Money in the bank is not your money anymore. By the time of credit cards, banks moved from being a custodian of money, to a service provider that can cut anyone off from their service.
Sure, this time it was not the banks itself but rather the government that did this, but they could only do this because banks and government has stopped seeing money in the bank as belonging to the person who put it there. They would have never gone to a farmer and taken 10% of their grain. They would have never gone and taken physical property in peoples home. That would had been an complete impossibility. I even strongly doubt that any safety deposit boxes will be effect by this.
I understand the idea that this is a blow against companies that are using Cyprus as an tax haven. Its fully understandable. But I really dislike this current system of treating money in the bank as belonging to the bank. This story is just a clear example of this behavior expanding further.
They would have never gone to a farmer and taken 10% of their grain.
Except this actually used to happen a lot in European countries in the Middle Ages. Farmers would still pay taxes to the king, and they'd have to pay in goods if not in gold.
I don't know. Your question is sufficiently general that a plausible answer could be given to support either "yes" or "no" answers. It is very dependent on what you mean by "change". And therein lay my answer: I don't know what you mean by "change".
The poster in this case was touching on a point that going out and taking a farmer's property (or generally anyone for that matter) explicitly was very unlikely to happen, but taking it from a bank is considered something else entirely. I think that's fairly reasonable in the first world. Could a scenario arise in the future where that isn't reasonable? Sure. But, that's kind of beside the point here I think.
If you extend your reasoning to the extreme, you could pretty much say to anything, "Well, humans have done it before so what's stopping them from doing it again?" The answer is nothing, but it's a red herring: it ignores the possibility that the chance of some Event X has gone down with the passage of time. Perhaps it has gone down so much, that it is no longer reasonable to address it if one want to maintain a modicum of concision.
Yeah, except you don't need to take the reasoning to the extreme. Physical property redistribution happens in countries all around the world all the time. Why do you think the founders of the US decided only property owners could vote?
I don't think of the government taking people's savings out of a bank and the government taking people's land as very different. It's a small and easy step to take from one to the other, and it's a step that has been taken many, many times before.
As to your last paragraph; it is foolish to assume social changes or governmental behaviors are more or less likely because of technological advances.
> Physical property redistribution happens in countries all around the world all the time.
We're not talking about the entire world.
> I don't think of the government taking people's savings out of a bank and the government taking people's land as very different.
Yes. I don't either, and neither does the top parent. That's the point.
> As to your last paragraph; it is foolish to assume social changes or governmental behaviors are more or less likely because of technological advances.
You're only talking about Western European and North American governments? They're not all that different from governments elsewhere.
See the interesting thing for me is that the taking of physical property is actually just as likely as taking savings from banks. You and the op seemed to disagree with this, but I don't know what you could use to back that opinion up.
If you believe that the discovery of electricity makes me a better person, or even a different one, I don't know what to say to you.
> You're only talking about Western European and North American governments?
The top parent is.
> They're not all that different from governments elsewhere.
This statement is content free. "Different" is sufficiently general in this context as to be completely useless.
> See the interesting thing for me is that the taking of physical property is actually just as likely as taking savings from banks. You and the op seemed to disagree with this, but I don't know what you could use to back that opinion up.
The top parent said
> They would have never gone to a farmer and taken 10% of their grain.
Which is true by observation. Governments in first world countries are demonstrably not doing this.
> If you believe that the discovery of electricity makes me a better person, or even a different one, I don't know what to say to you.
I don't understand the point you're trying to make here. This conversation has nothing to do with electricity or what defines a person to be "better".
>This statement is content free. "Different" is sufficiently general in this context as to be completely useless.
Please allow me to be more specific. Western European and North American governments are not, in terms of quality of leadership or structure of administration, tangibly different from many governments not present in those regions. Further, seizure of land is not unknown in the US.
If the government isn't particularly different, is it some quality of the people present in those countries that makes you so confident that they wouldn't take physical property?
>Which is true by observation. Governments in first world countries are demonstrably not doing this.
That's an interesting point to make because prior to this instance, governments in the developed world didn't take 10% of deposits, either.
>I don't understand the point you're trying to make here. This conversation has nothing to do with electricity or what defines a person to be "better".
Well, your response to my prior statement about the assumption that social and governmental changes are brought about along with technological changes was "if you say so."
This is generally something people say when they don't agree, but can't or don't want to prove their point. It's a tactic used to undermine the argument of the opposition without presenting a defined counter. I was responding to that.
