Location of Cyprus (Photo credit: Wikipedia)
I wrote this article last Friday. Events are moving so fast and unpredictably in Cyprus–first left, then right, then up, then down–that whatever you write may be compromised in just hours or days.
Therefore, some of the article I penned on Friday is not necessarily accurate this Monday. Nevertheless, there is a valid point to this article: there is now evidence that the governments of Cyprus and the EU are now sufficiently desperate to resort to open confiscation of bank accounts and pension funds to keep their fiat-money, Ponzi-scheme afloat. The first implication is that it may no longer be safe to store all of your savings in a conventional bank account in Europe.
The big question is How soon will the US emulate the European example? I’ve heard reports that Obama is in the process of dramatically increasing the number of IRS agents. If the reports are true, you can bet that one of the new IRS agents’ primary tasks will be to discover the bank accounts of delinquent taxpayers and confiscate whatever currency they can find therein.
Confiscation from bank accounts may be on the verge of at least supplanting inflation as gov-co’s favorite means of robbing the public.
Here’s the original article:
On March 16th—while Cypriot banks were closed—the government of Cyprus proposed a 6.75% to 9.9% “tax” on all Cypriot bank accounts. The taxes were intended to raise 5.8 billion euros needed to authorize a 10 billion euro bailout of Cypriot banks.
A sense of shock, fear, and confusion quickly engulfed Cyprus, then Europe, and then much of the world.
There was no end to interpretations of what happened and why it happened.
When all was said and done (and little was actually done, but much was said), this much seemed certain: confidence in the Cypriot banking system had shattered; confidence in the EU banking system had been shaken; and confidence in the global banking system had been diminished
As I write this on March 23rd, no new taxes have actually been imposed. Nevertheless, the “why” behind the proposed bank deposit tax is unknown, the people are perplexed and the pundits have panicked. Some say the proposed confiscation of depositors’ funds was probably orchestrated by a conspiracy of evil geniuses bent on ruling the world. Others insist that the proposed taxes were designed by a cadre of financial and political idiots who couldn’t rule a public restroom.
• Those who believe that the Cyprus crisis was dominated by idiots argue that, fundamentally, the threatened deposit tax was the result of gross stupidity since any fool should’ve seen that it might cause:
1) Widespread public outrage among Cypriots resulting in riots, significant damage to property, substantial costs to the Cypriot economy, and even political upheaval
2) A significant loss of public confidence in Cypriot banks and even banks around the world. The whole monetary system (like any other lucrative “con-game”) depends on the “confidence” of the “marks” to be robbed (a/k/a the “people”). Anything that diminishes public confidence should be anathema to the governments and central banker of the world. Thus, only a moron could support the Cypriot bank account tax.
3) Contagion. Bank runs and loss of confidence in the banking system in Cyprus might precipitate bank runs in other countries of the EU—or even the world. In fact, since the Cyprus Crisis began, the governments of Australia, New Zealand, Spain and Italy have considered proposals to impose similar “wealth taxes” on their peoples. That must be bad for the banking business.
More, the Cyprus Crisis is based on a lousy 10 billion euros. If the Cypriots don’t cough up 5.8 billion euros, the ECB and IMF will withhold the 10 billion euros that Cypriot banks need to survive.
But 10 billion euros is chump change. The US Federal Reserve has already dispersed billions of dollars to foreign banks in the context of QE2. The Fed is currently printing an extra $85 billion per month to support QE3. Ten billion euros are less than one week’s QE3. So why doesn’t some “white knight” (maybe the US, Russia or China) ride to the Cypriots’ rescue and just donate 10 billion euros?
Forbes magazine, writing in “The Botching of the Cyprus Bailout,” declared that,
“ [T]he German-led group of EU officials who engineered this weekend’s Cyprus bank bailout . . . have opted for a ‘solution’ to what may be the single most inexplicably irresponsible decision in banking supervision in the advanced world since the 1930s.”
