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BFCSA: Is Cyprus Entitled to Steal?

Posted by on in Consumers Fight Back
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Entitled to Steal
Monday, 18 March 2013
Melbourne, Australia
By Dan Denning

EXTRACT  --"The details of the events in Cyprus are as follows. The assets of the country's banking system are between five and eight times the size of its GDP. It's alleged that a great deal of the assets in the banking system belong to Russian oligarchs and global tax dodgers. Nonetheless, Cyprus was in need of a bailout.

--Instead, it got a hold up. Savers with guaranteed deposits in the banking system were assessed a 'stability levy' over the weekend. Depositors with over €100,000 in the bank will be taxed 9.9% of their savings. If you have under €100,00, it's a 6.75% tax. This 'up-front' and 'one-off' levy on insured accounts will raise an estimated $5.8 billion of bailout funds from bank depositors. The remainder of the money will come from the International Monetary Fund (IMF) and the European Central Bank (ECB) in the form of loans.

--The IMF said it didn't want to commit to a larger loan because then it would leave Cyprus with an unbearable government-debt-to-GDP ratio for such a small country (since when has that mattered in Europe?!). The result is that creditors to Cyprus will be paid in full at the expense of savers.

--Now in the scheme of things, the bailout amounts are small beer. Spain got bailed out for $41 billion, Portugal for $78 billion, Ireland for $85 billion, and Greece for $380 billion. By comparison, the situation in Cyprus is urgent but not terribly important, at least in terms of monetary amounts (and assuming you aren't one of the people who just had your savings confiscated).

--But the precedent established by the ECB's decision is what's important here. Guaranteed deposits will simply be confiscated to pay off bond-holders. ECB and EU officials had the bad taste to defend this on grounds of progressive social justice. They have claimed that since it is Cyprus being 'saved', all of Cyprus must pay.

--'In order to have burden-sharing, you extend the tax base, to residents and also non-residents,' intoned ECB official Joerg Assmussen.

How about that for an insight into the heart and mind of a central planning wealth stealer? Ordinary savers must be penalised along with Russian oligarchs to share the burden of making creditors whole. And asking people with fewer savings to share the burden isn't ethically wrong, it's an extension of the 'tax base'.

--This is the kind of high-handed thinking you get from entitled elites who view ordinary people as suckers to be pushed and shoved around for their own good. And there's more!

'As it is a contribution to the financial stability of Cyprus, it seems just to ask a contribution of all deposit holders,' said Dutch Finance Minister Jeroen Dijsselbloem.

--The only way to defend private behaviour that would otherwise be a crime is to say you're doing it for the common good and call it 'just'. It's hard to explain the attitude of the banking and political elites as anything other than a sense of arrogant entitlement. To be that confident and smug in taking what is not yours you must be supremely confident that you're morally right or politically untouchable.

--Practically speaking, you couldn't think of a better way to start a bank run, if that was what you were trying to do. You tell guaranteed depositors that their money can be taken at any time. How could it not occur to the ECB that this message would cause a bank run rather than preventing one? Any normal person would reach the same conclusion.

--The answer is that the political and banking elites in Europe - and Australia, and America - have routinely run rough-shod over political and economic liberty. It's what most of them do. The Europeans have referenda on a constitution and 'ever closer union,' and when 'the people' reject it, the planners move the planning behind closed doors and do what they like anyway.

--The same process happens everywhere. In the name of social justice or economic justice more liberties are curtailed. With the illusion of wealth that inflation provides, most people don't notice or don't care. So what if the government wants to limit free speech and censor the media? So what if there's a new tax? So what if the budget surplus has become a chronic deficit? No one cares.

--Only this time, the entitled class may have gone too far. They've systematically attacked personal liberty and individual freedom in Europe for years. They were so successful - and people were so passive - that they figured extending their attack to economic liberty would be just as easy. And in truth, so few people view low interest rates as a form of financial repression that favours the elites, the attack on economic liberty has also been wildly successful from the planner's perspective.

--But the naked theft of savings coupled with rhetoric of 'burden sharing' and what is 'just' is too much to ignore, even for the person who goes about his life doing his job and leaving the big matters to the big people. The Europeans will have to hastily back down or arrange something else.

--You can't un-think an idea once you've thought it, though. Because of what happened in Cyprus over the weekend, the thought will have occurred to many a European saver that the political class views banks savings as public property and the public as a bunch of gullible cows, suitable only for fattening and slaughter. A bank run is a stampede by another name.

Regards,

Dan Denning
for The Daily Reckoning Australia

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Comments

  • doyla66
    doyla66 Monday, 18 March 2013

    What's the bet those oligarchs and others with the privilege of knowing this was coming have shorted the market and gained big time from the sell-off today?

  • doyla66
    doyla66 Monday, 18 March 2013

    Instead of the Cyprus Government looking at other financial alternatives, they are creating a short term quick fix but a long term headache to their financial problems.

    They are pushing people too far hence causing a financial revolution. People will be withdrawing where possible and not depositing as they have lost trust and this will cause the banks to loose their power and strength.
    It is the people and their money which give power to the banks.

    Why can't Cyprus be bailed out like Portugal and Greece?

  • doyla66
    doyla66 Tuesday, 19 March 2013

    " . . . . when 'the people' reject it, the planners move the planning behind closed doors and do what they like anyway."

    Wow - that statement could be likened many a /state/local government/council planning department these days! Developments go to a 'committee' [read: stamp factory] to be approved with no need to be tabled in an Agenda for the minions like us to debate, let alone read about.

  • doyla66
    doyla66 Thursday, 21 March 2013

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