> Please allow me to be more specific. Western European and North American governments are not, in terms of quality of leadership or structure of administration, tangibly different from many governments not present in those regions.
There are despots and tyrants all over the world. They are very tangibly different from Western European and North American governments in terms of quality of leadership or structure of administration.
> Further, seizure of land is not unknown in the US.
We're talking about grain, not land. The specifics of the example are particularly relevant.
> If the government isn't particularly different, is it some quality of the people present in those countries that makes you so confident that they wouldn't take physical property?
I'm not confident at all that they wouldn't take physical property. Once again, this is irrelevant. We aren't talking about probability, or chance, or anything of the sort.
Once again, the top parent is a commentary on cognitive dissonance using factual observations about the world. Governments are not taking grain from farmers, but governments are taking money from banks.
> That's an interesting point to make because prior to this instance, governments in the developed world didn't take 10% of deposits, either.
Well, yes... The top parent was contrasting this with something the top parent believed was morally equivalent, but was not practiced.
> "if you say so." ... This is generally something people say when they don't agree, but can't or don't want to prove their point.
Actually, I meant it as, "I don't care to argue that point because it's irrelevant to the topic of conversation."
>Money in the bank is not your money anymore...Sure, this time it was not the banks itself but rather the government that did this, but they could only do this because banks and government has stopped seeing money in the bank as belonging to the person who put it there.
See, this is your part about cognitive dissonance. Except, there isn't any cognitive dissonance if governments are just as likely to take grain from farmers as they are to take money from bank accounts. There's no contradiction there.
>They would have never gone to a farmer and taken 10% of their grain. They would have never gone and taken physical property in peoples home. That would had been an complete impossibility.
And this is the part where we start talking about probability, because he's wrong.
>We're talking about grain, not land. The specifics of the example are particularly relevant.
They're actually not. We're talking about virtual property vs. physical property, not grain vs. cash.
It is my position that the lack of physical presence of property does not result in the greater likelihood that the property will be seized, save in instances where the physical property is impossible to seize for some reason. That's all. Governments are supposed to exist to protect the property of their citizenry. Unfortunately, many don't hold that up.
The middle ages had merchant banks, which is quite a step away from the bank that ordinary citizens use to place their earned wages.
Instead, the 17th and 18th centuries are a good milestone in the the history of banking where its function is similar to the one we expect today. (https://en.wikipedia.org/wiki/History_of_banking)
In my interpretation, taxation parallels "banks" in the comparison drawn by the top parent. From the parent,
> but they could only do this because banks and government has stopped seeing money in the bank as belonging to the person who put it there. They would have never gone to a farmer and taken 10% of their grain. They would have never gone and taken physical property in peoples home.
Now instead of "stopped seeing money in the bank as belonging to the person who put it there," simply think of "stopped seeing labor/goods/(taxable things) as belonging to the person who performed/has it/them."
IMO, the top parent was a commentary on cognitive dissonance. It's implied that the parent believes taking stuff from the bank is morally equivalent to taking 10% of the grain from a farmer. The parent could have been more explicit, but alas, this was how I interpreted it.
It's not about moral equivalence, it's about likelihood of action.
He's saying because the banks are structured a certain way, the government behaves differently than they would otherwise. Namely that the government feels it has a right to the goods/property of the citizenry that they did not have before. I disagree, because governments did things like this without the banks.
There's no such thing as an intrinsic value for "money", even in gold. If you keep your money in the form of dollars (or Euros) shoved into a mattress the value can go away through inflation. If you keep your money in the form of gold bars the value can also go away through inflation, but perhaps less so.
Physical gold bars are not money but a phyiscal, tradeable asset. It cannot be inflated except via mining - but even then there are roughly known quantities of metal in the ground that are then liberated. What can be inflated however is paper gold where more paper gold exists and is traded than physically exists - some estimate a 100 - 1 paper to physical ratio.
True that gold has no intrisic value, it's value is derived from other people valuing it and willing to trade services for it - and they have done so for thousands of years, where as a typical fiat currency (USD) does not have such a timespan. "Paper money eventually returns to its intrinsic value – zero." (Voltaire, 1694-1778)
btw - as i understand it wasn't a 10% tax, it was a mandatory debt for equity trade- meaning the depositors now own some part of the bank.