That which is “inexplicable” and “irresponsible” is obviously stupid. The only way the Cyprus crisis makes any sense is as a farce orchestrated by incompetents and fools.
• Even so, conspiracy theorists disagree. They see the Cyprus Crisis as caused by malevolent geniuses such as usually play the villains in spy novels.
Since Russia reportedly holds at least 23 billion euros in the Cypriot banks, the Russian government, Russian mafia, and former members of the Russian KGB are alleged to be actively threatening the lives of any Cypriot politician or official who surrenders Russian funds to the IMF.
Some suspect that Russia needs the Cypriot connection to better facilitate Russian relations to Iran and Syria. Some believe that the IMF intentionally attacked Cyprus as a means to attack Russia.
There are rumors of a Russian deal with Cyprus to provide some or all of the needed 10 billion euros in return for a Russian naval seaport to be located on Cyprus.
Conspiracy theories abound, but all seem based on a fundamental premise: No one in a position of real power could be dumb enough to have caused the Cyrus crisis without an ulterior motive (conspiracy).
The Daily Bell offered its own conspiracy theory:
“. . . statements made by top EU leaders in the past predicted that it will take a considerable crisis to create the longed-for deeper [European] union. . . . The only conclusion we can come to, watching events unfold in Cyprus, Greece, Spain and Italy, is that these moves are, in fact, being made to engender a kind of chaos. . . . [that] the crisis is being exacerbated on purpose becomes an increasingly logical opinion.”
• Gold guru Jim Sinclair commented extensively on Cyprus over the past week. Some of his comments seem to align with the “rulers-are-idiots” proponents; others seem more aligned with the conspiracy theorists.
Here are a few of his remarks:
“This is one of the most important events in modern times for the popularity of holding gold rather than holding fiat money.”
“There was a great miscalculation . . . and the situation has quickly turned into a catastrophe. The people at the IMF, which have spearheaded this disaster, never expected the ‘Cyprus Solution’ to blow up in their face the way it has.
Cyprus is showing the world that while your money in the bank may be safe from your local cat burglar, it’s not safe at all from the biggest thief of all: your government. I.e., FDIC insurance will protect American bank accounts from losses caused by bank mismanagement—but it won’t protect depositors’ funds from confiscation by the national government.
That leaves us to wonder Which robber do we fear more? The local cat burglar—or the national government?
Sinclair: “In truth, the IMF disaster which has just taken place in Cyprus is comparable to the assassination of Archduke Ferdinand that started World War I. This is a major event in history.”
“They were going to shift the onus of the funds required from the busted banks to the depositors and away from central banks. That would have been to the depositors, and away from QE.” [Quantitative Easing]
Sinclair implies that the Cyprus crisis is evidence that central banks are fed up with being the sucker of last resort. E.g., central banks may be tired of losing money to support every other bank and financial institution that might otherwise claim to be “too big to fail”. Therefore, central banks are trying to pass their obligation to fund loser banks to taxpayers.
More, “away from QE” means away from inflation.
The fundamental purpose of monetary inflation is to reduce the purchasing power of the fiat dollar so as to allow the US government (the world’s biggest debtor) to repay its creditors with cheaper dollars and thereby reduce the real size of the national debt as measured in purchasing power.
More simply, the object of monetary inflation is to rob creditors.
However, if Sinclair is right and the central banks are actually moving “away from QE” (inflation), then could it be that monetary inflation has failed as an efficient means to rob creditors?
Remember, QE was intended to inject enormous sums of fiat currency into the US economy, cause significant inflation, and thereby “stimulate” the economy to become active and regain some level of prosperity. However, during four years of QE, the Federal Reserve has injected several trillion fiat dollars into the US economy but only generated enough inflation and “stimulus” to keep the economy from collapsing. But the currency intended to inflate the dollar wasn’t spent. Banks held onto it. Result? The gov-co didn’t really get much “bang” (inflation) for their “bucks”.
