Capital flight, in economics, occurs when assets or money rapidly flow out of a country, due to an event of economic consequence. Such events could be an increase in taxes on capital or capital holders or the government of the country defaulting on its debt that disturbs investors and causes them to lower their valuation of the assets in that country, or otherwise to lose confidence in its economic strength.
This leads to a disappearance of wealth, and is usually accompanied by a sharp drop in the exchange rate of the affected country - depreciation in a variable exchange rate regime, or a forced devaluation in a fixed exchange rate regime.
This fall is particularly damaging when the capital belongs to the people of the affected country, because not only are the citizens now burdened by the loss of faith in the economy and devaluation of their currency, but probably also their assets have lost much of their nominal value. This leads to dramatic decreases in the purchasing power of the country's assets and makes it increasingly expensive to import goods.
Read more about Capital Flight: Recent Examples
Famous quotes containing the words capital and/or flight:
“Woman—with a capital letter—should by now have ceased to be a specialty. There should be no more need of “movements” on her behalf, and agitations for her advancement and development ... than for the abolition of negro slavery in the United States.”
—Marion Harland (1830–1922)
“No Raven’s wing can stretch the flight so far
As the torn bandrols of Napoleon’s war.
Choose then your climate, fix your best abode,
He’ll make you deserts and he’ll bring you blood.
How could you fear a dearth? have not mankind,
Tho slain by millions, millions left behind?
Has not conscription still the power to weild
Her annual faulchion o’er the human field?
A faithful harvester!”
—Joel Barlow (1754–1812)