17 ms·

The conclusion kind of scares me, especially coming from Dalio. > so they could very well impose prohibitions against capital movements to other assets (e.g.,

by vecinu 6y ago

The conclusion kind of scares me, especially coming from Dalio. > so they could very well impose prohibitions against capital movements to other assets (e.g., gold, Bitcoin, etc.) and other locations. These tax changes could be more shocking than expected. Who truly believes this is a likely scenario? A number of folks I know are already considering fleeing the US but if this was to pass, that number would skyrocket and I can't imagine a good outcome in the next few decades from capital flight in the US.

nemothekid 6y ago
Where would you go? The EU and Japan are already in a worse position than the US and if the US decides to commit to capital controls, they would probably follow. That only leaves China which already has capital controls.
- toomim 6y ago
  > That only leaves China There are 195 different nations on earth. That leaves a lot more options than the EU, Japan, and China. A lot of crypto-expats are going to carribean island nations.
  - nemothekid 6y ago
    >A lot of crypto-expats are going to carribean island nations. Are they going to buy Lamborghinis in pesos? More seriously, yes, some people are content with living like a rich native in the global south but for anyone else who plans to participate in the global economy (and I assume they do, because capital controls would likely only affect high net worth individuals), they would need to convert to EUR/JPY/CNY/USD.
  - calt 6y ago
    But on the topic of market impacting capitol flight, is that a real possibility? No.
  - frongpik 6y ago
    Small nations can't risk to offend the US.
derivagral 6y ago
There's (old) precedent for this in the USA[0] but it is hard to imagine for crypto. [0] https://en.wikipedia.org/wiki/Executive_Order_6102 https://en.wikipedia.org/wiki/Executive_Order_6102
- DennisP 6y ago
  Look at the rationale section. The Fed needed more gold so it could print more dollars. Since today's dollar isn't backed by gold or crypto, the same reasoning wouldn't apply. In fact, if crypto were used more as money in the real economy, banning it would have the reverse effect, shrinking the amount of money in the economy.
rawtxapp 6y ago
This was the part that caught my attention as well, it would be super interesting to see it play in real-time. For one, how would they even put capital movements controls on crypto? For example, I just have to remember my 12 word seed and I can hop on a plane to another country and my crypto comes with me. The other part is, wouldn't those capital controls be the last nail in the coffin of "we lost complete control of the situation"?
- jljljl 6y ago
  If the USG (or Europe, or China) still have a strong military, or a lot of influence over the financial sector at that point, you may have a tough time finding a bank to convert your crypto into Fiat. At that point, you’d have to find a country that accepts Bitcoin directly as a payment method or whose financial system can shrug off regulations. That might be harder to find than you think, or might require a significant haircut on the conversion.
  - randomopining 6y ago
    Can you not just go p2p/otc with the crypto and buy a hard asset plus some paper fiat? It’s like cash but even more effective for this purpose.
    - nickysielicki 6y ago
      If cryptocurrency exchanges don't exist in good public standing, the price of bitcoin will collapse. This is a risk that does not exist with precious metals. The real problem with bitcoin is you cannot physically transfer it. I can sell you a USB drive with a wallet on it, but you shouldn't buy it because you can't know if I have a copy of that USB drive in my other pocket. The only way to transfer bitcoin for-real is to submit it to the network and to make sure it's confirmed. My take is that the censorship-resistant qualities of bitcoin are highly overstated.
    - jljljl 6y ago
      The problem is that if you can’t easily convert it, the OTC price is going to plummet. Since the ledger is public, if the government knows which wallet is linked to you (easy if you’ve done KYC in order to use an exchange), they could also sanction any wallets that transact with your wallet, severely limiting who will be willing to do P2P/otc with you
JumpCrisscross 6y ago
> Who truly believes this is a likely scenario? The United States is the only major power with a strong ideological belief in unrestricted capital flows. The EU and China have both implemented capital controls in the modern era, sometimes repeatedly. (U.K. currently stands out, too.) All it takes is a populist “the rich are fleeing with their capital” trope to take hold on the far left and/or the right, and the centre to crumble, for such policy to become politically palatable. At that point, there really isn’t anyone else defending free market capitalism. Put another way, do you really think you couldn’t get a lot of people in e.g. San Francisco to sign onto a mandate that requires the rich to register outgoing capital flows?
- modo_mario 6y ago
  > The United States is the only major power with a strong ideological belief in unrestricted capital flows. This belief in ideological attachment to policy sounds so silly to me. It can change and it can change quite quickly in fact. It's like saying the US has a strong ideological belief in democracy that guides all it's geopolitical moves abroad.
- nemothekid 6y ago
