Think Cyprus can’t happen here? It already did.

March 17, 2013
By

There’s two bulls standing on top of a mountain. The younger one says to the older one: “Hey pop, let’s say we run down there and f*** one of them cows”. The older one says: “No son. Lets walk down and f*** ‘em all”.

- Robert Duvall in Colors

The world was shocked this weekend to learn that the European Union would fund the bailout of Cyprus by confiscating the assets of ordinary bank account holders.  Core Europeans and Americans no doubt comforted themselves that such a confiscation could never happen here.  They would be wrong.  In fact, it already has happened here.

What occurred this weekend in Cyprus was a theft from responsible savers to benefit irresponsible banks.  Small depositors get screwed while bank bondholders (largely other banks and large institutions) get made whole.  Which, it turns out, is exactly what has happened in the U.S. the past five years.

Bank CD rates were around 4% in 2008.  Since that time, the Federal Reserve’s interest rate manipulation has kept CD rates pinned between 0% and 1%.  This has allowed the banks to borrow at near-zero, whether from depositors or directly from the Fed, and invest in Treasuries or mortgage-backed securities earning 2%, 3%, or more.  Using this free-money interest rate spread, banks have indeed earned their way back to solvency.  But savers have had their 4% annual interest confiscated by the Fed.

So laugh at Cyprus all you want.  Those depositors lost 6.75% or 9.9% once.  You’re losing 4% annually for the fifth year running.  Who’s the chump?

Ben Bernanke and Eurogroup President Jeroen Dijsselbloem are standing on top of a mountain.  Dijsselbloem says to Bernanke: “Hey Ben, let’s say we run down there and rip off a bank’s depositors.”  Bernanke says: “No Jeroen.  Let’s walk down and rip off ALL the banks’ depositors.”

28 Responses to Think Cyprus can’t happen here? It already did.

  1. DrDog on March 17, 2013 at 7:37 am

    I agree with the sentiment. However I should point out that Cyprian bank depositors not only lost their 6.7% or 9.9% capital AND have over the years endured the same loss of earning rates via the ECB as American depositors have with the Fed. Example here — http://cyprus.deposits.org/

  2. allie on March 17, 2013 at 7:55 am

    Haven’t some democrats been talking about confiscating 401′s? Why would anyone be surprised by any of this. The federal government is being run by a bunch of crooks, thugs and thieves? Oh, wait, they aren’t running a government, they are running a criminal organization. Unfortunately they are in charge of the federal government.

  3. Jim,MtnView,CA,USA on March 17, 2013 at 12:21 pm

    They haven’t talked confiscation…yet.
    But they might decide how to invest your money, not let you make any choices.

    • DrDog on March 17, 2013 at 2:03 pm

      Jim, you need to revise your opinion of `they`. http://www.bloomberg.com/news/2013-01-18/retirement-savings-accounts-draw-u-s-consumer-bureau-attention.html The CFPB IS looking into `protecting` people, hah! Cordray, picked by a Democrat, and seated by an illegal appointment, is a Democrat. The sub office Office for Older Americans, is run by another Democrat, Hubert Humphrey III, yes the loins of that one. Pelosi’s team has already given it due consideration — http://www.workforce.com/article/20081016/NEWS01/310169987# Reid is of the same mind.

      The only reason they have not attempted it is they don’t control the House and have not devised a trigger event to make it happen.

    • Jim,MtnView,CA,USA on March 17, 2013 at 3:01 pm

      DrDog,I think we are saying the same thing.
      They will decide that it is too risky to allow you to buy stocks and you’ll be forced to buy…oh, I don’t know,… Government bonds.
      You’ll get a crappy return and forced to prop up the government.
      I don’t call that confiscation but it sucks.

      • IP727 on March 18, 2013 at 5:10 am

        It might also be a ploy to scare people into cashing in their 401k’s early,
        thereby triggering a tax windfall for the commies.

        • Fred on September 26, 2013 at 1:05 pm

          test

  4. DrDog on March 18, 2013 at 6:59 am

    The Dim leadership I can guarantee are watching the Cyprus situation very closely. If all hell does not break loose in Eurozone Pelosi and crew will come up with a scheme to match it here.

