What would you say if I told you that at anytime, at my discretion—to protect the firm—I could turn down your request to deposit to or withdraw from your personal investment account? Yes, a very stupid question. And my, what a very very stupid, firm-killing, decision on my part that would be!

From this morning’s Washington Post:

the IMFC recognized that economies coping with the effects of the major nations’ policies may need to act on their own — by using capital controls, for example, to regulate the flow of foreign money into and out of their nations. That is something the IMF has traditionally resisted, but now considers an appropriate tool for developing nations in some circumstances.

In its desperation, and unmindfulness of the utter impossibility that humans can effectively bend the global economy to their liking, today’s IMF is endorsing measures that any non-economist with a modicum of commonsense would view as utter lunacy. An emerging, and, at times, capital-hungry nation, using capital controls (restricting investor freedom)—whether its short-run aim is to defend or debase its currency—is the definition of not looking beyond the tip of its nose.

Of course it’s never that simple; there are volumes of literature making statistically-supported cases for capital controls, as you’d gather by reading Wikipedia’s page on capital control. My personal litmus test is always about freedom.