Cyprus Banking Crisis Conspiracy Theory

This story is interesting. There is a banking crisis in Cyprus. All the banks are closed “temporarily”. The shortfall is approximately $20B.

The government is saying “We guarantee bank deposits!”, BUT there will be a tax of 5-10% on bank deposits, making the guarantee meaningless.

Under pressure from several members of the eurozone – Germany in particular, if reports are accurate – the new Nicosia government agreed that deposits above 100,000 euros would be taxed 9.9 percent and those under 100,000 at a rate of 6.75 percent.

Some pro-State troll might say “HAHAHA!! This could never happen in the USA!” Actually, this did happen in the USA, except the tax was a lot more than 10%! Bank deposits pay 0% interest, while real inflation is 20-30% a year or more. When the government and Federal Reserve print new money to bail out banksters, that effectively is a tax on bank deposits. It isn’t an explicit tax. Inflation is a tax. In the USA, bank deposits are “guaranteed”, but the government will steal your purchasing power via inflation.

In the USA, the government can always print new money to prevent a default on bank deposits. Instead of an explicit default, it’s an indirect default via inflation. Why doesn’t Cyprus do the same thing?

Cyprus is a member of the EU. Cyprus does not control its own monetary system like the USA. Cyprus can’t bail out banks via inflation, because Cyprus is no longer sovereign. By joining the EU, Cyprus effectively ceded its sovereignty to the EU. The “deposit tax” is imposed by the EU, as a condition for receiving a bailout. Instead of robbing Cyprus depositors indirectly via inflation, Cyprus depositors will be explicitly robbed.

Incidentally, that’s one of the pro-State troll arguments against a gold standard. With gold as money, you can’t have inflation-financed bailouts, making bankster theft more obvious. Each gold standard “failed” when the government inflated to bail out banks, and then abandoned its fractionally-backed gold monetary system. The “free market” ruined the gold standard, as people rushed to redeem their inflating paper with gold, anticipating a default. The “free market” is blamed, while the gold standard was really ruined by fractional reserve banking and bank bailouts.

What’s the conspiracy theory? If Cyrpus bank depositors lost $20B, SOMEONE ELSE MADE $20B. In all the articles I read, that question was not asked. “What were Cyprus banks investing in, that they lost $20B?”

Another amusing bit is that Cyprus is an offshore tax haven for rich people. It defeats the purpose of having an offshore tax haven, if the bank can steal your deposit!

In the USA, banks can always be bailed out via inflation. Cyprus no longer controls its own monetary system, so depositors must be explicitly robbed to finance the bailout. There’s one gaping hole in all the articles I read. What were Cyprus banks investing in? If Cyprus depositors lost $20B, someone else made $20B. Where did the money go? Why are no mainstream media articles asking this question?

8 Responses to Cyprus Banking Crisis Conspiracy Theory

  1. Where did you pull a “real” inflation rate of 20% – 30%? I know the whole core inflation argument and all the exclusions (rent, etc.), but your number is still ridiculous. When people play fast and loose with the details, it only serves to weaken the credibility of the broader message. Well if you exaggerated X, he/she likely exaggerated Y.

    • My measure of inflation is very simple. I look at the price of gold. Gold is going up 20%-30% per year. Gold is pretty highly correlated with other commodities, making it a good measure.

      The CPI is a lie.

      For another example, the price of a half-gallon of apple cider went up from $3 to $4 compared to last year.

  2. Anonymous Coward March 22, 2013 at 8:45 pm

    If it helps a couple of years ago, the Daily Mail looked at a basket of household shopping items and concluded inflation was more like 7% – much higher than the UK government figures.

    I don’t have the figures, but I feel grocery bills have gone up lots in the past few years. Even a small shopping trip for groceries in London costs 20 – 30 pounds, even if you only buy a few things. It was never this expensive.

    If we consider the increase in value of property in London, then inflation is sky high. 20 – 30% would be considered a low figure.

  3. Anonymous Coward March 22, 2013 at 8:53 pm

    The clowns in the UK Conservative Party (how did these clowns get in with only 1 in 5 of the population voting for them?) are going to inflate property prices with their silly budget.

    Prepare for a bubble and huge property price inflation.

    The problem is high property prices. These fools want to make a bad problem worse.

  4. “If Cyrpus bank depositors lost $20B, SOMEONE ELSE MADE $20B. In all the articles I read, that question was not asked.”

    Cyprus banks invested their money into greek state funds, but last year greek government (or the EU, I’m not sure) said that they cut the value of these state funds with a high percentage, so the greek government doesn’t have to pay back that much.

    • They bought those bonds from someone. If Cyprus depositors lost $20B, that money didn’t vanish into thin air. Someone else made a profit at the expense of Cyprus depositors. This issue is downplayed in the media coverage.

      If Cyprus is only in trouble because of the Greek bond default, is that really the fault of the depositors?

      This story is interesting. Allegedly, some people knew of the crash in advance and withdrew their money. Some insiders were allowed to make withdrawals after the “bank holiday” started. That leads to bigger losses for everyone else who had an uninsured deposit.

  5. the bankers are in partnership with the government. Who both are greedy thieves they have stolen the money and been caught out they steal all the time but this time it is on a larger scale where they cant cover it up. My view all government and all bankers need replacing my good honest hard working everyday people. With corrupt and evil people running the world? What do we expect? This will be the case until the evil people are stripped of power and the good people are given a voice!

    • The could cover it up by printing new money to bail out the depositors. The depositors are not insiders and they are SOL. The insider depositors withdrew their money before or during the crisis.

      Here’s the rule of thumb for bank bailouts. If insiders will benefit from the bailout, there will be a bailout (TBTF banks in the USA). If the average joe will be screwed by the lack of bailout, there will be no bailout (MF Global, Cyprus).

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