Imagine a day when you plan a trip abroad… and you exchange some dollars for the currency of your destination country before you depart.
At the airport, uniformed agents ask whether you have any foreign currency. You are then asked to prove you obtained the currency legally… and inform the IRS about where you’re going, how long you’ll be away and the reason for your trip.
As of seven days ago, this is the new reality in Argentina. And as of 11 days ago, an event in Washington should give pause to anyone who says, “it can’t happen here.”
The new rules in Argentina came into effect a week ago today. They are aimed squarely at holders of U.S. dollars.
The government wants to keep those dollars within the country, the better to shore up the central bank’s reserves and pay down its debts.
“Many Argentines,” reports The Associated Press, “only declare part of their wealth and income to evade taxes, and use black-market currency exchanges to convert their inflationary pesos into dollars. Travel agencies are the latest target since they manage multiple currencies and offer customers black-market rates for their money.”
A curious letter addressed to Treasury Secretary Timothy Geithner raises the specter of similar rules coming down the pike in this country.
Dated May 24, it comes from Rep. Barney Frank, the top Democrat on the House Financial Services Committee… and Rep. Sander Levin, the top Democrat on the Ways and Means Committee.
“Frank and Levin,” says a joint press release, “have long been concerned that the language in U.S. trade and investment treaties was too restrictive and did not leave adequate flexibility for governments to use controls to stem the massive flows of speculative capital that can exacerbate economic crises.”
So they’re asking Geithner to make it clear, in writing, that the United States retains “the ability to deploy capital controls on the inflow or outflow of capital without being challenged by private investors.”
“You no longer have to read between the lines when it comes to currency and capital controls,” says an email from Addison this morning. Indeed, you can just read the lines directly.
Once Geithner obliges the Congress members with a written statement — do you really expect him to do otherwise? — a new brick will be erected in the “virtual Berlin Wall” that Addison has described to readers of Apogee Advisory for nearly a year now.
“Even if you’re a person of modest means,” he wrote last July, “and you merely want to ‘spread the risk around’ by putting a portion of your wealth outside U.S. banks and the U.S. dollar… it’s becoming harder and harder to do so.”
(Read more)