China is moving to step up control of capital to lead the flood of cash out of Canada, Shanghai correspondent for the Financial Times, Gabriel Wildau, stated. It is interesting to see if other countries will begin to follow suit, which could affect the cash in the world's developed countries, a report from CBC.ca said.
Governments were still uneasy of any fears that led to the Great Depression and did not trust bankers to work in their interests. This affected many ordinary people, including Canadian immigrants.
The 1970 currency controls have gone out of style. Nowadays money is seen as just one more asset moving back and forth across borders. As Canada's chief central banker Stephen Poloz said that, freely exchangeable currencies act that buffer of international economic realignment. "This is exactly why countries choose to have flexible exchange rates."
"It puts capital where it's most useful, maximizing prosperity. What's not to like?" said financial writer Ye Xie in a Bloomberg report. An attitude to the free flow of cash is great when it is flowing in, funding new development leading to prosperity.
Now China, which is still working to establish its renminbi or Chinese yuan into a freely floating currency, has begun to backtrack. Foreign issues of renminbi bonds could mean that there will soon be more yuan trading outside China. However, the value of domestic yuan and foreign yuan are diverging.
The rush of money out of countries like China, Russia and those in South America will surely result in an increase in developed-country real estate. Should a trend toward currency controls develops this could surely become a trickle. That's if these measures should work.
Without stricter restrictions that would affect trade, even a government such as Canada will only be able to slow it.
