Could The "Cyprus Fiasco" Occur In The United States?

Tyler Durden's picture


As has been assiduously explained by members of the European statist oligarchy, the reason for the deposit tax levy, in addition to the broader unsecured debt "bail-in" bailout of Cyprus, was due to the unique funding structure of Cypriot banks, in which the bulk of funding was in the form of deposits (whether Russian or domestic), leaving a tiny €2 billion in the form of junior bonds. Since the bailout would require realigning the balance sheet to a new, sustainable "fresh start" in which assets were remarked to a realistic value, it would mean impairing liabilities all the way down the capital structure. Naturally, politics played a big part in the decision to impair what Germany primarily saw as a Russian money-laundering haven, while local depositors were merely "collateral damage."

Politics aside, the bottom line is that the Rubicon has been crossed, and deposits have now been forcefully confiscated in what Europe promises to be a standalone case. What is certain, is that nobody will wait to find out how long it takes before Europe's class of increasingly more desperate and ill-meaning despots is found to be have lied once more (as it has about everything else since the start of the European crisis). And while the mainstream media will be focused primarily on Europe in the coming days, as BCG and we have warned, the topic of "wealth taxation" is now front and center, and it stars not only Europe, but the US as well.

The question then becomes: what does the funding structure of the US private depository institutions look like, and is there any possibility of Cyprus "wealth tax" recurring on the other side of the Atlantic. To answer this question, we present the summary layout of the consolidated US depository system, which according to the Fed's December 31, 2012 Flow of Funds report had a grand total of $15 trillion in assets, and a matched number of liabilities, of which 72%, or a total of $10.9 trillion was in the form of deposits (checkable, small and large time, and savings).

Visually, this looks as follows:

So, if the US was to go the Cyprus route, and begin impairing balance sheet liabilities to remark assets, there would be precious little space (with just $4.3 trillion in total other funding liabilities), before one would need to start eating into the deposit base, should Congress decide to implement a very "fair and just" financial asset tax in the US next.

Will Congress do this? Obviously, nobody can answer that question now. However, it was "absolutely certain" as recently as 48 hours ago that Cyprus too would see no depositor "bail in" either. Then things changed rapidly. What is known, is that according to the same BCG chart we showed last night, the necessary debt-reduction needed in the US to reach a sustainable debt level, was over $8.2 trillion using debt numbers as of 2009...

... Since then consolidated US debt has risen by over $5 trillion.

Which means that if, indeed, the US proceeds with its own wealth tax, then deposits may well be one "wealth class" that gets impaired. Of course, since in the US other financial assets, namely the stock market, account for a far greater proportion of household net worth, it is quite possible that instead of impairing deposits at US banks, which already subsist solely due to the Fed's $2 trillion in excess reserves, the government may instead choose to generously tax simple 30% of all of your stock holdings, and achieve the same "wealth transfer" result.


Because it's only fair, as the second coming of the glorious global socialist revolution has made it all too clear.

And remember this: there are no longer any rules, and any assets, any "wealth" saved, stored, and hidden is now fair game in the global forced wealth reallocation "game."

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Sun, 03/17/2013 - 12:40 | 3338510 Go Tribe
Go Tribe's picture

They are already stealing saver's money via QE and inflation. So hell yeah, why not just outright take it?

Sun, 03/17/2013 - 12:44 | 3338523 mikla
mikla's picture

You have it? I want it.

Mob rule requiring 51% of the people to decide to take everything from the other 49% (through elections) is too much trouble.  Just take it.

That's why the US was founded as a Republic, and not "mob-rule" (e.g., "Democracy"), because there are limits on what the 51% (mob) is allowed to do.

But, we don't have any rules anymore.

Sun, 03/17/2013 - 12:46 | 3338534 Manthong
Manthong's picture

It has been done already. Remember the retroactive tax increase?

They got away with it.

Sun, 03/17/2013 - 13:00 | 3338618 Bad Attitude
Bad Attitude's picture

And, Dear Leader got reelected by promising to be Santa Clause and give free stuff to his supporters. Santa's "elves" are those of us who still produce something.

Forward [over the cliff]!

Sun, 03/17/2013 - 13:05 | 3338645 francis_sawyer
francis_sawyer's picture

It wouldn't happen in the US until all the 'Billionaire Jews' had already safely transferred their funds to Puerto Rico & the Caymans... Oh wait!

Sun, 03/17/2013 - 13:11 | 3338677 DoChenRollingBearing
DoChenRollingBearing's picture

There is a lot of truth hidden in there...  Yes, the well-connected and the very wealthy will get most of their dough out in time.  Maybe they will leave behind a few token banksters to be judged...

