For Everyone Shocked By What Just Happened... And Why This Is Just The Beginning

Tyler Durden's picture

Today, lots of people woke up in shock and horror to what happened in Cyprus: a forced capital reallocation mandated by political elites under the guise of an "equity investment" in insolvent banks, which is really code for a "coercive, mandatory wealth tax." If less concerned about political correctness, one could say that what just happened was daylight robbery from savers to banks and the status quo. These same people may be even more shocked to learn that today's Cypriot "resolution" is merely the first of many such coercive interventions into personal wealth, first in Europe, and then everywhere else.

For the benefit of those people, we wish to point them to our article from September 2011, "The "Muddle Through" Has Failed: BCG Says "There May Be Only Painful Ways Out Of The Crisis", which predicted and explained all of this and much more. What else did the September BCG study conclude? Simply that such mandatory, coercive wealth tax is merely the beginning for a world in which there was some $21 trillion in excess debt as of 2009, a number which has since ballooned to over $30 trillion. And with inflation woefully late in appearing and "inflating away" said debt overhang, Europe first is finally moving to Plan B, and is using Cyrprus as its Guniea Pig.

For those who missed it the first time, here it is again. Somehow we think many more people will listen this time around:

Restructuring the debt overhang in the euro zone would require financing and would be a daunting task. In order to finance controlled restructuring, politicians could well conclude that it was necessary to tax the existing wealth of the private sector. Many politicians would see taxing financial assets as the fairest way of resolving the problem. Taxing existing financial assets would acknowledge one fact: these investments are not as valuable as their owners think, as the debtors (governments, households, and corporations) will be unable to meet their commitments. Exhibit 3 shows the one-time tax on financial assets required to provide the necessary funds for an orderly restructuring.



For most countries, a haircut of 11 to 30 percent would be sufficient to cover the costs of an orderly debt restructuring. Only in Greece, Spain, and Portugal would the burden for the private sector be significantly higher; in Ireland, it would be too high because the financial assets of the Irish people are smaller than the required adjustment of debt levels. This underscores the dimension of the Irish real estate and debt bubble.


In the overall context of the future of the euro zone, politicians would need to propose a broader sharing of the burden so that taxpayers in  such countries as Germany, France, and the Netherlands would contribute more than the share required to reduce their own debt load. This would be unpopular, but the banks and insurance companies in these countries would benefit. To ensure a socially acceptable sharing of the burden, politicians would no doubt decide to tax financial assets only above a certain threshold—€100,000, for example. Given that any such tax would be meant as a one-time correction of current debt levels, they would need to balance it by removing wealth taxes and capital-gains taxes. The drastic action of imposing a tax on assets would probably make it easier politically to lower income taxes in order to stimulate further growth. (See Exhibit 4.)


Curiously, not even BCG expected the initial shot across the bow to be so bad that everyone, not just those above the €100,000 threshold would be impaired. Alas, that is the sad reality in Europe, where as the chart above shows, a total of €6.1 trillion with a T in additional wealth confiscation tax is coming.

Oh, and US of A... fear not - your turn is coming too: with a price tag of €8.2 trillion in wealth tax pending as of 2009. This number is now somewhere north of €15 trillion.


The full BCG study which we urge everyone to read

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WayBehind's picture

This is not "just a beginning" but THE end. Its was fun ride. Game over! Bankers won. Sad day ... and even sadder just to think what is coming. Time to buy more gold and ammo.

flacon's picture

Cypriots that I know are planning on taking every last Euro out of the banks on Tuesday. This is also confirmed by reading comments on local Cyprus newspapers. People are irate over this. 


I lived in Cyprus for 11 years and still have ex-pat relatives living there now. Fortunately for them all their money is either in paper (a small portion) and the rest is in those two shiny metals. 

Joe Davola's picture

Why is sum of US column 101?

McMolotov's picture

We're obviously better than everyone else, and the laws of mathematics don't apply to us.

earleflorida's picture

indeed, but the 'Levant Basin' holds great leverage as a floating archipelago... goes ?

tallen's picture

Bank Run 2.0 starting. I'm looking forward to getting my Party like it's 1929 hat on.

Every dollar/pound/euro/frank/yen in a bank is leant out, then deposited, then lent out again, to such a huge degree today due to the computerisiation of the financial system. Any rush for withdrawals is going to crash the system and cause huge deflation. (Yes I'm a gold bug, tho deflation isn't always a bad thing for gold. 1929 onwards prooved to be a great time for gold mining stocks and gold.

ATG's picture

re "Bullish for bitcoin.":

which would you rather have when push comes to shove, virtual electron money or real money?


Maybe Harry Dent will be right about Dow 3300 after all...

