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Roger’s Rules

More Rot from the EU, Cyprus Edition

March 17th, 2013 - 4:39 am

Asked why he robbed banks, Willie Sutton is said to have replied, “because that’s where the money is.”

Obviously, Willie Sutton did not live in contemporary Cyprus, whose banking system, as Walter Russell Mead observes, is “easily the shadiest” in the eurozone. “Russian oligarchs use the island’s banks as a combination piggy bank and money laundry,” he notes — it’s a good rule of thumb that Russians + money = corruption  — and then there is the problem of stupendous mismanagement: “Largely because the Cypriot bankers invested lots of their clients’ cash in Greek bonds, the financial system is underwater.”  (Memo to self: why are Russian gangsters always called “oligarchs”?)

Now what?  Well, in exchange for a €10 billion bailout, the International Monetary Fund and European lenders (Deutschland, Deutschland über, etc.) are exacting a one-off (or so they say) 10 percent “levy” on all bank deposits over €100,000, payable Monday.  Goat herders, taxi drivers, et al. (what the New York Times calls “pensioners, workers and regulator depositors”) with less than €100,000 get whacked 6.75 percent.

As Business Insider reports, this so-called “stability levy” is expected to raise €5.8 billion. It is also expected to raise a “flood of concerns” — that’s bureaucratese for “panic” — about a run on banks elsewhere in the eurozone, where (as the report delicately puts it) “fragile public finances are also under scrutiny.”

Right. So that €100,000 it took you years to save is, come Monday, worth €90,000. And how about the following Tuesday, when it will turn out Cypriot banks need more dough? What then?  Jörg Asmussen, a member of the Executive Board of the European Central Bank, explained it thus: “In order to have burden-sharing, you extend the tax base. To residents and also to non-residents.” Spoken like a true socialist (or Social Democrat, which is the same thing).  Politicians and bankers mess up, you pay. Private property? Ha, ha, ha. [Update: my friend Janet Daley writes: "It's worth noting that this EU confiscation of private savings is using the same excuse (catching money-launderers and foreign currency smugglers) that the US uses to justify FATCA [Foreign Account Tax Compliance Act]. The civil liberties and property rights of law-abiding people can be trampled over in the name of pursuing ‘criminals.’”]

So what do you suppose happened in Cyprus?  Yes, Virginia, people rushed to the closest ATM and tried to get their money out.  Alas, many machines are already refusing to honor withdrawal requests. (Deposits, though, are happily accepted.)

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Top Rated Comments   
Here in the US, the government is much more subtle. Here they steal our savings by using the Federal reserve to create more fiat money. This devalues our savings. The effect is identical.
1 year ago
1 year ago Link To Comment
A morally literate people would call this by its right name, theft.
1 year ago
1 year ago Link To Comment
It's only a matter of time before this sort of Hope&Change! will come to this side of the Atlantic.

I think that the target here will not be deposits but retirement accounts. The government will snap them up to "guarantee their safety" offer "rock solid" SS benefits in their place. Later the benefits will be means tested to ensure a "fair and equitable" retirement for all at low rates not protected from the coming inflation.

Elections have consequences. Vote accordingly.
1 year ago
1 year ago Link To Comment
All Comments   (28)
All Comments   (28)
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The US should offer to bail out Cyprus if they would become a Category III or IV US Territory, which would involve a plebiscite and then a representative going to the US House of Representatives with a petition, copy of their constitution, and seeking to be admitted. Cypriots would be dazzled by not losing their money. Others in the European chicken coop would react accordingly. Wouldn't it be fun to have FBI auditors look over the bank records?
1 year ago
1 year ago Link To Comment
Should I just go ahead and cash out my IRA now? I need to get my car fixed.
1 year ago
1 year ago Link To Comment
We have to remember this: you cannot teach the President anything. One more time: you cannot teach the President anything. Last call: you cannot teach the President anything. He will learn nothing from what is happening in the German Federation because he hasn't learned anything. As bad as things are and they are terrible, we are in for a world of hurt.
1 year ago
1 year ago Link To Comment
And we have all of those low-hanging, ripe 401(k)s ready to be plucked.
1 year ago
1 year ago Link To Comment
Not funny,our own "share the wealthers" have just put their reading glasses on. I wasn't able to save much twords my retirement in my working lifetime though it never really bothered me much.I would gently ask my coworkers and friends if they really thought that Big Broke Brother Government could ever leave their pile of money alone?
I tell my friend as he learns a new skill,be it mudding a wall or souldering together copper pipes that you get the TOUCH for it soon enough.Like a shoplifter in a hurry our government has been telegraphing their punches for years!
1 year ago
1 year ago Link To Comment
A banking system that depends on deposits from Vladimir Putin's mafia cronies and invests in Greek bonds. What could possibly go wrong?

