Cyprus Deposit Tax: A Hint At the Future For the U.S. and EU

Sunday, March 24, 2013
By Paul Martin

Jed Chancey

The latest attempt by the desperate leaders of Europe to contain the euro crisis and to insure the banks remain solvent was a 6.75%-9.9% tax on all bank deposits. This tax has now failed to pass the Cyprus parliament and the EU and Cyprus are looking for other solutions. The tax was justified by saying that bank depositors must bear some of the burden for recapitalizing Cypriot banks. While the burden was placed on depositors, those who own bonds issued by either the banks or the government of Cyprus would have been repaid in full. This is another piece of evidence that the politicians and banksters will do whatever it takes to maintain their own financial dominance, including the direct looting of personal bank accounts.

Despite what many people believe, a bank deposit is a loan. When you deposit money in a bank, that money no longer belongs to you, it belongs to the bank. They can lend it out or use it to buy assets that they believe will generate a return. Their only obligation to the depositor is to repay the loan whenever the depositor requests his money, subject to legal limitations and the ever-present threat of a “bank holiday” or of the confiscation of a portion or the entire deposit by government action, as happened in Cyprus. As all fractional-reserve banks are by definition insolvent, all of the money loaned to them can never be paid back. When push comes to shove, someone has to lose, and what happened in Cyprus provides precedent on who the losers will be. The losers will not be those who loaned money to insolvent banks by buying their bonds, or those who bought the bonds of an insolvent government; they will be ordinary depositors and taxpayers, as usual.

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