THX 1178's picture

I blame the Eskimos. Or even the homosexual eskimos. AKA Homoseximos. Motherfuckin' popsicle sodomites.

WmMcK's picture

Is it hard to come out of the closet when you live in an igloo?

The Big Ching-aso's picture

First Corzine, Greece, and now Cyprus.   Is anybody's asshole safe?

IcantstopthinkingaboutNINJAs's picture

Not to worry,


Seems like only the biggest assholes are safe.


--That's why I'm richer than you.

Popo's picture

What's this B.S. about a "ONE TIME" wealth tax?   

Why would it just be one time?   Why not a second time?   Or a third time?   Or just make it annual from now on? 

They have now firmly established that the people are serfs.  When you need capital to pay back bond holders, you raid your serfs.   They are property of the state.

GetZeeGold's picture



Remain calm....all is well.


Rinse and repeat...we've just got the one play but it seems to be working so far.



duo's picture

It won't be one time, but if they really need to do $15 T of debt reduction in the US to get to the proper debt/GDP level, and there are 110,000,000 households, then you need $140,000 out of each household.

But wait, only 50,000,000 households have more than $50 in the bank (or even a bank account at all), so we need $285,000 from each of them.  A 10% wealth tax isn't going to cut it.

More like 150%...

All Risk No Reward's picture

Debt Money Tyranny gets real...

Debt Money Tyranny

This is no joke, people - spread the word.  This is a criminal operation engineered to bankrupt society - THAT'S THE PURPOSE PEOPLE!!!!!!!!!!!!!!!!1

How To be a Crook


BTW, did people in Cyprus bonds take the same haircut or just the banks?

The dElites who knew this was coming had to have hid their money somewhere.

Harlequin001's picture

The problem is not only that those not involved are forced to bail out private companies they choose to have nothing to do with but that in doing this to reduce debt and so spur the economy the politicians remove wealth from others that might provide it.

The idiocy is stunning. The answer is smaller government.

Svendblaaskaeg's picture

"Is it hard to come out of the closet when you live in an igloo?"

..they had a very meaningful relationship until he broke it off

Theosebes Goodfellow's picture

+1 for "homoseximos". Truly inspired.

jeff montanye's picture

i would have thought homoseskimos but the very idea of the popsicle sodomites appeals.

on a related topic, the economist notes that the senior bondholders of cypriot banks and holders of cypriot sovereign debt (the supposed "risk capitalists" -- what a sad joke) lost no money on this deal while the poorest of insured bank deposit holders with explicit insurance guarantees were ripped off:

"There is an argument to be made over the principles of bailing in uninsured depositors. And there is a case for hitting everyone in Cypriot banks before any taxpayer in another country. But there is no moral imperative for whacking Cypriot widows and leaving senior bank bondholders untouched, as appears to be the case here; or not imposing any losses on sovereign-debt investors in Cyprus; or protecting depositors in the Greek operations of Cypriot banks, as has also happened. The euro zone may cloak this bail-out in the language of fairness but it is a highly selective treatment. Indeed, the euro zone’s insistence that this is a one-off makes that perfectly plain: with enough foreigners at risk and a small enough country to push around, you get an outcome like Cyprus. (That is one reason why people are now wondering about the implications of this deal for little Latvia, also home to lots of Russian money and itself due to join the euro zone in 2014.)"

it is so clearly the powerful eating the powerless.  kind of like obama/holder going for life without parole for bradley manning.  don't know if he was inuit.


GetZeeGold's picture




How many gay banksters could there actually be?


These guys don't look gay to me. Dominique Strauss-Kahn sends his regards.



Ms. Erable's picture

Bankers are all bisexual; they'll fuck anyone and everyone.

unrulian's picture

endless winters, seal blubber and toothless women with make you do fucked up things man.....

jwoop66's picture

homosexual Eskimo joos!

The Heart's picture

Add: After the power has been cut off for months(emp)(solar?), and there is no ability to power up your computer, "which would you rather have when push comes to shove, virtual electron money or real money?"

hmmtellmemore's picture

Good Lord, are you really that paranoid?  No, bitcoin will work just fine don't worry.  And don't forget bitcoin and gold are a perfect match (currency and money), not competitors.

hmmtellmemore's picture

bitcoin is not money, its a currency.  People are definitely going to want both gold and bitcoin.

Long_Xau's picture

You are making the error of thinking that "Bullish for bitcoin" in any way conflicts with "bullish for precious metals". What supports the bullish case for precious metals is the need for a store of value for saving and some local in-person transactions. But don't forget this partial confiscation in Cyprus also affected the checking/card accounts. Now people need alternatives for electronic transactions and this means more transactions in Bitcoin. More more transactions in Bitcoin will bring more demand for the bitcoin currency.

