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.

The Washington Post via the Associated Press pseudo-reports:

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!”

Not so fast:

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.’

When profligate spending gives your country debt the size of Galactus, your country is doomed. There is no Fantastic Four to protect you. There are only politicians who will raid your bank account one way or the other.
When profligate spending gives your country debt the size of Galactus, it is doomed. There is no Fantastic Four to protect you. There is no Ultimate Nullifer. There are only politicians who will raid your bank account one way or the other in order to save their backsides.

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.

Yours truly, scuba diving with some kick ass Aussies off the island of Crete — just a stone throw away from Cyprus, Sept. 1998.
Yours truly, getting ready to scuba dive with some kick-ass Aussies and my Army buddies off the island of Crete — just a stone’s throw away from Cyprus, Sept. 1998. Regulations? Safety? Certifications? Who needs that?! Let’s do this.
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About the Author Douglas Ernst

I'm a former Army guy who believes success comes through hard work, honesty, optimism, and perseverance. I believe seeing yourself as a victim creates a self-fulfilling prophecy. I believe in God. I'm a USC Trojan with an MA in Political Science from American University.

23 comments

  1. this shows why banks need strict regulations and regulators with serious teeth aggressively enforcing those regulations. the Clinton-era deregulation continues to haunt our financial sector and the global economy.

  2. You’re the one who thinks that corruption is a one-way street, correct? It’s the “corrupting influence” of Wall Street that we must address, but not the “corrupting influence” of an ever expansive federal government, right? Interesting theory. My guess is that if you have thousands of regulations, then a few thousand more is probably not the answer.

    Perhaps I’m wrong, and what we really need to do is to write a few thousand more regulations and then appoint Lizard19’s circle of friends into positions where such righteous and just and infallible philosopher kings would make sure “the masses” were cared for.

    Perhaps you guys could start with a sequel to 1977’s Community Reinvestment act, and then you could bring some really smart people on board to do the same for 1989’s Home Mortgage Disclosure Act. I can’t wait for the results.

    1. not correct. the federal government is also incredibly corrupt, largely because of the revolving door between the public sector and the private sector. and both parties participate in this corruption, because both parties are dependent on huge sums of money, which turns regulation into a joke.

      that said, it would be prudent to reinstall Glass-Steagall, a depression-era regulation that kept investment banks separate from commercial banks.

    2. As I have openly stated before I do not claim to be a banking wizard, but the financial sector is a bit more complex than it was during the depression era. It would seem like the complexity of today’s financial markets would make recreating the regulatory conditions of that time period difficult.

      Regardless, if my memory of the “too big to fail” banks is correct, it wasn’t really commercial banks that were the problem.

    3. if investment banks want to make risky investments, they shouldn’t be allowed to put commercial depositors at risk. if that sounds simple, it’s because it is simple. it’s also smart policy.

      wall street has long depended on mentalities like yours, Doug, that banking is too complicated for us simpletons to even begin fathoming what goes on. it’s not. wall street operates on greed, and to protect ourselves from systemic exposure to under-capitalized, over leveraged too-big-to-fail banks, that greed needs to be regulated.

      I also think high-frequency trading needs to be targeted with a financial transaction tax, because high-frequency trading is ridiculous and shouldn’t have been allowed to happen in the first place.

    4. Where did I say that it was too complicated for me to figure out? I didn’t. I was deferring in this instance to you to explain. But as usual you have to turn an honest exchange into an attempt to sling an insult. Instead of using the opportunity to teach, you used it as an opportunity to prove how incapable you are of building bridges. Didn’t you say you’re a social worker? Unbelievable…

      Statement: It would seem like the complexity of today’s financial markets would make recreating the regulatory conditions of that time period difficult.

      True or False? Answer: True. And just because something is more complex than it was 100 years ago, it doesn’t mean it’s beyond applying just principles to modern legislation. I was simply acknowledging that I have not done the adequate research to speak authoritatively on the subject. You, however, think you know it all.

      Funny how everything is so nuanced until you say it’s simple. What constitutes a “risky” investment? (Or did you mean “too risky” since all investments have risk?) You didn’t elaborate. When and how exactly was Glass-Steagall repealed and how did it specifically result in the financial collapse? You didn’t elaborate. It just did because you said it did. Case closed.

      Instead of philosopher king, I shall now refer to you as The Lizard King. All hail The Lizard King and his reptile utopia, where investments carry no risk, but the reward is always grand. Break on through to the other side!

  3. “Wall street operates on greed, and … that greed needs to be regulated,” (Lizard19).

    There is the philosophical divide right there. One’s primary objective is to “regulate greed,” and the other seeks transparency and the consistent application of the rule of law.

    Riddle me this, Lizard: Do you operate on greed?

    1. That’s incredibly telling. Because I think you do. In fact, I’d say all of us do. It’s just a very delicate balancing act we must play between realizing our hopes and dreams, while still being able to keep our moral compass pointed in the right direction.

      Regardless, I appreciate your candor.

    1. Jim, to quote the Joker: “It’s all part of the plan.”

      First, I’m scoffed at for elevating the Bloomberg story to something worthy of my time when there are more “serious,” issues at hand, and then suddenly over at Liz’s blog there is an entire post revolving around … me.

      Interesting. Me writing about Bloomberg is ridiculous, but Lizard writing about me (aka: random blogger) is totally kosher.

      Besides, if I would not have engaged Lizard in this instance, the “regulate greed” line would have never happened. I WANT people to see that. I WANT people to think about where that rabbit hole goes, and then I want them to compare that with the principles I talk about on this blog regularly.

    2. Yeah, I also love how he claims that you’re “obsessed” with the debt, as if it isn’t an important issue (which it is) and dismisses the NYC soda ban as though it’s irrelevant and brings up some some conspiracy theory about Detroit being ruled by a “far-right radical,” which has nothing to do with anything.

    3. Here’s the thing, Carl: I don’t go to other people’s blog and start telling them what they should be writing about. If I comment, it’s on the issue at hand. Imagine if I showed up at Carl’s Comics and threw out little digs about how you spend too much time critiquing publisher “x” when “serious” comic bloggers critiqued “y.” It would be weird and rather unnecessary. It might make me feel good to say it, but it would most likely just irritate you and make having a productive conversation that much more difficult. If I feel as though I might have something to add to the conversation, I comment. If I don’t, I leave it be.

    4. I clicked the link to Liz’s blog. I was aghast — the guy who lectures you (us) about being politically “even-handed” sure had one of the most partisan blogrolls I’ve ever seen …

  4. Doug, why do you think it’s the fiscal malfeasance of government that has led to depositors having their money seized in Cyprus?

    1. I’ve edited the post to give a better description of the scope of the problem, given what I generally know about Cyprus and the problems facing the EU. I apologize for the clunky wording earlier.

  5. Hube, if I was a partisan, don’t you think I would primarily write about how awful Republicans are instead of pointing out, over and over, how hypocritical Democrats are?

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