By Rich Galen
Monday, March 18, 2013
It is well known that there are a number of countries in
Europe that are in dire financial straits. So dire, that they make our $16.7
trillion national debt look manageable.
We know about Greece and Italy, Portugal and Spain. Not
only are they drowning in debt, but they have high unemployment (Spain's is
nearly 25 percent) and negative GDP growth.
But the scariest news over the weekend came from the tiny
country of Cyprus.
I'll wait while you try to remember if you know where
Cyprus is located.
Ok. It is an island about half the size of Connecticut,
with a population of about 1.1 million, located in the Eastern Mediterranean
south of Turkey.
It is also broke.
Cyprus has close ties with Greece and had invested
heavily in Greek bonds. Unfortunately for Cyprus, foreign investors in Greek
debt were forced, in 2011, to take a voluntary haircut of up to 50 percent of
the value of those bonds.
With an economy as thin as Cyprus a loss of that
magnitude in the funds it had, essentially, parked for safety sake was more
than just a jolt. It threw the economy into a tailspin.
Why am I bothering you with the Cypriot economic woes?
Because of the manner in which the big guns in the European Union - in this
case Germany - wanted to structure a $13 billion bailout.
Here's what they decided: Individuals who have deposits
of at least $130,000 (equivalent) in Cypriot banks will pay what the New York
Times called a "one-time tax" of 9.9 percent of their deposits.
Smaller depositors will have their funds confiscated
taxed to the tune of 6.75 percent.
The Times reported that many of the higher-value
depositors are "Russians who have put vast sums into Cyprus's banks in
recent years" but it wouldn't matter if it they were North Korean
generals. A deposit is a deposit for the use of the depositor, not for Angela
Merkel.
Naturally as soon as word hit that this "tax"
was going to be imposed on Tuesday, there was a run on the banks to get money
out of bank vaults and into mattresses where it would be safe.
Naturally the ATM networks were shut down to prevent the
good people of Cyprus (or Russia) from getting to their money before the
government could take it away.
Chancellor Merkel said that making the depositors help
pay for the bailout is the right thing to do. "That way," she said,
"those responsible will contribute in it, not only the taxpayers of other
countries."
I have $12.75 in the bank in Alexandria, Virginia. How
does that make me responsible for creating the national debt?
My fear is this becomes a standard mechanism for helping
to reduce what is known as the "sovereign debt" - the money countries
owe.
Think about what will happen when officials of the Obama
Administration come to work this morning and read that the EU could force
Cyprus to confiscated legally deposited funds.
According to the Federal Reserve Bank of St. Louis, as of
last Monday there was $6.8 trillion on deposit in U.S. banks.
No one, not even Barack Obama, would consider taking 100
percent of those deposits, but I can certainly hear the clack-clack-clack of
keyboards drawing up the talking points explaining why rich people with
deposits of over, say $50,000 should be willing to do their fair share in
paying down the national debt.
Maybe to the tune of a "one-time tax" of, say,
15 percent. That's not 15 percent of $50,000, it would be 15 percent of
whatever you've got in the bank - in all your accounts. Maybe throw in those
greedy 401(k)s and brokerage accounts that have swollen with the sudden rise in
the U.S. stock market.
Sample Talking Point: If you can afford a 401(k) and
$4/gallon gasoline, you're making too much.
I'll be a little late for work this morning. I'm going to
the bank with my change purse and get my money out before I become an unwilling
donor to help reduce the Obama debt.
It may only be $12.75, but the taxes have been paid on
it, and it's mine.
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