Mind's Eye What might the Cyprus Deposit Snatch Mean For Us?

Cyprus is about to snatch 10% of bank deposits in order to get an EU
bail out - subject to a vote next week. The island is a stop off for
Russian hot money on its way to the offshore industry most controlled
by UK and USA. I doubt much of this smart money will be caught.

The UK and US have rather similar debt issues if we ignore financial
services (much worse or better depending on view in the UK as we have
more bankersterism as a % of GDP).
UK/US figures are 98/96 (household debt), 85/77 (corporate debt) and
72/84 (government debt). The idea is to get the total down to 180% of
GDP.
The necessary debt-reduction needed in the US to reach a sustainable
debt level, was over $8.2 trillion using debt numbers as of 2009 -
figures are proportionately similar in the UK.

If the US proceeds with its own wealth tax, then deposits may well be
one "wealth class" that gets impaired. Of course, since in the US
other financial assets, namely the stock market, account for a far
greater proportion of household net worth, it is quite possible that
instead of impairing deposits at US banks, which already subsist
solely due to the Fed's $2 trillion in excess reserves, the government
may instead choose to generously tax simple 30% of all of your stock
holdings, and achieve the same "wealth transfer" result. Something
similar could be done in the UK.

In Europe its being suggested a 15% deposit tax in Italy would bring
its government spending down below 100% - amazingly the Italians have
more wealth than the Germans. Much of the data can be found at
http://www.handelsblatt.com/politik/international/brisante-daten-die-maer-von-den-klammen-krisenstaaten-seite-all/7931578-all.html

Apart from the uncomfortable thought that money in a mattress is no
likely to devalue less than that held in bank accounts, I rather
favour wealth taxes. Of course, Cyprus is a tiny country far far away
- a bit like others before WW2 perhaps and half of it is Turkish. My
contention is that if we don't get after the filthy rich and their ill-
gotten gains, our governments will come looking for our money simply
because it is easier to find and steal. Cyprus may simply be where
they are testing this out.

In Cyprus you will get some bank shares in return for your involuntary
10% loss (presumably worthless in banks needing bailing out) and I'd
argue we have already suffered this in the UK and US via TARPs and QEs
- there are many economic ways to strip deposits governments can use.
Most are economically illiterate and don't bother finding out what's
really going on. We may now be at the point where a big country
(Italy, Spain) is tested with this direct theft policy.

The answer is to go after the crooks and filthy rich, sequester their
assets and temporarily nationalise the banks before splitting them
into 'real investment' centres to get us all working again on sensible
products.


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