Financial Crisis: Lessons from Cyprus Relevant for Everyone

Although officially “solved”, the Cyprus crisis is of significance to investors, savers and actually every private household in many countries. Seen as a “small scale” model scenario for a “real” crisis in the euro or, in fact, any paper currency worldwide, the handling of the Cyprus crisis offered very interesting reading and insight into how bureaucrats handle — or intend to handle in the future — any kind of lack-of-trust problem in the economy.

Said former German finance minister Wolfgang Schäuble: “Touching personal savings always is a very sensitive area, and we need to be very careful when doing so. In order to prevent a bank run, this should always be undertaken over a weekend.” He went on to demand procedures and policies for enacting “special rules” allowing to push through currency controls and ceasing of assets between Fridays and Mondays so there would be “no further need for extended bank holidays” as seen in Cyprus in March.

With this kind of thinking exposed, it is obvious what will happen in many additional places beyond Cyprus if there is any problem — which in light of the publicly known financial state of many countries, including core-European economies and the U. S., is not too far fetched at all.

U. K. Independence Party leader Nigel Farage, MEP, who due to his role in Brussels has significant additional insight into the inner workings of that bureaucracy and those bureaucrats’ irresponsible way of thinking, has already warned everyone having any exposure to the PIIG countries and even the rest of the EMU area to “get out your money while you can”.

The question to be answered, then, would be where to move those funds to. With all paper currencies effectively in the line of fire in the event of a euro, let alone dollar, collapse, there is little use even considering classical safe-heaven investments such as U. S. bonds (of all investments!), cash U. S. dollars themselves, or even Swiss francs and similar. The obvious answer would be moving into tangible assets like real estate or precious metals (the latter also being suitable for smaller quantities than your average minimum property price). Also, some “alternative” investments might be suitable, particularly if they offer regular returns (cash flow) and not just a chance of capital appreciation (which may or may not happen at some uncertain point in the future).

When there is nothing to be found offering such return, the point for “dumb” precious metals just sitting in one’s vault is even stronger: for precious metals offer the safest protection against economic turmoil even if they do not usually provide cash flow like dividends.

Bitcoin Has Official Seal of Approval in Europe

Back in 2013, the European Banking Authority (EBA) issued a statement warning consumers of certain dangers in using Bitcoin and similar cryptographic payment systems (so-called Crypto Coins or even Currencies). Apparently prompted by significant price increases of predominantly Bitcoin but also Litecoin, Ether, Dash and other Crypto coins, the sudden increase in virtual currency trading, and the fact that virtual currencies are constantly in the mainstream media headlines, the regulators are quoted as saying:

“Consumers should be aware that exchange platforms tend to be unregulated and are not banks that hold their virtual currency as a deposit. Currently, no specific regulatory protections exist in the EU that would protect consumers from financial losses if a platform that exchanges or holds virtual currencies fails or goes out of business,” the EBA bureaucrats said in a statement.

Obviously meant to primarily be a “warning against” using Bitcoin, this statement is, upon closer scrutiny, a great gift in disguise for the worldwide Crypto coin community. The statement reveals the official view of European officials to, quite surprisingly, give a nod of approval to Crypto payment systems like Bitcoin, Litecoin, Monero and all the other similar payment systems.

The EBA statement has a similar effect as some — initially wrongly reported — statement by China that banned Chinese commercial banks from using Bitcoin but, at the same time, defined use for private individual as perfectly legal in the country and stating an official hands-off approach to Bitcoin by the Chinese government.

In admitting that all Crypto coin-related businesses and services like exchanges or merchant service providers and similar are “unregulated”, that they are “not banks”, and that “no specific regulatory protections” existed for them in EU countries, the EBA gave de-facto blessing to that unregulated status quo. This gives all sorts of Bitcoin businesses worldwide a strong incentive to move their operations to Bitcoin-friendly countries within Europe, some of which — like Sweden, Germany, Austria, the U. K. and, to a lesser extent, even expensive Norway — are particularly suitable due to their individual regulatory situations, property prices, and/or overall features of their local legal systems, business culture and similar aspects.

On the back of the above announcement, it is time for any Bitcoin business seeking more certainty for their operations to cease the new opportunity and extensively go Forum Shopping in Europe now.

Retirements to Be Seized by EU and Other Countries

Just as savers in Cyprus have been fleeced by their government a few years back, and made to pay for the incapability and mistakes by bureaucrats and economic mis-allocation beyond the control the individual. Even though, it is individuals throughout the country who were footing the bill.

Cyprus is seen as a “model” for “solving” crises like that. And crises there are. Not only throughout all of Europe — including “rich” countries in the north and Britain having their very own demographic train wrecks coming up — but also in the U. S., Russia, and many other parts of the world. Ageing populations are not the problem, but limitless spending and business-as-usual in light of well-known facts while ignoring them is. Politicians want to get or keep their jobs by making even more outrageous promises while not caring about what happens when their terms end. Politicians are the ones to blame, not senior citizens or other recipients in systems that were designed by politicians (and not the elderly).

One of the politicians formerly responsible, German finance minister Wolfgang Schaeuble, even went as far as openly saying that Cyprus-style “bank holidays” needed to be scheduled on weekends to give bureaucrats a head start of two additional days, thereby openly admitting that “bail-ins” like in Cyprus will happen elsewhere.

Russia confiscated pension plans to convert funds to government bonds of dubious value only two months ago.

In the U. S., dictator Obama made it clear during his latest State-of-the-Union address in January that he always does what he wants without regard for any rules, other people or the constitution. He added that if he’d think it fit to add yet another Obamacare-style program he would do so by presidential decree and without even bothering to ask congress or follow some similarly “bothersome” constitutional rules. He also has a track record to not care about the overall economic consequences of his actions either.

The ongoing discussion about retirement funds, the alleged safety of pension plans, as well as recent events in the banking as well as retirement sectors themselves make it more than clear that confiscation of life savings is the new name of the game — be it in pension funds, plundering of savings, or other seizure of valuables such as real estate or similar.

Surprisingly, the game is still on, and nothing has really (visibly) blown up yet. Even the SBV and Credit-Suisse pre-quakes have been swepped under the carpet (so far). It’s only a matter of time, but it will happen sooner or later.

In light of these developments, it is not only obvious that “Savers Are Losers” but that everyone needs to re-think all pecuniary and financial matters before greedy governments are taking it all.