print“Savers Pay for Spenders,” our March 19 BAB post on Cyprus, asked:
WHY is state-sanctioned theft from Cypriot savers any different to your paycheck being docked for statutory payroll tax deductions?
WHY is state-sanctioned theft from Cypriot savers any different in principle to the statutory theft called the income tax; and, in particular, from the progressive income tax, where the rich (“savers”) are penalized for the sins of the rest?
As to taxes on assets: Property taxes, taxes on investments—why are these seizures of private property any different in principle to the lunge on Cypriot savings accounts the bankers and bureaucrats of Europe have made?
You’d think the US doesn’t tax assets. It does. And how are the taxes above different in principle from a bank deposit levy?
Today comes the news, (via Forbes), that Cyprus and its puppet masters have agreed that, “the Popular Bank of Cyprus (Laiki Bank) will wind down” [presumably this is journo babble for “close”].
Laiki Bank deposits above 100,000 euros—which aren’t protected by EU law—will be frozen and used to pay for the deal. The frozen accounts are expected to yield 4.2 billion euros ($5.5 billion), and account holders will see an estimated 30% to 40% haircut on assets. Far greater than the original 9.9% levy.
“Haircut” is yet more journo mumbo-jumbo. The correct word is “theft.” Large-scale robbery of private property.
Financier Peter Schiff completes the thought expressed in this post’s lede, above—and shared by every clear thinking libertarian. This is all a formality—a more in-your-face lunge for private property :
…isn’t inflation, which allows governments to pay off debt through the creation of new money that transfers purchasing power from savers to borrowers, just a deposit tax in disguise? (Read more about Japan’s plan to do just that). British citizens of all means have been living with such a three percent stealth tax for the past three years, and it is expected to stay that high for at least two more years. Yet a one-time tax of 6.75% in Cyprus is seen as the ultimate act of betrayal?
Many are lamenting that Cyprus’ membership in the EU prevents it from devaluing its own currency to get out of the jam. How would such a course be morally superior? Taking actual losses on deposits is no different than taking losses through devaluation and inflation. Both result in the loss of purchasing power. Asking for a depositor haircut at least deals with the problem honestly and immediately. Although it’s not quite as honest, devaluation can also be effective.