Don't be a victim, get some money out of the bank and buy some gold.

Sun, 03/17/2013 - 13:20 | 3338711 AynRandFan
AynRandFan's picture

and an ocean-going yacht to get it to your favorite island paradise.

Sun, 03/17/2013 - 13:54 | 3338838 Texas Ginslinger
Texas Ginslinger's picture

Cyprus is a tax haven.

This tax heist is going after dirty money- mostly dirty Russian money.

Will be interesting to see how wealthy Russians respond to this.


Sun, 03/17/2013 - 14:04 | 3338879 Manthong
Manthong's picture

Maybe so, but..

1.    They are as dirty as the “reformed commies”.

2.    They whacked the little guy at the same time.

3.    Using a corrupt process to steal from corruption to sustain a different corruption is evil.

4.    This won’t end well for anybody.



Sun, 03/17/2013 - 22:08 | 3340718 FEDbuster
FEDbuster's picture

The world is about to be Corzined.  Beans, bullets and bullion.

Sun, 03/17/2013 - 23:02 | 3340890 goldfish1
goldfish1's picture

Black swan?

Sun, 03/17/2013 - 14:22 | 3338972 They_Live
They_Live's picture

The European snake is broke and eating its own tail for the sake of less than $10bn. Mr Putin can sail to the rescue with $20bn and some cheap oil and all he asks in return is somewhere to park his destroyers and a little private wrestling tournament with some energetic Cypriot maidens.

Sun, 03/17/2013 - 14:33 | 3339018 Skateboarder
Skateboarder's picture

Okay, that's half of the deposits. The other half belongs to the actual residents. You'd surely be jumpin for jah if <your favorite TBTF of choice> just snipped 7% of your checkings account.

Sun, 03/17/2013 - 14:41 | 3339051 otto skorzeny
otto skorzeny's picture

someone on Bruce Kasting's article and is familiar w/Cyprus banking pointed out that Cyprus is basically a "quick stop" for Russian/European $ on its way to the Carribean banks and that all of this Russian mob shit is just the MSM trying to downplay the significance of this $ grab(like the "they had it comin" lib media bullshit). alot of European retirees on Cyprus got whacked pretty good also.

Sun, 03/17/2013 - 15:31 | 3339300 Oquities
Oquities's picture

buy stuff and hide it, bitchez

Sun, 03/17/2013 - 15:52 | 3339389 Kirk2NCC1701
Kirk2NCC1701's picture

It's not just Dirty money, but a lot of Gray money -- money legally earned but undeclared (untaxed) because it came from businesses that deal a lot in cash.

The demographics of gray money includes small businesses, who are fed up with sky high taxes. Sound familiar? Isn't it amazing what you can learn, when you see the world in hi-res color, rather than low-res black & white?

Sun, 03/17/2013 - 16:53 | 3339653 Debt-Is-Not-Money
Debt-Is-Not-Money's picture

Looks like it.

I wonder how much of it is Putin's and his buddies?

Maybe the Russians will have a heart-to-heart "discussion" with some of these Euro Banksters and do us all a favor! After all the Bolshevics were Khazarian "Jews" that killed Czar Nicholas and his family, brought in communism and set Russia back a century- and killed how many- 50, 65, 75 MILLION? Remember Stalin was one of THEM?

Just how much more of their shit are the real Russians willing to take?

Sun, 03/17/2013 - 13:47 | 3338804 Miffed Microbio...
Miffed Microbiologist's picture

Just like in Argentina when the elite exited in the middle of the night under armed gaurd with suitcases full of cash. All the regular people could do is pound the banks with pots.The rest of the world yawned, including myself at the time I'm sad to say. I was very naive and plugged in. i look around today and i dont see people with any spirit to fight or even wield a pot. This is a perfect time for them to rape the world.




Sun, 03/17/2013 - 14:24 | 3338949 TheGardener
TheGardener's picture

That pot banging was scary. My hotel was on a road leading to parliament (Av.5 de Mayo?) , basements all boarded up and
me taking a bus back to Brasil despite having prepaid the hotelier for yet another month to get half price. Everybody very sophisticated there, laughing all the way to their dollar accounts at foreign bank branches while talking on their cellphones for a dollar a minute. Did not quite work out.

The day before I left I found a large stash of cash (no joke!) lying in the street downtown and something told me to get out of there.

Sun, 03/17/2013 - 15:21 | 3339223 francis_sawyer
francis_sawyer's picture

Those were the 'Argentine Jews' you speak of... Thereby ~ I rest my case from above...

Sun, 03/17/2013 - 14:22 | 3338973 rambo1028
rambo1028's picture

+1 exactly! 

