After Cyprus, New Tolls For the Euro
2013-03-22 0:00

By Rick Falkvinge | Falkvinge


After the attempted tolls on bank savings in Cyprus for saving the Euro, a new kind of tolls can be heard in the distance for the currency. The fundamental trust in the currency as a store of value has been broken, according to multiple signs across Europe. Even with the Cypriot parliament backpedaling frantically, the situation appears snowballing – there could be a bank run in two weeks.

When I was speaking at the first European Bitcoin conference in Prague, another speaker was a seasoned economist whose name I forget. He described how today’s bank system with so-called fractional reserve banking is essentially a crumbling Ponzi scheme. In summary, banks have the right to conjure up money out of thin air and lend that money to you against interest that they get to keep. (Yes, really, that’s actually how it works today, although it is admittedly a very simplified description.) As part of the Q&A, I asked him what the first sign of a collapse scenario materializing would be.

He responded that a first sign of collapse would be that people didn’t trust their holdings in the currency to retain their value, so they would actively seek to trade it off for other stores of value – other currencies or just about anything else. This was an answer that made sense in the light of the history of known hyperinflations and currency collapses.

In the past days with the Cypriot bailout measure, these first signs of a currency collapse scenario have materialized. People are now actively seeking to trade off their Euros, no longer trusting them as a store of value. When this has happened in the past to currencies, they have not survived.

This was visible on first on Cyprus, where people made a so-called run on the bank to get their money in cash to save it from the negotiated 6-10% “save-the-Euro” toll from all bank accounts, except the banks were closed, so it became a run on ATMs which predictably drained of cash in a heartbeat (and deliberately were not refilled).

A “run on the bank” means that people no longer trust the banks to hold their savings, so everybody tries to withdraw their money at the same time – something that no current bank survives, as the customers’ money isn’t in the bank vaults. This is a scenario that can develop in hours in any economy, when some people start withdrawing in a sign of distrust and more people follow suit to not be the one left standing when the music stops.

The tremors of the bank run – or the attempted bank run, thwarted only by a bank holiday – were felt far and wide across the entire Eurozone. People in several countries got the message loud and clear: it’s their savings, their retirement money, that may be next up for a shave.

[...]

Read the full article at: falkvinge.net




The Confiscatory Cyprus Bank Tax Idea Destroyed European Bank Confidence
By Gary A | Seeking Alpha

In Cyprus, the ECB had forced a tax upon the bank deposits. The plan was to force Cyprus banks to exact a 9.9 percent tax on accounts with more than 100 thousand Euros and a 6.5 percent tax on accounts with less than 100 thousand Euros. Those latter accounts are protected by deposit insurance.

The Cyprus Government was trying to modify this confiscation and just voted unanimously to void the agreement, choosing instead to play a game of chicken with the ECB. The ECB blinked and promised to supply necessary liquidity to the Cyprian banks without taxation. There will likely be a run on the Cyprian banks when they are reopened, and that is rescheduled for Thursday but may not open even then, to the hardship of the poor and elderly who have accounts.

Had the ECB plan been approved it would have likely put gold back into the picture. I had written previously that in the bankers’ order of things, gold was less pristine as collateral than treasury bonds of the strongest nations, like Germany, the US and Japan.

But confidence is waning in the Eurozone, and if there could be a bank run in Cyprus, there could be one in Spain, Italy, etc. Contagion often starts with banks not trusting each other. The ECB had planned to use the 5 plus billion euros collected along with new loans to stabilized the nation’s banks. Now it could be up to the Germans to bail out Cyprus, and if so, bigger demands could be forced upon the wealthy nations of Europe.

[...]

Read the full article at: seekingalpha.com




Related Articles
Will The Banking Meltdown In Cyprus Be A “Lehman Brothers Moment” For All Of Europe?
17 Signs That A Full-Blown Economic Depression Is Raging In Southern Europe
The Guy Who Predicted the Eurozone Crisis 17 Years Ago


Latest News from our Front Page

41% of Americans Support Criminalizing "Hate Speech"
2015-05-23 7:31
The following are from a recent poll about what some are calling on for "hate speech" 1. Support for Hate Crimes Legislation Do you support or oppose the federal law that requires increased penalties for hate crimes committed on the basis of the actual or perceived race, color, religion, national origin, ethnicity, or gender of any person? 2. Support for Expanding Hate Crimes Do ...
FBI Admits No Major Cases Cracked with Patriot Act Snooping Powers
2015-05-23 7:36
FBI agents can’t point to any major terrorism cases they’ve cracked thanks to the key snooping powers in the Patriot Act, the Justice Department’s inspector general said in a report Thursday that could complicate efforts to keep key parts of the law operating. Inspector General Michael E. Horowitz said that between 2004 and 2009, the FBI tripled its use of bulk ...
Sweetener Stevia Was Once Hailed As An Anti-Fertility Agent for Population Reduction
2015-05-23 7:13
Maybe it's not so sweet now... If you've thought stevia, the natural alternative to sugar and artificial sweetners with aspartame, et al., is too good to be true, there may be a catch. Check out this textbook written in 1970 by Paul and Anne Ehrlich, the precursor to the textbook Ecoscience they wrote with Obama Science Czar John P. Holdren ...
TPP Aproved: Senate Republicans Give Obama New Powers - Details Remain 'Classified'
2015-05-23 6:43
President Obama won a big victory for his trade agenda Friday with the Senate’s approval of fast-track legislation that could make it easier for him to complete a wide-ranging trade deal that would include 11 Pacific Rim nations. A coalition of 48 Senate Republicans and 14 Democrats voted for Trade Promotion Authority late Friday, sending the legislation to a difficult fight ...
Circumcision battle: Mom seeks release from jail after federal lawsuit is dismissed
2015-05-23 3:22
West Boynton mother on Wednesday gave up trying to get a federal judge to stop her 4 1/2-year-old son from being circumcised as his father wishes — a battle that also led to her arrest May 14 on a state court warrant. An attorney for Heather Hironimus, who lost similar legal challenges in two state courts, notified U.S. District Judge Kenneth ...
More News »