Gold can inflate quite easily, and does all the time, independent of its scarcity. It's possible for the price of anything and everything to go up, on an absolute scale. And if that happens accross the board then you've effectively inflated even some hypothetical absolute currency.
Money has no value, it is in fact nothing more than tradeable debt. It has as much value as the market is willing to allow. To imagine this in an extreme case imagine if the entire worldwid economy collapsed and food bacame very much rarer. Now you'd expect to have to pay vastly more gold for food. Inflation.
My point is that no part of the economy is static, all of it is dynamic. All of it. The value of everything, labor, goods, food, even money is dynamically dictated by the action of the economy.
Gold can be inflated the same way as any other currency. Since people don't typically trade in physical gold, but in certificates used to represent the gold, it is possible to print more certificates than you have gold. While this is a fraud, it is an increase in the money supply.
This sure seems like it would be a violation of a person's right to be secure from seizure of property in the USA.
Does anyone with a legal background have any insight they want to share? I am having trouble wrapping my brain around the idea that money I have in the bank could be seized to pay for someone else's fuckup. I know inflation can sort of do that on a society-wide scale, but seizure of post-tax income from a private bank account? That's mind-boggling.
>Executive Order 6102 required all persons to deliver [gold] owned by them to the Federal Reserve, in exchange for $20.67 ... The price of gold from the Treasury for international transactions was thereafter raised to $35 ... resulting in an immediate loss for everyone who had been forced to surrender their gold ... The resulting profit that the government realized funded the Exchange Stabilization Fund
In the U.S., a new tax like this would require an act of Congress. If it passed it would most likely be found Constitutional--there are basically no limits on the power of the Congress to levy a tax.
But, it would take truly dire straits for Congress to even consider such an obviously unpopular idea. And those dire straits would have a much harder time arriving in the U.S. than the EU.
Cypress (and Greece, and Italy, etc) is in such big trouble because they cannot print their own currency. The U.S. can always bail out its banks because it can create as many dollars as it needs. In fact this is what happened a few years ago, and why the U.S. financial system is currently in better shape than the EU.
The flaws in the EU concept have been laid bare by this financial crisis. When you have financial consolidation without political consolidation, you get unelected bureaucrats deciding to take 10% of the bank accounts in one member nation, and there's nothing that population can do about it. In the U.S., the threat of getting voted out office is a powerful restraint on the governent's eagerness to levy shocking new taxes.
When you have financial consolidation without political consolidation, you get unelected bureaucrats deciding to take 10% of the bank accounts in one member nation, and there's nothing that population can do about it.
Part of the reason I think they're crazy to do this is that the above is obviously not true.
There may be nothing the population can legally do about it, but we're living in a time when governments are in genuine danger of going bankrupt, funny money isn't worth the paper it's printed on, and people are literally worrying about essentials like putting food on the table and keeping a roof over their kids' heads. Sooner or later, if we continue down this path, something is going to give, spectacularly.
Unfortunately, when that happens, it will probably come with a horrific body count and potentially even civil or all-out international war. That's the really terrifying thing about this whole mess: it is disrupting the basic fabric of society, the implicit trust we all place in our political and legal and financial systems so we can enjoy our modern, civilised lifestyles. We take a lot of things about that civil society for granted that we would miss dearly if they were gone.
We can only hope that whoever thought this blatant cash grab was a good idea will come to their senses in time to contain the fallout if they go through with it.
I cannot comment on the rights of a person in the EU against seizure of personal assets. In the United States there is a right to due process of law if the government wants to deprive citizens and some other classes of people (long conversation) of property (money or actual physical property) or freedom (jail). This can happen through legislative action and (sometimes) by the fiat of an government agency like the IRS, but when either of these happen people can get the matter heard in court. However, at times Due Process can be a fuzzy concept, like when property is seized as part of certain drug related or anti-terrorist laws. TL;DR: This type of taking would be harder to do in the US unless you are a terrorist of a drug dealer/smuggler/or in possession of drugs.
- penalizes savers who lived within their means and didn't overextend themselves, saving up for a rainy day. Debtors who took out excessive mortgages etc. aren't affected.
- penalizes foreign investors like the Russians, who will be paying about 40% of the money to be raised from this measure if you do the math. Never a good idea to scare foreign investment away.
- might create a bank run in other weak economies in the EU, like Italy, Spain, and Portugal. That could create a problem on a huge scale.
