Quick Update On Cyprus

Blast Radius

So having learned that Parliament would not approve a deposit levy in the name of a “tax”, and that the government was deeply opposed to forcing citizens and other depositors in its banks to bear losses without the bondholders being wiped out first as one would expect in the capital structure, Germany, the ECB and rest of the EuroThieves did something innovative.

They simply ignored Parliament and came up with a scheme that didn’t require a vote.

We’ll see how this works out for them.

This, incidentally, is exactly what happened here with GM.  It was blatantly unlawful to protect the UAW’s pension fund, which had no senior standing while trashing senior bondholders.  The government did not care and did it anyway — and the courts permitted it.

This has been the repeated means by which you are stolen from.  When you enter into an investment, whether you make a deposit in a bank or buy a bond or something else, you are buying into a capital structure in a given place with a given and declared level of both risk and potential reward.  You price that risk and your willingness to enter into the transaction with the full understanding of where you are in that capital structure.

When that is unilaterally changed retroactively you are being stolen from.


This theft is wrong.

It is actionable.

It remains actionable whether the courts recognize it or not, just as theft from a drug dealer is actionable even though the dealer cannot go to the police and report the fact that you stole his stash because what he’s doing is illegal.

He may just sit and take it, because for him to act on it requires escalation in the form of violence that he may not be willing to commit.

But if you steal from him enough times or in enough magnitude then he has only two choices — go broke or deal with you himself, likely using an extreme level of violence.  The fact that he may be unable to pay for his “stuff” and thus his suppliers may come after him with guns may well influence his decision.

These thefts in our financial system are increasing in severity and frequency.  They have destroyed the belief in the capital structure.  They have and will make it difficult or impossible to attract capital, since the aggrieved parties cannot find solace in the law.

But worse, these thefts are and remain actionable until they are compensated.  They remain actionable whether or not the law recognizes the cause of action or dismisses it with the wave of a hand. They remain open like a festering wound.

They will continue to fester and poison free enterprise until some group decides they’ve had enough of both the annoyance and injury and decides to obtain recompense through whatever means are necessary.

This is not acceptable folks but it is our fault collectively that we do not demand that this crap stop and that everyone involved in these “redefinitions” of legal structure after the fact go directly to prison instead of continuing to hold their jobs in government or even be promoted.

You probably didn’t get directly screwed tonight, unless you live in Cyprus.  You probably didn’t get directly screwed when GM went under either, nor when any one of a number of other, similar events (Greece anyone?) has taken place.

But you did get screwed, because your place of work had its capital structure and the ability to attract capital damaged.  Your ability to invest with a reasonably-calibrated level of risk and reward was damaged.  You were personally harmed by these acts, even though your harm is at this point diffuse and difficult or even impossible to pin down and put a number on.

But make no mistake, you were harmed, and when, not if, those who were directly hosed in any of these incidents decide they’ve had enough, and that they will no longer sit still for this form of financial rape, if you’re within the blast radius of whatever they decide to do you will be harmed again — and quite possibly to a much greater degree than you can imagine.

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