I meant to remark on this a few days ago, but I’m a busy guy…
When the Cyprus bailout-plus-tax-on-depositors was first announced, most people flipped out, saying it was stealing money from the average Joe in order to rectify the bad investment decisions of the fat cats. I myself took this tack in the March issue of the Lara-Murphy Report.
Yet here the critics (including me) were unwittingly buying into the very problem: People have been conditioned by governments (and the financial elites) that there is something sacrosanct about depositing your money in a bank. If you put your money in Bank A, and it lent those funds to the Greek government which then defaulted on the loan, then why shouldn’t you take a hit? It’s partly your fault for giving your money to an institution that makes such dumb decisions.
I first saw Richard Ebeling make this point on Facebook, and then I saw Lew Rockwell write up a version at his blog. Their arguments completely flipped me around; I had been looking at the situation too simplistically.
Now, the actual proposal in Cyprus really did involve genuine theft, because (I believe) every depositor (at least based on levels of the deposit) was going to get hit with the fee, regardless of how his or her particular bank performed. Also, there would possibly be different haircuts given in an actual bankruptcy proceeding, depending on when somebody (effectively) lent his money to a given bank.
Nonetheless, I just wanted to draw everyone’s attention to Rockwell’s short post, because (as I said) many people–including me–were too quick to classify this as the rich bankers screwing over the little guy, when our own recommendation would amount to effectively the same thing in many respects.