Fausta's Blog

American and Latin American Politics, Society, and Culture

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Captain Louis Renault goes to Cyprus

“I am shocked, shocked!”
Mega-Rich Withdrew Money From Cyprus Before Looting

The real targets of the “haircut” are businesses, entrepreneurs and the middle class

News that the Cypriot President’s family moved 21 million euros to London days before the bank accounts of his people were looted as part of the bailout deal serves as another reminder that while the media portrays the victims of the Cyprus “haircut” as the mega rich and wealthy Russian oligarchs, the real victims are middle class families and small business owners.

And,

In addition, as Reuters reports, “While ordinary Cypriots queued at ATM machines to withdraw a few hundred euros as credit card transactions stopped, other depositors used an array of techniques to access their money.”

Branches and subsidiaries of Cypriot banks in London and Russia remained open while banks in Cyprus were closed, allowing Russian oligarchs and other wealthy depositors to move their money.

When asked about the amount of money that had exited Cyprus before the bailout deal, German Finance Minister Wolfgang Schaeuble refused to provide figures.

Take it away, Louis!

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EU: Raiders of the lost savings UPDATED

They’re taking what’s yours

This should take no one by surprise at this point; in fact, Kudlow was talking about it on his show last week,
Cyprus bail-out: savers will be raided to save euro in future crises, says eurozone chief
Savings accounts in Spain, Italy and other European countries will be raided if needed to preserve Europe’s single currency by propping up failing banks, a senior eurozone official has announced.

The euro fell on global markets after Jeroen Dijsselbloem, the Dutch chairman of the eurozone, announced that the heavy losses inflicted on depositors in Cyprus would be the template for future banking crises across Europe.

“If there is a risk in a bank, our first question should be ‘Okay, what are you in the bank going to do about that? What can you do to recapitalise yourself?’,” he said.

“If the bank can’t do it, then we’ll talk to the shareholders and the bondholders, we’ll ask them to contribute in recapitalising the bank, and if necessary the uninsured deposit holders.”

Because,

“If we want to have a healthy, sound financial sector, the only way is to say, ‘Look, there where you take on the risks, you must deal with them, and if you can’t deal with them, then you shouldn’t have taken them on,'” he said.

It would have been nice of him to have warned savers that their accounts could be raided. But I digress.

The president of Cyprus says it’s all temporary,

Which brings up this question,
Have The Russians Already Quietly Withdrawn All Their Cash From Cyprus? Yes, they have, never to return.

How’s that for “temporary”?

Related:
Hayek v. Krugman – Cyprus’ Capital Controls

UPDATE:
Repeat after me: $19.2 trillion dollars is currently held by US citizens in 401k and other retirement accounts.

Do you really think the government doesn’t want to “help” you manage that money?


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Today’s euphemism: Oligarch

ol·i·garch

 [ol-i-gahrk]  

noun

Old meaning:

one of the rulers in an oligarchy.

New meaning:

Russian mobster.

Use:
Russian oligarchs stung by Cypriot bank tax

But it’s not just Russia that is affected by the proposed bank account tax in Cyprus. Oligarchs in Ukraine also like to transfer money to Cyprus and then re-invest it back home. Just like in Russia, Cyprus has been the largest foreign investor in Ukraine. In 2011, the country invested more than $10 billion, according to Ukraine’s statistics agency Derzhkomstat. That represents one-fifth of the total foreign investments in the former Soviet republic.

More than 90 percent of all Ukrainian foreign investments in 2012 went to Cyprus. If ownership changes in the Ukraine, a company with a postal address in Cyprus simply gets replaced by another one in Cyprus.

Which brings to mind another term: money laundering.

Here’s the latest on Cyprus,


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Cyprus’s Sham-Wow

Yesterday the plan was to scalp all bank accounts over €100,000 by 10%, and everybody else by 6.75%.

But now, the Cyprus’s government, just like in a Sham-Wow ad, right when you think has sucked up all the sanity, doubles the offer, and proposes a new plan to ease the burden of that tax on small savers:

According to two European officials familiar with the talks, the new proposal being floated by the government would see smaller depositors, those with up to €100,000, taxed at 3% rate—down from 6.75% as initially envisaged. Savers with €100,000 to €500,000 would be taxed at a 10% rate; and those with over €500,000 taxed at 15%, one official said.

Because the “small savers” are the ones who take to the streets, storm the banks’ doors, and riot.

Maybe the EU ought to be worrying about Putin, who’s not happy,

The deposit levy would be felt sharply by Russian financial institutions and companies which have large footholds on the island. According to Moody’s Investors Service estimates, Russian residents and institutions could lose around $2 billion if Cyprus goes ahead with this latest unconfirmed proposal to raise taxes on deposits.

Russian President Vladimir Putin has strongly criticized a proposed deposit tax in Cyprus that could cost Russian financial institutions an estimated $2 billion as “unfair” and “dangerous,” his spokesman told news agencies Monday.

“Mr. Putin said that such a decision, if adopted, would be unfair, unprofessional and dangerous,” said his spokesman Dmitry Peskov.

We all know what happens when Vladdy is not happy.

Putin is nothing if not professional; he might even say “This is the business we have chosen”:

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“It could never happen here”?

Tomorrow all bank deposits over €100,000 will have 10% expropriated in Cyprus, while

Goat herders, taxi drivers, et al. (what the New York Times calls“pensioners, workers and regulator depositors”) with less than €100,000 get whacked 6.75 percent.

What do they get for that? A €10 billion bailout from the International Monetary Fund and European lenders.

Roger Kimball has the story.

In Ireland, Hungary, Poland, Bulgaria and France, the governments take over citizens’ pension money to make up government budget shortfalls.

In 2008, Ambrose Evans-Pritchard asked, Argentina seizes pension funds to pay debts. Who’s next?

My fear is that governments in the US, Britain, and Europe will display similar reflexes. Indeed, they have already done so. The forced-feeding of banks with fresh capital – whether they want it or not – and the seizure of the Fannie/Freddie mortgage giants before they were in fact in trouble (in order to prevent a Chinese buying strike of US bonds and prevent a spike in US mortgage rates), shows that private property can be co-opted – or eliminated – with little due process if that is required to serve the collective welfare. This is a slippery slope.

This is only the beginning, folks.

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