City Journal Spring 2014

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Spring 2014
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Nicole Gelinas
Bold Cyprus « Back to Story

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This is an excellent article. It's a severe injustice that the political leaders of a modern state have protected senoir bondholders at the expense of the the poor who probably struggled to save money for various needs (not six figure wrist watches).

The concentration of wealth and profits in the financial sector, in addition to the curruption in the political culture, has resulted in the worst possible form of capitalism: crony capitalism. Both the protected financial "elite" and the political leaders are playing with fire.

This is not just a problem for a small country in Europe, but throughout the developed world.

Free markets, with clear and fair rules, should govern the economy. The government should provide for the common defense and welfare of those in need and enforce the rules fairly.
Does anyone else out there feel as I do that it might just be time to hide at least some of one's savings where our own predatory government can't get hold of them?
I wonder what Warren Buffet thinks of this because it's an attempt to tax your net worth, at least the liquid part. I think he would change his idea about raising taxes if his next worth was in the crosshairs of a tax plan.
Aimi, you make some valid points and there is certainly plenty of blame to spread around. Yet I think it unfair to burden German (or any other) voters/taxpayers with the sins of others, in this case, the irresponsible succession of Cypriot governments and the unelected Mandarins in Brussels who allowed it into the EU, let alone the Euro zone. The German (and other national) voters generally vote on issues close to home and, I am certain, if elections had been about Cyprus' admission, and underwriting its banking system, I have no doubt that the campaigning and outcome would have been different. But, the Juggernaut that is the European Project must not be hindered.
Let us not put Cyprus on the pedestal - it is but a clearing house for the Russian mafia, not a paradigm of virtue any country should follow anxiously. Bold? Not really. Brazen, more like it. Perhaps the negotiated price of a (temporary) reprieve, a fractional confiscation of funds, was worth paying after all. Or perhaps not. Who is to say, without having a rock-solid crystal ball or direct line to Fate. Ultimately, there will be a price to pay, and there is no escaping it. Negative interest rates on deposits, anyone?

It is not to be overlooked that allegedly some 4.5 bln euros flew out well in time from the Cypriot accounts of the well-connected insiders, doubtless including assorted government officials and those politicians who so bravely voted "Nein!" in the parliament.
Odd comments:

-- "Cyprus is more parasitic than it is productive"

-- "...the rest of the Euro-area countries were just as complicit in allowing the tainted money (to pour into) the Cyprus (banks)...."

-- "(Cypriots) voted in the succession of governments who implemented their irresponsible economic policies...."

-- "...German taxpayer support their welfare state...."

Anybody read Nicole's article? The private, Magic Free Market banks in Cyprus took in foreign investment money, which they invested in Greek debt. That private investment is what tanked.

D'oh.

The article is worth reading and re-reading. She explains what FT describes. FT has more detail and does not take the trouble to explain what is happening.
Excellent article by Gelinas. Germany has been caught with its pants down - and I am happy it is now getting a spanking. Any country that keeps lending long after it is economically prudent to do so, to other countries whose economies are running huge structural deficits, is doing so at their own risk. Now they want to download that risk to people in the debtor nation who have been prudent enought to save money! How does that seem fair? It is the banks and the offshore money that have been bilking the Cypriot economy and yet they are the ones being protected. Fie on that! Instead of refusing these loans, forcing countries like Greece, Spain and, yes, Cyprus, to fix their own problems, Germany enjoyed the returns they were getting on their usurious lending practises. Good for them. Now, like any other investor, when things go bad, they need to take the losses, too.
"Cyprus isnít some Third World nation, .."

Really?

Even if it isn't, Cyprus is more parasitic than it is productive and has been living high about its market worth.

The sad truth is that Cyprus, like Greece and other such countries, will face a diminishing of their standard of living.
Giaccomo, the rest of the Euro-area countries were just as complicit in allowing the tainted money pouring in to the Cyprus and the irresponsible economic policies. If they weren't happy with what was going on they could have kept Cyprus out of the Euro. The money coming in to Cyprus ended up being denominated in Euros. You also could just as easily argue that the voters in Germany kept voting in Governments that were perfectly happy with the status quo in Cyprus. And Stuart- the real estate boom in Cyprus meant more demand for durable goods from Germany, it is inaccurate to suggest that the German economy/taxpayer didn't benefit from the Cypriot 'business model' and thus shouldn't pay.
I fail to see how this is Merkel's fa8ult or the German taxpayers' responsibility.

Cyprus has indeed been betrayed, but the betrayers are its business and political classes. I have every sympathy for the plight of the teachers, the farmers, the retirees, and anyone else whose hard-earned life's savings would be effected. Yet they voted in the succession of governments who implemented their irresponsible economic policies and whose greed welcomed the tainted money pouring in from abroad. The source of that money was no secret and its influence corrosive (the last President but one, Tassos Papadopoulos, was at one point Slobodan Milosevic's money-launderer).
I agree with tom blair, but the next question must where to those that earn more than they save put their money.

I know some people will smile, but I bought the family 3 1/2 acres 20 minutes from the town I work in and the kids go to school. I have spent a fair bit of the excess cash in water tanks, orchards, solar panels and making us self sufficient.
I have to support Merkel here. Of course Cyprus is feeling betrayed. But they don't have the right to demand that they German taxpayer support their welfare state. This is the same problem with welfare in America - eventually its recipients beging to feel they have the right to share in wealth they did not create.