Skip to comments.EU: Daylight robbery in Cyprus will come to haunt EMU
Posted on 03/19/2013 12:36:02 AM PDT by bruinbirdman
One's first reflex is to gasp at the stupidity of the EU policy elites, but truth is that most EU officials handling the Cyprus crisis know perfectly well that their masters have just set the slow fuse on a powder keg and they can only pray that it is slow.
The decision to expropriate Cypriot savers even the poorest was imposed by Germany, Holland, Finland, Austria, and Slovakia, whose only care at this stage is to assuage bail-out fatigue at home and avoid their own political crises.
This latest debacle has caught me on the hop, literally, since I am in Tokyo learning about Abenomics, so let me just make a few quick points before going off for a pint of sake.
The EU creditor states have at a single stroke violated the principle that insured EU bank deposits of up $100,000 will be guaranteed come what may, and in doing so they have more or less thrown Portugal under a bus.
They appear poised to seize large sums from Russian banks 1.3bn from state-owned VTB alone, and therefore from the Kremlin prompting the condign riposte from Vladimir Putin that the action is "unfair, unprofessional and dangerous."
They have demonstrated that the rhetoric of EMU solidarity is just hot air, that they will not force their own taxpayers to share a single cent of clean-up costs for the great joint venture of monetary union in which northern banks, insurers, pension funds, and indeed governments, were complicit.
Their refusal to pay is entirely understandable in one sense and if I were a German taxpayer, I would not care to swallow these losses either but then the leaders of these creditor countries can hardly expect the world to believe that they
(Excerpt) Read more at blogs.telegraph.co.uk ...
Spending more of an ever an dwindling pile of ever shrinking value currency does not sound like it has a great future does it?
but the leftists are blind to reality
No what’s wrong are people like you pushing simultaneously for deep cuts AND massive tax increases.
You get flat growth and with an economy dead in the water, you get massive social unrest.
Europe’s present course is not sustainable - economically, socially or politically. There’s no upside to it for European politicians who’ve sold Europeans a bill of goods.
The EU crisis will continue to worsen.
Socialism is an ugly thing.
Free Trade Communist Globalism does not work. Those who still think it works after this EU robbery of Cyprus will the loudest ones calling to be bailed out
When you borrow money, you are borrowing from an assumed productive future. For example, if you borrow $24,000 for a car, to be paid back in 6 years, you are predicting that you will make enough money back over the next 6 years to pay it back. If you do, great. However, if you don’t, you will lose the car, everything you have paid into the car, and you will have nothing. This is the nature of debt.
However, when you borrow money from your future, you are making a deliberate decision to reduce your future prosperity for a more prosperous present. This is not necessarily a bad thing, because by borrowing money now, you may be creating a more prosperous future, because having that car now allows you to take advantage of opportunities that you might not have if you didn’t have a vehicle to drive. However, it is not wise to borrow from your future to pay for things that do not contribute to your future prosperity, like vacations, video games, or fancy clothing, because if you do not have the money to pay these things back, then you must resort to outright theft by declaring bankruptcy and rob the people who loaned you money.
This is basically what Europe has done to itself. It didn’t just borrow money to create a productive future for itself. It also borrowed money on non-productive things like healthcare, pensions, and welfare based on the gamble that it had a future prosperity and could afford it all. Unfortunately, it’s prosperity has been less than it hoped and the debt it borrowed has grown.
The only ways out is to either cut its non-productive spending: education, healthcare, welfare, and pensions, until,the books are glanced or resort to outright theft to those that bought Europe’s bonds based on the promise that Europe would eventually buy those bonds back.
And united to cut off Adam Smith's invisible hand.
Just how far class warfare has gone. It's not immoral if you steal from a rich person.
It’s amusing watching Putin and Medvedev get into a tizzy about this, considering that Cyprus is one of the most popular destinations for the Russian Mafia and oligarchs to deposit their dirty money. I read that over half of the assets in Cyprus are Russian...
Wouldn’t be surprised if Putin himself was in danger of losing his money.
They may decide to 'manage' your 401k's.
