Judging by the Cyprus bail out deal you'd think the financial market just won the Powerball lottery twice in a row. Not so fast Mr Gotrocks. Articles plastered across the financial news tout a last minute bail out deal. All well and good for those who only read the headline and not the meat of the articles. We heard last week that depositors would take a 10% haircut on their accounts which caused the beginnings of a run on the banks. When that idea didn't fly it was back to the drawing board and the new plan calls for even more suffering with a proposed plan of anywhere between 20 and 40%. So you didn't like the plan of the bully punching you in the face? Well then this time he'll kick you in the nuts too. How do you like them apples?
But seriously this was all caused by several factors. Cyprus was in great financial shape just a few years ago but when it got sucked into the black whole of the housing and derivatives market then the picture turned bleak very fast. The nations' debt was a mere 2% of GDP back in 2004 jumping to 6% a few years later. Russia is said to have some 20 billion in investments which might be puzzling considering the main source of income for the nation like Greece is tourism. Ah but it was those tax breaks that sank the ship. Cyprus became a tax haven for wealthy Russians looking for a place to hide their gold and cash. And since Cyprus is a part of the Euro zone it can't print it's own money to stabilize it's markets should things go awry which they did. And the irony is not lost in that it was Germany in the 1930s who faced the very same situation only the names were changed.
So as the Wall Street boys pop their corks on the bubbly the game isn't over yet. What would you do knowing your bank statement would be 20% or more lighter if and when the banks open again? And limiting the amount of withdrawals to 100 euros isn't going to make for a healthy economy any time soon. Most food and rent is more than that these days.
The underlying plan is to separate the assets of the two largest banks and creating a good bank and a bad bank. We've seen this before and it's the same story. The banksters get the assets while the taxpayers get the debt. Focus on the assets and forget about the debt because after all it's been sequestered into a bad bank. And yet again it's privatize the profits and socialize the losses. These crooks must think we're stupid.