Have the Powers That Be (PTB) rejected inflation as the primary means to rob their creditors? Is inflation too slow? Too unreliable?
But if the PTB can no longer rely on inflation to rob creditors subtly, will they resort to open robbery of creditors’ bank accounts? Open repudiation of existing debts? Collapsing the dollar? How far will the Powers go to continue robbing their creditors?
• Sinclair: “Up to now what has been done is to insure the bank depositors without them having to lose. This was the ‘Super Glue’ to hold together the possibility of an economic recovery.”
Sinclair is right. So long as the funds in our bank accounts were guaranteed safe, we could leave those funds in the banks where they could be used to write checks or use debit cards. Checks and debit card allowed for fast purchasing of products and services. I walk into a store, see something I want and give the storekeeper a check, debit card or credit card. The speed and convenience of these means of purchasing make impulse purchases convenient and fast. Impulse purchases make the economy go ‘round—and go fast.
But if the people come to believe that their bank deposits aren’t safe, they’ll withdraw their funds. Once that happens, there’ll be fewer checking accounts, less debit cards, probably fewer credit cards—and much less “impulse buying”. Without the speed of checking accounts or electronic methods of payment, the number of transactions and the “velocity of money” will slow significantly, and the economy may slow significantly. Without confidence that our bank accounts are secure from all thieves—including the government—we could slide into a full-blown depression.
• I initially doubted that the consequences of the Cyprus crisis would be as grim as Mr. Sinclair supposed. The “worst case scenario” is, by definition, always the “least likely” scenario. Insofar as Mr. Sinclair predicted a “worst case,” odds are he was wrong.
My doubt was reinforced last Tuesday when The New York Times reported that proposed Cyprus bank-deposit tax had been scuttled:
“[Cypriot] Lawmakers rejected a 10 billion euro bailout package on Tuesday, sending the president back to the drawing board to devise a new plan that might still enable the country to receive a financial lifeline while avoiding a default that could reignite the euro crisis. After the parliamentary vote, the European Central Bank indicated that it would not immediately cut off emergency cash—without which Cypriot banks probably could not survive.”
See, Mr. Sinclair? You didn’t have to cry. The idiotic but kindly folks at the ECB saw the error of their ways and terminated the proposed deposit-tax proposal. The Cypriot economy could continue to limp on.
• But what a difference a day (or two) makes. Now, I’m beginning to believe Mr. Sinclair was right because on Thursday, The New York Times published “Mood Darkens in Cyprus as Deadline Is Set for Bailout”. That article claimed,
“As the European Central Bank threatened to shut off crucial financing for banks in Cyprus without a rapid accord on an international bailout, members of Parliament put off a vote on Thursday on yet another revamped formula.
“The ECB warned that the Cyprus Popular Bank risked an immediate default if [the Cypriot] Parliament did not pass the bailout measure by Monday.”
Dayham! No more Mr. Nice Guy.
The “kindly folks” at the ECB and IMF are playing hardball and using collection procedures that would make Al Capone proud. On Tuesday, they agreed to “play nice”—but by Thursday, they were showing their teeth. The Cyprus government is being extorted by the ECB and IMF. Pay or die.
“President Nicos Anastasiades presented Parliament on Thursday with a plan that scrapped a controversial tax on bank deposits. Experts warned, however, that the bank deposit-tax plan might need to be revisited unless the government found other means to reach the goal of 5.8 billion euros, or $7.5 billion, needed to satisfy international negotiators.”
E.g., the Cypriot government has to come up with 5.8 billion euros and the only way they can, is to take it from someone else. Bank depositors have far more than 5.8 billion euros, so they were the logical candidates to be robbed.
Unfortunately, the bank depositors wouldn’t consent to be robbed. Therefore, the government thief had to either find some other wealthy entity to rob (say, pensions)—or simply to rob the bank depositors at “gunpoint” (by overt, non-consensual force).