They may just use the standard remedy and inflate - which is already happening. That way, they can steal even the money hidden in mattresses - technically, the money is untouched, but the value is drained from it.
Hmmmm - Europe went through two disastrous, world changing wars that killed nearly 75 million people in 25 years, allowed Communism to take over Russia and nearly the world, destroyed the British empire and untold billions of dollars of wealth, (or whatever currency you wish to denote it in), ruined countless lives, nearly resulted in a world wide race based dictatorship, yada, yada, yada.
And they really want to poke the Germans through the bars one more time? Really?
Just wait and see what happens when the banks re-open for business...bye, bye Miss American Pie, drove my chevy to the levy and the levy was dry...
leftists are all theorists. From the writers in 19th century Europe to the political leadership world wide, including the White House. As theorists they have no interest or background in the real world. If the theory looks good and polls well it will succeed. And when it doesn't, the normal out come, reasons for the failure start with unidentified right-wing reactionaries and go down hill from there.
It's already cost them more than "a single cent." This kind of rhetoric renders the argument essentially, hot air.
There was no way to create monetary union without political union in the first place. Allow for state sovereignty and one of said "sovereigns" will eventually seek to plunder the others with reckless fiscal policy. That was completely understood by every one of the current union member states. That is why the Maastricht Treaty specified specific fiscal targets. It's failure is that it lacked specific enforcement means. So, loser members blew off the fiscal targets almost before the ink was dry.
Friedman pointed out that such a system leads directly to higher unemployment, because there is no mechanism for devaluation of the currency because of loose fiscal policy. Gad do I miss his clarity in the public debate.
You are missing the big picture....Look on a map....where is Cyprus?....Currently, Russia has one Navy base in the Mediterranean, and it is located in Syria, not exactly the most stable of places these days.
Thing that gets me here is no one is talking about risk/interest rates. Banks pay low rates due to security, and low risks. Risk almost did not exist. Now throw 9.9% risk (and how often?)... what do interest rates have to be to cover that. The banks can not afford it.
Switzerland here comes the money. Until Switzerland creates a fear of risk.
You might like this.
Cypriot banks were paying out 7% on deposits.
That screams risk.
Thanks again. I’ve been writing on the topic of the Levitical economic system (as designed, not as implemented). This should help with lending perspective.
The interest motive has been pretty small for quite some time and now EU members can be robbed through the banks, a little at a time. Why wouldn't anyone/everyone in the EU take their money out ASAP.
They have been given an entirely untrustworthy promise that other countries won't be involved. The check is in the mail, I promise I'll still respect you in the morning. That may slow it down, but the runs will start and move fast with the next country that is “taxed” in this manner.
IMO this will spread way past the EU—the only question is how fast.
I can't help but wonder if the geniuses in charge are really this dumb or if somebody thinks a world wide depression is in his interest.
New Zealand planning to rob small depositors
This is why it is wise to have some savings in the form of silver and gold as both are relatively immune to inflation unlike paper currency.
So the people in Europe are mad that the the Socialists they elected are Socializing?
Sounds like what is going on in the US....
I believe that if Putin does nothing (publicly) then it's a green light for others to start doing it too.
Robbing Russian Mafia is a task not for the faint of the heart. But that's minor details; the proposal failed to pass anyway. I think Putin now has a good possibility to position Russian banks as a safe haven - safe from EU's turbulence, at least. Russian economy is stable, thanks to high oil and gas prices. Additionally, the same well known team is in power - and they are not likely to do something exceptionally stupid with other people's money. At least because they don't need to. Perhaps Mafia figures won't be so interested to keep their ill-gotten gains in the country; however plenty of foreign (EU) clients might not care that Putin can look into their accounts.
Probably China and other major non-EU players are also interested to get into this game. They are a bit farther geographically, though - however little it matters today, in the age of instant secure communications.
It did teach me to be more aware of the warning signs that the system is about to go unstable. Yet what to do when the dollar loses its reserve currency status isn't any clearer than it is now. Somehow, in an era in which nearly every transaction is traceable, I don't think a flight to gold will work.
The above post was to be for you. Thanks again, CO