This is what textbook capital controls look like

Selling snake oil and issuing unbacked paper currency are not so different. They’re both wildly successful ploys for the guys pulling the strings. And they’re both complete scams that depend solely on the confidence of a willing, ignorant public.

But once the confidence begins to erode, the fraud unravels very, very quickly, and the perpetrators resort to desperate measures in order to keep the party going.

In the case of fiat currency, governments in terminal decline resort to a very limited, highly predictable playbook in which they try to control… everything… imposing capital controls, exchange controls, wage controls, price controls, trade controls, border controls, and sometimes even people controls.

Just since 2010, Argentinian President Cristina Fernandez has–

Nationalized private pensions, plundering the retirement savings of her people. Increased tax rates across the board– income, VAT, import duties, etc. as well as imposed a new wealth tax. Inflated Argentina’s money supply, printing currency with wanton abandon; M2 money supply has increased 215% in the past three years. Driven the value and purchasing power of the currency down by 50%. Street-level inflation is now 30%+ per year. Made a mockery of official statistics, comically understating the level of Argentine inflation and unemployment. She even began punishing economists for publishing private estimates of inflation that didn’t jive with the government figures. Taken over control of one industry after another, most notably the nationalization of Spanish oil firm YPF’s Argentine assets. Imposed export controls of agriculture products from beef to grains, forcing growers to sell at artificially lower domestic prices. Imposed capital controls, reducing her citizens’ capability to dump their poorly performing currency and hold gold, dollars, euros, or anything else. Imposed a two month ‘price freeze’ on items in the supermarket, and encouraged retail consumers to rat out any grocer that doesn’t abide by the government order. Imposed controls over the media, most recently ordered an advertising ban in Argentine newspapers (weakening their financial position).

Cristina’s policies here are leading to shortages in everything from food to fuel to electricity.

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