Tuesday, March 19, 2013

Cyrpus Bailout II

 The Great EU Bank Robbery

We Are All Cypriot Savers

Few more observations on this government confiscation of private property for payment to private banks.

Strange that the IMF is calling this a 'bank -tax', this is quite the misnomer.  A bank tax would be payed by banks out of their profits, a profit garnish so to speak.  Something like that would be much more appropriate here.

This is not a 'bank tax', but a confiscation of private funds.   The powers that be like to hide their blatant theft with many words, catch phrases to be repeated by the media in an attempt to throw off the general public.

Since a large portion of the general public pays no attention to the news they are likely to hear the words 'bank tax' in passing on the radio and think, "wow they are finally making the banks pay!", when in fact nothing could be further from the truth.

The question also needs to be asked; who is actually owed money?  Cyrpus as a country is in the hole for 7 Billion Euros, so who actually holds the bonds and is demanding to be paid?  This question has not been addressed in any of the articles I have read.  There is no doubt in my mind however that the answer is that other international banks hold the bonds.

The article indicates that the problem originated with the Cypriot banks;   

"According to credit rating reports, Cyprus arrived at this fiscal crisis initially because its banks carried a lot of Greek debt as approved by international bank rules." 

So the problem started with Cypriot banks doing business in accordance with international banking rules.  These banks ruined themselves by taking on bad debt, destroyed the Cypriot economy but now expect private citizens to pick up the pieces.  In the meantime the IMF thinks this is fair and that it "appropriately allocates the burden sharing."  Wow.

I also find it interesting that based on a typical fractional reserve banking system banks typically only hold about ~10% of their total liabilities in cash.  Therefore what the banks could be doing in effect is confiscating all the real currency and leaving the public with zeroes on a computer screen.  See what happens when you try to withdraw that!

What may happen through this though bailout is that the banks are actually shooting themselves in the foot.  As the Daily Mail article stated;

"Sebastien Galy, of the bank SocGen, agreed the move could be the ‘trigger’ for a new eurozone crisis:  ‘It breaks a cardinal rule – namely, public trust on which money relies.'"

People use banks because they are a guarantee; deposit insurance is supposed to mean that nothing can happen to your money.  This situation proves that this is not the case.  As such I expect people may think twice before placing their funds somewhere that they can be so easily confiscated.
This may have an actual negative impact on banking in the long run.  The whole situation makes me think that a shoe-box under the bed or a safe in the basement is looking like a good option, especially given the fees banks charge and the low rates of interest they offer.

In any case at this point I will simple re-iterate the ideas I brought up in my previous post.

Nothing in this life is guaranteed. 

These are the verses I have been thinking about in light of what is happening in Cyprus:

"Come now, you who say, “Today or tomorrow we will go into such and such a town and spend a year there and trade and make a profit”— yet you do not know what tomorrow will bring. What is your life? For you are a mist that appears for a little time and then vanishes. Instead you ought to say, “If the Lord wills, we will live and do this or that.” (James 4:12-15)

"But the day of the Lord will come like a thief. The heavens will disappear with a roar; the elements will be destroyed by fire, and the earth and everything done in it will be laid bare.  Since everything will be destroyed in this way, what kind of people ought you to be? You ought to live holy and godly lives as you look forward to the day of God and speed its coming.  That day will bring about the destruction of the heavens by fire, and the elements will melt in the heat.  But in keeping with his promise we are looking forward to a new heaven and a new earth, where righteousness dwells." (2 Peter 3:10-13)

 “Do not store up for yourselves treasures on earth, where moths and vermin destroy, and where thieves break in and steal.  But store up for yourselves treasures in heaven, where moths and vermin do not destroy, and where thieves do not break in and steal.  For where your treasure is, there your heart will be also. (Matthew 6:19-21)

1 comment:

Andrew Smith said...

For those who may wonder how I have such time to write blog posts while at work... I am off sick today with a nasty cold, hunkered down in the basement with a tuq the space heater right beside me. If the post is quite rambling... it's probably the meds.