The exact importance of the theft of euros from Cypriot banks this past weekend is difficult to determine at this stage but cannot be understated. The European Union government is stealing the private property from citizens and handing it to the wealthy backers of the banks. It is a bank robbery in reverse as this cartoon below shows:
The EU spin machine is trying to hide this truth, calling the 6.7%/9.9% theft a “wealth tax.” Mark J. Grant writing at ZeroHedge puts the lie to this bit of obfuscation:
Let’s get some things straight and look what has happened directly in the face. There was no tax on the bank accounts in Cyprus. There still is no tax; the Cyprus Parliament has not passed it and will not vote on it until tomorrow so whatever action takes place it is retroactive. Next, this was not enacted by Cyprus. The people from Nicosia did not go to the Summit and ask to have the bank accounts in their country minimized to help pay the bills. Far from it; the nations of Europe, Germany, France, the Netherlands and the rest, demanded that this take place, a “fait accompli,” the President of Cyprus said and Europe annexes Cyprus. Let’s be quite clear; the European Union has confiscated the private property of the citizens in Cyprus without debate, legislation or Parliamentary agreement.
If someone breaks into your home while your away and steals 10% of your possessions, we call it burglary and Society prosecutes and jails the thief if caught. If you run a small shop and the local mafia sends some thugs to extract a 10% “business tax” to do business on their turf, it’s called “extortion” and authorities prosecute it as a crime. In the United States the Fifth Amendment of the Constitution states citizens “shall not be deprived of life, liberty, or property, without due process of law; nor shall private property be taken for public use, without just compensation,” but even this has not prevented the abuse of eminent domain laws, most recently in New London Connecticut in a case that reached the US Supreme Court (Kelo v. City of New London). Europeans love to take Americans to task for our outdated or overly-restrictive constitution, yet that piece of parchment does at least stand between an abusive government backed by force and the powerless citizen.
The EU spinmeisters will also tar Cyprus with the same brush they use on the Greeks, Italians and Spanish – the southern EU states that spend too much and work too little, while the industrious and spend-thrift northern EU states (e.g. Germany) bail them out. But let’s not forget what a bank bailout does and does not do. A bank bailout does not punish debtor nations for laziness, it rewards the investors and owners of banks for their failures to practice due diligence and lend accordingly. Bank bailouts shift the losses the wealthiest would suffer onto the balance sheets of governments and the taxpayers who fund them. Since the vast majority of tax payers are of modest means, bank bailouts benefit the rich at the expense of the poor. Germany isn’t bailing out Greece because it’s generous; it’s bailing them out because wealthy Germans who own the banks would lose their shirts if the banks were allowed to go bankrupt.
For months, really years now, the world has watched the EU try to hold itself together, not because it worried about Greeks or Spaniards starving in the streets, but rather to protect the rich who fund the banks and also exercise undue influence on the government. Cypriots would not lose 10% of their money if the banks failed because the banks are covered by deposit insurance, but the wealthy Germans who backed the banks would lose their investments. Similarly if Greece refused to pay its debt and left the euro, Greeks would be freed from the burden of austerity measures dictated by Germany and be able to prosper with a devalued currency, but the German investors who back the banks who lent money to Greece would suffer.
In 1992 the European Union heralded a new beginning for the continent promising economic cooperation and prosperity for its peoples. Two decades on the EU has become a grotesque caricature that resorts to petty theft to survive in order to protect its wealthy elite. Pathetic.
UPDATE: Walter Russell Meade disagrees, writing, ” Any sentient depositor in a Cypriot bank had to know that things weren’t right. The dubious nature of the Cypriot banking system has been a notorious fact for almost a generation; during all this time Cypriots seemed perfectly happy that their country was running an offshore money laundry for some of the nastiest people around.”
I respect Meade a lot, and you will will find more links to his articles on this site than any other, but I believe the good professor is wrong in his conclusions. First, as recently as July 2011 Cypriot banks passed European Banking Authority (EBA) stress tests. It’s not as if everyone knew Cypriot banks were wobbly and it was only a matter of time before they collapsed. Second, these banks were operating under EBA rules and authority so if they were indeed “running an offshore money laundry for some of the nastiest people around,” they were doing so under EU regulation. Finally, if these accounts were held by “nasty people” why didn’t the EU charge them with crimes or go to court to confiscate their money? There are all types of nasty people sitting in jails around the USA waiting for their day in court, and that day will come and they will be afforded due process and allowed to defend themselves. Would Meade support pronouncing all of them guilty and order them to serve prison sentences simply because they were nasty?
I don’t care a wit about how the money was acquired in those bank accounts. What I care about is the unprecedented decision to steal private property without due process. There are ways that dirty money can be tracked and expunged from the banking system. Within the USA there are numerous processes in place that prevent funds being funneled to rogue regimes like Iran or nasty characters like Mexican drug lords, but everyone, drug lord and drug abuser are afforded due process before their money is confiscated.
By stealing money from bank accounts, the EU is courting a disaster whose scale threatens world prosperity. A bank run in Europe would destabilize the entire economic system, from Cyprus to South Africa and New York to Nanjing. The international economic system is robust but it is not indestructible, and History has shown time and time again that the Achilles Heel of the system is the banks, and their weakness is the freedom of depositor to take their cash. Break the trust with the depositor, and the results are always catastrophic.
Update 2: The Cypriot parliament has told the EU to take a long run off a short pier. No one knows what happens next. Interesting times.