Monday, March 25, 2013

Cyprus:Shows A More Dangerous View...L&C

The troika and Cyprus came to terms over the weekend and the biggest loser is you, dear reader. I'll explain, however there are two unknown knowns that signify my conclusion. First, we can no longer trust the news media to accurately report stories. There are many examples and the Cyprus bailout is the latest. Initially, the media reported that the island nation faced bankruptcy because reserves in the banking system suffered losses from withdrawals due to lack of trust by depositors. Later, it was revealed that the government had placed derivative bets on Greek bonds that went sour causing the losses. Finally, the first bailout plan which revolved around taxing the banking system depositors to cover the losses. This initial plan reveals one of the unknown knowns and that is this: the elite will stick it to us every time if a crisis surfaces that could damage the banking system with the only other option is for the taxpayer or citizen.
We have been down this road quite a few times in recent history and the thinking always comes to the same conclusion, screw the public in favor of the banks and government status quo.
Remember the Jon Corzine episode with MFGlobal? He took customers deposits and he used their money to cover his losses to keep his company alive. He did not go to jail and customers lost their money which is totally bogus. Cyprus is the second example where we find our money is no longer safe due to lack of honesty and trust in the system.
How about the Fed and the Wall St. bailout in the financial crisis of 2008 or the lack of a fair interest rate for savers?
How about FDR stealing citizens gold in 1933?
How about the next financial crisis in the future?
In the Cyprus case there was an unusual twist in that the economy of the country attracted many wealthy Russians and Britons who vacation there. This tidbit covered the troika solution because not only were the citizens being taxed, but the levy would hit the rich too. The troika overlooked the fact that the wealthy have friends who have friends who write the laws and lo and behold, this plan was scrapped.
Bottom line: the citizens still got screwed along with some wealthy visitors. The banking system basically stays intact along with the government leaders...until Tuesday when the banks reopen and the run begins. Of course, the wealthy will move their money electronically in case someone had a bad idea of robbing someone when they left one of the remaining banks.
Liars and Crooks: this week goes to the often used excuse for the weakness in our economy due to excessive regulations. Folks, we need regulations or the forest would be gone, fish extinct, water polluted and the air poisoned. With that said there are dumb laws on the books too due to corruption within the system and bad ideas that seemed good at one time. This is one of those:ethanol gas mix act. Even though gasoline demand is down, prices are up which makes no sense until you realize that the cause is ethanol regulation. We have too much ethanol because planners thought that demand would be higher not expecting the economic downturn, price evasion and alternative transportation. Refiners only need 10% in mix, however they are forced to buy than they need due to supply excesses. This is a bad regulation. This is what effects the price more than anything else. In addition, the act causes farmers to plant more corn due to price. We need to repeal this act in order to save the land because corn is too intensive, water using food source that is better on the table than driving to the store to put food on the table.