Well, I suppose it had to happen, the market needed an excuse for a sell off and events in Cyprus gave them as good a reason as any to pull back a little. The question now is whether we are entering into a period of sustained selling, which to some degree after the recent rise in stock markets would not necessarily be a bad thing. The question as always when a down period starts, if indeed that's the case, is how long will it be for?
The Cyprus financial crisis and the events towards the end of last week tell you a lot about how conspiracies start and you can understand why. The decision to place a tax on savings/bank deposits for everyone is an extreme example of David Cameron's "we are all in it together" mentality, when in reality we are not all in it together. Some of us didn't con the system and don't see why we should pay to bail it out in these ways.
Taxing everyone in this way and giving them in return shares in dodgy banks, treating everyone to a bit of the pain of austerity is not only grossly unfair, but also counter productive. It has brought back the spectre of bank runs, the fear that other countries with much greater problems will try the same, who's next? Greece? Spain? Italy?
The conspiracy side of it comes from the belief that TPTB (The Powers That Be), whoever they are, have deliberately done this to Cyprus to test the water. Cyprus is a small country, where any public revolt against this may be controlled, if necessary by force. The country has a history of military coup, rule by force, so if this turned out a disaster they know how to control things. It would be more difficult to do that in Spain or Italy.
However, if they were to get away with this tax, then a precedent has been set. Financially it might work, but that doesn't take away the fact that it is totally, morally wrong. Politicians have a habit of using precedent to do things again once they see that it "works".
Taxing everyone for the mistakes of a financial elite that took us all up the yellow brick road to their fantasy land of prosperity will only disgust anyone who feels that this is another kick in the balls of justice and what is right and wrong. The people of Cyprus are right to be outraged and the politicians should take note of the potential for trouble that they are unleashing in taking such measures.
But this is also the problem with conspiracies, are they really that stupid? Or perhaps "they" want more bank runs? The start of a new EU crisis? You can go round in circles on this one, but this tax is madness in its attack on Mr and Mrs average, the little guy, the person who was prudent and honest while others conned the system for all they could get pre-financial crash and carry on conning the system today. The former are the people we should be on the side of and its the latter that should be pursued, financially and legally.
Update:
ReplyDeleteThere is a lot of potential back tracking going on here and it looks likely that some revised deal will be done aimed at smaller savers, but the tax itself looks like remaining.
However, precedent being set, the UK Government has indicated that it will compensate some UK citizens based in Cyprus.
The Chancellor described the Cypriot bail-out as an "extraordinary" situation, but he pledged that British armed forces personnel and Government staff serving on the island will be protected from the bank levy.
"It’s a difficult situation for people who live in Cyprus," Mr Osborne told the BBC's Andrew Marr Show. "For people serving in our military and our government out in Cyprus, we are going to compensate anyone affected by this bank tax - people who are doing their duty for our country in Cyprus will be protected from this Cypriot bank tax."
http://www.telegraph.co.uk/finance/financialcrisis/9935596/UK-troops-hit-by-Cyprus-bailout-will-be-compensated.html
On the plus side, this compensation precedent would make it very difficult for any UK Government to introduce the same tax. On the other hand, Government always likes to keep the armed forces on side. Dictators always try to buy off the loyalty of their armed forces, democracies do it in more subtle ways.
Update:
ReplyDelete"But don’t suppose that being outside the euro has spared British savers the same injustice. In many respects, the damage has been worse, undermining the nation’s wealth much more comprehensively than the comparatively minor haircut Europe is attempting to impose on Cyprus. It’s just that the British haircut is being done in a different and more subtle way.
Rewind to the Northern Rock crisis in the autumn of 2007, and the UK government made a number of commitments to protect depositors. Alistair Darling, then UK Chancellor, gave an unqualified taxpayer guarantee to all Northern Rock deposits. The prime minister, Gordon Brown, later promised that not a single UK depositor would lose money in the wider banking crisis.
In terms of the nominal, sterling value of deposits, they spoke the truth – well, sort of, for Britain imposed its own version of Cyprus’s deposit tax some years ago in the form of the banking levy, which is a charge, albeit a very small one, on wholesale deposits. British savers have also been persistently leached through low interest rates to pay for the bad debts of the boom.
Yet the main difference is that in Britain the damage to savings has been external, through currency devaluation, rather than as proposed for tiny little Cyprus, internal. This has had a devastating impact on the relative worth of British savings.
Your British pounds are today worth nearly 25pc less in Cyprus than they were five years ago, even though Cyprus has arguably had a worse banking crisis. Elevated British inflation – in part, a direct consequence of devaluation – has done the rest. Even after the haircut, the Cypriot nest egg will look in much better shape than the British counterpart, all other things being equal."
http://www.telegraph.co.uk/finance/comment/jeremy-warner/9938659/Cypriot-savers-have-it-cushy.-Weve-had-worse-haircuts-in-Britain.html