This is highway robbery. It reneges on the contractual agreement between the depositors and the banks to get the full deposit back. If they impose a 10% levy on the new deposits, then fine. They are levying on existing deposits retroactively. That's simply robbery.
Just because the money is from foreigners doesn't make it right. EU banking will have not credibility after this.
This will discourage people to put money in the banks and encourage them to keep them at home.
>Just because the money is from foreigners doesn't make it right.
Well, the locals got screwed, too. Here's some good analysis: http://bit.ly/110JLpm He speculates that they could have taxed the foreigners (Russians) @ 30%, but that would have finished off Cyprus as a destination for foreign money. Instead, they taxed everyone at 10%. The Russians might see 10% as the cost of doing business.
One is intended as an encouragement to invest and, it works for the most part(401k, roth, 529, etc.. etc..) Most Americans know that that just sticking your money under a mattress is stupid, so we actively invest. Just about anyone in the US with disposable income invests in some way. This is something that benefits society as money that would normally be sitting idle is out in the market being used. And, how it gets used is determined by society and the markets, not a bureaucrat.
This, on the other hand, is simply confiscation. There's no plan, no incentive, nothing. It's a short sighted implementation that will hurt things in the long run. What's everyone who's had their money taken from them without warning now thinking? They certainly aren't considering options that allow them to stay active in this country's markets. Quite the opposite, I assume.
I agree with this answer. The expectation in a bank account is that whilst the interest may or may not cover inflation, at least you don't have confiscation to worry about in addition to that.
Yes, one problem I see that this is repeatable and not predictable. Continual inflation can be predicted and planned for, but confiscation of people's money can happen whenever the government needs money. What if next week they take another 10%?
The difference is that U.S. monetary policy seeks to create a low, predictable, consistent level of inflation. This allows everyone to incorporate it into their long-term financial plans.
> seeks to create a low, predictable, consistent level of inflation
Too bad seeking isn't reality, and too bad it isn't low and isn't consistent. Unless, of course, you alter the metric that measures inflation as the U.S. has done periodically.
Well, for one thing, inflation doesn't cause bank runs. Even if you suppose that inflation is really an asset tax, this tax in Cyprus has just been evaded by anyone who's been keeping their money stuffed under the mattress.
Greece, Italy, Spain, etc. will now be lucky if they don't themselves start having a problem with bank runs. Arguably it won't happen elsewhere, but who can say for sure?
Is Satoshi Nakamoto's secret identity José Manuel Barroso? It's hard to imagine a way for the government to drive people to Bitcoin any harder (short of officially adopting it).
an old lesson that has been forgotten needs to be relearned. Money is not meant to be saved. Money is for earning and spending. Saving should be done in real tangible assets.
To paraphrase Silvio Gesell, an economist in favor of symbolic currency almost a century ago, "All the physical assets of the world are at the disposal of those who wish to save, so why should they make their savings in the form of money? Money was not made to be saved!"
I think the term "assets" in "all the worlds physical assets" doesn't mean all physical items in the world - including baskets of half ripe banana's, but things like durable, enduring, tradable wealth assets. ie: precious metals, collectables, land, art. Things that super producing wealthy people trade their massive inflow of currency for and therefore retain value.
There is only one asset you need though, and that is the same physical asset that Central banks hold that is not an IOU from another country. It is that asset only that will be able to be revalued and reflate the balance sheet when the currency 'assets' have burned to the ground.
Iceland is growing at 2 percent, faster than much of Europe. But Petursson's comments underscore worries about the recovery's sustainability in a straightjacket of capital controls - coupled with questions over having a currency that one politician compared to the Disneyland dollar.
Growth has been downgraded this year from 3 percent to 2 percent. Inflation is stubbornly high and the central bank has been forced to step up intervention in the currency market to prop up a weakening crown.
Many expected Iceland's recovery to be stronger given the way smaller economies can bounce from deep recessions. The International Monetary Fund had originally forecast annual growth of around 4.5 percent from 2011-2013. It now is under half that.
When did Iceland become a "tax haven" intentionally or otherwise? If you're thinking of the recent banking crisis, a "high-interest rate account haven" would be a more accurate term.
Not gonna happen. Several countries moreover already have withdrawal limits per day / week / months to precisely prevent bank runs. Those limits have recently been lowered (for example in Italy). Laws are passed nearly on a daily basis to lower the maximum amount of "physical" money (bills) you can use to buy stuff.
