Tag Archives: political economy

Obama Sequester Cluelessness

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Here are two examples.

DHS Budget Undersecretary Rafael Borras, just last Tuesday, on the sequester:

There was an expectation that the sequester would not come to pass.  We’re doing everything we can to limit the impact.

House Democrats are whining about President Barack Obama and his administration being hectored about the sequester’s budget impacts before his Cabinet and agencies have had a chance to begin dealing with it.  Also last Tuesday, Congressman Gerry Connolly (D, VA) bleated

Did we expect [the sequester] to kick in within 19 days?  No!

Crap.  They’ve had 19 months since the sequester was passed—and signed into law by Obama.  On what basis do these folks think a law was not to be obeyed?

They All Could Learn from the Poles

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In the aftermath of the Cyprus Parliament’s rejection (wholly correct IMNSHO) of the troika’s “bailout” offer—a “one time” “tax” on bank deposits held by Cyprus banks—talks are failing (breaking down?) within the government, between the government and the troika, and between the government and Russia on a Plan B to avert Cypriot bankruptcy.

Amid this crisis, and exacerbated by the rejection and potential failure of the subsequent talks, panic is growing in the EU, and especially in the euro zone, that a Cypriot bankruptcy will force Cyprus out of the euro zone, and that will lead to the doom of the euro.

That panic is both palpable and foolish (see here, also).

Polish Foreign Minister Radoslaw Sikorski has the right of it.

There is no obligation to accept help.  Cyprus has the possibility of living with its own mistakes.

He knows—Poland does not use the euro.  Greece and the EU should take this advice to heart, also.

Why Not Just Take It All?

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Spiegel International Online notes that the Cypriot government may be figuring out some of the foolishness of the troika’s (ECB, EC, and IMF) demand concerning the latter’s “offered” bailout as well as some of the variants under discussion.  Some of those variants include reallocating the confiscationtax according to more deposit account sizes than just two, and hitting the highest—still those over €100,000 with a 15.6% claim.

[C]oncerns have emerged that a large number of foreign investors and depositors will withdraw their money from the country en masse.  Critics warn this would devastate Cyprus as a financial center and also threaten the country’s entire economy.

Well, yeah.

Still, even the current proposal has central bankers nervous.  Officials at the Cypriot central bank are still fearing a massive capital flight.  Central bank head Panicos Demetriades said he expects that at least 10 percent of deposits will be transferred abroad during the first few days after the banks reopen, according to lawmaker Roula Mavronikola who attended the session.

Demetriades is optimistic.  The Cypriot banking system would be fortunate to retain a single euro, were this institutionalized theft to go through.  The only way to stop the capital flight would be for the government to steal it all.

In the event, though, the Cypriot Parliament rejected any sort of levy, rather resoundingly.

More Obama Sequester in Action

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A few of items.

Congressman Ted Poe (R, TX) is wondering about sequester cuts to tuition aid for our military veterans while we continue to send education aid to Pakistan.  The Marines, for instance, had spent $47 million tuition aid in 2012, while nearly $13 million went to Pakistan for “higher education.”  And then, post-sequester, the Obama administration committed another $37 million to the Pakistan program.

Hmm….

And there’s this example of Obama cynicism.  Recall that the US Department of Agriculture would be forced to “furlough” a significant portion of its meat inspectors, among other personnel.  In the meantime, though, and again post-sequester, the Obama administration

continues to pursue a “partnership” with the Mexican government to “raise awareness” about food stamps among immigrants from that country.

In complete disregard for current immigration law that says immigrants can’t come in unless they are, or can reasonably be expected to be, self-supporting.

And this:

School officials on Native American reservations across Minnesota are forced into making cuts to their current budgets in anticipation of sequester cuts.  These  are programs that had been making progress, improving high school graduation rates by the small, but concrete, 3% per year.

But in post-sequester DC, a six-figure income position was created for a former aide to Congressman Charles Rangel (D, NY) with the important title of Executive Director of the White House Initiative on Educational Excellence for African-Americans.

Apparently some uses for post-sequester money are more important than others.  Especially when there’s political gain to be had.

YGTBSM

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And these guys are serious.

Recall that Cyprus is as bankrupt as Greece.  In order to bail out Cyprus (we’ve been over the legitimacy of bailouts elsewhere), the European Central Bank, European Commission, and the IMF have demanded a one-time tax on deposits: 9.9% on deposits over €100,000 ($131,000) and 6.75% on smaller deposits.

Nothing underhanded about any of this, either.  Uh, uh.  Because depositors, including many of the 3,500 British soldiers stationed in Cyprus, are complicit in the incompetence of the banks’ management.  Yeah.  That’s it.  We’ll go with that.

Finance Minister Michalis Serris already has taken steps to block depositors from taking their money out ahead of the tax:

We have taken immediate measures so that electronic transfers cannot take effect before banks reopen on Tuesday [today is a holiday in Cyprus.]

Chump change was recovered by depositors over the weekend via Cyprus’ cash machines, but the machines’ money stocks were limited and not replenished as they ran out.  Willy Sutton couldn’t have done it better.

A planned weekend vote by the Cypriot Parliament to pass this thing, however, was been postponed until today amid…concerns…that the Parliament may have more integrity than Serris and block the “agreement” with the ECB, the EC, and the IMF.

This is supposed to raise €5.8 billion ($7.6 billion).  Think about this, though.  Are the interest rates or investment rates of return that the Cypriot banks are paying on those deposits more or less than those taxes?  You get three guesses, and the first two don’t count.  For how long will those depositors leave their remaining money in those banks?  Again, three guesses, and the first two don’t count.

This is what happens when the wrong folks are left in charge of OPM.

Update: Cyprus’ legislative vote has been delayed until Tuesday afternoon.

Update again: Today (Tuesday) the Greek Parliament rejected any “tax” on private deposits by a vote of 36 “No,” 19 abstentions, and 0 “Aye.”