Cyprus copycats: NZ and Spain talk wealth tax on bank deposits

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Four days ago, on March 16, 2013, the people of Cyprus were told by the grand poobahs of the eurozone that as much as 10% of the deposits in their personal bank accounts would be “levied” confiscated, in exchange for a $13 billion (€10 billion) bail-out of their heavily indebted country to avoid bankruptcy and a banking collapse.
Cyprus is a small island country in the Eastern Mediterranean Sea to the east of Greece, and a member of the European Union (EU). The eurozone is an economic and monetary union of 17 EU member states that have adopted the euro (€) as their common currency and sole legal tender.
The eurozone’s levy was contingent on the approval of the Cypriot parliament. Yesterday, parliament resoundingly rejected the confiscation of Cypriots’ bank assets, which means the EU must now contemplate one of their members defaulting on its debt.
But the damage is already done. As Tyler Durden of ZeroHedge puts it, “the Rubicon has been crossed.” The idea of “wealth taxation,” that is the involuntary “levy” or confiscation of citizens’ bank assets, “is now front and center” not only in Europe, but undoubtedly in the United States as well.
Faster than you can say “Jiminy Cricket,” the governments of two other countries already are making similar levy noises.

New Zealand

Yesterday, New Zealand’s Green Party issued a press release claiming that NZ’s National Government are pushing for a Cyprus-style solution to bank failure in their country.

Bill English

Bill English


As reported by NZ’s (independent news) Scoop, NZ Deputy Prime Minister and Finance Minister Bill English is pushing for the Open Bank Resolution (OBR) under which, if a bank fails, the savings of all bank depositors would be reduced overnight to fund the bank’s bail out. In effect, small depositors would be forced to fund big bank bailouts.
Green Party Co-leader Dr Russel Norman said:
“Bill English is proposing a Cyprus-style solution for managing bank failure here in New Zealand – a solution that will see small depositors lose some of their savings to fund big bank bailouts. The Reserve Bank is in the final stages of implementing a system of managing bank failure called Open Bank Resolution. The scheme will put all bank depositors on the hook for bailing out their bank. Depositors will overnight have their savings shaved by the amount needed to keep the bank afloat. While the details are still to be finalised, nearly all depositors will see their savings reduced by the same proportions.
Bill English is wrong to assume everyday people are able to judge the soundness of their bank. Not even sophisticated investors like Merrill Lynch saw the global financial crisis coming. If he insists on pushing through this unfair scheme, small depositors can be protected ahead of time with a notified savings threshold below which their savings will be safe from any interference.
Open Bank Resolution is unprecedented in the world. Most OECD countries run deposit insurance schemes which protect people’s deposits up to a maximum ranging from $100,000 – $250,000. OBR is not in line with Australia, which protects bank deposits up to $250,000.
A deposit insurance scheme is a much simpler, well-tested alternative to Open Bank Resolution. It rewards safe banks with lower premiums and limits the cost to taxpayers of a bank failure. Deposit insurance will, however, require the Reserve Bank to oversee and regulate our banks more closely – a measure which is ultimately the best protection against bank failure.”

Spain

Luis de Guindos

Luis de Guindos


According to a report by El Paiz, yesterday (March 19, 2013), Spain’s economy minister Luis de Guindos proclaimed in the Senate that “Spanish savers should stay calm.”
But De Guindos has a peculiar way of reassuring Spanish savers because in the same breath, he assured them that bank deposits under €100,000 are “sacred,” which of course implies that deposits over €100,000 are not!
As Tyler Durden observes, it would appear Spain has changed constitutional rules to enable a so-called “moderate” levy on bank deposits,  as under previous Spanish law this was prohibited. For now, the helpful De Guindos claims the “levy” will be “not much higher than 0%” and is mainly aimed at regions in Spain that have “made no effort to collect taxes” based on new revenue expectations. Minister of Finance and Public Administration Cristobal Montoro defends the need for such a “levy” in their constitution on the basis of standardizing taxes across regions, and is preparing a proposal on the amounts to be paid.
Although the European Commission could previously argue that such a “tax” would violate the free movement of capital in Europe, Cyprus and Spain have opened the door to eventually effectively taxing bank deposits in Europe.
See also my post of March 19, 2013, “Confiscation of bank deposits: Can it happen in America?.”
~Eowyn

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0 responses to “Cyprus copycats: NZ and Spain talk wealth tax on bank deposits

  1. If this were to be tried here , I wonder how long it would take for the average joe to finally wake up and realize our gov’t is out of control . If this doesn’t do it , nothing will .

     
    • The dumbMasses are so busy with their Obamaphones they won’t even notice.
      Besides, most of them don’t have money in the bank, but only the Obamabucks they get every month.
      Of course, they will take notice when those bucks stop coming and their Obamaphones stop working, but it will be too late by then.
      -Dave

       
  2. Dr Russel Norman is clearly ignorant about how banks works, the OBR is standard procedure for unwinding a failed bank adding deposit insurance won’t change its essence; it has nothing to do with the proposed levy in Cyprus which is a tax on all banks whether failed or successful.
    See my post Nonsense about the Open Bank Resolution in New Zealand for a detailed look.

     
  3. What a terrible abuse! People put their money in banks to protect their assets and maybe to grow their savings, albeit in tiny amounts, since banks long ago stopped paying much of anything to use your money. I predict that more people will simply find a way to remove that money from the banks, and use it to pay down other debt so they can at least stay solvent. I would.
    If I thought the government was going to take my meager few thousand set aside for emergencies, car repairs etc; I would most certainly simply use it to
    do upgrades or repairs on my house, fix up my car, pay off a credit card, any number of things that I have tried to put in perspective and balance, by trying to keep something in the coffers for when it is in dire need. I have even considered this for some time, because of the possibility that oru own government will do something like this in the near future. The signs have been there for a couple of years. I would rather be able to do what I need than leave it in a bank so the government can suck it up like a slurpee.
    I belong to a credit union, and would never even consider a bank. I have alwasy mistrusted banks, and my reasons have been vindicated over the last few years. However, should our great Oz and his merry men decide to find a way to plunder our account no matter where they are; I won’t be leaving much in there. I’ll be using it myself. But they will get their cut no matter what I do.

     
  4. “Glass-Steagall Here, Glass-Steagall Now, Glass-Steagall Forever!!!!!”

     
  5. Perhaps they want a run on the banks – this is the quickest way to collapse the banking system and impose a world “electronic credit” money system. Also a good way to incite riots and blood in the streets.
    They’re not stupid and they know how people will react.

     
  6. Thank you Dr.Eowyn for this important post. Anything is possible, given the current regime and its evil ways. Are our deposits safe?

     

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