Topic: Uncontrollable cash outflow with crypto. Does it really exist? - page 2. (Read 520 times)

The concept of "uncontrollable cash outflow" as far as I know, describes a trade deficit.

When there's more capital or trade moving across borders in one direction than the other, there is a danger for one side to become increasingly wealthy at the expense of the opposite side which becomes increasingly impoverished.

The media, economic experts, financial gurus and others have repeatedly gone on record saying: "there's absolutely nothing wrong with trade deficits". I would imagine they needed to invent the term "uncontrollable cash outflow" to avoid having the public recognize they were essentially describing a trade deficit to avoid making it too obvious they contradict themselves on a regular basis.

I don't think taxes have anything to do with that. Governments are interested in keeping their trade balance balanced, so to speak. Import tariffs are used to limit imports in order to give local producers an advantage before their foreign competitors. Honestly, I'm not even sure if imports themselves have anything to do with capital flight because it is a bi-directional flow (goods <-> money), that is, not someone trying to move their money abroad.

You're not. The countries are trying to minimize this outflow through online shopping by taxing imported goods, which brings some of the money back, but not all goods are being taxed, so the outflow from countries where the prices/taxes are too high or the quality of goods is low (china) is our reality. That's why some countries are so afraid if this process and trying to ban cryptocurrencies. Other countries, those where the situation is extremely grim (like North Korea) are limiting migration, foreign trade, import, everything.

Am i wrong by saying all online shopping does the same thing?
All overseas purchases result in currency migration.
As I understand it I dont see the big deal, its just focusing on BTC again.

Bitcoin or any other crypto does not cause uncontrollable cash outflow as there are normally trades made across the borders for things like a car or antique pieces. People buy those things with their countries fiat and the other person in another country receives payment in his fiat currency. This does not create any outflow and there might be tax paid by the person who purchases the good. Similarly, when anyone from some country purchases bitcoin from any holder from another country he just needs to transfer money to the holders account and wait for the bitcoin to be received while the holder also pays the transaction fee.

That point I don't particularly question but I still have issues with it. First of all, this is definitely not a cash outflow because no cash leaves the country unless we think of bitcoins as cash, of course. Further, if we think of bitcoins as a form of capital as gold or steel, then there is an issue with governments refusing to accept crypto as a genuine asset. If they don't consider it an asset, then they can't claim capital flight via crypto. As simple as it gets. I guess you can't have it both ways at the same time. Imagine a government cracking down on crack just because it contributes to capital outflow.

There has to be some form of data to support capital flight or capital outflow of cash. From what I understand if it is possible to regulate Bitcoin or cryptocurrency exchanges in a country, then the capital outflow can be traced through those exchanges, that is if people are purchasing Bitcoins in their home country and selling it in foreign exchanges. I'm going to bring in China here because of a report that I've read by Bloomberg about China's exchange rate devaluation since August 2015 and there were significant capital outflows. There's a possibility that it could exist, but this isn't just related to Bitcoins being bought in China and sold on foreign exchanges, but also about investors buying offshore properties and because of mergers and acquisitions in offshore companies. This could be one of the main reasons why China has imposed restrictions for local traders to trade cryptocurrencies on offshore exchanges. A less harsher methodology would be to impose trading limits on foreign exchanges of such cryptocurrencies. People over there are made to report foregin transctions or when providing yuan loans to foreign companies.

There's hence the possibility that many cryptocurrency traders are probably also travelling offshore to trade and make settlements through offshore accounts and this could be where concerns could arouse.

What are you talking about? What huge amounts of dollars can be taken out of a country and how exactly? Care to explain? At best, it can be said that capital in the form of a cryptocurrency "leaves" the country, though cryptocurrencies are extraterrestrial. Dollars or any other fiat remain in the country, not a single dollar gets lost or hurt. But the question is whether bitcoins can actually be considered as capital. If not, then there is neither cash nor capital outflow.

Actually in traditional ways,no one would be able to transfer huge amounts of money for example say USD without authorisation of the respective country's authorities.But with bitcoin,no such act is needed and even very huge amounts of dollars could be easily taken out of a country.

Yes, that's exactly the point which I can't quite understand or accept, though I prefer the example with gold. But it doesn't really matter. There are 2 things which raise red flags for me here. First, bitcoins can't be moved because they are already existing everywhere. You don't have to move them anywhere like steel or gold, though this is a minor issue. But a major issue is that governments are criticizing crypto as a means of speculation, a worthless asset (non-asset), and at the same time they still treat it as a real value carrier or even value itself as in steel or gold. Isn't that an example of an utmost hypocrisy? How the fuck is that possible?

