The Cyprus Swindle
On March 16th, 2013 a tiny island nation south of Turkey in the eastern Mediterranean Sea became the newest and most dangerous financial battleground in the world.
Any person, with any money, in any bank, anywhere in the world should take heed of the fate of bank deposits in Cyprus. Your deposits may be next.
In banker talk, it’s called a “haircut”.
To rest of us, it’s called “highway robbery!”
Only an artifact of modern banking technology – the ATM – has allowed citizens access to their own money.
Debt Raises Its Ugly Head
The world was tooling along minding its own business recovering from the Great Recession. Everyone is happy. 401Ks, flush with freshly printed money driving up stock prices, are at record highs. Businesses are swimming in cash. Millionaires and billionaires are getting richer.
Then… smack!… all of the sudden… reality set in again.
I hate when that happens!
Its the law of gravity. What goes up, must come down. Speculative investments and printing money inflate unrealistic money bubbles that must deflate and fall flat when the air lets out.
That is what happened in the U.S., Greece, Ireland, Iceland, Italy, Spain and now tiny Cyprus.
When a nation’s financial system teeters on the brink of collapse, what can be done?
If left alone banks fail, depositors lose their savings and, without financing, a nation’s economy grinds to a halt and tumbles into a nasty depression.
That is what Cyprus faces on Monday!
The United States faced that same prospect back on Friday, October 3rd, 2008. Congress quickly passed TARP which the President signed into law that day to infuse up to $700 billion cash into a financial system set to collapse on Monday, October 6th. That is what saved the U.S. economy.
Cyprus doesn’t have that option. Instead, it must depend on the EU, ECB and the IMF to bail out its failed banking system. As a condition for a €10 billion loan to save it, Cyprus is required to put up bank deposits to pay for most of the loan.
In other words, without a hint it was coming, individual Cypriot depositors are gonna have money robbed from their bank accounts!
Banks have been closed in Cyprus since March 15th, shutting off account access, while details are getting sorted out. Only some ATM’s still work.
The Plot Thickens
Nobody likes the Russian mafia. Nobody likes fat cat millionaires and billionaires either. They hold a big chunk of a whopping €68 billion found in bank deposits in little-bitty Cyprus with only 1.1 million residents. That is more than 3 times its GDP!
Cyprus banks are used for money laundering and fake tax dodges by the Russian mob and fat cats. Cyprus supplies most of Russia’s investment capital.
Someone in the EU got the brilliant idea to make rich outside bank depositors pay for Cyprus’s foolish bank debt in order to save the EU and its precious euro from embarrassment.
At first all depositors were supposed to pay. When that got shouted down they settled on a 20% levy on deposits over €100,000. Yeah! Sock it to the greedy rich and money launderers! That works.
There are many reading this who probably think soaking rich Russians is a perfectly fine solution. It isn’t.
It isn’t because those responsible for debt are not the ones paying for it.
Nobody has sympathy for criminals and tax dodgers. They should be made to pay for their crimes, but not this way.
This is institutionalized theft by governments anytime, anywhere. Distant governments are deciding who they can steal from.
Their first instinct was to make every Cypriot depositor pay for something they had nothing to do with. They were forced to abandon that idea. Then they settled for despicable outside depositors.
Next time it might be your government going after your bank account. And, next time, you might no be so lucky.
That is why any person, with any money, in any bank, anywhere in the world should take heed of the fate of bank deposits in Cyprus.
Update 3/24/2013 10:44PM EDT:
The Wall Street Journal Reports tonight a loan deal for Cyprus was reached. Their email announcement said there will be a 40% “haircut” on deposits in the Bank of Cyprus over $129,760. Legal thievery is alive and well in the eurozone!! Their article says Cyprus’s 2nd largest bank, Cyprus Popular Bank, will be shut down.