WESTMINSTER, United Kingdom If you ever wanted to see why British people are so sick of the European Union look no further than the two announcements on Cypriot security today.
At 5:30am today, sirens echoed across Cyprus marking 41 years since Turkey invaded the island nation in the eastern Mediterranean Sea.
The real problem, as I explain in this interview for Voice of America, is that Cypriot banks became insolvent because they made very poor investment decisions, particularly their purchases of Greek government bonds
Regular readers know that I have the same understanding of global economics as a three-year-old has of quantum physics.
There used to be a time when governments sought to so structure financial markets and banking in such a way to engender confidence in the system, not to systematically erode confidence
"Government is theft." The old libertarian battle cry came to mind when the news hit, two weeks ago, that Cyprus was about to confiscate 7 percent of all the insured deposits in the island's two biggest banks.
The European Union has now made it official policy, under certain circumstances, to encourage member states to seize depositors' assets to pay for the stabilization of financial institutions.
Obama, John McCain and others- like Paul Krugman- who head up the Bad Idea Brigade, will likely import Cypriot banking methods to the US very soon. The risky politicians and their Liberal Conscience, would love for you to think the crisis is about the evil banks, the shady depositors, their greed and lust for money.
Cyprus is reopening its banks on Thursday. The banks were closed on March 16th, as the country worked on a new bailout deal.
Cyprus will get its bailout money and the EU will get a bank levy up to 100 percent of deposits from the country’s largest banks. Accounts in excess of 100,000 euros in the Bank of Cyprus and Cyprus Popular Bank will fund the bailout. The levy will avoid taxing Cypriots, but will fall mostly on rich, Russian depositors.
The decision of the government in Cyprus to simply take money out of people's bank accounts there sent shock waves around the world. People far removed from that small island nation had to wonder: "Can this happen here?"
Cyprus, an island most people have forgotten exists, became the center of the world when they put forward a bizarre plan to solve their economic crisis. The leaders of Cyprus proposed a wealth tax that would take funds directly from people’s bank accounts.