Sun, 03/17/2013 - 14:40 | 3339045 Skateboarder
Skateboarder's picture

Commoner 1: "You have my pot."
Commoner 2: "And my pan."
Commoner 3: "And my ladle!"

Sun, 03/17/2013 - 14:55 | 3339122 sessinpo
sessinpo's picture

The hidden truth is that francis_sawyer wishes he was a billionaire jew.

Sun, 03/17/2013 - 15:26 | 3339265 francis_sawyer
francis_sawyer's picture

'Billionaire' [valued in WHAT? joobux?]... FAIL [but that's all jews seem to know how to value themselves by ~ so be it]...


All this shit is comical... Jew bankers rape, pillage, & use the media & politics to propaganzide [I'll be NICE here and leave 'enslave' & 'murder' out of it]... Then ~ the minute somebody points a finger at them & says 'OH WAIT'... Their brainwashed corporals come out of the woodwork & have anuerysms...

Fucking comical... SERIOUSLY ~ I don't do it for the HATE... I do it for the PATHETIC COMEDY... Gotta have some fun around this fucking gulag...

Sun, 03/17/2013 - 17:56 | 3339893 toady
toady's picture

I've often wondered why we don't invade the Cayman Isles. We could payoff the national debt, and anyone who complains can be sent to gitmo as an economic terrorist.

Sun, 03/17/2013 - 15:46 | 3339367 WmMcK
WmMcK's picture

+1 - You can't fool me, there ain't no Sanity Clause.

-- Chico Marx

Sun, 03/17/2013 - 13:13 | 3338624 McMolotov
McMolotov's picture

For the love of God, it's not a 51% versus 49% thing, much as some people like to simplify it. This isn't fucking mob rule; it's a tiny minority of kleptocrats stealing from everyone else, using the coercive power of government to accomplish that goal.

It's statists versus the proles, plain and simple. Government has a monopoly on the use of force, and the assholes at the top of the food chain have commandeered governments around the world and turned them against us. They use the meme of "mob rule" to distract us from that fact and keep us fighting amongst ourselves instead of directing our anger at the appropriate target: them.

Sun, 03/17/2013 - 13:14 | 3338687 disabledvet
disabledvet's picture

"when their not swapping favors their swapping spit." absolutely spot on...i must say i an felt as though i should regret my diatribes at the "elites of today"...well, i do apologize but i just can't help myself.

Sun, 03/17/2013 - 13:16 | 3338696 AynRandFan
AynRandFan's picture

Where were you during the last election?  The proles elected their candyman candidates all over the U.S.

Sun, 03/17/2013 - 13:50 | 3338817 McMolotov
McMolotov's picture

This is all far more insidious than it seems. The goal is to eliminate the middle class so that there is a massive permanent underclass and an incredibly small upperclass with control over every aspect of our lives. The easiest way to do this is to steal from the middle class and give to the poor. The poor will be grateful, and the people of the middle class — while angry — will lose that anger within a generation as their children grow up dependent on the system. The middle class work ethic and sense of self-reliance will, in essence, be bred out of existence.

The people who pull the strings are playing the middle and lower classes against each other, and since they are able to effectively direct the economy to benefit themselves and redistribute wealth however they see fit, the middle class will probably lose. It will eventually disappear. It's easy to think the poor are just being "takers." They are, but it's because the system has brainwashed them and made them dependent. With that accomplished, the next target is the middle class, and the soulless bastards behind the scenes will succeed if they can keep us distracted from their manipulation.

Sun, 03/17/2013 - 14:18 | 3338941 RockyRacoon
RockyRacoon's picture

The oligarchs no longer need a middle class to buffer the trends toward communism and outright socialism that they faced in the early part of the 20th century.  The proletariat small businessman and the upper level white-collar worker served as that buffer.   With the relief from unionism and social justice upheavals, the powerful money-wielders can drop the hammer on that buffer class.  The "middleman" has become superfluous.  The old ways of fiefdom organization can resume.  It was only a bump in the road to further harvesting of the workingman's sweat.

The age of industrialism and the advances in technology, all the fruits of entrepreneurship, have merely served to provide the rope to hang themselves with.

Sun, 03/17/2013 - 14:21 | 3338966 CrazyCooter
CrazyCooter's picture

When I was younger, I came across a quote that significantly changed my world outlook in many ways.

Never assume malice where incompetence will suffice.

Your narrative could be true. But a much more simple solution is greedy actors motivated largely out of self interest. Government always wants more control. The rich always want to be richer.

The tradition of promising free stuff is a time honored tool in politics. Kyle Bass's recent interview where he called out Karl Rove for buying votes with Medicare Part D is a perfect example. It invariably leads to collapse because it is not sustainable.

