March 26 2013
Ich Bin Ein Cypriot?
One of the things the Cypriot government had to do to justify seizing money from the bank accounts of private citizens was to corrupt language. The seizure is being called a tax.
This Orwellian use of language sent Bloomberg columnist Caroline Baum straight to the dictionary, where she found the definition of a tax:
Tax: A fee levied by a government on income, a product or an activity....The purpose of taxation is to finance government expenditure."
The seizure of money from bank accounts in Cyprus doesn’t fit the definition of a tax. Baum writes:
In this situation, depositors aren't being asked to cough up additional money to meet a tax liability. To the contrary, a portion of Cypriot deposits will be confiscated -- electronically, no less -- by the government because that's what euro zone finance ministers, the European Central Bank and International Monetary Fund demanded as a precondition for a 10 billion euro bailout.
If the raid isn’t carried out, the biggest banks in Cyprus will go under, taking with them the euro zone. Europe’s bureaucrats are desperate. The decision to take money from private bank accounts means that every bank account in the euro zone is now “subject to the whims of politicians as they try to prevent their dream of a united Europe from shattering.”
A lot of the money seized had been deposited by Russian kleptcrats, and I am not shedding tears for them. But it is difficult to wrap one’s head around what this means for private citizens who've saved their money.
My own savings represent a certain amount of self-denial. I can’t imagine what it would be like if my government decided to confiscate a hefty portion—and, adding insult to injury, call the theft a tax.
But what about my savings? Could what has happened in Cyprus happen here?
There are a number of pieces out addressing this scary issue. Here is what Thomas Sowell answers the troubling question of whether our money is safe in American banks:
Yes and no. The U.S. government is very unlikely to just seize money wholesale from people’s bank accounts, as is being done in Cyprus. But does that mean that your life savings are safe? No. There are more sophisticated ways for governments to take what you have put aside for yourself and use it for whatever politicians feel like using it for. If they do it slowly but steadily, they can take a big chunk of what you have sacrificed for years to save before you are even aware, much less alarmed.
That is in fact already happening. When officials of the Federal Reserve System speak in vague and lofty terms about “quantitative easing,” what they are talking about is creating more money out of thin air, as the Federal Reserve is authorized to do — and has been doing in recent years, to the tune of tens of billions of dollars a month.
When the federal government spends far beyond the tax revenues it has, it gets the extra money by selling bonds. The Federal Reserve has become the biggest buyer of these bonds, since it costs them nothing to create more money.
This new money buys just as much as the money you sacrificed to save for years. More money in circulation, without a corresponding increase in output, means rising prices. Although the numbers in your bank book may remain the same, part of the purchasing power of your money is transferred to the government. Is that really different from what Cyprus has done?
Let me draw another Cyprus parallel. In a little more than two weeks, we will be forced to send the U.S. Treasury money. Much of this money will be spend on creating more government dependence. A lot of us hate that. We find it more painful to send our money to Washington because so much of it will be spend on programs that our liberal elites support but that we don’t.
An article in the U.K. Telegraph characterizes the seizure in Cyprus this way:
The brinkmanship that has been on display over the Cypriot financial crisis makes obvious to all but the wilfully blind the level of political determination in Brussels to save the euro at all costs. No amount of empirical economic evidence – or misery for ordinary people – matters when the dreams of the continent’s elite are threatened.
No amount of empirical evidence or the financial sacrifices required of ordinary U.S. taxpayers matters to our elites. They dream of big government and we’re “asked” to pay for it every April 15.