Please consider ‘I Can’t Get My Money Out’.
- Emerging markets investing veteran Mark Mobius says China is restricting capital outflows.
- He told Fox Business’ “Mornings with Maria’ that he couldn’t pull investment funds from his account in Shanghai.
- “I would be very, very careful investing in China,” the founder of Mobius Capital Partners said.
“It’s just amazing. They’re putting all kinds of barriers,” he said. “They don’t say, ‘No, you can’t get your money out,’ but they say, ‘Give us all the records from 20 years of how you’ve made this money,’ and so forth. It’s crazy.“
Also consider the Reuters report Billionaire investor Mark Mobius says he cannot take money out of China -FOX Business
“The bottom line is that China is moving in a completely different direction than what Deng Xiaoping instituted when they started the big reform program,” he said, referring to the former Chinese leader.
“Now you have a government which is taking golden shares in companies all over China. That means they’re going to try to control all of these companies … So I don’t think it’s a very good picture when you see the government becoming more and more control-oriented in the economy.“
Capital Flight Rules
I had this Mobius exchange on Twitter with Keith Weiner.
Too Big to Succeed!
Amusingly, and I have never heard this expression before, but Mobius is “Too Big to Succeed!“
What’s Really Going On?
I suspect two key things that Mobius should have seen this coming.
- China has capital controls to prop up the yuan.
- President Biden is far more belligerent towards China than President Trump.
Biden Threats
- February 24, 2023: ABC reports Biden tells ABC’s Muir ‘we would respond’ if China sends weapons to Russia
- February 7, 2023: State of the Union (above video), Joe Biden warns China over threats to US sovereignty in State of the Union address
- February 8, 2023: Bloomberg reports Biden Taunts Xi Days After Shooting Down Chinese Balloon
- May 23, 2022: CNN reports Biden says US would respond ‘militarily’ if China attacked Taiwan.
Biden to Bar Some U.S. Investments in China
If the above bullet points are not enough, here’s a single report that is alone sufficient.
In addition to China not being welcome to capital flight in general, Biden has threated further capital investments in China.
On February 10, 2023, Reuters reported Biden Plans to Bar Some U.S. Investments in China, Track Others.
The Biden administration plans to outright ban investments in some Chinese technology companies and increase scrutiny of others, three sources said, part of its plan to crack down on the billions that American firms have poured into sensitive Chinese sectors.
The ban is expected to apply to some investments tied to chip production, two of the sources said. The upcoming rules are likely to track sweeping new restrictions the U.S. placed on exports of American artificial intelligence (AI) chips, chipmaking tools, and supercomputers, among other technologies, to China in October, sources also said.
“The Indiana Jones of Emerging Market Investing”
Mobius Investments bills itself as “The Indiana Jones of Emerging Market Investing“.
If you have billions trapped in China, what is the way out?
What About Bitcoin?
In general, Bitcoin advocates mostly believe that it is impervious to any government actions.
But I asked a simple question above. Results are ongoing for two more days.
I don’t know the answer nor does anyone else because it is impossible to know for sure. But I suspect Bitcoin would plunge.
Capital Restrictions
What would happen if the US restricted movement of money into or out of Bitcoin, from/to US dollars?
That we do know beyond any reasonable doubt. If you cannot legally get money in or out, the value of Bitcoin would undoubtedly plunge.
You still have your Bitcoin, no one will take it away. You just cannot do anything with it.
Rather than totally restrict Bitcoin transactions, perhaps the government heavily taxes money into or out of Bitcoin. How would Bitcoin holder legally (if at all) get around that?
Perhaps the government simply puts onerous reporting restrictions on money flowing into or out of Bitcoin. What would that do?
Marginal Price of Bitcoin
The above capital restriction concerns are on top of one fundamental reality. The price of Bitcoin is set at the margin as is the price of gold or a house.
The main driver now for Bitcoin is speculation.
Sentiment can easily change, and price will reflect that change.
Perhaps the all time top is already in. Potential government actions that we do not now foresee, may have unknowingly sealed the fate already.
Trapped in China
Meanwhile, make a note that Mobius Investments has billions of dollars of investments in China, he just cannot get at the alleged value of those investments.
Is he a pawn in US-China relations? Does it even matter why he is trapped?
In my title, I called this “amusing”. That’s really not the right word. Government “theft” is more like it.
Bitcoin Faith-Based Cult
What if you have investments in Bitcoin that for any reason you cannot convert to fiat to spend, or have to pay huge taxes if you do?
Theft? You bet. I would not support it or call it amusing.
But I assure you that if the US government or Fed ever felt threatened by Bitcoin, that’s guaranteed to happen.
I was asked today on Twitter, why if it’s doable, hasn’t it happened. The easy answer is the US has not felt threated by Bitcoin yet. If the price stays low enough, the Fed may never feel threatened.
If you truly believe the price of Bitcoin is guaranteed go up over the long haul, no matter what actions governments take, you are in a Bitcoin religious cult.
Is a monstrous tax hike on Bitcoin transactions impossible if Democrats ever win the trifecta again (Senate, House, and White House)?
Twitter Q&A
What If?
Prove where the money came and pay a huge tax. Is this idea really that unlikely if the price gets high enough?
Note that attempts to circumvent would be tax evasion.
For further discussion, please see my take Why Bitcoin Won’t Reach Mass Adoption Ever: A Three Generations Theory Rebuttal
You have your Bitcoin. No one will take it. But what’s it worth?
This post originated at MishTalk.Com.
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Mish
To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures;
To provide for the Punishment of counterfeiting the Securities and current Coin of the United States;”
It’s the speech impediment. Gets me giggling every time.
Russian GNP fell 2% in 2022. That’s what Putin says, so probably the GNP was -4% or worst. Besides, I don’t think China needs counsels to take other’s money, it has a lot of experience stealing patents or african mnerals.