THE SLOG pensa que sim:
How the rape of Cyprus will torpedo the banking system
I’ve been moving money around over the last few days. I still am, and I don’t know many people in my immediate circle who aren’t. We all seem to have the same aim: to be in the safest place with the safest currency. And the catalyst for all of us busily doing this is specifically, the Cyprus bank heist involving depositor confiscation; and leading on from that, the growing evidence that the political and financial Establishments globally have every intention of applying such glorified State theft in the future.
What I want to do in this piece is posit a hypothesis about just how nasty this could all get – and how quickly. But first let me offer you some evidence thus far that all trust in Sovereigns keeping their fingers out of our tills has disappeared for the majority of those who are awake. As I’ve said before, nothing gets Fritz, Pierre, Tommy or Vladimir off the sofa quicker than a Sovereign with a bad kleptomania habit.
Simply because French President Francois Hollande pushed through a raft of tax rises and stepped up his campaign against the rich – no obvious grand larceny involved – France suffered a surge of capital flight in the second half of 2012. The net loss in just two months was over €50 billion. Six months before that – when the Spanish situation looked dire – €100 billion flew away in ten weeks.
On Tuesday, a German opinion poll showed that only 2 in 5 Germans trust Merkel when she says their money is safe in a bank. That is incredibly significant.
Last weekend, the leader of Britain’s fast-growing anti EU Party UKip advised British expats to put their money in Spain somewhere offshore. Hardly anyone dismissed his comment as scaremongering.
Yesterday, credit agency Moody’s issued a strong advisory document to clients opining that the EC/ECB lunacy in Cyprus had set a dangerous precedent for future rescue efforts, and by definition made the region more prone to bank runs if depositors in other debt-strained countries think their money is no longer safe.
“Policymakers appear very confident that market conditions are benign enough and that they have the tools to avoid contagion to other peripheral economies and their banking systems,” Bart Oosterveld, managing director of sovereign risk at Moody’s, told Reuters,”but we think that that confidence may well be misplaced.”