For those thinking that a Cyprus-style outrage might happen here, I have bad news

The truth is that, worse has been happening in the UK for years beneath your very noses.

According to the first EU offer, those with EUR100k or more in deposits will have 9.9% of their balance converted into bank shares. Those with below EUR100k will have 6.75% converted. As time progresses, the wolf is tempting the sheep a little by suggesting 3% on amounts between EUR20k and EUR100k, with those under EUR20k escaping and those above getting punished with 15% – transforming a bad scheme into one even more unfair.

This is not straight theft, mind, but more of a unilateral renegotiation of a loan agreement. It is no less of an outrage for that.

What most people do not realise is, a bank deposit is not cash held at a bank, but a loan to it. Putting your money in a bank is to no longer have it. One’s bank statement does not represent the cash one has, more what the bank owes. The Cypriots have found that their loans have become 90.1% on-call loan and 9.9% bank shares of dubious value and liquidity. Given the capital controls, the 90.1% loan is rapidly losing its on-call status, too.

pick-pocket-from-short-film-thin-strip

This is bare-faced and in the open. If you want to see insidious, stealthy theft, look no further than the Bank of England, with its artificially low interest rates coupled with increasing Govt debt and money-printing, now called “Quantitative Easing” to spare their blushes. Those with holdings in Sterling, savers, in other words, have had the value of their wealth transferred away from them by these effects. Debtors gain that wealth. The State is a massive debtor, so it has a significant vested interest in such policies. It all happens gradually and under the surface so people hardly notice.

All across the world, people are shocked at the events in Cyprus, but, oddly, the very predicament Cyprus is in has forced the State to crawl out into the daylight and reveal its vile actions for all to see. Normally, it invisibly taxes by devaluing and diluting the currency, and everyone chews the cud as before. As one cannot hit the monetary base of Cyprus alone due to it being in the Euro, it is savers that are hit.

The cattle are all chained together in the Euro. The butcher had to do its slaughtering and skinning in plain sight of the other cattle, and the herd is now restless. We look on with concern, not knowing the slaughtering and skinning is being performed in the night, as Morlocks will stalk the Eloi.

Will there be widespread runs on the banks? If I were in Spain or Italy or Portugal, I would not have my money let out to an organisation that has the State’s chain running through its nose.

How long before people wake up one day to find their “savings” partly transferred into worthless UK Gilts or unwelcome RBS shares?

Desperate times require desperate measures. Desperate debtors, even more so.

8 Comments

  1. “What most people do not realise is, a bank deposit is not cash held at a bank, but a loan to it.” I am very interested to hear your stance on this important subject. I believe this is incorrect, money deposited at a bank is my money, left there for safekeeping. That is why we have deposit guarantee systems. Now I know the EU is pretending that we are lending to the bank and they can do what they like with it, but that is just part of the scam.
    If you are correct, and I am wrong, then, as a long time critic of the EU and Euro, the result will be better than any I could have hoped for.
    Everyone in Italy, Spain, Greece, Portugal and France will immediately take their money over E100k and deposit it into a Swiss bank, where the amount is guaranteed, I know I would! I bet the smart money is already moving, and I bet the media is being told to hush it up.
    Total collapse of the entire banking sector = shut down the Euro Zone. The fact it is a self-inflicted wound makes it all the sweeter, so bring it on!

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    1. ” I believe this is incorrect, money deposited at a bank is my money, left there for safekeeping. That is why we have deposit guarantee systems.”

      I think Tim is correct. This was ‘settled’ back in the 19th century, when certain court cases determined that money held in deposit accounts had the status of a loan from the account holder to the bank, not as a bailment. This is not connected to the deposit guarantee systems, which have been instituted in the post Gold Standard days, and amount to no more than a bottom line position of the B of E printing enough to cover everything. I am referring to England, though, and not the system in the EU. I expect if people do start a massive clear-out of deposit accounts in Italy etc, then the banks will shut, as they certainly don’t have the paper supplies on hand.

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      1. OK, so that explains the £85k guarantee system. To be honest this suits me fine because :
        1. I don’t have more than £100k in any bank
        2. I don’t really care what kills the EU / Euro, as long as something does!

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    2. The money you have deposited is indeed lent to the bank, and then lent on.

      We have “deposit guarantee systems” because politicians want to both placate the masses and make them more dependent.

      Deposit guarantees are fine, if the depositor pays for them individually and respective of the amounts and location of the deposits guaranteed.

      What we have now is a state-funded universal system which hides yet again the risks from the individual, making it harder to make sound choices and increases the moral hazard.

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  2. It is basically about Fractional Reserve Banking.

    To quote Andrew Lilico

    A deposit in a fractional reserve bank (the ordinary high street banks we have in Europe) is a loan the depositor makes to the bank – deposits are not, in that sense, “savings” at all. The depositor receives interest on the loan (the deposit) precisely because the bank uses deposits to support risky lending of its own – lending for mortgages, business finance, personal loans, and so on.

    He goes on “Until the mid-1980s there were “savings banks” (like the old TSB), which simply stored your deposits in the form of government bonds, gold or cash – deposits were “100 per cent backed”, in the jargon. This form of account was driven out, inter alia, by deposit insurance.

    For more, see the rest of Lilico’s helpful article here:
    http://www.cityam.com/article/botched-cyprus-bailout-was-right-hit-retail-depositors

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    1. It is more than just Fractional Reserve Banking.

      It is about currency monopoly, money printing, interest rate fixing.

      Fractional reserve banking, on its own, did not get Cyprus, the UK or the Euro to where it is now.

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      1. Sorry, Tim. I was intending to respond to Lawrence’s post, and to make the point that under FRB, a bank deposit is indeed a loan to a bank – no matter what most members of the public think. I thought that Andrew Lilico’s article was helpful on that subject.

        But yes, I take your point that what is happening in Cyprus and the EU is about more than FRB.

        Interestingly enough, before I read your original post of the 19th, it struck me that what was happening in the UK with QE was actually effectively the same as what was happening in Cyprus with “haircuts” for depositors – so it was good to read your post confirming that my understanding was correct.

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