This weekend, in Cyprus, the government decided to 'tax' all bank deposits with a one time 6.75% tax for deposits under 100,000 Euros and with a 9.9% tax for deposits totaling over 100,000 Euros.
I thought the theft of depositors' money or part of it was supposed
to only happen in communism. This example comes to show that
'democracies' can decay pretty much overnight into pure communism.
The lifetime of any given democracy is close to 1 day, seeing how Cyprus is punishing bank account holders.
Seemingly it seems that it is more important for Cyprus to remain in
the Euro zone than to abide by the principles that say that the
government cannot take away private property from citizens without
This is stealing, pure and simple, in spite of the fact that the president is promising bank 'shares' in exchange for this outright confiscation, with no war threat or martial law in effect.
This incredible decision, supported and recommended (!) by the European authorities, given that Cyprus is in the Euro zone, shows -as clearly as daylight- what the fundamental problem with the European common currency is. The periphery always breaks the rules and the core countries need to step in to defend the common currency, even though the currency is the only common thread between periphery and core. This cycle cannot be broken without changing the rules 'on the fly', as it were. But jeopardizing democratic principles on the commonality spiel altar is reprehensible. Totally.
The officially backed theft of depositors' money is almost unprecedented as it indicates that taxation decisions were/are taken without public input and without regard to individual property rights.
The government of Cyprus has shown that it behaves like communist government, with excuses that are equally ridiculous.
Instead of exiting the Euro zone and affect fiscal policy in a democratic fashion, Cyprus decided to remain in the Euro zone and behave like a dictatorship. Paying for the government's mistakes over the years with private money is totally wrong on so many levels that I cannot afford to go over in a short post.
As we have learned in school, there is a trade-off scale that maps democracy to economic freedoms. The less economic freedoms there are (and this includes predictability around taxation) the less democracy there is, no question about that.
How can the common currency (Euro) continue to survive this mess? It is only a matter of time before the economic separation between nations will include again national currencies. Strong nations cannot continue to subsidize weak nations forever or else.
Democracy and economic freedoms demand private ownership be respected as it is the unbiased basis for economic growth. Threats to private ownership make it impossible for economic growth to achieve critical mass and sustain economic momentum.
Cyprus's example shows what 'peaceful' governments can resort to when needed and we should all learn from this that we need to protect our private property -with all our powers- against abusive practices of confiscation, even partial, and even when 'justified'.