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Thursday, March 21, 2013

Today it's Cyprus, tomorrow...?

Courtesy of Phil Davis' Stock World.
Just when you thought the World's money-men were only going to loot your savings indirectly, by having their government buds run paper-money printing-presses non-stop AND taxing the crap out of you to bail them out because they're too big to jail, the Euro Kleptocrats are trying out a new scheme to roll their fellow citizens more directly, by taxing their supposedly guaranteed savings deposits.

In his Seeking Alpha post, "A Better Alternative for Cyprus", Felix Salmon effectively skewers one attempt to justify this blatant act of robbery :
Andrew Ross Sorkin defends the Cyprus deal today, on the grounds that (a) Cyprus is "tiny", and "largely irrelevant to the global economy"; (b) Cyprus is a genuinely unique case; (c) it would be grossly unfair not to bail in Russian depositors, who are generally losing less than they've made in interest over the past few years; and (d) the Greek alternative "will not work in Cyprus", and that therefore (this last bit is only implied, never stated outright) the current plan is really the only option.
Notably, Sorkin doesn't attempt to defend the most indefensible part of the plan - the confiscation of wealth from depositors with sovereign deposit guarantees. While hedge-fund bondholders will get paid their full $1.4 billion on June 3, the date of Cyprus's next coupon payment, small depositors with just a few hundred or a few thousand euros in savings will lose money which the Cypriot government had promised them was safe. Why is the government's promise to foreign hedge funds more important than its promise to its own citizens? Sorkin never attempts an answer to that one.
David Zervos, quoted in the Business Insider, goes further, describing the attack by the Troika -- the EC, ECB, and IMF - on Cypriot savers as nothing less than waging a "Nuclear War On Savings And Wealth":
All of us should really take a moment to consider what the governments of Europe have done. To be clear, they initiated a surprise assault on the precautionary savings of their own people. Such a move should send shock waves across the entire population of the developed world. This was not a Bernanke style slow moving financial repression against risk free savings that is meant to stir up animal spirits and force risk taking. This is a nuclear war on savings and wealth - something that will likely crush animal spirits. This is a policy move you expect from a dictatorial regime in sub-Saharan Africa, not in an EMU member state. If the European governments can clandestinely expropriate 7 to 10 percent of their hard working citizen's precautionary savings after the close of business on a Friday night, what else are they capable of doing? Why even hold money in a bank account? Are they trying to start a bank run? 
 And Nicole Gelinas offers this assessment in City Journal:
In voting down an arbitrary, confiscatory tax, Cypriot lawmakers stuck up not only for their constituents but also for the principle of investor discipline. Merkel and the rest of European officialdom should start doing the same.
It's hard to imagine Angela Merkel instructing the Troika to take its collective foot off Cyprus' throat until AFTER she's triumphed in the upcoming German elections...


UPDATE

For other views of the Cyprus Financial Crisis and its wider implications, check out these links to The Economist (from which the above illustration was derived), Financial Sense, CNBC, and Der Speigel.



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