How does the government react when its budget is cut compared to how government reacts when it considers cutting into the private budgets of citizens and residents? Thinking about the anti-sequestration fear campaign in comparison to the White House’s vocal opposition to the looting of bank deposits in Cyprus gives us a window into how government thinks.
First of all, remember that the international politicians involved in threatening to inflict thirty billion Euros of harm on the Cypriot economy in order to extort less than six billion Euros, are “our” kind of people. We help staff and support the International Monetary Fund. Liberal politicians in America typically hold up Europe as a positive role model. The EU’s demand that the Cyprus government steal over six percent of all insured deposits and ten percent of the deposits of more than 1000 Euros is a demand coming from a single political class that includes both Americans and Europeans.
Secondly, despite the ongoing hysteria about the “cuts” involved in the mandatory sequestration, nothing more is involved than a 2.3 percent reduction in the total budget, which itself planned to increase spending by much more. A spending freeze would have been much more substantial and much more helpful.
As we all know, this 2.3 percent reduction is a being portrayed as a national disaster in the making, one that will degrade public services and will hurt American jobs. This daringly and ill-planned less steep increase in spending is a horrible danger to the American economy (though that strikes me as akin to throwing a lit match onto a bonfire).
But when it comes to private citizens and their money, what do we find? Suddenly, it is completely acceptable to take away real money, not just reduce a planned raise at a later date. Six percent of “insured” accounts (which are, in fact, now revealed to not be insured) and ten percent of accounts of over 100,000 Euros are to be confiscated from bank deposits. And what do we hear from the White House? Tacit approval.
“The White House is monitoring Cyprus’ plans to seize money from bank depositors to secure the island’s financial rescue, a White House spokesman said on Monday, but declined to comment further on the plan, which has rattled financial markets. ‘We’re obviously monitoring the situation right now,’ White House spokesman Jay Carney told reporters at a briefing. ‘We believe it’s very important for Europe to take steps necessary, as they have been, to both grow and deal with sovereign debt issues.’”
Translation: The bankers can go ahead and eat the Cypriots for dinner.
That’s the political mindset. In reality, the confiscations would be devastating. As was pointed out on one financial blog:
“This has simply got to be ruinous for legitimate business in Cyprus. Right off the bat every business in Cyprus is having part of its capital confiscated. Governments may not understand this but a lot of people and businesses are on a razors edge. That $1000 rent payment may not withstand a $67.50 haircut. A monthly payroll of $100,000 might not be made if 10% of the businesses cash is seized.”
Taking money from people’s accounts is far more destruction than the sequestration will ever be, but it is treated by politicians and bankers as if it is a rational decision rather than an unethical assault on people. Cutting government funds, or even reducing their rate of increase, is the ultimate sin. Plundering the people, on the other hand, is just fine.