The banks at Cyprus now have re opened. But are the markets stable? The bail out is a temporary measure. The debt problem/contagion is still there. How can the huge debts be repaid?
Why did the private individuals taxed/sequestered?
Will it happen in the PHL? Could it start a riot sometime.
Imagine if you had deposits over 100,000 and the govt had to impose a 40% tax (lately the news flash say it could be up to 60%)
As most of the depositors are Russians.....
Could this start instability in that part of Europe?
From:
League of Power - Easy Street
Date: Wed, Mar 27, 2013
Subject: Cyprus: Could It Happen Here?
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Could What Happened in Cyprus Happen in the U.S.?
Hello Jorge,
If you've been watching the news at all during the last week you probably heard something about the country of Cyprus. The people of Cyprus, called Cypriots, have had a go of it lately. Their country is in financial turmoil, like most of the world and they are the latest country in the Eurozone to require a bailout.
As Americans we have become a bit desensitized at the hearing of another European bailout. It seems each month we hear about another country receiving more bailout funds to keep it from going under. Normally we just roll our eyes, hope for better days to come soon and move on. But this particular bailout is different and it should be something Americans fear.
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Before I get into why Americans should be fearful of this bailout, let me first explain what happened to the good people of Cyprus this week. Basically the Cypriot people (and foreigners with Cyprus bank accounts) were robbed. But instead of being fleeced by a masked man with a weapon, the country's inhabitants were robbed by their own government. As part of a last minute $13 billion bailout deal to save the country from financial collapse, the government agreed to tax its people who have bank deposits with more than 100,000 euros at levels up to 40 percent.
100,000 euros equals approximately $128,600. In terms of U.S. dollars that means depositors would lose over $50,000 of their own money to the government. The money would just be gone from your accounts overnight. You would have no means of recourse or any hope of ever getting that money back.
That insane, heinous "haircut," as some news outlets are calling, it is what happened to the unlucky people of Cyprus this week. The depositors went to bed with the money in their accounts and woke up to news that the government had taken it from them. Never before have we seen a bailout require such terms. Could this be the new model going forward? If so Americans should be worried. Could the U.S. government ever seize Americans assets in a financial crisis like the Cyprus government did to its own people? The answer is a very real yes.
The speculation regarding whether or not a similar situation could happen to Americans has led to some public outcry. Economists tell us it can't. They cite the FDIC, the Federal Deposit Insurance Corporation which is a nationwide guarantee that all deposits are backed by government funds up to $250,000. Cypriots didn't have this same level of insurance. They had what equated to a state level guarantee, and the new federal bailout supersedes that insurance.
The government also assures us that what happened there won't happen here because our banks are built on a sounder financial footing. American banks make money through stocks and bonds as well as deposits; whereas in Cyprus, banks there make money solely thru deposits.
Still the cause for concern led Federal Reserve Chairman Ben Bernanke to hold a press conference last week. He assured Americans that it's "extremely unlikely" such a similar tax on depositors could take place in the U.S. But is he telling the truth? The truth is that in fact the U.S. government HAS done the same thing to Americans in the past. Just ask your grandmother or grandfather, they might even remember it.
The circumstances were eerily similar to our country's current financial state, the last time this happened. In March 1933, the U.S. was in the throes of the Great Depression. Americans worried that the government would begin printing paper money, making cash virtually worthless.
Any of this sound familiar?
At that time, paper money was backed by gold and with fears of rapid inflation on their minds, Americans rushed to exchange their cash for gold. The sudden demand on American's banks threatened an already severely strained American economy and President Roosevelt responded by issuing the Gold Confiscation Act.
The Gold Confiscation Act allowed the U.S. government the power to seize the American people's gold money and replace it with paper Federal Reserve Notes. They went a step further and made it illegal to own gold, except in the forms of small amounts of jewelry, collectors' coins and dental implants. This act allowed the government to devalue the U.S. dollar by 40%. Which meant that the Federal notes the American people now held in place of gold were worth that much less than it was the day before. In effect the government got away with levying a 40 % tax on Americans and their money.
To all the government officials and economists who say what happened in Cyprus won't happen here. I say it has before and I don't trust the government to not do it again if we get into another financial crisis.
So what can we do to mitigate our risk of getting another "haircut" by the U.S. government like the one that they did in Cyprus this week? Firstly you should limit how much money you put in any one account. You shouldn't put more than $250,000 in any one account, that's the amount the FDIC insures bank deposits up to. Instead spread your money out throughout several institutions if you can.
Another strategy is to reduce your dependency on the dollar. Now I don't normally recommend specific products, but it just so happens that League of Power created a course on this very subject. The release of the product couldn't have come at a more opportune time either. If you're interested, check out what they have to say on protecting your money from the greedy hands of the government.
Keeping Money in Your Pocket,
Nancy Patterson
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