Ron Paul: "The Great Cyprus Bank Robbery"

Tyler Durden's picture

By Ron Paul

The Great Cyprus Bank Robbery

The dramatic recent events in Cyprus have highlighted the fundamental weakness in the European banking system and the extreme fragility of fractional reserve banking. Cypriot banks invested heavily in Greek sovereign debt, and last summer's Greek debt restructuring resulted in losses equivalent to more than 25 percent of Cyprus' GDP. These banks then took their bad investments to the government, demanding a bailout from an already beleaguered Cypriot treasury. The government of Cyprus then turned to the European Union (EU) for a bailout.

The terms insisted upon by the troika (European Commission, European Central Bank, International Monetary Fund) before funding the bailout were nothing short of highway robbery. While bank depositors have traditionally been protected in the event of bankruptcy or liquidation, the troika insisted that all bank depositors pay a tax of between 6.75 and 10 percent of their total deposits to help fund the bailout.

While one can sympathize with EU taxpayers not wanting to fund yet another bailout of a poorly-managed banking system, forcing the Cypriot people to pay for the foolish risks taken by their government and bankers is also criminal. In their desire to punish a “tax haven” catering supposedly to Russian oligarchs, the EU elites ensured that ordinary citizens would suffer just as much as foreign depositors. Imagine the reaction if in September 2008, the US government had financed its $700 billion bank bailout by directly looting American taxpayers' bank accounts!

While the Cypriot parliament rejected that first proposal, they will have no say in the final proposal delivered by the EU and IMF: deposits over 100,000 euros are likely to see losses of at least 40 percent and possibly as much as 80 percent. “Temporary” capital controls that were supposed to last for days will now last at least a month and might remain in effect for years.

Especially affected have been the elderly, who were unable to use ATMs or to transfer money electronically. Despite the fact that ATMs severely limited the size of withdrawals during the two week-long bank closure, reports indicated that account holders who had access to Cypriot bank branches in London and Athens were able to withdraw most of their funds, leading to speculation that there would be no money available when banks finally opened up again. In other words, the supposed Russian oligarch money may well be already gone.

Remember that under a fractional reserve banking system only a small percentage of deposits is kept on hand for dispersal to depositors. The rest of the money is loaned out. Not only are many of the loans made by these banks going bad, but the reserve requirement in Euro-system countries is only one percent! If just one euro out of every hundred is withdrawn from banks, the bank reserves would be completely exhausted and the whole system would collapse. Is it any wonder, then, that the EU fears a major bank run and has shipped billions of euros to Cyprus?

The elites in the EU and IMF failed to learn their lesson from the popular backlash to these tax proposals, and have openly talked about using Cyprus as a template for future bank bailouts. This raises the prospect of raids on bank accounts, pension funds, and any investments the government can get its hands on. In other words, no one's money is safe in any financial institution in Europe. Bank runs are now a certainty in future crises, as the people realize that they do not really own the money in their accounts. How long before bureaucrat and banker try that here?

Unfortunately, all of this is the predictable result of a fiat paper money system combined with fractional reserve banking. When governments and banks collude to monopolize the monetary system so that they can create money out of thin air, the result is a business cycle that wreaks havoc on the economy. Pyramiding more and more loans on top of a tiny base of money will create an economic house of cards just waiting to collapse. The situation in Cyprus should be both a lesson and a warning to the United States. We need to end the Federal Reserve, stay away from propping up the euro, and return to a sound monetary system.

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ihedgemyhedges's picture

End the Fed? Good luck with that Dr. Paul.....

DJ Happy Ending's picture

"Bank runs are now a certainty in future crises"

There hasn't been a single bank run yet, how is this a certainty? After watching Cypriots and PIIGSeons sit idly by through this event, it makes me wonder what it would take.

Quinvarius's picture

No bank runs yet, huh?  I guess a whole lot of people with faith in their overlords are going to go down with the ship.  One way or another, that account they worked for their whole lives is going to become worthless.  Probably through both theft and hyperinflation at the same time.

DoChenRollingBearing's picture

Ron Paul's article above is the BEST short piece I have yet read summarizing what happened in Cyprus and what the fallout may be.


Bravo, Tylers, for bringing us this piece!

BaBaBouy's picture



... On Right Now


AllThatGlitters's picture

Look at Silver continue to dive in real time:

The premiums on the physical remain cheap too. I feel like an idiot having pumped it awhile back now.

Then again, now that I think about it, whenever I feel like an idiot and want to go hide, that is the time to buy. 

Gold doing the exact same thing.  Watch it pop hard and fast:

How do I know they will pop?  Cuz I don't have funds to get my order in for 2 or 3 days.  


DoChenRollingBearing's picture


Hear ya.  80% of the time I buy gold, the price drops markedly within 1 - 3 days following.  I should sell my planned purchase dates so everyone can take the other side of the trade...