What is going to happen is lots of politicians blatantly lying and saying: "Something like this is unthinkable in our country, even if we're in the eurozone our situation is not the same as that one of Cyprus".
Just as politicians from Cyprus blatantly lied throughout all this week when that option was mentioned: they said it wouldn't happen.
And people didn't bank run.
Cyprus is too small (0.2% of the GDP) to be detonating factor.
It not the size of the GDP that is at issue, bank runs happen out of fear. I can tell you from conversations I have had with friends (not very scientific, admittedly) that people in European countries are legitimately freaked out by this. Additionally, there may be a physical limit on withdrawals, but electronic transfers are far easier and more common in the EU. That is the real threat. If we are all lucky, tempers will cool by Tuesday.
Cyprus is clearly not the most typical european country (with vast quantities of Russian money flowing through it). However this clearly demonstrates that people do not fully control what happens to their savings. I'm wondering how much it'll take for, for example, Spaniards to start removing their money from their banks. The French have already been doing so.
I didn't see any references to "only affects residents living in Cyprus". From the articles I've read, it appears to be a tax on all deposits, regardless of foreign or domestic, personal or business.
In some ways, this isn't a great plan. It punishes those who saved their money while rewarding those who consumed their income. It also means that people will have to start assuming that wealth taxes on bank account balances may happen in more jurisdictions and that they should move their money into what they deem to be safe jurisdictions. This could do harm to other countries whose banking systems have been having trouble.
This is not some sort of illegal seizure - and wouldn't even be in the United States. While we normally tax income or consumption, governments can and do tax wealth. In the United States, property taxes are quite normal. What is the difference between charging someone x% of their house value in taxes and charging someone x% of their bank account balance in taxes? It's mostly normative: we're used to taxes on physical property like houses, but not used to taxes on cash that we carry in banks. If the government decided tomorrow to switch from property taxes to bank account taxes, would you care? Mostly, it would depend on where the bulk of your wealth is. If it were in your home, you would welcome the change.
I think the reason that they chose to go after the bank balances is that a lot of it is foreign-owned. In many ways, this is much better for the Cypriot people. They may not like seeing their bank accounts go down by 6-10%, but this method spreads the burden to a lot of foreigners. If they went the route of imposing a high property tax, they would have to shoulder a much higher burden.
It's also easier to implement, in a certain light. If you impose a new tax of, say, 2% on the value of real property holdings, people are going to lose their houses when they can't come up with the money for the tax. You don't want that: it would just be chaos. Taxing the bank accounts is taxing a liquid asset. You know they have the cash to cover 10% of their bank account balance because, well, it's their bank account balance.
Since they're going to impose the levy before the banks open on tuesday (monday being a banking holiday) and banks putting a withdrawal limit of 400 Euros on customers, it looks like it can be implemented.
In many ways, it's the easiest, quickest successful tax that they could impose. And, while it will cause a lot of uproar from Cypriots, it's probably better than any other measure for them. If the government were to try and raise the money from other means (whether a real property tax, higher consumption taxes, higher income taxes, etc.), the burden would fall on residents more than this tax will. Similarly, this tax will hit the rich harder than the poor. If they raised VAT, income tax, or real property tax, the rich could move elsewhere and be spared a lot of it.
EDIT: I'm going to respond to some replies here.
First, I never said this was a good plan. I said that it would be easy and quick from an administrative standpoint. The ECB doesn't seem to want something long and drawn out or get into a situation where legislative processes and elections throw everything into chaos. Since Cyprus wants the bailout, the ECB holds a lot of the cards. We've seen how governmental changes can throw a wrench into the bailout agreements. Because this levy can be implemented "overnight", it's easy and doesn't rely on a legislature agreeing on austerity measures for many years.
This solution will be a betrayal of people's trust, it will hurt people. It will make people think twice about putting their money in banks. In fact, this is something that parts of Latin America face. However, are there alternatives for coming up with 5.8 billion Euro that would be better?
Frankly, in order to criticize well, you have to bring up other solutions against the chosen solution. This move is bad. No one thinks this is a happy move. It has cons. People will lose savings (including money they were counting on having). People will distrust banks for the foreseeable future. It will create resentment and anger. It will be bad. So, what would be better?
Now, one can argue that defaulting on the debt would be better - that's certainly a position to take. However, assuming that Cyprus doesn't want to default, how else should they have secured the ECB bailout (assuming that one needs to raise 5.8 billion Euro to do so)?
