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by Al Martin

Wealth Confiscation & Capital Controls: Not in My Back Yard

(8-24-14) After Cyprus and Spain, Portugal is now the next country that is considering capital controls – but it’s not that onerous. Capital controls simply means preventing the shipping of money out of the country. It doesn’t mean anything more than that.

      In Cyprus, for example, the banks didn’t simply take the money out of depositors’ accounts. What they did is restrict withdrawal. If you had more than 100,000 Euro on deposit, you were essentially frozen in because the government could not finance the banks any further – beyond the ECB 100,000 Euro guarantee. This is very similar to what the FDIC does in the United States.

      Countries with some form of capital controls include China, Colombia, Iceland, Cyprus, India, Argentina, Venezuela, Ukraine and Cuba. All of these countries have currencies that are either worthless since the countries are all beat out – or they’re currencies that are non-convertible because that’s how the governments in question want them to be.

      Capital controls simply means that there is a limit in how much local currency you can convert to US Dollars or any other hard currency and take out of the country.

      This can’t happen in the United States when everybody else’s money is flooding into the United States. Thus there’s no reason for capital controls here. The only capital controls we could have here is what China tried to do in the beginning – to prevent OPMs (Other People’s Money) from coming in. But that’s not possible in this day and age of electronic transfer and electronically traded currency. There’s no country that can prevent the flow of money from coming in.

      An online newsletter pitchman writes – “Why Governments Impose Capital Controls. It’s simple: imposing capital controls is similar to penning sheep that are about to be sheared so that they cannot escape.” But is this hyperbole or fear mongering?

      It’s just over-simplistic to say that. Capital controls are not simply confiscation. It limits the money that a citizen can withdraw from the bank and convert to another currency or move out of the country.

      This idea, however, of out-and-out confiscation is something that gets pushed on the internet by conspiracy types that don’t know anything about economics. No country has yet out-and-out confiscated money from account holders – not even the former Soviet Union, Cuba or North Korea ever did that.

      Meanwhile in Portugal, the Banco Espírito Santo (BES) -- Portugal’s second-largest bank -- has collapsed and has now been taken over effectively by the Portuguese government. Portugal has already backed out of the EU agreement which paid off the money they already owed to the ECB. They decided not to take an emergency line of credit from the ECB in exchange for which they get to control their own banking. They used a 6 billion Euro emergency fund that the Portuguese government had accrued by increasing insurance rates in banks to bail out Espirito Santo.

      So will Portugal institute some sort of currency control? That’s iffy because there would be political pressure within the country not to because the Portuguese people realize that in order to avoid that the only thing the Portuguese government could do is to go back to Mario Draghi with their tail between their legs and ask for an emergency line of credit which was already offered to them. Therefore it is unlikely that Portugal would institute currency controls and, if the Portuguese people thought that, you would see money coming out of Portugal in droves – which hasn’t happened.

      In another internet post called “Is Portugal next in line for wealth confiscation?” the punchline is to get an offshore account and guess what -- we can help you with it. Obviously in the world of offshore accounts, if Citizen Smith doesn’t know anything about them, he should stay away from them – because they’re loaded with scams. It’s a combination of out-and-out fraud which is mostly in the Caribbean with Caribbean banking licenses which are meaningless – or you get bad advice on the internet from people who don’t know anything about offshore banking.

      It’s appealing to the conspiracy crowd – this idea of having an offshore account. Of course since they don’t have any money for an offshore account -- why worry about it? But the idea is appealing to them even though they don’t know anything about it. So then they go to the internet and turn to the names they’re familiar with who know equally as little as they do.

      So there should be no fear of bank account confiscation. As we had written several years ago in this venue, the Obama Regime has effectively closed the window on offshore accounts. They also pressured offshore jurisdictions like Costa Rica and the Cayman Islands to impose some sort of an unearned income tax. That was to prevent wealthy Republican money from fleeing the States. The Obama Regime isn’t concerned about beat-out conspiracy theorists that don’t have any money.

      Also what the Obama Regime prevented citizens from doing which is the real reason to have an offshore account which only happened in 2012 – no more numbered accounts for US citizens domiciled in the United States. And that was the principal reason to have an offshore account was for the discretion.

      The conspiracy theorists look at it the wrong way. They don’t care about numbered accounts. They think they want to get their money out since they believe the US government is going to confiscate their money because they’re nuts. But in fact what’s happened many times is that internet website deals run by people who know nothing about banking or economics is that they get relationships with very marginal offshore banks in Liechtenstein and Switzerland which are Liechtensteinian or Swiss banks in name only. They maintain a post office box in Vaduz or Zurich but in fact what they have is a banking license from some nickel and dime Caribbean island.

      On the other hand Panama under Noriega became a place where you could hide money – but at least the money was safe.

      Even when George Bush invaded Panama, it was still safe. The Banco de Nacional, the state bank in Panama, would run deposits through it and then get deposited in UBS or Banc Suisse. That was to prevent the United States from getting their hands on any depositor’s money.

      This piece then could be called Filtering through the Internet Nonsense -- Part 2. It makes sense to bill it this way because there’s probably a market for deciphering or filtering internet nonsense. It’s not a big market but it’s more of the educated upper middle classpeople that do want to have offshore accounts and have securities accounts overseas and they don’t really know where to go to get real information. And they know what they see on the internet in that regard is nonsense. So it has to be marketed that way.

      Actually it wasn’t needed until a few years ago, but with the bust-out of all the retail wire-houses in the United States, that’s where this upper middle class would traditionally go for financial information. But they’re all gone now. At the very top you don’t have that problem because you already know what to do. Or your lawyers know what to do. Or your guy at Goldman Sachs or Morgan Stanley knows what to do.

      At the very bottom the conspiracy theorists and electro-nonsense people that do business with electro-fly by night outfits – they’re not the market for real information because they don’t have any money. The market then is the people in between who can’t get the financial advice they used to. This then would be a site where every week internet nonsense would get exposed and the fact that the people who are writing the nonsense don’t have any experience in markets or banking and therefore just muddy the waters, as they say.

      If you might be interested in such an informational website, please send an email to virtualagency (at), and put “Al Martin” in the header and we’ll keep you posted…

    * AL MARTIN is an independent economic-political analyst with 25 years of experience as a trader on NYMEX, CME, CBOT and CFTC. As a former contributor to the Presidential Council of Economic Advisors, Al Martin is considered to be a source of independent analysis for financially sophisticated and market savvy investors.

After working as a broker on Wall Street, Al Martin was involved in the so-called "Iran Contra" Affair as a fundraiser for the Bush Cabal from the covert side of government aka the US Shadow Government.

His memoir, "The Conspirators: Secrets of an Iran Contra Insider," ( provides an unprecedented look at the frauds of the Bush Cabal during the Iran Contra era. His weekly column, "Behind the Scenes in the Beltway," is published weekly on Al Martin, which also publishes a bimonthly newsletter called "Whistleblower Gazette."

Al Martin's new website "Insider Intelligence" ( will provide a long term macro-view of world markets and how they are affected by backroom realpolitik.


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