The current financial system, with governments and central banks controlling the flow of money, creates impediments for people’s economic freedom. Among them is the danger that the ruling class will try to hide its mismanagement of the country’s affairs by preventing people from voting with their wallets and trying to secure their savings on safer shores. The latest example of this comes from Argentina where capital controls are now back in effect.
Just An(other) Emergency Measure
President Mauricio Macri of Argentina re-introduced capital controls on Sunday in an effort to prevent further collapse of the peso (ARS) exchange rate and a possible default on government bonds. All citizens were barred from making over $10,000 worth of conversions to foreign currency per month. Companies now have limitations on their ability to legally purchase dollars on the open market without authorization, crucial for trading with international partners or to give out dividends to shareholders overseas.
The move has initially rattled stock investors as well as ordinary savers, and there were even reports from the country of people lining up at banks on Monday to withdraw as much money as they could. Some are also turning to the black market to buy USD at a worse rate than the official one. This is reflected in the crypto markets where there is now around a 10% premium on the amount of ARS needed to buy BTC compared with the global USD price.
Argentine President Mauricio Macri
The return to these measures is largely seen as a desperate measure by the government, as President Macri canceled the previous capital controls regime in one of his first actions in office after he came to power in 2015 promoting a free market approach to fixing the Argentine economy.