Daily Archives: 25 March 2013

A Thought on Cypress and the Euro

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After having offered his church’s assets to a solidarity fund proposed by Cyprus’ government pursuant to Cyprus’ efforts to find a way out of their current economic debacle, Archbishop Chrysostomos II, Archbishop of Nova Justiniana and All Cyprus (the Greek Orthodox Church in Cyprus), has one.  The Guardian quotes him:

The euro cannot last.  I’m not saying that it will crumble tomorrow, but with the brains that they have in Brussels, it is certain that it will not last in the long term, and the best is to think about how to escape it.  It’s not easy, but we should devote as much time to this as was spent on entering the eurozone.

The Orthodox church is the island’s biggest landowner, and it has serious investments in a broad range of endeavors—from hotels and construction to a brewery, to a majority stake in Cyprus’ third largest bank, Hellenic Bank (right behind Laiki Bank (Popular Bank) and the Bank of Cyprus, the former of which would be seized by the government and reorganized under a version of Plan B, and the latter of which is just as insolvent and needs reorganization).  Chrysostomos’ opinions are worth listening to far beyond his position as Cyprus’ moral leader.

I agree with the Archbishop.  It’s a bad fit, Cyprus and the European Union, Cyprus and the euro zone, as has been written elsewhere.

The badness of fit has now been demonstrated, by a midnight deal between the eurozone Finance Ministers and Cyprus President Nicos Anastasiades.  The deal, according to Spiegel Online International:

…focused on the island’s two insolvent major banks.  It will wind down the largely state-owned Popular Bank of Cyprus, also known as Laiki, and shift deposits below €100,000 [$130,000] to the Bank of Cyprus.

Deposits above €100,000 euros in both banks, which are not guaranteed under EU law, will be frozen and used to resolve Laiki’s debts and to recapitalise Bank of Cyprus through a deposit/equity conversion.

[Euro Group (the finance ministers of the eurozone acting together) President Jeroen] Dijsselbloem says that

[t]he raid [that’s exactly the right word] on uninsured Laiki depositors is expected to raise €4.2 billion [$5.5 billion].

There’s more extortion and theft to come.  The takings inflicted on large depositors—those holding deposits greater than €100,000—will be determined at a later date by the Cypriot government and the troika.  Those €4.2 billion represent the target for recapitalization and bank debt resolution; the “tax” on those deposits required to achieve the target has yet to be determined.

And, because this setup is being handled as a bank restructuring and Cyprus’ Parliament had already passed a bank restructuring law that allows it during a panicky weekend session prior to this…arrangement, the Parliament cannot now block it, as it did the original raid.

It’ll be interesting to see where the Russians put their money in the aftermath of this.  It’ll be interesting to see where any large depositor, or any other depositor with the capacity (which includes most middle class folks and small/medium businesses) puts his money, now that Cyprus has been banished from the international financial center business.  The little man—those with the small deposits—have no choice.

It’ll also be interesting to see who in the rest of the eurozone or the broader EU profits from this.

SOI suggests that in the end, Anastasiades had no option but to accept to these terms.  This, though, is to misunderstand what has happened and to misunderstand the immorality of it.  This is just government theft of private money from folks—depositors—who had nothing to do with the decisions of the bankers and government functionaries that put Cyprus in this box in the first place.

Anastasiades indeed had a choice.  He could have accepted bankruptcy and the (painful) recovery of a Cyprus then free of EU and eurozone restrictions on Cypriot sovereignty.  And free of exposure of his country’s banking system to international distrust from fear that the next time it becomes convenient to government, the next batch of deposits will be similarly confiscated.  The banks in the rest of the eurozone, if not of the EU at large, must face this distrust today, especially since the original demand by the Euro Group was to confiscate significant portions of the little man’s deposits, also.

Cyprus needs to listen to the Archbishop.