In no way was this a good plan. It doesn't net a significant amount of money in terms of EU GDP, and it enrages and frightens a lot of people.
The difference between a government switching what it taxes and this is that the former goes through intense oversight and debate by the elected officials of the country involved. People can influence the decision and it is an internal matter.
In this case, it was an external force that decided the seizure was necessary. More, it was a German-led decision. Germany imposing its will on the southern countries hasn't been well received in the past and I don't believe it will be now.
mdasen gave some very reasonable arguments that in fact, yes, in some ways it was a good plan. Fr the reasons you gave, you can certainly argue not a good plan on balance. And I would tend to agree with you, although I would confess significant ignorance to the particulars of the situation
But it is misapplication of the affect heuristic to say that because the plan stinks over all, there is nothing good about it.
He really only gave two arguments. One, that it is easier to implement, and two, that it spread the burden to foreigners.
I don't actually think this is easier to implement. Perhaps faster. In the long run, however, this is the hard way to go.
As to spreading the burden to foreigners, that's only a good thing if you're not a foreigner and you don't plan on doing business with foreigners in Cyprus.
If you are a wealthy man who has his fortune elsewhere, this is still not a good plan, because there is potential for personal repercussions.
>This could do harm to other countries whose banking systems have been having trouble.
This. Cyprus isn't the most troubled southern EU country. That honor goes to Italy or Spain. It was a bad idea for Germany to have tipped its hand this early in the game. They should have reserved this for Italy or something. You're going to see a bunch of people moving their cash out the southern EU countries ASAP.
Your conclusion that this action would be lawful in the US is an overstatement. Without contorting the Euro Zone economic rules into the US monetary system, if something like this happend in the US, it would not be a tax, but a seizure of private property without Due Process. Kinda a no-no, legally speaking.
Yes but the difference is that Cyprus lost its sovereignity regarding money creation by entering the eurozone.
The U.S. has its own way to confiscate citizen's money and that is called quantitative easing, which creates inflation. That's why they abandoned the gold standard: to be able to confiscate as much as they want using inflation.
While it's not illegal, it's hard to argue that this move is just or moral. Yes a country can levy taxes however they like, but a surprise 10% wealth tax is unprecedented. The analogy with VAT/income/property is a bit difficult because in almost any case where a government has instituted those taxes the populous would have fair warning before they went into effect. At least in America, these things weren't enacted overnight with no legislative oversight/debate, and I doubt in any other Developed nation such a thing has occurred.
That said, I can understand why they went this route. It's basically a free down payment on an emergency loan mostly provided by wealthy Russians. Again, not illegal, but it isn't exactly just to have foreigners pay for your countries debts. I don't feel terribly sorry, since most of that Russian money likely came from less than reputable means. But as the saying goes, two wrongs don't make a right.
But the repercussions will be far reaching. First off, Cyrpus can expect a run on their banks from foreigners. Don't know if they have plans on stopping that, but I don't see why any foreigner would keep money there. Secondly, Smaller countries (and possibly large ones as well) in financially precarious situations will probably start seeing a run on their banks. This can set off contagion in a region without a strong central economic force to stave it off.
Though I expect some off-shore type country to pass a law soon stating they will never perform such a tax, and a lot of money will start flowing into their banks.
In this circumstance, the first measure should be to cut losses now and dissolve the most toxic banks. Cyprus' banking system is ridiculously oversized for its economy. We need to get back to the idea of banks facilitating business, not being it.
Extracting money from people's bank accounts without even an acknowledgment is akin to foraging through their purses and wallets without consent.
Can't you see the larger issue here? This shortsighted measure will backfire.
Imagine you saved just enough money to cover rent, or see a dentist. You counted on that money being there. Wouldn't this be upsetting and a betrayal of your trust? Would you be so quick to leave money in a bank account ever again?
Edit: Actually, re-reading your comment, you went both ways and waffled like a politician. You didn't actually say anything.
It's the cost of living in a group. Your receive all the benefits of living in the group, and when the group as a whole is in trouble, you need to do your part.
If you want to be libertarian, go be a hermit in the mountains. You'll be the master of your domain there, and won't have to pay taxes or pay a penalty when other people screw up.