True story: years ago I worked in a place where we had dealings in Ukraine which required occasional transfers of small amounts of $ (by international standards) to a bank in Kiev. We'd send say 100k from our bank to the transfer bank in NYC which would send it to the bank in Kiev. The money would hit the bank in Kiev and then go on vacation for a week or two to Cyprus before making back into Kiev account.

I don't understand what could possibly go wrong with a system like that.
1 year ago
1 year ago Link To Comment
I've been waiting for the event that begins the collapse of the Euro and EU. I think this is it. The Left has crossed the red line.

The consequences are dire. Money will flow out of Cyprus, and probably the PIIGS since they're next. And soon money begins to flee all of Europe.
Cyprus moves to a cash and underground economy, trust in banks is dead. The banks fail anyway. Russia is pissed and move their money outside Europe, probably Dubai or something. Anger in the streets.

Even if they change their mind at the last moment, the damage is done. Everyone knows their money isn't theirs any more.

The Left's true colors are coming out of the closet. It isn't your money. "You didn't build that" means you didn't earn that and you don't own that.
1 year ago
1 year ago Link To Comment
After all didn't he warn us 5 years ago?
1 year ago
1 year ago Link To Comment
The Russians will not lose anything. The FSB has its tentacles deep into the EU. Any Russian who loses money in Cyprus is a low-level chump. The Russians are already in Dubai.
1 year ago
1 year ago Link To Comment
To Bobo from Texas. Hillary Clinton, when she was a senator already had her beady, greedy eyes on IRA's and 401k's as another source for her scheme to buy votes. Just wait until Hillary and Michelle run in 2016, according to rumors anyway, you ain't seen nuthin' yet.
1 year ago
1 year ago Link To Comment
How stupid do they think we are?, you ask. You won't like the answer.
The IMF is being used as a figleaf, not for the first time, with Christine Lagarde talking out of both sides of her mouth, also not for the first time. The real culprits: the shadowy and always lower-case 'euro zone group' -- an ad hoc claque of finance ministers and ministry officials from within the e-zone, not known for record keeping, who actually coughed up this crap in the wee hours of Sat. morning in Europe (the Friday-night news release game in spades). You can be sure that very, very few Brussels bureaucrats will appear on camera; for sport, you might want to track the movements and antics of Barroso. Sadly, the MSM is unlikely to go near, so far is it from the approved Narrative.

Janet Daley nearly gets it but not quite: " 'The civil liberties and property rights of law-abiding people can be trampled over in the name of pursuing ‘criminals.’'' But it's worse than that: law abiding and thrifty savers are themselves converted into criminals at the stroke of the pen of an unelected bureaucrat. So it is in Spain: a new law, effective at the end of next month, purports to 'extend the tax base' to the worldwide assets of non-resident individuals -- any assets in Spain itself are liable to forfeiture. International corps. are next. These guys are desperate.

The next two days in Cyprus will be very instructive; I do not know but it's a reasonable guess that Greek and Turkish Cypriots alike still have access to many weapons from the civil war. Next up: Italy and Spain. Meanwhile, drinks with umbrellas for Wall Street and MSM -- until the penny drops, that is, then chaos.

Put another way, the Jörg Asmussen's of the developed world belong at the end of a rope tied to a lamp post. The French are experts; this time, they'll have plenty of help.
1 year ago
1 year ago Link To Comment
How is this different than the Chrysler "bailout"? Bondholders made a conservative investment just like Cypriot depositors did. At this point, Chrysler bondholders would be happy to have 90% of their investment back.
1 year ago
1 year ago Link To Comment
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