While driving to my stock group Saturday morning I listened on the car radio to the program hosted by Ric Edelman, financial guru to the masses.
Edelman and his two yes-men sidekicks (I wonder what he would do if one of them happened to disagree with him sometime) were having a knee-slapping laugh at all those upset about the plan to loot bank depositors in Cyprus so Europe's financial Godfathers would keep the country on the dole and in the Eurozone. How small was Cyprus's economy? One of them said, about the size of Shreveport, Louisiana's, har har.
Of course Cyprus's spot of bother is microscopic in numbers of euros involved, by comparison with the economic devastation wrought on Spain and Italy, which threatens to spill over to other countries. It's nonetheless shocking that the banking-EU cartel felt safe in openly helping itself to depositors' savings.
It's no exaggeration to say that it strikes at the heart of everyone with any degree of wealth to protect, if it can arbitrarily be confiscated to prop up countries and central banks that have maxed out their credit cards.
Karl Denninger writes in The Market Ticker:
When you enter into an investment, whether you make a deposit in a bank or buy a bond or something else, you are buying into a capital structure in a given place with a given and declared level of both risk and potential reward. You price that risk and your willingness to enter into the transaction with the full understanding of where you are in that capital structure.The amounts involved are almost beside the point. The point is, the rule of law, the protection and enforceability of contracts, can no longer be assumed.
When that is unilaterally changed retroactively you are being stolen from.
Lest you believe that such treachery is performed only by perfidious Eurocrats kneecaping citizens of an off-the-freeway country like Cyprus, recall that something along similar lines happened right here in the Formerly United States. In using taxpayers' money to bail out General Motors, the government saved the feather-lined union pensions while stiffing GM bond holders. In a bankruptcy, bond holders are legally at the front of the queue when it comes to dividing up the surviving assets.
These thefts in our financial system are increasing in severity and frequency. They have destroyed the belief in the capital structure.The essence of the conservative outlook on life isn't simply a matter of tried-and-tested tradition, or even the rule of law, as important as those are. The rule of law is only a particular case of an even more basic principle.
They have and will make it difficult or impossible to attract capital, since the aggrieved parties cannot find solace in the law. But worse, these thefts are and remain actionable until they are compensated. They remain actionable whether or not the law recognizes the cause of action or dismisses it with the wave of a hand. They remain open like a festering wound.
They will continue to fester and poison free enterprise until some group decides they've had enough of both the annoyance and injury and decides to obtain recompense through whatever means are necessary.
Even Ric Edelman might wake up if all bank deposits in Shreveport, Louisiana, received a "haircut" one fine day.