Which benefits? Education level going down the drain in France? Police force unable to stop rising crime? Army fighting wars in Africa and Middle East just to put dictators in place? Crazy high taxing of the private sector, so high that it's nearly killing the private sector and then taxing 21% on everything I consume? And then yet taking another 10% on what I managed to save?
The problem with "doing your part" is that once you reach a certain level of taxation you have diminishing returns: that's the Laffer curve and, sadly, socialists don't seem to be able to understand that.
And I can tell you that in many countries of the eurozone the private sector is "doing its part" since decades, only to pay for the lifestyle and entitlements of the ever growing number of public servants.
F^ck socialism. We're witnessing the failure of socialism and I can tell you that I love it. What I don't love is all the states running at deficit since decades trying to wag the dog and pretend the problem is not that states are indebted at crazy high levels.
The public sector is way too important in Europe. That's the Laffer curve and you can't do anything about it besides lowering taxation on the private sector and citizen if you want an efficient economy.
Socialists always end up with state default. There's no other way. Because socialist economies do not work. Even Sweden lowered it's public sector from 67% of the GDP to 49% in 20 years, realizing they were otherwise going into a wall.
Some countries, like Switzerland, have a constitution forbidding the state to run with a deficit too important.
This is what the eurozone should do. We should beat the socialists who are ruining our economy and destroy the entrepreneurship spirit...
You miss the larger picture too markdown. I pointed straight at it and you're still squinting.
This won't work. When the government undermines the trust of the people so that they will no longer use the financial system they are trying to protect, that's called "shooting yourself in the foot".
A bank is only in business if people trust it. Money only works if people trust it. Governments only work if the people trust it.
No, I'm not missing the larger picture. I just choose to acknowledge that the people who chose this course of action have dedicated their lives to the financial sector, are highly educated, and have access to the brightest minds in the world.
Considering that we learn about bank runs and trust in the financial system in high school economics class, I highly doubt that these people don't know about them.
In all likelihood, they chose the option that with the information they had, appeared to have the highest chance of success.
It is shortsighted: it is a temporary to prevent the sky from falling in a few days. But it's just kicking the can a bit further down the road: economically it makes no sense. You'll destroy trust and discourage people so much that you're giving a blow to the private sector so big that in a matter of years the state shall have less income than if they didn't do this.
The problem is that the state is broke. It's that or they're out of the eurozone.
I've submitted this first but it didn't take off...
Anyway: this is just the beginning and it's not going to stop anytime soon. The Eurozone is in big trouble: it simply cannot work when you have people who only want to work 32 hours / week and stop working at 60 years old (France) while on the other side you have hard-working germans.
The crisis we're witnessing since a few years in the eurozone is really simple: the GDP growth number in most of the eurozone are fake in that they do not correspond to wealth created but to wealth created + state debt. Nearly every single country in the eurozone is running at deficit.
The crisis is due to one and only one thing: states that are so indebted that they cannot borrow anymore.
Economists warned about precisely that scenario before the first euro even circulated: Greece, Spain, France, Cyprus... 15 years ago people warned that it would happen just like that. It was just a matter of time.
I can tell you what's coming next: Greece is going to default a second time.
In 2014 France shall have its deficit skyrocketing and shall have issue re-financing itself on the market.
France is the 2nd biggest economy of the eurozone and the eurozone is f^cked. It's game over. France has taxed the private sector so much that it cannot tax it anymore and, anyway, it's too late: investors did flee the country and now individuals are engaging in a bank run (or leaving the country).
The obvious solution would be a massive devaluation of the euro but this cannot happen because if it happens Japan goes down (and probably the U.S.).
We're near the endgame: the house of cards may fall soon.
And I can tell you thing: I want less state. This entire euro-crisis is a debt of sovereign states having way too much public debt because they've constantly been running at deficit, for decades. And now they're running out of money.
It didn't help that they borrowed money to save banksters but don't be mistaken: nobody forced these states to run with crazy-high deficit for decades.
F^ck socialism. Really f^ck it.
Btw I don't care if Cyprus was supposed to be very liberal: Cyprus is 0.2% of the GDP of the eurozone and doesn't matter.
What matter is that socialist Spain, Greece, Portugal and France are close to state default.
They'll be watching closely how announcing money confiscation just before a long week-end plays out (monday is a legal day off in Cyprus) and they'll probably be desperately trying to do the same in these countries.
And it's not going to work.
People should really start realizing that Keynes was all wrong all along and that the Friedman school is the only correct one: they did predict all this. Keynesians didn't.
