As stock market
speculation reaches new highs, it is important to realize that the rumblings of
global financial collapse are growing in the Eurozone.
The European
Central Bank has outlined a €10 billion “bailout” plan for Cyprus.[1]
In what is being
called “The Great Bank Robbery”, the plan calls for a one-time theft (tax) of
6.75% on all bank deposits under €100k, as well as a 9.9% “tax” on deposits
over that amount.
The 6.75% and 9.9%
amounts have been immediately frozen and will not be available for withdrawal
when banks reopen on Tuesday. Thursday. Citizens and other depositors of funds in Cyprus banks woke up Saturday
morning potentially poorer with no warning.
In a normally
functioning economy (or what passes for normal today), when an institution is
insolvent, the order of liquidation is;
Shareholders
Preferred
shareholders
Debt (Bond) holders
Central Bank
creditors
and lastly, Depositors
...in that order.
Deposits of €100k
or less are, or were, guaranteed. This guarantee has been abandoned. This
abandonment sets a damaging precedent and calls into question all Central Bank
guarantees and assurances.
The ECB says €10
billion is needed, but €17.7 billion could be raised from shareholders, bondholders,
and Central Bank creditors[2].
This begs the question why does the Central Bank need to steal money from
depositors? As investors, shareholders and bondholders are, and should be,
exposed to risk. Depositors should not be.
I believe the
European Central Bank is doing this as a high-risk test case to judge the
peoples reaction and to see how far they can go, how blatantly they can steal
from the general populace to protect their rich accomplices.
The risk of course, is a run
on banks in other troubled Eurozone countries, specifically Spain, Italy
and Portugal.
We will be seeing measures in the next few days by the ECB to attempt to stave
off these bank runs.
Can it spread to
the U.S.?
Probably not in the near term. Americans are still lulled into believing that
all will be well. In the medium term, the probability that the collapse will
ensnare the U.S.
as well is 100%.
You have been
warned.