However, you don't need to worry too much about it until you start seeing things you can only buy with a cryptocurrency/payment system such as Bitcoin, or if, you are a seller, when high transaction costs, inconvenience, counterparty risk, etc. start putting clients off. Oh, and credit card companies' extortions for both sellers and buyers. And not wanting to have an account even if it didn't cost you anything.

SilverIsKing's picture

Just a thought...

Are we sure that Bitcoin isn't something floated by the government to sucker people into a digital currency that they will have complete control over once they get everyone in?

It is their goal to have everyone using a digital currency and they surely want it to be fool proof, which is something many ZHers attest to.

GetZeeGold's picture



Dammit.....I knew it had to be a trick.

PeakOil's picture

Doubtful dude. It's mathematics (public key crytpography) and Open Source. Scrutinize the code.

As a longtime Au/Ag bug, in addition to being a software developer, I had been cursorily dismissive of Bitcoin for some time now. Well, this weekend I decided to take a closer look...


  • the current implementation is rickety. Hey - it's software WTF do you expect!? Good software, depending on complexity, like wine - takes years to mature
  • the IDEAS behind Bitcoin are nothing short of genius!
  • this is revolutionary software, and if it catches on, TPTB have reason to be very worried
  • if I were on the dev team of this project - I would watch my back very carefully 
  • gotta wonder about some on the dev team - lecturing the CIA?? the originator, Satoshi Nakamoto is the smartest of the bunch - he keeps a low profile
  • At the moment I see Bitcoin as not antithetical to PMs at all. Indeed there is commonality of intentions
  • I will continue to hold physical PMs as a monetary store of value
  • However Bitcoin as an exchange mechanism is, in theory very compelling and deserving of attention





malek's picture

I have not wasted time to read long articles on the (supposed) workings of bitcoin, but no one pimping bitcoins so far has even touched on:

- For a medium with no inherent value, there has to be an open, observable market to determine the valuation. And by that I mean a market of observable trades, not just bids (hello stock exchanges and HFT!)
Where is that in existence for bitcoin?

- An open observable market automatically becomes a SPOA (single point of attack) for government regulation.
How does bitcoin believe it can avoid such?

As long as all writers dance around those elephants, I can safely continue ignoring bitcoin...

Long_Xau's picture

Good point. At the moment MtGox is considered the standard for quoting the bitcoin price, but in reality you can buy/sell anywhere you can find a seller/buyer. Bitcoin is a currency and a payment system but not a market, so people should look elsewhere for market facilities. A peer-to-peer market, or better yet, a peer-to-peer social networking protocol that allows all kinds of interactions is the next disruptive technology thing on my wish list (I should not be just wishing that someone else did it, but acting, but I'm not sure yet how to contribute toward such a goal). This, of course, would also be very helpful with determining the real price of fiat currencies in precious metals, which is currently hard to do.

Lets see a few pros and cons for price discovery and analysis of the markets for precious metals and then the market for bitcoins:

Markets for precious metals

  • +many buyers and sellers and big amounts
  • +buyers and sellers found in many places


  • -strong pressure by people serving the fiat currencies against there being a big free exchange
  • -some fragmentation with differing prices due to tariffs, transportation costs etc.
  • -for the mostly monetary and not-very-industrial metals like gold (also high stock to flow ratio) you don't get much information about pricing looking at industrial demand
  • -hard to obtain good data about mining supply and mining costs

Market for bitcoins

  • +buyers and sellers found in many places
  • +mining supply is known and predetermined, mining costs can be estimated with relatively good precision from the hashrate (also see chart of miners' revenue minus estimated electricity and bandwidth costs:


  • -relatively few buyers and sellers and smaller amounts (amounts being themselves a function of the price)
  • -potential pressure by people serving the fiat currencies against there being a big free exchange
  • -you don't have a purely non-monetary demand like the metals have

A good solution for a free, open and observable market, such as one based on a peer-to-peer network, is desirable, but this issue is not inherent to bitcoin. Such a solution is needed not just for trading bitcoins, but for many things.

In any case, the best way for one to determine the market price is to watch fully completed trades between really trusted parties, such as oneself.

Your second point is also obviously valid for precious metals and almost everything else and asks for the same solution. Bitcoin at least allows for fully anonymous interacions without any risks related to a physical interaction. For example you can do a digital service AND get paid for it, both over an anonymized internet connection.

malek's picture

Thanks for the reply!

Read my first point again attentively:
For a medium with no inherent value, there has to be an open, observable market to determine the valuation.

That also implies that for a medium with some non-negligible inherent value, one can live somewhat without an open, observable market - you might not get a good price but will get something for it.
But for a medium with no inherent value it becomes a must.

