Capital: Just in case

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The gated globe

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Capital controls are back as part of many countries’ financial armoury

IT WAS AS if the Vatican had given its blessing to birth control. The International Monetary Fund, which has long been the ideological guardian of borders open to capital, declared last November that under certain circumstances capital controls were a good thing.
The IMF’s conversion reflected some rethinking within the organisation, but it was also an acknowledgment of what member countries were doing anyway. In 2008 Iceland became the first industrial country in decades to impose capital controls, to limit a flight of capital from its busted banks. Between 2009 and 2011 Brazil, South Korea, Thailand, Indonesia, among others, introduced controls to discourage inflows of hot money that they feared would drive their currencies to uncompetitive levels. And within the past few months India has reimposed controls to slow an exodus of capital. These moves have reversed a decades-long trend towards greater openness …

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