Imagine you’re saving for your retirement or your kids’ college funds. You’re a responsible human being, and for every dollar you put into a bank you expect to get $1 out when you need it. Now imagine that because of the bad public policy and fiscal malfeasance of your government and other sovereign nations a situation can unfold where — at any time — that dollar, or tens-of-thousands of dollars, can be plundered by people who claim they need it to protect you from the consequences of their bad behavior.
Well, imagine no longer. You live in that world.
Cyprus clinched a last-minute solution to avert imminent financial meltdown early Monday after it agreed to slash its oversized banking sector and inflict hefty losses on wealthy depositors in troubled banks to secure a 10 billion euro ($13 billion) bailout. … (emphasis added).
[If you kept reading until the 13th paragraph you’d find out]:
Deposits at Bank of Cyprus above the 100,000 euro [130,000 dollars] insured level will be frozen until it becomes clear whether or to what extent they will also be forced to take losses. The money from those deposits will eventually be converted into bank shares. German Finance Minister Wolfgang Schaeuble said he expected a bit more than 50 percent of savings at Bank of Cyprus will be involved in the swap (emphasis added).
Ask yourself why it took the Associated Press until the 13th paragraph to define what a “wealthy” depositor was. One would think that part of the story was relevant enough to possibly be included in the nut graf (i.e., nutshell paragraph) or shortly thereafter, would it not? Take a look around the web and you will find that is indeed the case when an outlet is at least attempting to be intellectually honest. Others, like Bloomberg, not so much (11th paragraph).
This sort of action creates a very dangerous precedent. Years ago I told my girlfriend (now my wife) that socialist goons in our own government would one day go for our retirement savings, and the Cyprus debacle proves it.
People ask, “Why do you care about that little country? Who cares?” I care because I look at Europe and I see a harbinger of things to come. And given that our economy is so huge, the bigger they are …
“But Doug,” you say, “the markets are doing fine. The economy is improving!”
Analysts were not convinced however that the rally would last much longer than three or four days.
Head of trading at ETX Capital, Joe Rundle told CNBC Monday the Cyprus deal was “unpalatable” and the last week has left markets feeling nervous about the threat of contagion spreading across weaker euro zone nations.
“Markets are welcoming the news but this rally is likely to be short-lived with the attention likely to re-shift again to the prolonged political uncertainties in Italy, a country that remains ungovernable,” he said in a research note.
As I said before, you can only accrue so much debt before the accounting tricks run out. Some debt can be a good thing, as in your individual life (e.g., you take out a mortgage on a house when you are at a stage in life where you can responsibly do so). Similarly, when your debt becomes a giant Jenga tower the size of Galactus, you are in serious trouble. And by ‘trouble’ I mean ‘doomed.’
The unintended consequences of these evil clown sheep herders will be vast and painful. Don’t believe me? Just ask the Russians. If you think they’re going to sit idly by while their citizens (some good, some really, really bad) get the shaft, you are mistaken.