The New Financial Iron Curtain: Taxes, Capital Controls, and the War on Your Wealth

The New Financial Iron Curtain: Taxes, Capital Controls, and the War on Your Wealth

There is a term called "gating" in the fund management world. It refers to blocking investors from redeeming their funds. Funds do this sometimes as a precaution… and other times when they are in the poo. Well, governments are the same. When they are in the poo, they also resort to their version of gating. It’s just called taxes.

I’ve always loved the Dutchies. Growing up in South Africa with the Afrikaners — descendants of the Dutch — I can tell you that as a group they are fantastic: hard working, ethical, and very down to earth.

It is with sadness, therefore, that I have to acknowledge that their government is thoroughly cocked-up, and they themselves are already behind a financial iron curtain.

They recently approved a 36% unrealised capital gains tax. It has since been put back for consideration, but this is not the point. The point is that when governments get into the proverbial isht, this is precisely what happens. You’ll know this because we’ve been talking about it for donkey’s years in these missives.

Along with California and many blue states, the Canadians and Aussies are also toying with the idea. It’s been trial-ballooned (usually how they go about these things) in all of the above-mentioned places, but the Dutchies just approved it.

Some of you may recall how we don’t like ETFs which use futures contracts. The reason is that you are mathematically 100% going to lose money if you hold them over time. Why? Because volatility will erode you. Every time you roll the futures contracts you get shredded if there’s been any volatility. And inevitably there will be volatility.

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In any event, what’s going to happen with the Dutchies is kinda similar. Let me explain with some basic maths.

Let’s get on our bicycles for a minute and pretend we’re Dutch, and we invest $1,000 into a stock.

Year 1: Because we’re geniuses, our stock goes to $2,000. Excellent! We made $1,000. Except we now owe $360 in capital gains tax. But we didn’t sell anything. We don’t have the $360. So we’re forced to sell shares to pay tax. But everyone else who has made any gain is also forced to sell too. Mass panic selling. Stock crashes to $800. We have $440 left after paying tax.

Year 2: Stock recovers to $1,200. Government: "You made $400, pay $144." Forced selling again. Price drops to $900. Now we have $756 left.

Year 3: Stock is back down to $1,000. Government: "You made $100, pay us $36." Actually, anyone still dumb enough to be hanging around Holland at this point is literally retarded. All the smart money has fled. Anyway, we have $964 in stock.

In total we paid $540 in taxes. Our stock is back where it started (0% gain). We only have $460 left. Congratulations. We just lost 54% on a stock that broke even.

On the other hand, the government made more money off this investment than we did — $540 — and they had a "no money down" deal.

Sticking with the topic of this theft tax, serial entrepreneur Balaji Srinivasan posted the following, which I thought was interesting as I’d not considered it.

"Wealth taxes are even worse than you think. Any asset held by Californian billionaires or Dutch citizens is now at risk of experiencing forced liquidation pressure…

… Because the long run fruits of Western Keynesianism are the same as Soviet Communism, in the sense of wealth seizure and pauperization.

I mean, if you knew the future, you wouldn’t want to co-own a farm with a Russian in 1916. For similar reasons, you might not want to co-own a share of stock with Dutch national in 2026. Or with anyone in a seizure-curious jurisdiction…which unfortunately includes much of Western Europe, Canada, and Blue America."

I have been warning for years now that the EU would impose capital controls. Please understand: they are already here.

All of the EU is a mess and difficult, but the Dutch and Germans are actually in the worst position.

Now I’m not here to lament and whinge. Complaining is both useless and unproductive. I’m here to explain that we are only just getting started. If you think this stops here — or that more doesn’t come — you are betting against hundreds of years of history.

Capitalist Exploits Insider isn’t particularly meant to be about these issues. After all, we’re fund managers buying listed equities, and I’m not here to tell you how to go about obtaining secondary residencies or anything else. These are simply intelligent steps to take and you need to go educate yourself on those aspects. Now. Because if you don’t, then reading this article after all your wealth has already been stolen is not going to serve you well.

You know what is most frustrating of all? The apathy of the citizenry. The Dutch government just declared open war on them and the response? Nothing. I don’t anticipate anything different in all the other countries mentioned which are preparing for this or something very similar. Very disappointing.