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Strategies & Market Trends : Booms, Busts, and Recoveries -- Ignore unavailable to you. Want to Upgrade?

To: TobagoJack who wrote (51259)	6/28/2004 9:31:09 PM
From: Taikun	Read Replies (1) \| Respond to of 74559

Eventually, if the US does not come to grips with its large deficit and nations begin to seek an individual/regional military presence as well as develop their own domestic markets (Chinese foreign investment should be a huge opportunity for US firms to sell high-tech equipment to run factories-instead the offshoring topic gets the coverage) then the resultant weakening of the USD and the US financing machine-through T-Bills, could result in financial controls a la Malaysia, Thailand, Indonesia, South Korea in 1997 (post-Soros pound manipulation). Ditto England in the 30's, when businessmen would leave for the continent, their socks stuffed with pounds. The average Singaporean was so burnt by the punitive 50% capital gains taxes Malaysia imposed that they aren't that interested in investing despite its recent economic strength. Free flow of capital is a relatively recent phenomenon, but most young people do not realize that this was not the case pre-1980 in most countries, and Japan was in the late 1980s. Pre-1980 the US, Britain and Switzerland were some of the few countries with no capital controls. After protectionism, then capital controls for the US? The anti-globalisation movement does advocate these kind of capital controls. if you retire to Mexico can you access your 401k? can you take more than $3,000 on vacation? can you invest overseas? will your child be able to use their education savings account to go to university in the UK where they were just accepted? can foreign central banks sell US holdings (treasuries) and repatriate the gains? will the IRS report all US capital gains to the tax agencies of foreign investors (currently this is mainly limited to countries with tax treaties and then only some transactions) *can an American firm ship a plant and investment cash to China unrestricted? Even the architects of Bretton Woods (Keynes et al) were in favor of permanent capital controls, for they feared capital flows would become 'an independent and disruptive force'! Even though the US has put together free trade treaties like NAFTA, it would likely impose capital controls in 'emergencies'. (I guess if the Treasury held an auction and no Asian 'guests' came, that would be an 'emergency') Time to invest in socks?