Contagion of Capital Controls

And time respects no person
What you lift up must fall
They're waiting outside
To claim my tumbling walls
--John Mellencamp

Pending capital controls in Cyprus have sparked speculation about capital controls across the EU. Government attempts to control capital that wants to move is a loser's game.

If people doubt that they will be able to withdraw their deposits, then banks runs commence. The longer government locks the vaults, then the stronger the urge among depositors to leave. As soon as the doors open, a run commences.

Controls to prohibit capital from fleeing increase the urge to escape.

Do bureaucrats not understand that confidence is the only thing holding the bank Ponzi together? If confidence is lost in the capacity for banks to deliver deposits on demand, then the house of cards that is modern banking comes tumbling down.