In the series of events - if there are flows in both directions, I don't think you can call it capital flight. For example, in imports / exports, flow of goods happens in one direction while flow of money happens in another direction. Similarly, if it is a loan repayment, the assumption is that it just reverses a loan given at some point of time. In capital flight, transfer of value is unidirectional - like the transfer of bitcoins out of a country.

I understand your confusion. You think that things are not interconnected. But eventually they are. Though it may be indirectly connected and the capital flow may take time to go from one country to another, it does happen. It may be via import/exports, remittances, direct foreign investment, direct purchase in foreign (other than investments), payment of loans etc. These series of events may not be related to bitcoin, you do buy bitcoin with fiat, so again they are all inter-related but are definitely indirect.

You're in country A.
You have two millions fiat and you buy bitcoins with it.
The value of that capital in that country was 2 millions, your fiat and 2 million in btc you're going to buy.
That is 4 millions.

You buy the bitcoins and you get out of the country.
The capital that remains is 2 millions. (-2)

You enter a country where somebody is willing to buy your coins.
Capital at this moment 2 million.
You sell the coins to him, total capital 2 millions fiat and 2 millions in BTC.
Total capital 4 million. (+2)

Capital flight is not just about paper money, assets are also used when fleeing a country.

If the dollars come back to China, then you could say that the bitcoins have been exported. If the dollars don't come back, then it is capital flight. The difference is that in the export case, the value remains balanced. In the capital flight case, it does not.

Consider steel instead. If you buy steel with renminbi in China and sell it for dollars in the US, the amounts of renminbi and dollars don't change in the respective countries, but the value of the steel has moved. The US has both the dollars and the steel, and China has the renminbi but less steel.

There is capital flight, if you buy btc in the US then send them to China and sell them there and keep those funds in China then that's where the capital is being moved. It's fairly clear.

I see no logic in this. When you buy 100 bitcoins with dollars or whatever, you don't transfer dollars anywhere. So the situation after selling bitcoins is not any different with before buying them. In other words, for the cash outflow to happen the amount of dollars in one country should diminish while in the other increase. This is not the case with crypto. And even if you buy bitcoins with renminbi in China and sell them for dollars in the US, the amount of renminbi and dollars doesn't change in the respective countries.

I think it depends on your perspective. This is the main problem that China has with bitcoin. Chinese government wants investment and their yens to stay in their country, and it's even hard to make international transfers there, so with bitcoin, they could do this easily and they don't like that. The simple fact that you are buying bitcoin with yens, is already making their coin weaker, because you could see that as a normal "forex" trade. If you do it in an international level, the money you could be spending in China, is now being spend in another country, so they are losing capital.

Still referring to China, before bitcoin was used, they normally had to get very creative to transfer money abroad. Sometimes they bought art, or expensive goods, they would then transfer them to other countries so that they could sell them there. This was they would have their money available in another country. Bitcoin made this international transfer much easier to do.

I'm not clear on what the confusion is. The value has been transferred out of the country, though I guess it is not real until the money has been spent outside of the country. Would it make more sense if you wrote "someone can buy bitcoins for renminbi in one country and sell them for the same amount of dollars in the other"?

The way its being explained goes beyond basic understanding and that is why you think it does not contribute to capital flight and looking at it from the 1000$ or $2000 dollars we are dealing with, it makes the claim of capital flight sound bogus or unfounded but I will try to paint a scenario if it will aid understanding of what is being said here.

In a country, a business cannot move fund abroad without obtaining clearance from the relevant authority and there is always a certificate and maximum amount allowed to each company. The reason is because as we all know businesses can come to the home country and trade making over 500% profit margin and then move to their own country taking that money from the local economy will distort the supply of money thereby leading to scarcity and these are the reasons people complain that there is no money in the economy also it means there would be less liquidity in banks to create more money.

With bitcoin, you don't need to obtain the certificate of have to face any form of maximum amount to be transferred all that is needed is to purchase as much as possible bitcoin for example I need to move $1 million abroad, I just need to buy 100bitcioins on the average then send without even having to pay necessary fees.

Just imho Bitcoin doesn't create any insane uncontrolled cash flows. Everything happens the same way as it goes with fiat cash. If you are buying 1 BTC in one country and selling in another one then no one gona really care about those bloody 8000$. You could just take your cash from one country to another. While if you are trying to cash out 100 BTC then you will face some questions no matter if you are using crypto or just smuggled those money. Cryptocurrencies doesn't create those "critical mass" of uncontrolled money, everything remains in its own places as it could be without crypto.