"The moment the idea is admitted into society that property is not as sacred as the laws of God, and that there is not a force of law and public justice to protect it, anarchy and tyranny commence." --John Adams
2013-03-22-digest

The tiny Mediterranean island of Cyprus is currently mulling over its few available options to stave off financial collapse after a week of battles with the EU Central Bank caught much of the world's attention. Cyprus was in line for a €10 billion (euros) loan from Brussels, but the EU wouldn't help without a €5.8 billion guarantee from the Cypriot government. And thus was born the bright idea of confiscating a portion of private savings from Cypriot depositors to fund the guarantee. Think something similar can't happen here? Think again.

 

The original formula called for a one-time tax of 6.75 percent on savings between €20,000 and €100,000, and 9.9 percent on savings over €100,000, taken straight from bank accounts. Cypriot President Nicos Anastasiades and Central Bank Governor Panicos Demetriades both claim they were blackmailed into accepting this plan by the EU, the International Monetary Fund, and the European Commission.

 

Predictably, the plan set off a run on banks and ATMs as depositors scrambled to move their money out of the government's reach; that forced bank closures. On Wednesday, however, the Cypriot parliament rejected the tax without a single vote in favor. Cyprus is now trying to rework the terms of the bailout while its banks remain shuttered.

 

Cyprus also sought aid from Russia, which has a disproportionately large amount of money in Cypriot savings accounts, but the latter nation withdrew any offer for help when talks didn't progress. The EU set a Monday deadline for a plan.

 

The EU argument for its unprecedented and outrageous idea to arbitrarily confiscate private savings is that Cyprus should take part in its own salvation. The EU also wants to tap into the country's large foreign savings pool. Thanks in part to lax anti-money laundering rules, 37 percent of the €70 billion in Cypriot banks is foreign-owned, and 60 percent of that belongs to Russia. Whatever excuses the EU comes up with, this tax on savings is unlikely to work. EU central bank bailouts -- and this would be its fifth -- are meant in part to shore up confidence in European markets. Plucking money out of private savings accounts by government fiat will do just the opposite, particularly when that savings is supposed to be insured by the very same government. If people don't believe their money is safe, then they will take it elsewhere. Or they may even take it out of circulation altogether by stuffing it under the proverbial mattress, or, worse still, not save money at all. This won't help the Cypriot economy or the larger European one, because banks rely on that cash to serve as capital for investors, thereby driving the engine of commerce.

 

An even scarier outcome of the Cypriot banking crisis is the possibility that similar events could happen here. Barack Obama is a faithful observer of how the Europeans handle their leviathan governments, and, like most leftists, he picked up on all their bad habits. He's built his entire presidency on "spreading the wealth around" and making the rich "pay their fair share." This kind of confiscatory policy is tailor-made for a statist who wants nothing more than to continuously expand the size of government.

 

Indeed, Fox News host Neil Cavuto noted, "While no one is taxing our bank holdings, thanks to ObamaCare, they are going after some of our other assets. Remember that 3.8 percent Medicare surtax on investment sales larger than a couple hundred grand. Surprised? The next time you try to sell your house, trust me, you'll be hitting the roof. I want you to think about that. A tax not on your income, earned or unearned, but your assets, what you have, what you own, your tangible assets. Homes here, bank accounts [in Cyprus]. Is there really a difference? No." Not only that, but the Federal Reserve continues its policy of quantitative easing, which causes inflation and has the same net effect as a withdrawal from your savings account.

 

U.S. debt far outweighs that of every European nation -- nations that are going for bailouts one after another. The U.S. government could seize 100 percent of the $9.3 trillion held in banks in the country and it would cover just over half of our total national debt. That $9.3 trillion would cover just two-and-a-half years of the federal budget.

 

Think about that the next time a politician laments the supposed disaster caused by reducing budget growth by $85 billion.