But, I will just continue to buy gold as money comes in.  Even at $1535, $1235...  Because NONE of our financial problems have been solved.  Not even addressed!

caconhma's picture

People IQ are not very high after all. The money was stolen/Corzined from their accounts (both here in America and in Cyprus) and they still entrust their money with thieves and robbers. Incredible!


After all, who needs gold? Let these blood-thirsty banks have it all. We, the people, prefer to have funny money...


aerojet's picture

You have no choice but to entrust savings with thieves and robbers--it's not like there is some alternative.

TwoShortPlanks's picture

Ding Ding Ding Ding Ding...Jackpot!

Pump those markets Ben (Bilge Pump that is). Eurozone can't do that so they confiscate.

TSP predicted earlier: $134k/oz....we'll see....

Pegasus Muse's picture

After all what's a mere Quadrillion (1000 Trillion) dollars of derivative exposure (notional) between friends?

redpill's picture

In a way I guess it's a good thing Ron Paul didn't become president because he would have been shot by now.

Slack Jack's picture

The EU gives the Cypriot system 10,000 per citizen yet Tyler tells us that the EU is stealing from Cyprus.


So what does Tyler mean when he implies/says the EU is stealing Cypriot money?

He means the Cypriot banks have stolen the money, right?

If a bank invests your money and loses it, then is that theft?


silverserfer's picture

did you not read the article? how can somebody be this fucking dumb and ask these questions? Just run head first full sprint ito a concrete wall and spare us all. Your not worth an explanation.

Slack Jack's picture

The moron silverserfer has no answer to the questions.

Pity you don't have the intelligence to answer the questions.

Vagabond's picture

Listen up ZH, we need to get our facts straight.

Deposits in the U.K. and Russian subsidiaries are separate from the Cyprus banks. Depositors in those countries were able to withdraw money on deposit in the U.K. or Russia. But they were not allowed to move money from Cyprus to the U.K. or Russia. It would be like if you had money in a Citibank subsidiary in Brazil and Brazil imposed capital controls. You wouldn’t be able to take money out of your Citi Brazil account, but your account in New York would not be impacted. So while reports may have indicated this happened… it didn’t.  None-the-less I completely agree that fiat currencies and fractional-reserve-banking are the culprit and must be eliminated.

CH1's picture

You have no choice but to entrust savings with thieves and robbers--it's not like there is some alternative.

Of COURSE there are alternatives - have been for a long time.

People just don't have the guts to use them.

Dr Paul Krugman's picture

People who bought silver are getting what they deserved, too.

AllThatGlitters's picture

Keep gloating.  What you deserve is coming. Sooner than you think.

Dr Paul Krugman's picture

When I have pointed out time and time again that holding gold and silver in bullion form is nothing but putting a dead weight on economic activity, and that it is not a wise way to speculate, it is gloating?  I beg to differ.  I am merely showing what a proper way to invest is; financially and economically one should put money towards investments that grow - this helps oneself and one's economy.

Dr Paul Krugman's picture

There are so many things wrong with this thoughtless band of right wing fanatics I can't count them on my feet and hands.  Obamacare is going to bankrupt the U.S., we can't finance the deficit, we must go back to the gold standard!  All of this is wrong, and has been disproven time and time again by lengthy research at the top level Universities across the globe.  So while you to sit in your armchair and get emotional others are using time tested and true theories that win awards and rescue nations.

Colonel Jessup's picture

Dr. Krugman - Let me say that I relish the opportunity to communicate - by communicate I mean express my disgust for you and your poilicies - directly. And so in that vein, let me say that I do hope that this is really you.

You and your fiat pumping pals have destroyed nearly every economny on the planet via your fractional reserve banking ponzi scheme ( it's OK and works great as long as nobody actually wants access to their physical currency). And the only reason that the game has gone on for so long is that people never could quite catch on - oh, that, and Legal Tender laws that prevent people from refusing to accept your paper for goods and services. But people are catching on now - and that must make you nervous.

To your comments about rescuing nations - you mean like Argentina? Where the IMF demanded that they privatize their infrastructure ( like water supplies ) by selling them to crony firms to raise capital to pay back IMF loans - and then those companies then recover their "investment" by raising the prices for said basic services provided thru the infrastructure by 500%+. This is how to destroy nations, not save them. But I'm sure, deep down, you know that.

You sir, and your ilk, are not economists - you are nothing more than two-bit con men who have been found out for what you are.

Oh - and I thought folks would find this photo of you - and the only pussy you've ever had or are likely to ever get - amusing.

tarsubil's picture

Oh, so this is satire. Thanks.

CH1's picture

That's a relief, isn't it? :)

LawsofPhysics's picture

"others are using time tested and true theories that win awards and rescue nations."  - LMFAO!! A troll of trolls.  The real Krugman wouldn't recognize a safe store of value if it hit him on the head.   Still waiting for him to print up some more oil.  Halarious, no energy, no eCONomy, period, print all you want.  At least this troll admitted it was really a CONfindence game and nothing more.

