Uh oh! It’s
already a pain in the neck to try to keep the lights on south of
the Rio de la Plata. If you move money into the country officially,
you will take about a beating. Officially, the exchange rate is
under six pesos to the dollar. But guys will come up to you on the
street and offer you eight pesos to the dollar – and more.

In Salta, for
example, you pull up in front of a bank at the corner of the central
square. You beckon to one of the many money changers standing on
the sidewalk. You don’t get out of your car.

“How much
do you want,” he asks.

“I want
to change $1,000,” you reply.

“Then,
I’ll give you eight.”

“No thanks,”
you say… shooing him away.

“Alright,
8.1.”

“OK…
we have a deal.”

You count out
your money and go on your way. No standing in line. No need for
photo IDs. Cash and carry. Remarkably efficient. As long as you
stay in the black market. You can spend your money, no problem.

But try to
do business in an aboveboard way and you will quickly be caught
in a trap. The government is running out of dollars. It tries to
force you to give up dollars at less than the market rate.

Already, these
controls have driven many imported products off the market completely.
And now, with even stricter controls coming, it’s going to get even
tougher.

But what would
you expect from Argentina? Is there any foot in the Argentina
banking system that isn’t missing at least a couple of toes?
Give them a super-stupid policy “gun,” and they will aim
for their feet.

The Turning
of the Screw

Europe is a
different matter. Or so we thought. More sophisticated. More subtle.
More careful. Run by German bankers with memories that stretch all
the way back to the Weimar debacle of the 1920s.

But here’s
another story from yesterday’s news. You’ll see that Europe is thinking
of imposing the same capital
control policies that are hobbling the Argentine economy. From
Reuters:

Eurozone
finance officials acknowledged being “in a mess” over
Cyprus during a conference call on Wednesday and discussed imposing
capital controls to insulate the region from a possible collapse
of the Cypriot
economy.

“In
detailed notes of the call seen by Reuters, one official described
emotions as running “very high,” making it difficult
to come up with rational solutions, and referred to “open
talk in regards of (Cyprus) leaving the eurozone.”

“Some
additional laws need to be passed. Overall we are in a very difficult
situation,” the official said, according to the notes. “(We’re)
trying to do everything within the powers to limit any unauthorised
outflows.”

We hope you
are paying attention, dear reader. The euro feds are talking about
passing laws to stop “unauthorized” outflows. In other
words, they will make it illegal for you to put your money where
you want. You will need their permission to move it. They want it
right where they can get it… if they need it.

They think
they can pass laws and add to the wealth of the nation – or
at least parts of it. And it won’t be too long before Americans
join in. They’re already robbing savers with ultra-low interest
rates. And the U.S. has already passed laws to make it difficult
to keep funds in foreign bank accounts.

As their financial
problems mount, the feds will turn the screws harder – just
like the Europeans and the Argentines.

March
23,
2013

Bill
Bonner is
a New
York Times
bestselling author and founder of Agora, one of the largest independent
financial publishers in the world. If you would like to read more
of Bill’s essays, sign-up for his free daily e-letter at Bill
Bonner’s Diary of a Rogue Economist.

Copyright
© 2013 Bill Bonner

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