Btw if the eurozone goes down dont' think the U.S. is going to be fine: some economists are predicting a worldwide drop of the world GDP by as much as 30%.
Socialism and capitalism are tools, not complete methods to run and provide for a country's people, or society. No country exists as purely one or the other. Every country is a shade of socialist and capitalist grey. Even the US has a huge amount of socialist spending. The huge military for starters, all that money that goes via the military to the industries that supply it. Money straight in to jobs. And so on....
Socialism is basically government spending. That is all. Capitalism is the bit that raises the money for the government spending. The very simple problem is when the balance goes wrong. The balance has gone wrong, every where.
Thing is, what the anti socialists seem very keen to forget is that this all kicked off with subprime loans, badly regulated, free market loans, not government loans or spending. That was us, the public and its ever increasing demands for personal borrowing, and capitalism absolutely lapped it up, until it failed. Capitalism failed, not socialism. Capitalism ran rampant and crashed. Luckily socialist levied money was there to bail it out. The bail outs are government spending. If government didn't have money to bail them out, they would have catastrophically failed. I assume the anti socialists wanted the banks to fail? Fair enough actually, that is how capitalism works, the weak fail. In some ways, I think the banks should have failed. But, if we are to get angry at 10% of people money being converted in to bank shares (did people miss that? It is a bullet point here: http://www.bbc.co.uk/news/world-europe-21818598 ), then losing everything in a bank fail must be very much a no no. So, we do like government spending when it suits.
So, one cannot complain about the spending when it was the money provider, capitalism, that screwed up in the first place, leaving no money to spend.
Put it this way: If Mr Hubby lose his job, its not the wife's fault for spending the family budget each week, is it? Equally not the wife's fault if she asked Mr Hubby if she could take out a loan, he agreed, and not cant pay it back because hubby lost his job. More, over, if Mr Hubby was pushing her to take loans, it is even more not her fault.
So stop with the finger pointing rightard anti socialism hate stuff. It doesn't work, its childish, and way too Glen Beck for sensible discussion.
Now, of course the socialism bit has to do its bit and contract so that the capitalism bit can breathe and rebuild, while regulating it enough such that insane lending and borrowing cant happen again. The balance must be restored.
> The huge military for starters, all that money that goes via the military to the industries that supply it. Money straight in to jobs.
Jobs which create guns and bullets which are fired and kill people and do absolutely nothing for the betterment of man and do nothing (or very little) to increase productivity. In other words, this is a great example of the broken window fallacy.
> what the anti socialists seem very keen to forget is that this all kicked off with subprime loans, badly regulated, free market loans, not government loans or spending.
So you're just going to ignore all the government encouragement along the way? You're going to ignore the Community Reinvestment Act, Fannie Mae and Freddie Mac, mortgage deductions, and everything else the government has done in the past half century to encourage home ownership? You're just going to ignore the very low interest lates proceeding the dot-com bust? You're going to ignore the implicit bailout guarantees provided by the government and the FDIC? You're going to ignore all the regulation that encouraged too-big-to-fail banks to grow and continue to exist?
No, the housing crisis was a joint effort. It was, as I've heard described best, the private market getting drunk off booze provided by the government. The private and the public sector both messed up. Derivative packaging and trading and all of that was certainly ugly. But you cannot possibly blame this on the free market (because free it wasn't) and you cannot absolve the government of responsibility. To do so would be irresponsible itself.
> I assume the anti socialists wanted the banks to fail?
It was government policy that encouraged their creation, so yes. Of course.
> So, we do like government spending when it suits.
Government spending to solve a problem created by the government. Brilliant.
> So, one cannot complain about the spending when it was the money provider, capitalism, that screwed up in the first place, leaving no money to spend.
No. Just no. This is like saying capitalism caused the Great Depression. See above.
Sure, this time it was not the banks itself but rather the government that did this, but they could only do this because banks and government has stopped seeing money in the bank as belonging to the person who put it there. They would have never gone to a farmer and taken 10% of their grain. They would have never gone and taken physical property in peoples home. That would had been an complete impossibility. I even strongly doubt that any safety deposit boxes will be effect by this.
I understand the idea that this is a blow against companies that are using Cyprus as an tax haven. Its fully understandable. But I really dislike this current system of treating money in the bank as belonging to the bank. This story is just a clear example of this behavior expanding further.