Note that, even though the Cypriot government claims to have abandoned their proposed bank-deposit tax, they’re still keeping Cypriot banks closed in a “bank holiday” until (at least) next Tuesday.
Why the “bank holiday”? The Cyprus government will answer To prevent a “run” on the banks. But I suspect there’s an ulterior motive: to keep the bank deposits in the banks where they can be most easily “confiscated” by government. Once the banks open, the currency will be withdrawn and deposited in places of banks that the Cyprus government can’t even find, let alone confiscate.
Thus, it appears that the government of Cyprus are still toying with the idea of robbing bank depositors.
“Lawmakers will also vote on restrictions on taking cash out of banks and out of the country, known as capital controls. The bill would limit cash withdrawals, prohibit or restrict check cashing and bar ‘premature’ account closings and any other transaction that authorities deemed unwarranted.”
The Cypriot government will pass laws that compel the people to leave their money in bank accounts that are easily robbed by government.
If capital controls can be imposed in Cyprus, they can also be imposed in the US. In fact, US laws already inhibit private Americans from taking their cash from US banks and moving it to foreign banks. Like Cyprus, the US government wants you to keep your money at a location/bank where government confiscation is easy.
“The [new] plan sent to Parliament on Thursday would nationalize pension funds from state-run companies and conduct an emergency bond sale to help raise the 5.8 billion euros Cyprus needs to secure a 10 billion euro bailout.”
If the Cyprus government can’t rob private bank accounts, they’ll rob pensions—but the bankrupt government is going to rob somebody.
Conclusion
The Cyprus crisis suggests that the PTB may prefer to reduce reliance on the seemingly “invisible” robbery of creditors by means of inflation and instead embrace the overt violence of robbing bank depositors by force.
A week ago, I would’ve bet that a shift by the PTB from relying on inflation to in-your-face confiscation was almost impossible.
I’d’ve lost that bet.
I’m surprised by the “Powers” apparent transition from inflation to confiscation. That transition suggests that the PTB are either very stupid, very desperate or very wicked.
While we may not yet be able to accurately assess the nature of the PTB or the real cause for the Cyprus Crisis, we can reasonably suppose that the transition from robbery-by-inflation to robbery-by-confiscation signals a major change in the current economic scenario.
Something important is happening in Cyprus.
I know because on Tuesday the ECB agreed that they would “play nice” and not immediately shut down a major Cyprus bank. The crisis appeared to be over. But, on Thursday, the ECB threatened Cyprus like a Mafia knee breaker.
I know something big is going on behind the scenes because the problem could be easily resolved if just one nation or central bank would to kick in a lousy 10 billion euros.
I know something important is happening because the Cyprus crisis is being allowed and even caused to fester, even though it could be easily resolved.
The Cyprus Crisis is beyond stupid. It’s being made to happen. Someone—perhaps some one or some organization who believes that “a crisis is a terrible thing to waste”—wants this crisis.
I don’t know what the real motive(s) behind the Cyprus crisis may be. What underlying force could’ve pushed the “Powers” to shift their strategy from reliance on inflation to engage in outright confiscation? Common sense tells me that whatever the underlying force precipitated that shift may be, it must be huge.
If so, we may be entering an era of violent “snatch-and-grab” robberies by the PTB.
Thus, Jim Sinclair may be right. Perhaps the “Cyprus Crisis” is as important as the assassination of Archduke Ferdinand in that it might mark the beginning of an era of outright, Gestapo-style confiscation of bank accounts. So far, the banksters haven’t actually confiscated any bank accounts. But they came so close to open confiscation of part of one nation’s bank accounts, that anyone who holds a bank account should be concerned.
The current evidence suggests that you might be wise to move some of your wealth from your “easily-accessible” bank accounts to another location or even to another form of wealth that’s not so easily found, accessed or confiscated by your “friends” in Washington DC.