  >Put another way, do you really think you couldn’t get a lot of people in e.g. San Francisco to sign onto a mandate that requires the rich to register outgoing capital flows? Your example is poor; there are 10s of millions of people in California who have been trying to get healthcare reform passed for nearly a decade now and the trend so far has been Obamacare being slowly unwound. It's unclear if the far left/right is anything more than a boogeyman at this point considering the glacier pace of the Senate in the last 20 years. The media would have you believe the democrats are well on their way full blown communism, but the reality is the party self-sabotaged their own $15 minimum wage proposal and managed to be less generous than Trump on stimulus checks. If the Federal Reserve decided to implement capital controls, I doubt it would happen democratically. It's more likely that you would wake up one day and all the major banks would have limits on how much gold you could purchase in a year for "liability reasons". I'm sure a Senator or two would scream, but the next week there would be the next culture war story with Ted Cruz complaining about MTV.
kgin 6y ago
India is seriously considering it now. https://www.reuters.com/article/uk-india-cryptocurrency-ban/india-to-propose-cryptocurrency-ban-penalising-miners-traders-source-idUSKBN2B60QP https://www.reuters.com/article/uk-india-cryptocurrency-ban/...
ericd 6y ago
It happened during the Great Depression (the outlawing of private gold ownership). I wouldn’t say it’s that unlikely if things get rough.
- DennisP 6y ago
  Yes but it happened then because the dollar was backed by gold, and the Fed needed more gold to back the new dollars they wanted to make, to bail out the economy. Now they can print as many dollars as they like. https://en.wikipedia.org/wiki/Executive_Order_6102 https://en.wikipedia.org/wiki/Executive_Order_6102
nostrademons 6y ago
I actually believe something far scarier. I think we're going to see a worldwide disintegration of governments and then sort of a feudal anarchy - basically the Syrian Civil War, but spread across the globe. People will stop taking the government seriously and just go do what they want, with a lot of local bullies and warlords springing up to take their place. The financial picture Dalio paints is the first stage of this, but it merges with a lot of other trends to make something horrible. There's the ongoing migration crisis; conditions are becoming inhospitable in areas like Central America and the Middle East, which is driving migrants to developed nations like the U.S. and Europe and destabilizing those countries. There's the climate crisis, which is the root cause of the migration crisis. There's a trust crisis propagated by the Internet and Big Tech, where nobody knows what to believe anymore. There's a pending military technology shift where cheap autonomous weaponry fundamentally changes the power balance between large nation states and small insurgencies. And then there's a population that's just fed up, as evidenced by the Capitol Riots and lockdown protests (as well as plenty of Internet vitriol). Unfortunately fleeing the U.S. won't do anything for this, because if the U.S. goes, the whole world will erupt in flames. Better to put down roots in a community whose values you agree with, ideally one in a well-defensible location with plenty of natural resources.
- selimthegrim 6y ago
  The Silicon Age Collapse?
  - gota 6y ago
    Let's blame some mysterious "Sky Peoples" but never record who they are to mess with future archeologists
- WalterBright 6y ago
  > There's the climate crisis, which is the root cause of the migration crisis. The driver of that is more like unfree markets which always result in mass poverty and misery.
  - 6y ago
JMTQp8lwXL 6y ago
Embrace and extinguish would be American way of imposing restrictions on capital movement. Make something so superior to Bitcoin (a la FedCoin), and have it be the unquestionably superior choice. Bitcoin has a huge usability, "did I enter the right public address" problem. Point is, there's a lot of ways regulators could manufacture the behavior. A great deal of market behavior is already manufactured through the the Federal Funds rate.
javierluraschi 6y ago
I don't think they need to go as far as prohibit crypto, all they have to do is increase taxes for crypto since we already have to pay taxes on capital gains for crypto. If this tax rate increases, people will be less likely to use crypto.
- tarsinge 6y ago
  Isn’t that what Diallo is saying?
jamesgreenleaf 6y ago
Likewise. Hearing Michael Burry recently talk about hyperinflation as a possibility, albeit a small one, is also frightening. I don't know if gold is under threat, but there's certainly historical precedent for it, as mentioned in the article. For Bitcoin, India and China have both been taking small steps toward limiting or banning it. Western media and influential figures (Bill Gates) have been recently talking about how wasteful it is. No matter your arguments on either topic, the fact remains that governments can limit their own citizenry, by threat of force, from transacting with any instrument.
deleted 6y ago
[deleted]
emodendroket 6y ago
Far fewer people than imagined even flee to different states within the US because of higher taxes. The notion that everyone's going to go live in the Caribbean and eschew their social lives and their kids' fancy schools seems unlikely. Consider: https://www.bloomberg.com/news/articles/2021-03-10/wall-street-a-listers-fled-to-florida-many-are-eyeing-a-return https://www.bloomberg.com/news/articles/2021-03-10/wall-stre...
- notsureaboutpg 6y ago
  Are you kidding me? Why do you think the fanciest schools are boarding schools?
- refurb 6y ago
  Big difference between a lower tax rate and having access to your money blocked.
- eru 6y ago
  You are right about the aggregate. But interesting things happen at the margins, too.