Chuck Walla's picture

Krugie means City of Stockton Munis. Safe, Sure!



Plata con Carne's picture

In 1998 you said By the year 2005 the internet will have done no more for the economy than the fax machine. Idiot.

denverdolomte's picture

Dr. Krugman, I'd relish this opportunity to ask you a question regarding explaination of your economic beliefs. What algorithm is being used currently to avoid austerity of the markets and TBTF's, that will contain a shift in the near future to reclaim all this exposed debt wagered through QE's and Bailouts, as no matter how I have mathematically figured there is ZERO chance of paying back said debt is paid through GDP growth and interest, growth comes via consumption, consumption of resources, and resources are not infinite......infinite growth is thus impossibile, so back to the same point, how do we unwind trillions in debt with zero interest rates and a GDP that by the laws of physics will not grow bigger than it already is?


For 5 years we have watched this add more to the pot theorems with the same results, really austerity is that bad? Allow say 1 year for market correction, tough times for society during this phase, 1 year more for the rebuild. (hypothetically) OR why doesn't your think tank agree on debt forgiveness if money consumption is your largest goal?


just a dude's picture

Dr. PK, you are viewing purchase of precious metals as speculating/investing (as an aside, I admire your honesty in equating the two).  I grant you that there are at least some precious metals purchasers buying them for exactly that.  Then there are others, like myself, who purchase and stack, but do not trade them or otherwise speculate in them.  So, your argument is either ignorant or disingenuous.

resurger's picture

I have sent you a silver .408 for free.

It's okay no need to thank me. 


DaddyO's picture

As in CheyTac?


thisandthat's picture

Mr. Krug Man sir, nice seeing you! Btw, not tot waste your time, but being a (wise and knowledgeable, obviously, duh) Jew(ish!) e-conomist, you're probably just the right person to enlighten us about this, which I'm sure you're familiar with, but I wonder if any of those genius ECB Haircut Cowboys ever heard about a certain Samson (you know, that Samson)?

For the ignoramus gentiles, story goes way-too-cool dude got one major haircut (and I mean, one of biblical proportions, you could definitely say!), again, for being way too reckless and overconfident for his own good (rings a bell?). The aftermath of said epic shaving, though, should maybe come as a warning to anyone hell bent on trendsetting it (probable sole reason it was ever put in writing, btw).

So, I don't know (yep, gentile, here...), but shouldn't those ECB folks better apply for Sunday/Saturday/Friday/whatever school, before going all Dalilah on each and any rogue "peasant" they run into (you know, just in case they ever cross the wrong one)...?

What's your take on this - is it the kosher thing to do. or is biblical wrath under way on them, oh Wise One?


just a dude's picture

DPK, my average acquisition cost (including premiums) for silver is $18/ounce.  I did most of the acquiring in 2009.  At this point, given the expansion of the monetary base during the ensuing 4 years, a +51.44% return (on paper) is FAR LESS than I deserve, were I a trader of silver, which I am not.

thisandthat's picture

You mean, silver?

At least they got what they purchased, not tungsten, like some IMF customers...

auric1234's picture

You seem to think people bought silver in order to sell it later for a higher FIAT price? Poor misguided one...

I'll be buying again this month. Thanks for the discount, IDIOTS


Mine Is Bigger's picture

I am enjoying massive gains on my silver purchases. (At least, the ones I bought several years back.)  I have been buying PMs for the long term.  I still have the same ounces as yesterday.  So, I don't let these price fluctuations bother me.

Hopefully, we'll see who is right soon enough.  In the meantime, plese keep us entertained.  Thanks!

silverserfer's picture

you buy vagisil beacuse you get what you deserve as well troll.

moonstears's picture

"It is easy to imagine a broad public demand that those who have been lucky enough to find gold be required to share a significant fraction of their winnings with those who have not."

-- Paul Krugman, The Washington Monthly, October 1995

Look what the actual shitbag you claim to be said, in 1995. Interesting commie thought, interesting choice of words, huh?

Strider52's picture

Methinks the boat sails tomorrow, after the price of silver drops just a bit more...

Alert the crew, mate! We sail at sunrise!

Update: the ship actually sailed moments ago. I couldn't resist...

cornedmutton's picture

Remember, price and value are not the same thing.

jvetter713's picture

Premiums cheap?  Umm...I don'y know where you get yours but 25%+ is not cheap.

AllThatGlitters's picture

What the heck are you talking about?  Where do you get 25% premiums?



Peter Pan's picture

You bet there is a stupid sale on. It really makes you wonder when the Wal Mart style of consumer crush will come to gold and silver.

Patience though and all will be revealed......including how much gold China has been accumulating during such smackdowns.

Why else do you think China keeps her mouth shut?