Capital controls at the boundary of the Eurozone would be hard enough ... but when bona-fide domestic Euro credit money can be created in Frankfort and spent in Florence, its hard to impose effective capital controls.

It might be an "Italian Euro" that the monetary authorities in Italy work hard to maintain at parity with the real Euro, but capital controls in the sense of the kind of controls imposed by Malaysian after the Asian Financial Crisis, or in the sense of the capital controls in force today in China ... is at its heart controlling foreign exchange transactions. If I borrow Euros in Germany and spend them in Italy, that's not a foreign exchange transaction. If Italy imposes the regulatory framework that makes it work like one, its de facto left the Eurozone.

Inside an Economic Union it would be hard enough ... the narrowest "straightforward" boundary for Italian capital controls is the European Union.

In a conventional Free Trade Area, it would be fairly straightforward, but of course the US "FTA"s are conventional Free Trade Areas in name only ... they are mostly agreements on eliminating capital controls in return for trade access to the US market, though dressed up as bilateral removal of capital controls and bilateral trade access. So capital controls in the US context would basically be reneging on the FTAs. But since most of them are not passed as Treaties in any event, there's the institutional freedom to renege on them if we want to.


I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.