Outflow of Capital
Categories: International, Econ
You are a stunningly deep sleeper. One day, you fall asleep on the beach just before the tide comes in. When you wake up (covered in seaweed and surrounded by flopping fish), you find that everything you brought to the beach has washed out to sea. Your towels. Your beach umbrella. Your cooler with the mango juice and the cups made out of coconuts. And your wallet, with that stack of cash you brought for vacation.
Capital outflow in a nutshell. Well, in a coconut shell.
Real-life capital outflow involves the same concept...only on a national level. Assets move out of country. Investors pull their money out of one place because they think their cash will be better off somewhere else.
You're an investor in a sumac farm in the small Mediterranean nation of Shlobania. The king dies and his dopey son takes over the throne. Uh-oh. You’re sure the new king’s policies will run the country’s economy into the ground. So you close down your sumac farm and buy another one in a neighboring country with a more stable future. Capital outflow out of Shlobania and into its neighbor. Capital outflow doesn’t just involve foreigners moving money from one overseas investment to another. Citizens of a country might move assets out of that nation if they think they’ll be safer somewhere else.
Take China. A country with a restrictive government and not a huge respect for the rule of law. If you’re a rich person in China, you’ll want to get as much of your money out as you can. Move it somewhere else. You want to get your capital to a safe harbor against your own government.
You take what cash you can and look for investments elsewhere...outside of the restrictive rules in China. You buy an apartment in Paris. Or a castle in Scotland. Or a cotton candy factory in Iowa. Or...maybe you start looking at a sumac farm along the Mediterranean.
Just not in Shlobania.
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And finance Allah shmoop What is the outflow of capital
All right well you are a stunningly deep sleeper One
day you fall asleep on the beach just before the
tide comes in When you wake up covered in you
know seaweed and surrounded by a flopping fish You find
that everything you brought to the beach was washed out
to the sea Your towel's your beach umbrella You're cooler
with the mango juice and the cops you know made
out of coconuts And your wallet Yeah that thing with
that stack of cash you brought for vacation Well capital
outflow in a nutshell Well in a coconut shell anyway
Riel life capital outflow refers to the same concept but
only on a national level That is assets move out
of the country They flow out Investors pull their money
out of one place because they think their cash will
be better off somewhere else You're an investor in a
Su Mak farm in the small Mediterranean nation of Slovenia
The king dies and his dopey son takes over the
throne So yeah you're sure the new king's policies will
ruin the country's economy and run everything businesswise into the
ground So you closed down your Su Mak farm and
you buy another one in a neighbouring country with a
more stable future in a way smarter Qing Capital Outflow
out of Slovenia and into its neighbour That's what's happening
Well Capital outflow doesn't just involve foreigners moving money from
one overseas investment to another Citizens of a country might
move assets out of that nation if they think they'LL
be safer somewhere else So let's go to China It's
a country with a restrictive government and not a huge
respect for the rule of law for its individuals Like
if you're a rich person in China well you'LL want
to get as much of your money out is you
can most likely anyway move it somewhere else somewhere safer
somewhere less scrutinizing So you take what cash you can
and you look for investments elsewhere outside of the restrictive
rules of China So you buy an apartment in Paris
and maybe a small castle with little golf course in
Scotland and then you come back around and buy a
cotton candy factory with corn in Iowa Or maybe you
start looking at ASU Mac Farm along the Mediterranean Yeah 00:02:09.365 --> [endTime] just not inched Slovenia