For an average mind such as mine, what has happened in Cyprus will not be a mere caduceus act, but eventually common practice. Eventually all citizens, of every nation with massive debt, no matter where you live, in particular in Europe, now no personal/private bank account anywhere in the world is safe. If the big wigs of the EU (Mario Draghi, the president of the European Central Bank (ECB), Christine Lagarde, the managing director of the International Monetary Fund (IMF), José Barroso, the president of the European Commission (EC) and Herman Van Rompuy, the president of the European Council), can pull this off, you can best believe some similar folk of status are meeting around the United States in the board rooms of the twelve Federal Reserve banks.
The precedent set by the Eurozone to go for depositors is a reflection of how uncertain the world of derivatives and complex papers is. What we see, what we understand, are the images of long lines in front of ATMs and for what – all to save the institutions that gave us the economic downturn, just to save the banks. Around the world, just in the US the banks are what are important and not the people even if they are the criminals, they only get larger and are even beyond incarceration [see JP Morgan Note below].
NOTE: [The U.S. Treasury’s Office of Foreign Assets Control found that JPMorgan had illegally aided dictatorships in Cuba, Sudan, Liberia and Iran, including transferring 32,000 ounces of gold bullion for an Iranian bank. Not to mention misleading investors, making fake and false trades, wrongfully foreclosed on soldiers charged veterans hidden fees for refinancing, illegally increased their collection of overdraft fees by processing large transactions before smaller ones or by switching its fixed-rate debt to variable helping push Jefferson County, Alabama into bankruptcy.]
Although under the guise of a bailout, what we see in Cyprus is an indication of things to come worldwide. If another bailout is need for another EZ nation, the likes of Spain and Italy, then the savings accounts of the citizens in Spain, Italy and other countries will be raided. Now some will say its different because in Europe, many nations are way over leveraged and that they are taking these steps to preserve the Euro by aiding insolvent and failing banks. I will agree but would ask how that is any different from the situation with the US dollar and “too big to fail banks?”
As during the time of the great depression and what America is dealing with now, it is common knowledge that excessive leverage was one of the primary causes of both – folk buying stocks and other complex papers on margin. And excessive leveraging undermines financial stability because the goal of the banker is to always transfer credit risk to those better able to absorb losses. When it is impossible to do the aforementioned, the financial sector becomes weak and breaks.
Ironic that I just finished reading Richard Bookstaber’s “A Demon of our own Making.” He describes this so aptly. He notes that new forms of investment strategies like portfolio insurance, based on the Black-Sholes formula of making it possible to set a price on an option and features such as “greenmail” gave us the crisis of not only the past but today.
When banking systems are or become excessively-leveraged, the risk that a crisis in one country will spread to another dramatically increases. Meaning that the reality is that the US financial system could come tumbling down the hill at any time because it is mathematically impossible for just the continuous printing of money alone can go on forever.
Another concern I have is that less than two years ago, all the banks of Europe were given stress test, which by all accounts were way harder than the stress test given to US big banks by the Treasury, and all the banks of Cyprus passed with flying colors. Now within the last two weeks we see such wasn’t the case since Cyprus’ two largest banks, the Bank of Cyprus and the Cyprus Popular Bank (the Laiki Bank), which hold half of all bank deposits in the country are the worse of the bunch, and if this is the case what can we interpret from the weak azz stress test the US Treasury implemented some few years back as well?
In addition to the math, the behavioral antecedents are clear as well – it’s all about the banks, fuck the people and the workers and the average family. The precedent of Cyprus is clear - nothing is safe from being seized by the state, no savings account, but also no house or apartment. The Germans experienced this after World War II, when they were charged an extra real estate tax in the form of compulsory mortgages. Governments have even banned the possession of gold during currency crises, forcing citizens to exchange the precious metal for the national currency.
Even with the aforementioned, the Federal Reserve, Wall Street and Washington Politicians always want to point the finger at the average citizen. Ben Bernanke let it out the hat when he advocated for the elimination of all reserve requirements: “The Federal Reserve believes it is possible that, ultimately, its operating framework will allow the elimination of minimum reserve requirements, which impose costs and distortions on the banking system.”
The simple reality is that no matter what happens, the majority of people will be significantly poorer. As it stands, not only in the US, but around the globe the continuous transfer of wealth from the bottom into the pockets of the wealthiest is a reality unavoidable. Here in America consequently, we must not be fooled by leaders regardless of party affiliation and their words of addressing economic equity because their actions never fit the actual goals they promulgate via their illustrious oratory. No matter what Obama for example says on the political stump, his policy continues to add to the economic inequity in America. For example, no matter what he says his policy will always aid in the disparity for example of the average CEO’s hourly wage of $5000 per hour compared to $7.00 an hour. The point is if in Europe, Cyprus to be more exact, any level of personal savings decided upon by bankers for confiscation, is basically the same as just stealing money from people’s bank accounts.
On top of all of this (and I won’t mention our debt to China) China and Brazil just signed a trade, currency deal ahead of BRICS summit that will allow them to bypass using the dollar by agreeing to trade in their own currencies the equivalent of up to $30 billion per year, moving to take almost half of their trade exchanges out of the US dollar zone. Thus there is a new world post the 1950s, Bretton Woods and the Marshall Plan when the US Dollar became the de facto global reserve currency.
Like the Euro, the reality is that the global exposure to the US Dollar remains by default rather than design and the global (at least European) sovereign debt crisis is placing the US Dollar at risk for the future. Just looking at Cyprus, it should be clear that oligarchs and plutocrats, who are protected by the elected elite, will always be considered over the average citizen. The Bankers (not the people or elected leaders) have decided that citizens, who had nothing to do with the national debt as individuals, will be forced without choice to pay for the faults of the elected elite which sets a truly alarming precedent for other debtor (all nations) around the world.
I am just asking the question and using basic match to formulate a possible answer. I mean there is only one answer, albeit multiple solutions to solve any equation. I just think this may become banking versions of reality TV, and if that show had a name, it would likely be called “F*** you, pay me (the international bankers anthem.)