This is not the first time in human history where the rich had a plan to get richer to infinity and blew up the system in the process, nor will it be the last. In 150 years, when we are doing it all over again, no one will be interested in reading all the books we write about it so people will still be just as gullible, just as uneducated, and just as screwed.



Sun, 03/17/2013 - 14:47 | 3339076 Kayman
Kayman's picture


 Malice and incompetence are not mutally exclusive. I prefer the malice theory with loads of incompetence evident.

Sun, 03/17/2013 - 15:01 | 3339159 Skateboarder
Skateboarder's picture

CC - thanks for the quote, I like it a lot too, but only in theory. In practice I'll support Kayman's assertion. Remember that incompetence is an excellent front for malice, whether the two occur in the same person or among a group of people.

Tue, 03/26/2013 - 16:22 | 3378730 MayIMommaDogFac...
MayIMommaDogFace2theBananaPatch's picture

also: greed != incompetence

Sun, 03/17/2013 - 14:31 | 3339012 TheGardener
TheGardener's picture

Sometimes the middle class is just one paycheck away from
the so called underclass...

Sun, 03/17/2013 - 17:45 | 3339793 Kirk2NCC1701
Kirk2NCC1701's picture

I don't always agree with McM, but he has been spot-on in his above comments. His view mirrors my blogs that feudalism is coming back: FEUDALISM 2.0

The only other thing worth noting is that technology makes Mfg. blue collar jobs obsolete, thanks to the white collar middle class.

Tue, 03/26/2013 - 16:24 | 3378740 MayIMommaDogFac...
MayIMommaDogFace2theBananaPatch's picture

...and robots.

Sun, 03/17/2013 - 14:01 | 3338876 tlnzz
tlnzz's picture

You assume no corruption of any consequence in the last election. I no longer believe that.

Sun, 03/17/2013 - 13:30 | 3338758 ziggy59
ziggy59's picture

Divide and conquer... Distract and takeover

Sun, 03/17/2013 - 14:05 | 3338888 Freddie
Freddie's picture

Hope & Change.  Democrats voted for this.  The RINO shit is just as bad. 

Sun, 03/17/2013 - 16:09 | 3339459 Ident 7777 economy
Ident 7777 economy's picture

useful poltical idiot; and a democrat I'll bet (until just seconds ago) ... 

Tue, 03/26/2013 - 16:12 | 3378684 TumblingDice
TumblingDice's picture

There are never any rules. We were just able to dress up this wild whore called anarchy with some fancy clothes and called it democracy. Now she's fiending for more with the makeup all smeared. A lot of suckers still think she's pretty but some people know who she really is.

Sun, 03/17/2013 - 12:46 | 3338525 nope-1004
nope-1004's picture

The money grab is on to avoid default at all costs.  What the idiots in power don't realize is that default would be a good thing, cleanse the system, rid them of their ivory tower jerbs, and bring back a balanced market.

Shrinking package size of food items is inflationary, just as taxing capital savings is currency devaluation.  It is clear that default will be avoided at all costs.  Owning PM's now becomes paramount to ones financial future, not for capital gain, but to avoid government theft.  SILVER AND GOLD must be bought.


Sun, 03/17/2013 - 13:03 | 3338636 Waterfallsparkles
Waterfallsparkles's picture

Taxation on the sale of Gold or Silver is brutal.  No capital gains tax just ordinary income.  So, Sell your Gold and you may get a 40% haircut.

Sun, 03/17/2013 - 13:04 | 3338640 DoChenRollingBearing
DoChenRollingBearing's picture

Don't sell it...

Sun, 03/17/2013 - 13:27 | 3338748 machineh
machineh's picture

'Sell your Gold and you may get a 40% haircut.'

Coincidentally, a 41% haircut is what Frank 'Gold Grabbah' Roosevelt applied, when he devalued the dollar from 1/20.67 ounce to 1/35 ounce of Au.

Like a dog who will happily fetch a stick all day, the elites never tire of imposing the same simple play over and over, ad nauseum.

Sun, 03/17/2013 - 13:53 | 3338835 ZeroPoint
ZeroPoint's picture

Which cannot repeat itself now. It's a global market, and Asia will dictate the price soon enough.

Sun, 03/17/2013 - 14:15 | 3338933 Quinvarius
Quinvarius's picture

Uhhh.  NO.  That collectible rate is the ceiling not the floor.  Gold and silver have a reduced tax rate.  Collectible tax rates are the max you will ever pay, not the minimum.  Some people just repeat the nonsense they hear on CNBC without checking facts. 

Sun, 03/17/2013 - 17:08 | 3339719 s2man
s2man's picture

Don't sell your gold and silver.  Barter with it.

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