Allow me to explain.
According to the “deal” all accounts under 100k will be spared (great, good news) everything above that will be taxed or raided or plundered or re-allocated or whatever you want to call it.
So how much will the tax be you ask. I asked the same. The thing is no one knows. It’ll just be something. Yes something.
So a deal has been done in which it has been agreed that deposits above 100 000 euros will be taxed at a rate… eeerm well they haven’t agreed to that yet.
Doesn’t sound like much of a deal does it? What has been agreed then?
Well, it has been agreed that the Cypriot parliament won’t be allowed to vote on it again. Yep. The country’s own legislators won’t be allowed to vote on matters that affect the country. In other words, the Cypriots have given up sovereignty.
When the Cypriot parliament first threw out the deposit tax proposal I joked on Twitter that the EU would just make them vote again until they got it “right”. It seems we have now dispensed with such formalities as voting by democratically elected representatives and just decided to take power away from them in case they make a pig’s ear of the EU’s plans. Taking away sovereignty seems to save sooooo much more time, eh?
So to recap: The EU has agreed that the Cypriots can’t be trusted to rule themselves and have taken away their sovereignty and that all deposits under 100k won’t be taxed. How the 5.8 billion euros the Cypriots need to come up with will be collected weeeeelll. Let’s not worry about such trifle details now.
No One Knows What’s Going On.
Let’s start with some hard data. It has been reported that Cyprus has a total of around 370 000 bank accounts of which 10 000 are foreign accounts (the number seems small to me). There have also been reports that the amount of the “tax” on these accounts will be between 30-70%. What does that tell you?
It tells you that nobody in Cyprus or the EU has any kind of clue whatsoever about how much money is in the Cypriot banking system. That’s what it tells you.
Let’s do some basic math. We know Cyprus needs to raise 5.8 billion euros. If the bank levy is 30% it would mean there are deposits of 19.33 billion euros (5.8bil/30%) if the levy will be 70% it would mean there are deposits of 8.28 billion euros.
Think about that for a moment. In effect that tells you that the EU and the Cypriots think there’s somewhere between 8 and 19 billion in the system that they can tap. That’s a pretty damn massive ball park. Is it not?
This goes to prove that no one has any idea of how the money can be raised.
I have stated it before on this blog and in my tweets that I am convinced a vast amount of the big deposits have been transferred into non-cash holdings before the banks closed in Cyprus. Either as cash transfers out of the country or into assets that are not in scope of the levy such as German or US government bonds.
Bonds are held in segregated accounts from the bank’s balance sheet. If those are to be got at to raise the 5.8 billion, then that would brake another holy banking edict. That would mean that none of your assets, cash bonds, gold, house, car, anything would be safe from the plundering by an extra-governmental power (in this case the EU).
We live in amazing times ladies and gentlemen and I truly believe the magnitude of these changes are too much for many to begin to fathom. I know I am having plenty of trouble doing it.
Let me end by saying. This s*^t still ain’t over.