The second point applies to everything and there is no solution that doesn't go at least somewhat contrary to point 1.
But once again with something of some inherent value you might be able to accept some trade-off on point 1.

Finally on your "anonymous interactions":
You must be joking. Anything fully anonymous by definition has nobody detectably responsible for it and is therefore worthless from a trust/reliability standpoint.

Long_Xau's picture

For a medium with no inherent value, there has to be an open, observable market to determine the valuation.

If you want to have such a market you can find it. It's up to you.
Just think what are the most basic elements that can form a market that is satisfactory for you. I suspect you'll find that just 1 or 2 connections would be sufficient for the bare minimum. Then, whether you want a trusted party that is comfortable disclosing its trades or trusted buyers and sellers that can and will fulfill the orders they've placed or anything else - really just look for it. Your social network is your market. Find appropriate trusted parties and don't buy bitcoins before you do.
No centralized structures are inherently required, so governments/gangs might find themselves having to pass "laws" that put most people outsite of the "law" and "laws" that are at the same time unenforceable. Well, so be it. That would show the true nature of things a little clearer. Sort of like legislative hyperinflation. Big, impressive claims, but little value.

BTW here are a few websites that show trade data (recent trades, order depth, etc.) from many Bitcoin currency exchanges: (lol MtGox is implying EUR/USD at 1.26566?)
I don't endorse any of these sources - you are responsible for deciding who you trust.

Finally on your "anonymous interactions"[...]

I should of said "pseudonymous", not "anonymous", my bad. Under a pseudonym one can earn a good reputation (e.g. Tyler Durden, Another, Friend of Another, Satoshi Nakamoto etc.) by doing valuable things and one can even be open and transparent about those things and still keep their real identity secret. It's worth taking small risks (e.g. reading their posts, reviewing their white papers) when they bet their good reputation (As opposed to taking substantial risks trusting a known person who is not transparent about the things that matter, e.g. Bernard Madoff, ... well the whole establishment goes here).
One can easily protect their pseudonymous identity from any abuse (like impostors) by using a digital signature (no third parties needed).

pelerine's picture

"Are we sure that Bitcoin isn't something floated by the government to sucker people into a digital currency that they will have complete control over once they get everyone in?"


And this is different from Visa and MasterCard... how, exactly?

dark pools of soros's picture

well just think of bitcoins as anonymous paypal

Long_Xau's picture

I assume by "floating" you mean working on or cooperating from the outset. When was the last time you saw a government make an actual innovation, which is what Satoshi Nakamoto did (see:; this article is written in response to this: is Worse is Better)? When was the last time you saw anyone make an actual innovation specifically and solely to scam someone (note that later co-opting, debauching, attacking, etc. are still threats, which Bitcoin was designed to mitigate).

Even if there was any influence from un-free forces (government) the free guys win in the end. We, free people, now have the idea of how to make A purely peer-to-peer version of electronic cash [which] would allow online payments to be sent directly from one party to another without the burdens of going through a financial institution. and anyone can recreate his work, or make his own improved version, or use the idea in new ways.

It is their goal to have everyone using a digital currency

Their more cherished ambition would probably be to have everyone using a digital store of value. We are pretty close to that with the fiat currencies. They do try to maintain a pretense of a store of value for the fiat currencies. See E.O. 6102  - gold store of value was "fairly" replaced with dollar currency. In the short to medium term transactions in bitcoins are safe (I wouldn't promise you that for investments in bitcoins though - they are speculative).

AE911Truth's picture

ATG, "which would you rather have when push comes to shove, virtual electron money or real money"?

Which would you rather have as you try to move your wealth outbound through Greece / EU Customs, gold coins or bitcoin?

Freewheelin Franklin's picture

Exactly. People seem to forget that there are two aspects to bitcoin. One is a currency. The other is a transfer system. That transfer system is going to come in real handy when the shit hits the fan. It's hard to confiscate an encrypted file. 

Freewheelin Franklin's picture

which would you rather have when push comes to shove, virtual electron money or real money?



Troll Magnet's picture

I'm going to be a contrarian here and predict that gold and silver will take a nosedive on Monday. Why? Well, the banksters won't allow them to explode. They will dump billions of paper PMs that they don't own to keep this bullshit going. This is all about their survival and they own the market.

whotookmyalias's picture

Sold my paper silver and gold.  Will be happy to buy back into it once the banks hammer it down.  Not for long term, just for quick paper profits.

prains's picture

eventually you end up the suckker at the poker table and lose it all, you know that right

GetZeeGold's picture



No worries.....he's uber quick. Weekend shenanigans don't worry him a bit.

in4mayshun's picture

Price dump will only hasten the comex default at this point

Son of Loki's picture

KY lube is going to sell out fast in the island.