Cyprus has certainly shaken up the world.
Our Congress is now addressing concerns over the European Union demands that a percentage of Cypriot deposits be seized before it bails-out the banks on the Mediterranean island. There are reports that Cyprus still may seize bank accounts, but restrict the seizures to large depositors — but even that is unclear at this moment.
When the Cypriot troubles became international news, Professor Jacobson took a reader poll with eye-popping results. Between the “Yes” and the “Lean Yes” options, nearly 90 percent of respondents believe a similar act could happen here.
Now, one representative has offered a “Sense of the House” resolution to assuage American worries.
[Rep. Billy Long (R-Mo.)] Long said Wednesday that his resolution, H.Res. 129, was introduced to ensure the United States never considers a levy on deposits.
“The government should not tax people’s private savings accounts, which they have already paid taxes on, especially for the purpose of funding more bailouts,” Long said. “I was shocked by the news that some countries might be considering these kinds of taxes, and I think Congress should say that this kind of tax won’t happen in America.”
At this point, the Missouri representative remains the only sponsor of the resolution.
Meanwhile, Cypriot President Nicos Anastasiades is in a series of emergency meetings in Brussels in an desperate attempt to get a bailout.
Cyprus needs to raise 5.8bn euros (£5bn) to qualify for a 10bn bailout and avoid bankruptcy.
The EU’s economics chief Olli Rehn said the island had only “hard choices left” and must agree terms on Sunday.
Cypriot leaders are struggling to agree how to raise the money.
Anne Sorock had earlier reported that the lawmakers in Cyprus wisely rejected the original EU proposal to seize assets. However, the political leaders of Cyprus are now massaging the language and proposing to offer Parliament a new alternative for funding the bailout with a “levy”.
Mr. Anastasiades had also briefed Cypriot political leaders on the outline, which is said to call for imposing a hefty one-time tax on bank deposits above 100,000 euros, or about $130,000. Whether that will pass Parliament, whose signoff is needed, remains to be seen.
“The situation is very difficult,” the president said in a statement issued early Sunday.
Difficult, indeed. German Finance Minister Wolfgang Schaeuble said that the crisis in Cyprus has, “if anything,” grown worse over the last week and the euro has slipped 0.7 percent against the dollar (the most since the period ended March 1).
And, as the Cypriot president travels to Belgium, it must be noted that some of the island’s citizens view Moscow as a counter to Brussels, especially because Cyprus provides important financial services to wealthy Russians:
Cyprus has until now frozen out Russian interests from offshore gas concessions, snubbing a low bid by Novatek, a Russian company whose directors include Gennady Timchenko, a wealthy oil trader and judo club acquaintance of President Vladimir V. Putin’s. In talks last week in Moscow over a possible loan to Cyprus, Russia made clear that it expected a piece of the gas pie for its own companies, according to Cypriot officials and politicians.
…The Moscow talks yielded no deal and dashed hopes that Russia might ride to the rescue. But many Cypriots still view Russia as a useful counterweight to bullying by Brussels. “We are not a Trojan horse for Russia in Europe, but we are trying to protect our interests like everyone does,” said Petros Zarounas, a diplomatic adviser to the Democratic Party, part of the governing coalition.
Plainly, all eyes remain on Cyprus.
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The progressive politicos are scrambling to find a solution to keep the dominos from tipping over, but Margaret Thatcher said it best, “At some point, you run out of other people’s money to spend.”
“Whoever digs a pit will fall into it; if someone rolls a stone, it will roll back on them.” Proverbs 26:27
It’s only a matter of time before the entire financial system implodes and guess what, we will still be in the driver’s seat but not without considerable pain.
Yep, it’s only a matter of time…
I think what you might see here (unlike Cypress) is first the shareholders get wiped out, then the bondholders, and then what is left gets distributed among the depositors maybe with some deposit insurance from the US government. The problem with Cypress is that if the bondholders get wiped out, the problem spreads to other countries in the EU because of all their bond holdings and because the EU central bank holds those bonds, too.
But, for that to happen, the banks books have to open to depositors and analysts, all assets need to be marked to market, and the loan ratios and fraction of deposits held against loans, needs to be transparent. We would also need to go back to something like Glass Steagel where the JPM whale could not affect the solvency of the bank. In other words, banking would stop being a high stakes crap shoot.
Couple points, I am sympathetic to move back to Glass Steagel like regulations. It would end TBTF, whereas Dodd Frank institutionalizes the same, a remarkable feat (failure?).
Second, I support Rep. Long’s resolution, however his comments indicate he is not well informed as to what is going on in Cyprus. “…especially for the purpose of funding more bailouts,” leads me to believe he thinks they are striving to fund a TARP-like vehicle. That is simply not the case. The sovereign has guaranteed the banks, if BOC and Laiki fail the nation will default. Argentina, not AIG and Goldman Sachs, is the comparison. The damage will be amplified by the fact that Cyprus’ primary industry has been the financial sector that will cease to exist. Regardless of what choice is made the outcome for the average Cypriot will be bad, very bad.