by vecinu 6y ago

nemothekid 6y ago

Where would you go? The EU and Japan are already in a worse position than the US and if the US decides to commit to capital controls, they would probably follow. That only leaves China which already has capital controls.

toomim 6y ago
> That only leaves China There are 195 different nations on earth. That leaves a lot more options than the EU, Japan, and China. A lot of crypto-expats are going to carribean island nations.
- nemothekid 6y ago
  >A lot of crypto-expats are going to carribean island nations. Are they going to buy Lamborghinis in pesos? More seriously, yes, some people are content with living like a rich native in the global south but for anyone else who plans to participate in the global economy (and I assume they do, because capital controls would likely only affect high net worth individuals), they would need to convert to EUR/JPY/CNY/USD.
- calt 6y ago
  But on the topic of market impacting capitol flight, is that a real possibility? No.
- frongpik 6y ago
  Small nations can't risk to offend the US.

derivagral 6y ago

There's (old) precedent for this in the USA[0] but it is hard to imagine for crypto. [0] https://en.wikipedia.org/wiki/Executive_Order_6102 https://en.wikipedia.org/wiki/Executive_Order_6102

DennisP 6y ago
Look at the rationale section. The Fed needed more gold so it could print more dollars. Since today's dollar isn't backed by gold or crypto, the same reasoning wouldn't apply. In fact, if crypto were used more as money in the real economy, banning it would have the reverse effect, shrinking the amount of money in the economy.

rawtxapp 6y ago

This was the part that caught my attention as well, it would be super interesting to see it play in real-time. For one, how would they even put capital movements controls on crypto? For example, I just have to remember my 12 word seed and I can hop on a plane to another country and my crypto comes with me. The other part is, wouldn't those capital controls be the last nail in the coffin of "we lost complete control of the situation"?

jljljl 6y ago
If the USG (or Europe, or China) still have a strong military, or a lot of influence over the financial sector at that point, you may have a tough time finding a bank to convert your crypto into Fiat. At that point, you’d have to find a country that accepts Bitcoin directly as a payment method or whose financial system can shrug off regulations. That might be harder to find than you think, or might require a significant haircut on the conversion.
- randomopining 6y ago
  Can you not just go p2p/otc with the crypto and buy a hard asset plus some paper fiat? It’s like cash but even more effective for this purpose.
  - nickysielicki 6y ago
    If cryptocurrency exchanges don't exist in good public standing, the price of bitcoin will collapse. This is a risk that does not exist with precious metals. The real problem with bitcoin is you cannot physically transfer it. I can sell you a USB drive with a wallet on it, but you shouldn't buy it because you can't know if I have a copy of that USB drive in my other pocket. The only way to transfer bitcoin for-real is to submit it to the network and to make sure it's confirmed. My take is that the censorship-resistant qualities of bitcoin are highly overstated.
  - jljljl 6y ago
    The problem is that if you can’t easily convert it, the OTC price is going to plummet. Since the ledger is public, if the government knows which wallet is linked to you (easy if you’ve done KYC in order to use an exchange), they could also sanction any wallets that transact with your wallet, severely limiting who will be willing to do P2P/otc with you

JumpCrisscross 6y ago

> Who truly believes this is a likely scenario? The United States is the only major power with a strong ideological belief in unrestricted capital flows. The EU and China have both implemented capital controls in the modern era, sometimes repeatedly. (U.K. currently stands out, too.) All it takes is a populist “the rich are fleeing with their capital” trope to take hold on the far left and/or the right, and the centre to crumble, for such policy to become politically palatable. At that point, there really isn’t anyone else defending free market capitalism. Put another way, do you really think you couldn’t get a lot of people in e.g. San Francisco to sign onto a mandate that requires the rich to register outgoing capital flows?

modo_mario 6y ago
> The United States is the only major power with a strong ideological belief in unrestricted capital flows. This belief in ideological attachment to policy sounds so silly to me. It can change and it can change quite quickly in fact. It's like saying the US has a strong ideological belief in democracy that guides all it's geopolitical moves abroad.
nemothekid 6y ago
>Put another way, do you really think you couldn’t get a lot of people in e.g. San Francisco to sign onto a mandate that requires the rich to register outgoing capital flows? Your example is poor; there are 10s of millions of people in California who have been trying to get healthcare reform passed for nearly a decade now and the trend so far has been Obamacare being slowly unwound. It's unclear if the far left/right is anything more than a boogeyman at this point considering the glacier pace of the Senate in the last 20 years. The media would have you believe the democrats are well on their way full blown communism, but the reality is the party self-sabotaged their own $15 minimum wage proposal and managed to be less generous than Trump on stimulus checks. If the Federal Reserve decided to implement capital controls, I doubt it would happen democratically. It's more likely that you would wake up one day and all the major banks would have limits on how much gold you could purchase in a year for "liability reasons". I'm sure a Senator or two would scream, but the next week there would be the next culture war story with Ted Cruz complaining about MTV.

