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What it means if their dangerous manifestations – Currency Controls or Gold Confiscation/Restriction – ever make it onto our shore (The USA).

Freezing Trade Sentiment

At the G-20 Summit a few months back in Washington, we saw a pledge by all members to keep trade flows free of protectionist sentiment…perhaps in light of the Hawley-Smoot Tariff Act of 1930, and its devastating impact in terms of deepening the Great Depression.

Fast forward to the World Economic Forum’s Summit in Davos just a few weeks ago, and you will see countries hurling insults and blame all around while few seemed willing to cooperate or offer solutions.

Newly appointed, tax-dodging Treasury Secretary Tim Geithner had some strong words for the Chinese. And the “Buy American” rider in Obama’s economic stimulus package is rapidly souring relations with EU Allies.

It is plain as day to see a rapid, downward trend in the health of trade relationships.

Beyond the borders of the U.S. and her allies, protectionist measures are already well underway…emerging market governments are in the process of establishing foreign exchange controls and even restricting gold trade.

Emerging Market Harbingers

Just a week after that G-20 Summit mentioned above, Indonesia announced foreign exchange controls, triggering the first round of restrictions or limits on foreign currency trading.

In June of last year, as a response to skyrocketing inflation and soaring interest rates, the Vietnamese government barred gold imports. By restricting gold purchases, the Vietnamese Communist Authorities were making an attempt to hold down inflation. But they were fighting a rampant trend;

An unprecedented surge in gold ownership.

Prior to the restrictions, Vietnamese lunged for gold bullion, surpassing India and China as the world’s largest source of demand. According to the World Gold Council, Vietnam’s first quarter 2008 gold imports were 36.8 tons. That’s up an astonishing 71% from the first quarter of 2007.

And gold-hungry consumers purchased 31.5 tons of that total supply – or 86% – as investments.

The UK even imposed foreign exchange controls in the 1970s, while mired in economic turmoil. And it’s not unlikely that some major industrialized countries do the same today or, at the very least, implement the first stages of restrictions on foreign assets or property.

But that couldn’t happen again here (USA)…right?

Extreme economic conditions usually result in severe policy responses by government, hang on to your hats America, A Cold Wind is Blowing.