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Sunday, April 07, 2013

A Dangerous Idea

 Anti-Austerity Demonstration in Lille, France

Some time ago, maybe as far back as 2008, some people wrote about the measures governments might take when things begin to unwind. I think grabbing peoples' deposits was one possibility. It is still a possibility.

There is no limit to the lengths politicians will go to place burdens upon the citizens to correct the disasters that politicians themselves have wrought.

Keep it in mind as we begin talking about the tit-for-tat of spending cuts in a rage for fiduciary appearances. Whose ox was gored, and as a result how many innocent bystanders will be gored in order to get back to fiscal health?
It is eye for an eye, tooth for tooth, and our dollars of present money for our dollars of past wasted money. 

Plans from Brussels put the onus on bank depositors, rather than the taxpayer, to bear the costs of bank failures.
"Cyprus was a special case ... but the upcoming directive assumes that investor and depositor liability will be carried out in case of a bank restructuring or a wind-down," Mr Rehn, the European Economic and Monetary Affairs Commissioner.
"But there is a very clear hierarchy, at first the shareholders, then possibly the unprotected investments and deposits. However, the limit of €100,000 (£85,000) is sacred, deposits smaller than that are always safe."
Mr Rehn was referring to a directive being drafted by the European Commission on bank safety which would set out investor liability in the law of member states. He was speaking in an interview with Finnish TV after Cyprus last month forced richer depositors to suffer heavy losses in order to secure a €10bn bail-out from the EU and the International Monetary Fund.
Cyprus had initially planned to make people with deposits under the crucial €100,000 mark to take a cut also, before backtracking in the face of an outcry. Smaller deposits are supposed to be protected by state guarantees.
Mats Persson, director of think-tank Open Europe said: "Rehn was only re-stating what's in an EU proposal tabled in 2012, which quite sensibly suggests a mechanism whereby first, investors and secondly, large depositors - rather than taxpayers - foot the bill when a bank goes bust.... "

There is a 60-40 chance this idea will reappear soon. It is not 50-50, since the assault on deposits still stands for deposits over €100,000, and has not flat-lined.


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