kgin 6y ago

India is seriously considering it now. https://www.reuters.com/article/uk-india-cryptocurrency-ban/india-to-propose-cryptocurrency-ban-penalising-miners-traders-source-idUSKBN2B60QP https://www.reuters.com/article/uk-india-cryptocurrency-ban/...

ericd 6y ago

It happened during the Great Depression (the outlawing of private gold ownership). I wouldn’t say it’s that unlikely if things get rough.

DennisP 6y ago
Yes but it happened then because the dollar was backed by gold, and the Fed needed more gold to back the new dollars they wanted to make, to bail out the economy. Now they can print as many dollars as they like. https://en.wikipedia.org/wiki/Executive_Order_6102 https://en.wikipedia.org/wiki/Executive_Order_6102

nostrademons 6y ago

I actually believe something far scarier. I think we're going to see a worldwide disintegration of governments and then sort of a feudal anarchy - basically the Syrian Civil War, but spread across the globe. People will stop taking the government seriously and just go do what they want, with a lot of local bullies and warlords springing up to take their place. The financial picture Dalio paints is the first stage of this, but it merges with a lot of other trends to make something horrible. There's the ongoing migration crisis; conditions are becoming inhospitable in areas like Central America and the Middle East, which is driving migrants to developed nations like the U.S. and Europe and destabilizing those countries. There's the climate crisis, which is the root cause of the migration crisis. There's a trust crisis propagated by the Internet and Big Tech, where nobody knows what to believe anymore. There's a pending military technology shift where cheap autonomous weaponry fundamentally changes the power balance between large nation states and small insurgencies. And then there's a population that's just fed up, as evidenced by the Capitol Riots and lockdown protests (as well as plenty of Internet vitriol). Unfortunately fleeing the U.S. won't do anything for this, because if the U.S. goes, the whole world will erupt in flames. Better to put down roots in a community whose values you agree with, ideally one in a well-defensible location with plenty of natural resources.

selimthegrim 6y ago
The Silicon Age Collapse?
- gota 6y ago
  Let's blame some mysterious "Sky Peoples" but never record who they are to mess with future archeologists
WalterBright 6y ago
> There's the climate crisis, which is the root cause of the migration crisis. The driver of that is more like unfree markets which always result in mass poverty and misery.
- 6y ago

JMTQp8lwXL 6y ago

Embrace and extinguish would be American way of imposing restrictions on capital movement. Make something so superior to Bitcoin (a la FedCoin), and have it be the unquestionably superior choice. Bitcoin has a huge usability, "did I enter the right public address" problem. Point is, there's a lot of ways regulators could manufacture the behavior. A great deal of market behavior is already manufactured through the the Federal Funds rate.

javierluraschi 6y ago

I don't think they need to go as far as prohibit crypto, all they have to do is increase taxes for crypto since we already have to pay taxes on capital gains for crypto. If this tax rate increases, people will be less likely to use crypto.

tarsinge 6y ago
Isn’t that what Diallo is saying?

jamesgreenleaf 6y ago

Likewise. Hearing Michael Burry recently talk about hyperinflation as a possibility, albeit a small one, is also frightening. I don't know if gold is under threat, but there's certainly historical precedent for it, as mentioned in the article. For Bitcoin, India and China have both been taking small steps toward limiting or banning it. Western media and influential figures (Bill Gates) have been recently talking about how wasteful it is. No matter your arguments on either topic, the fact remains that governments can limit their own citizenry, by threat of force, from transacting with any instrument.

deleted 6y ago

[deleted]

emodendroket 6y ago

Far fewer people than imagined even flee to different states within the US because of higher taxes. The notion that everyone's going to go live in the Caribbean and eschew their social lives and their kids' fancy schools seems unlikely. Consider: https://www.bloomberg.com/news/articles/2021-03-10/wall-street-a-listers-fled-to-florida-many-are-eyeing-a-return https://www.bloomberg.com/news/articles/2021-03-10/wall-stre...

notsureaboutpg 6y ago
Are you kidding me? Why do you think the fanciest schools are boarding schools?
refurb 6y ago
Big difference between a lower tax rate and having access to your money blocked.
eru 6y ago
You are right about the aggregate. But interesting things happen at the margins, too.