Here’s a scenario:
The Eurocrats decide to make an example out of Cyprus and kick them out of the EU. Cyprus goes bankrupt while Brussels sneers.
Then, in fairly short order, say 6-to-24 months, Cyprus emerges from bankruptcy—and is in better shape than the EU and its too-big-to-fail components. Maybe Russia acquires a foothold in the Mediterranean.
Just wondering.
Quite a few theories over on the British blogs.
Unfortunately today one just can”t brush off international bankers conspiracy theories. The twist with this edition is the real involvement of Jewish money via the Russian exiled oligarchs .
Before they were moderated out, some posters linked it into a best seller stuff ranging back to the largely Jewish Bolsheviks & to the plunder of Russia post USSR fall.
Oligarch Boris Berenevsky was found dead this week & British authorities sent out radiatio teams etc at considerable cost for what is likely a suicide. It is a fact Boris was a rogue olgarch & that he was Jewish & an Israeli ciitizen . How many of the others are is the big question.
Certainly the Cypriots went to Moscow this week . Russia might be willing to suffer some losses if it hurts their expatriot enemies more.
Berezovsky.
one commenter wrote Hey Vlad you got the wrong Boris.
When the banks open on Tuesday, the depositors will all rush to their bank accounts regardless of what happens to the accounts while they are closed. There will be a bank run in Cyprus, guarantee it. The Euro Oligarchs are just testing the waters to see how far they can get before people revolt.
We can print money, (and do) so doing something as flagrant as confiscating assets would not be necessary.
BUT, anyone that has cash is getting 0%-2% when they should be getting 5-8%. This is essentially theft in interest, plus theft in the guise of destruction of our currency.
The USD remains RELATIVELY strong, because every confetti currency being printed, except Cyprus can’t. But the Euro already does their version of printing … I forget the process, some kind of guaranteed swaps maybe, not my thing.
Obama said Bush’s $550 billion deficit was unpatriotic. So Obama doubled down on being unpatriotic, which seems to fit the plan. Cyprus is only news because they weren’t subtle at the suggestion of stealing assets, as the US bubble blowers have been. Trillion a year deficits is theft from the next generation, and our own retirements.
If the big bond holders around the world decide it is time to sell the USD, Katy won’t be able to bar the door, even with all king’s horse’s and all the king’s men. Quantitative easing might prop up the market in slow times, but is too small to stop a “bank run”.
Stocks would surely follow the path down, if bonds lost 50% in two weeks. Soros will be short and will make a couple billion. Some might then feel like their wealth has been “confiscated” by Bernanke and Greenspan, in cahoots with the bailed out speculators from LTCM days, I suppose.
This is why I HATE when these idiotic talking heads all say this Cyprus confiscation won’t happen here. It ALREADY IS. These idiots obviously do not see the rising prices of oh, say, EVERYTHING. That is not a coincidence, that’s INFLATION. We are simply inflating everything away.
Inflating debts works well for debtors like our federal government to pay off our existing debts, but the dumbass Republicans and Democrats KEEP SPENDING LIKE OUR BUDGET IS 2X HIGHER THAN IT IS. You can’t get out of debt by spending more and more.
But, GAY MARRIAGE!! ILLEGAL ALIENS!!!
That’s what’s important!
re happening here: Yes, Fed printing is theft, i.e., taxation without representation. Also, the ObamaCare 3.8% home sales tax is effectively theft from those who store their wealth in property.
Would Long’s bill apply to American’s overseas deposits? The DOJ is going after those now: http://www.zerohedge.com/news/2013-03-24/switzerland-next-swiss-banks-set-foward-confidential-bank-client-data-us-officials I.e., we will get our European subordinates to levy the accounts of rich Americans. Isn’t Communism wonderful?
if anyone is interested the midnite hour & fewer moderators _ is on over at the Telegraph. Tim Stanley”s blog about Boris”s demise is fantastic entertainment.
The FEDS’ 0% interest rate has been helping the banks to rob savers in the USA for years.
The cap gains for Calif, when selling your prop istreated as ordinary income. But the voters passed Prop 30 to create an additional bracket of 13.3 %/ However, there steps up to that point. So when you sell, you become the “millionaire”
and are subject to the new rate via the steps up to the 13%.
There also is the Obama care tax and it is not on the gain
but on the gross sale price. Federal law so theexemption of 250/500 K does not protect you.
All these rules still being figured out, .If you are selling prepare to be socked. and Save some dough to pay more later if the rules are “re-intrepreted”
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