Currency Restrictions

in capitalist states the aggregate of quota rules directed at restricting operations (business deals) with national and foreign currency, gold, and other monetary values. These rules, issued legislatively or administratively, establish a system of procedures for the organization and execution of currency control by the competent body; these operations chiefly serve to ensure the balancing of currency receipts and payments in international accounts. The introduction of currency restrictions is associated with the unfavorable balance of payments and the exhaustion of currency and gold reserves and is one of the characteristic manifestations of the currency policy of capitalist countries in the period of the general crisis of capitalism. With the imposition of currency restrictions, exporters and other organizations and persons are obliged to give up to banks or other authorized bodies the foreign currency that they receive as a result of export and other transactions; the exporters must present a declaration of sold goods to the currency bodies; and restrictions are introduced on the sale and purchase of foreign currencies and gold, on the export of securities, and also on transactions associated with the export and import of capital.

Currency restrictions were introduced for the first time in individual capitalist countries during World War I; in the following years they were put into effect in almost all capitalist states with the exception of the USA, Switzerland, and a number of countries of Latin America. After World War II, a partial relaxation took place in the 1950’s in the systems of currency control in many Western European countries: for example, in France, free trade in gold within the country and the influx of francs from abroad were permitted, and the limit on the free outflow of francs taken abroad both by French citizens and by foreigners gradually increased. In 1959, France introduced the convertibility of the franc into dollars for current transactions by nonresidents (as a rule, foreigners), and Great Britain introduced the convertibility of the pound sterling into dollars for all persons living outside the sterling zone. Following France’s lead, West Germany, Belgium, the Netherlands, and Italy also announced the partial convertibility of their currencies into dollars and into other currencies. Similar measures were enacted by Sweden, Norway, Denmark, Finland, Austria, Ireland, and Portugal. In West Germany the full convertibility of the national currency was established; that is, both residents and nonresidents were granted unlimited freedom to take out, bring in, or transfer to the accounts of foreigners German marks on accounts in any transaction and also to exchange these marks freely for the currency of any other country.

In spite of measures carried out by the countries of Western Europe aimed at the weakening of currency restrictions, the currency control exercised by capitalist states over transactions involving monetary values continues to operate and to retain its importance in the system of state monopoly capitalism. The state resorts to the system of currency restrictions whenever a financial complication arises. For example, in France at the beginning of 1967 a law was enacted abolishing the currency regulation that permitted one to take out of or bring into the country any personal currency, French or foreign, and also to bring in or take out gold by presenting a declaration with a visa from the Bank of France to the customs authorities. However, controls remained in effect on foreign loans made in France and on French loans made abroad, on foreign capital investment in France and French investment made abroad, and also on transactions involving the exchange of patents and licenses with foreign firms. The law of 1967 stipulated the right of the French government to restore currency control over all transactions involving currencies if required for the protection of national interests. During the currency crises of 1967 and 1968 the French government used this right and again introduced restrictive measures on many currency transactions. Thus, in accord with the decree of Nov. 24, 1968, French banks are prohibited from buying from foreign banks banknotes issued by the Bank of France; the outflow of French francs taken out by French citizens is restricted; and French banks are prohibited from granting certain kinds of credit to nonresidents without special permission from the Bank of France.