When murderes in the United States are sentenced to death, they are placed on Death Row, awaiting execution. They are isolated from other prisoners throughout the usually lengthy process from sentence to the needle.They are known as Dead Men Walking.
When the Eurozone leaders last week forced the Cypriot government to impose 6.7 per cent hair cuts on all bank deposits in Cyprus below the level of E100,000, they sentenced themselves to such death row conditions. It may take a while for the euro-zone to make its way to the Death Chamber. But it surely, from this moment on, is a Dead Man Walking.
Readers should be aware that all euro-zone bank deposits, irrespective of nation, are guaranteed by deposit insurance for holdings below E100,000. This guarantee constitutes an inportant component of the rule of law. It has now been violated at the specific request of Germany and Finland as a condition for a $17 billion bailout, without which the entire Cypriot banking system is at risk of collapse.
The circumstances are as follows. The Germans and the Finns demand that $7 billion of the $17 billion bailout must be extracted from the Cypriot banks. This extraction is designed as a warning to other euro-zone countries about the negative bail-out consequences of seriously bad behavior. No one need have qualms about such a policy.The Cypriots deserve to be placed in the naughty corner of the euro-zone, where they will not find themselves to be alone.
However, the Cypriot government proved to be unwilling to allow that hair cut to fall where it should have fallen, namely first on the shareholders and second on the bondholders of the failing banks, followed by the large depositors, whose holdings are not protected by deposit insurance. Such a policy would have upheld the rule of law.
The Cypriot president refused to allow double-digit hair-cuts to be imposed on all wealthy depositors. Perhaps 15 per cent haircuts would be required to meet the $7 billion target. Many of the large depositors are Russian – and the response of the Russian Mafia targeted onto leading Cypriot government officials is too obvious to spell-out. Moreover, Cyprus is currently renegotiating a $2.5 billion loan with Moscow!
Furthermore, Nicosia has attracted considerable volumes of laundered money, seeking tax evasion under the lax enforcement mechanisms deliberately applied by a euro-hungry government. The long-term foreclosing of such an opportunity surely was not in the interest of Cyprus’s political elite, many of whom receive kick-backs from such investors.
So now, noone with small deposits in euro-zone banks has any deposit insurance. That is the implication of the Cyprus capitulation.For what has been applied to one, predictably can be applied to all. As small savers across euro-land move their investments out of euros and into dollar accounts and pound sterling accounts, so the prison gates of death row will clang shut and the slow retreat to the ultimate death chamber needle jab will commence.
Tags: Cyprus caves to euro-zone pressure, death of the euro-zone, flight to dollar and pount sterling, rulew of law abrogated, small deposits at risk across euro-zone
March 18, 2013 at 5:46 pm |
Reblogged this on Oyia Brown.
March 20, 2013 at 12:30 am |
Thank you for reblogging this post
March 21, 2013 at 3:14 am |
Sometimes even the Hebrew Bible prophets must have worried that no-one was listening, one or two disciples apart. Nice to know that this is being reblogged. No doubt the attention will gradually increase.