  5. Jim,MtnViewCA,USA on March 18, 2013 at 7:34 am

    btw, kudos to WCV. This was an excellent insight and presented in an imaginative and entertaining manner :)

  6. Harris Tweed on March 19, 2013 at 4:48 pm

    UPDATE: The government of Cyprus has backed down . . . for the moment at least.

  7. Haverwilde on March 20, 2013 at 12:11 pm

    It is even worse here than what you suggest. Not only is the interest rate being kept low, and we are losing interest, the printing of trillions of dollars is inflating the currency. We see that inflation everywhere but the government index on inflation. In five years my $200,000 emergency funds have lost $20,000 in interest and about $45,000 in purchasing power. Thanks to the fascist democrats and the statist republicans.

  8. John Everett on March 21, 2013 at 7:06 am

    Today in Good News

    RINOs Claim Victory Over Tea Party:

    ‘Today, the membership page for the caucus is defunct. The caucus hasn’t met since July 2012; it has posted no news since July 2012. In the press, “Tea Party caucus” has become an offhand way to refer to conservatives. In her speech to CPAC, which included a typically Bachmann-ian error about how much TANF money is wasted on administration, Bachmann didn’t mention “the Tea Party.” But the new relaunch date for the Tea Party Caucus is April 15, and according to Bachmann’s spokesman, “the main purpose of the Tea Party Caucus is to listen to Tea Party leaders and activists, not be a mouthpiece for the Tea Party.”

    There’s no way to un-spin this. Nationally, the Tea Party flag is so tattered that it’s not in a Republican’s interest to maintain it. (This isn’t true in some states; the Texas Tea Party caucus is alive and well in Austin.) At the same time, the fade of the “Tea Party Caucus” itself is a positive development for Republicans. Ideological conservatives always had their qualms about the group. It allowed members who didn’t have movement bona fides—Denny Rehberg, Todd Akin, Dan Burton—to “Tea-wash”* themselves.’

    RIP

    • Freudian Chip on March 21, 2013 at 8:37 am

      Why are you so afraid of people who agree with tea party/constitutional principles?

      A swelling number of people believe the tea party was merely the tip of the iceberg.
      Your hang wringing obsession over this matter is very obvious.

      • John Everett on March 21, 2013 at 9:04 am

        Your iceberg melted. Maybe it’s the global warming.

        • Rick McPhee on March 21, 2013 at 5:56 pm

          Oh goodie, one crackpot theory backed up by another crackpot theory. The modern day leftists sure are on full display on this site – and their brain dials are all stuck on stupid. LOL!!

        • Freudian Chip on March 22, 2013 at 6:27 am

          Why can’t you answer the question, John?

          Why are you so afraid of people who agree with tea party/constitutional principles?

          Again, many people see the tea party as the tip of the iceberg
          ..and, your craven hang-wringing obsession is quite telling

          Seek help.

          • Jay on March 22, 2013 at 6:36 am

            Seek help, Ace, you are too shrill, behind too many sock puppets.

          • John Everette on March 22, 2013 at 7:27 am

            I thought your question was rhetorical. Doesn’t everyone know we treasonous RINOs just hate freedom and America?

          • Freudian Chip on March 25, 2013 at 7:15 am

            LOL!! Thanks for proving that you can’t answer such a simple question.

            It really exposed your sad “Tea Party Derangement Syndrome” quite well.

            And everyone knows that you can’t get well, until you admit you have a problem.

            So, now you know – it’s called “TPDS” and you’re badly infected. Seek help.

    • Haverwilde on March 21, 2013 at 9:25 am

      Don’t get too close to the RINOs. They are already dead and beginning to smell. They just don’t know it yet. The Tea Party is in remission for another year or so, then watch them start burying the RINOs.

  9. R U in the tank for the RINO Keynesins?? on March 24, 2013 at 8:19 am

    excellent post, wcvarones!

  10. nol west on April 24, 2013 at 12:38 pm
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