Another Look at the Senate Democrats’ Budget

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The Heritage Foundation has looked at it.  As has already been pointed out, Senate Budget Committee Chairwoman Patty Murray’s (D, WA) budget has little good in it; although it does preserve the sequester cuts in their magnitude and general allocation.  However.

Cynically, it raises taxes on Americans—and amazingly, on our businesses, which already are subject to the highest rates in the world—by a shade over $1.5 trillion.  This isn’t new, but their budget is worse than originally thought.  The Democrats’ guess (and I use that term advisedly) of getting $155 billion per year over the next 10 years is based on their erroneous static analysis.  A dynamic analysis, which includes the actual and ongoing effects of taking this much money out of the economy, indicates that this “budget” would only get $88 billion per year.  Heritage’s graph below illustrates the year-by-year revenue flow.                                          

This only exacerbates the impact of the Democrats’ continued increases in spending on our debt and on our economy.  Their 5% increase in spending, in every year of those same 10 years, increases the Federal budget deficit, and it contributes to a continued explosion in our national debt—to the tune of $7 trillion more added to an already ruinous level.

But that’s all to the good, anyway, right?  The Democrats say so.  The Senate Republicans have a different analysis.  Overall, they point out that this budget would

  • Lower GDP by $1.4 trillion over 10 years.
  • Cut job growth by an average of 853,000 jobs each year.
  • Slash after-tax incomes by $1.9 trillion over 10 years.
  • Shrink household income by $1,512 per year.

They also look on a state-by-state basis, and the outcome is clear and even starker (it’s important to note here that the state-by-state analysis was done by the Senate Budget Committee’s staff economists, not by Republican staffers).  Here are the outcomes for, oh, say, California and Texas.

California:

For the state of California these tax changes mean losses in personal income, household disposable income, and job opportunities:

Texas:

For the state of Texas these tax changes mean losses in personal income, household disposable income, and job opportunities:

There are no states—none—in which the Budget Committee’s staff economists projected gains in personal income, household disposable income, or job opportunities.  Every state suffers losses as a result of this Democrat budget.

This is Backwards

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Here’s another case of government’s men who should know better, not knowing.

From the New Jersey Law Journal comes a description of a court considering the (mis)use of one law to feed the impact of another.  Sorry about the paywall; here’s a summary [emphasis added].

COURT TO DECIDE IF SEAT BELT LAPSE CAN SUPPORT A CRIMINAL CONVICTION The New Jersey Supreme Court has agreed to decide whether violation of the 1984 law that made seat belt wearing mandatory can support a criminal conviction under another statute.  To be reviewed is an appeals court holding that not wearing a seat belt can be a predicate offense for N.J.S.A. 2C:40-18, which criminalizes “knowingly violat[ing] a law intended to protect the public health and safety” through reckless conduct that injures another.  In State v. Lenihan, A-4667-10, the Appellate Division found the statute’s language gives no indication the Legislature would object to how it is being applied in this case, where the unbelted driver’s passenger was killed.

Leaving aside the question of how far a court—or any other government branch—should reach in order to criminalize an activity, giving no indication of objection is not the same as positively approving.

The principle embedded in our Federal Constitution in the 9th and 10th Amendments is this: negatively, enumeration in the Constitution does not limit or deny the not-enumerated to the people, and positively, powers not delegated to the United States are, in their remaining infinite entirety, left wholly to the States and to the people.  Moreover, these Amendments are to a Constitution that was written by We the People—an acknowledgment of the sovereignty of the members of our social compact over the government we members, we citizens, hire to administer and to protect our rights.

If that principle is valid, though, it’s valid everywhere.  The citizens of each State of these United States are sovereign over each of their State governments, also.  Hence, here, too, positive action must be taken to proscribe a thing.  Absent active proscription, that thing must remain within the province of the individual, either acting alone or in concert with (some of) his fellows, to do or not do.

Thus, unless the New Jersey (or any other State) legislature definitively states, in the present case for instance, that not using a seat belt criminalizes other behavior under other law, it cannot be so used by a court.