From Sovereign Man:
In the late 1920s, the economy of the Weimar Republic was beset by numerous fiscal troubles. The global depression spread quickly to Germany, undermining the government's ability to make its reparation payments from the Great War.
Fearing a return to hyperinflation, many Germans who had spent the last decade building up a small fortune during the Weimar Republic's own 'Roaring 20s' decided to pack up and leave; they remembered the days when banknotes were used as wallpaper and had no desire to repeat the experience.
In 1931, Chancellor Heinrich Bruning imposed a 'flight tax', which levied a 25% tax on the value of all property and capital for Germans leaving the country.
Total revenue collected from this tax amounted to roughly 1 million Reichsmarks (RM) in its earliest days ($56 million today). By the late 1930s under Hitler's rule, flight tax revenue soared to RM 342 million ($21.5 billion today) as more people headed toward the exits.
This flight tax constitutes one of the earliest modern examples of capital controls. They've evolved substantially since the days of Hitler, but the end goal is the same– governments controlling the flow of capital across borders.
Governments impose these for a variety of reasons– rapidly developing nations may want to restrict the flow of capital into their country, preventing 'hot money' from pumping up prices and affecting local markets. We see this today in places like Brazil and Thailand.
In other instances, bankrupt governments seek to trap capital within their borders, maximizing the amount available for subsequent taxation or other forms of confiscation. This tactic is usually employed when lost confidence has impaired the government's capability to borrow.
We're seeing strong indications of both examples today, though the latter is the most alarming. As I scan the headlines and hear from colleagues in the US and Europe, it's clear to me that the march towards stricter capital controls is quickening its pace...
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More on capital controls:
The outrageous new tax you'll soon be paying
Tax HORROR: IRS is pursuing global capital controls
Tax horror: These states will have the highest tax burdens under Obama's new plan
