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Paul Krugman Wins Nobel: Best Supporting Liberal Playing Economist in Cyprus

The opinions expressed by columnists are their own and do not necessarily represent the views of Townhall.com.

It’s becoming increasing clear that the latest European financial Crisis-Without-End is largely an exercise meant to grant government more power to steal from citizens. Don’t expect for the phenomena to remain in Europe, either. Obama, John McCain and others who head up the Bad Idea Brigade will likely import it to this side of the world, very soon.


These things, you see, tend to travel from the continent, through England and then to the USA.

Providentially for the Bad Idea Guys, while the European Union (EU) busied itself with stealing money from depositors to “save” Cyprus for the EU, the United Kingdom just announced that their banks- surprise!- need $38 billion in fresh capital to make it through the year.

Hmm, I wonder where they’ll get that money?

They might, for example, use the “template” that EU finance chief Jeroen Dijsselbloem advocated recently- the one used in Cyprus- where depositors have their accounts raided in order to make up for the poor performance of politicians.

Oh? You thought this was about risky banks?

No, it’s not.

I’ve recapitalized a private bank that ran into trouble. And I’ve done it without government help. It’s actually possible to fix a risky bank without government help.

But it’s never possible to fix the risky politicians, unaided by heaven.

The risky politicians- and their Liberal Conscience, Paul Krugman- would love for you to think the crisis is about the evil banks, the shady depositors, their greed and lust for money.


“What’s the common theme in these episodes?” writes Paul Krugman, Nobel Prize winner. “Conventional wisdom blames fiscal profligacy [from governments], but in this whole list, that story fits only one country, Greece. Runaway bankers are a better story; they played a role in a number of these crises, from Chile to Sweden to Cyprus.”

While I think Krugman won his Nobel Prize for Best Supporting Liberal Playing an Economist, the truth is that it is only the last two appellations that I used- greed and lust for money- that apply in the case of Cyprus.

And it’s not greedy bankers, either, to whom the names apply.

It’s greedy government.

Let’s not forget that the crisis in Cyprus was caused by the collapse of the Greek welfare state.  And the collapse of the Greek welfare state was occasioned by the collapse of many other European welfare states. See: Italy, Spain, Portugal, Ireland, France. These welfare states were able to grow because the financial system that they all attack today was able to provide them substantial sums of money yesterday to allow them to grow.

And when the system could grow no further, it burst.  


Anyone who starts by first taking the position that the reason why the financial crisis happened worldwide was because banks were “deregulated,” has no idea what the word “deregulated” means.

There are at least five federal regulatory agencies that oversee banks, just here in the US. The rules and regulations from the FDIC alone cover four volumes. The FDIC rules are so complex that a “bulletin” is sent out twice a week to alert banks to changes in the rules.

Including the repeal of Glass-Steagall, there have been at least four attempts to reform banking regulations in the last 15 years, and each attempt has been worse than previous rules. 

And that regulatory drag doesn’t count all the regulations, “best-practices,” helpful hints and direct taunts from NGOs like the International Monetary Fund, the World Bank, Fannie Mae, Freddie Mac, M-O-U-S-E, that increasingly crowd the US financial space.      

"If there is a risk in a bank,” says Euro money honcho Dijsselbloem “our first question should be 'Okay, what are you in the bank going to do about that? What can you do to recapitalise yourself?'. If the bank can't do it, then we'll talk to the shareholders and the bondholders, we'll ask them to contribute in recapitalising the bank, and if necessary the uninsured deposit holders.”


And if necessary “the uninsured deposit holders”…what?

You‘ll steal from them? Like in Cyprus.

I’m great with governments not backstopping and bailing out banks with taxpayer money. But,raiding uninsured depositor accounts to meet the capital requirements of any bank, without the consent of the account holders, well, that’s theft.

But as Krugman says: Evil banks, shady depositors and runaway banking make a much better story.

And for politicians and guys like Krugman, it allows them to just act natural.    

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