"It profits me but little that a vigilant authority always protects the tranquillity of my pleasures and constantly averts all dangers from my path, without my care or concern, if this same authority is the absolute master of my liberty and my life."

--Alexis de Tocqueville, Democracy in America

Tuesday, March 26, 2013

Stories You May Have Missed - Cyprus

We focus so much on the back-and-forth, push-and-pull of politics in America, that we sometimes miss huge stories because they're happening on the other side of the world.

One such story is the looming disaster of the Cyprus bailout, which appears to involve simply confiscating the wealth of large bank depositors, many of whom are foreign.   When a deposit in a bank isn't safe, when the government can simply confiscate wealth, then you are one step away from chaos.   I can't think of anything more essential to the social contract than the notion that an individual's property can't simply be seized by the government.   If the government won't honor its side of the social contract, why should the citizenry honor their side?

A taste of today's news from Cyprus:
Despite promises since last week that the country’s banks would reopen Tuesday, the government late Monday ordered all of them, including the Bank of Cyprus and Cyprus Popular Bank — the nation’s largest financial institutions, with most of the accounts on the island — to stay shut through at least Thursday. The extended bank closing is to reduce the risk of a bank run by nervous depositors. Automated cash withdrawals will be limited to €100 a day.
The island’s faltering banks suffered a new indignity on Tuesday, as Fitch Ratings said it was cutting its credit grades on Cypriot banks because of the losses imposed by the bailout deal on senior creditors.
Fitch said it was cutting its rating on Cyprus Popular Bank, known as Laiki Bank, to “default.”
Fitch also cut its rating on Bank of Cyprus to “restricted default,” a grade Fitch said means the bank has experienced a payment default on a bond, loan or other material obligation but has “not entered into liquidation or ceased operating.”

Oh, and by the way, it's not like Cyprus is in a dangerous part of the world or anything:

1 comment:

  1. This is why the solution is not just more regulation to prevent money laundering and so on, but a radical change in the entire banking system.

    bank bailouts