Yesterday, the people of Cyprus awoke to the news that up to 10% of the cash in their bank accounts was to be confiscated on Tuesday 19th March, as part of an EU deal to bailout banks. This decision, signals the insidious next step of the Great Bank Robbery underway since the Financial Crisis of 2007/8. First Bailout, then Austerity and now direct Confiscation of wealth from the 99% to the 1%.
The Three Steps of the Great Bank Robbery
There have been three distinct phases to the great bank robbery of the banking and corporate class on the 99%.
In the bailout of 2009, the UK government had to guarantee funding to the banking sector, of 101% of GDP. That is, the UK diverted over £2trn of tax payer money (101% of GDP), equivalent to almost 3 times its entire annual budget, to prop up its failed banks. This is twenty years of NHS spending (£106.7bn a year), forty years of education spending (£48.2bn), or five hundred years of job seekers allowance (£4.9bn a year). All that money is going to prop up a derivates market which serves zero social purpose. It doesn’t build things, it doesn’t create things, it doesn’t do anything except repackage debts for fees and notional profits.
The US spent or guaranteed $12.8trn in its bailout package, which is equivalent to almost its entire annual GDP.
This rescue package for Banks, is absolutely unprecedented. If you take just the UK and US figures, ignoring everyone else, you’re at $15trn. How does this compare to other large scale expenditures?
The accumulated debt of the 49 poorest countries in the world: $375bn
Current global aid levels: $104bn in 2007
The Marshall Plan which reconstructed the whole of Europe after World War II:
The Race to the Moon:
The Savings & Loans Crisis:
The Korean War:
The New Deal which created the welfare state in the US:
The Invasion of Iraq:
The Vietnam War:
All of these things combined do not come close to the cost of the bank bailout so far. For all that cash, not a thing was produced and right now those markets are busy running that figure higher without a single piece of regulation applied since the crash.
In order to fund these bailouts, so called ‘Austerity’ programmes have been rolled out across Europe and North America. However, this is not austerity. The government is not tightening its belt. The laws have not been changed to ensure this crisis cannot happen again. Not a single banker, financial institution or regulator has been tried or sanctioned for their role in the crisis.
These Austerity programmes apply only to public spending on….the public. They seek to roll back the post World War II social contract. Funds for social programmes such as health, education and social security are being cut at unprecedented levels, while those funds are diverted to corporate subsidies, outsourcing public services to private companies for profit and now….outright confiscation.
The results of so called ‘Austerity’, which is only in its very early stages, have been catastrophic.
We’ve already looked at Greece, but Greece is not alone. The Red Cross has reported that Food Aid in Europe has now reached its highest levels since 1945. There has been a tenfold increase in people relying on Food Banks to eat in the UK alone. Unemployment and prices are rising, while wages are stagnating or falling across Europe and the US.
Meanwhile, the worlds richest expanded their wealth to record levels last year. This is not just a case of the poor getting poorer and the rich getting richer. The poor are getting poorer in order for the rich to get richer.
The productive capability of the 99% and the real economy have been subordinated to service the debt of the banking sector of the 1%. But with Cyprus, they have crossed the rubicon: a direct confiscation of personal, private wealth from your bank account to bail out banks.
The EU, IMF and European Central Bank have placed conditions on the bailout which would rescue their banks: The Cypriot government must confiscate 10% of the cash in personal accounts worth over £100,000, and 6.75% from everyone else. According to reports, the choice was to adopt the plan or go bankrupt and leave the Euro.
The people of Cyprus then quite rationally staged a run on the bank at the news, only to find the Bank offices closed, the ATMs refusing to dispense more than small amounts and a ban on electronic transfers of money out of the country.
This is a bank robbery, committed by the banks on their depositors.
We Are All Cyprus
Whilst noises are being made that Cyprus is an isolated case, the slightest interrogation of the situation reveals quite the opposite. Where Cyprus goes, we likely all will follow. We are all Cyprus.
The key failings that saw Cyprus go cap in hand to the central banks were a bloated banking sector, exposure to bad debt (primarily Greek but elsewhere) and a crisis in public finances.
Bloated Banking Sector
The banking sector of Cyprus has grown too big relative to the real economy of Cyprus. The banking sector has liabilities worth 835% of the entire annual income of the tiny nation of 1.1m people. Sadly, the bulk of these loans were made to Greece.
However, the UK has a bloated banking sector over 500% the size of its GDP, Japan is more than 200% whilst the US, Germany, France and others exceed GDP aswell with the trend being a rise in the size of the sector relative to GDP.
Exposure to Toxic Assets
Cypriot banks started to bleed money as a principal bond holder of (lender to) Greece. The Greek economy is being eviscerated by bogus austerity policies which have seen unemployment rise to 26% (57% for young people), poverty so endemic that people can no longer afford to bury their dead, a resurgent fascism and it’s young people leaving the country in unprecedented numbers. This total obliteration of the Greek economy rendered the bonds worthless and left Cypriot Banks exposed.
This story should sound achingly familiar to informed citizens across Europe and the US. In fact, the exposure of Cyprus is trifling compared to the nightmare of toxic assets the rest of us are simply waiting to explode.
The financial crisis of 2007/8 was the first in what will be a wave of collapse in the derivatives market. This is where the lid really comes off the whole thing.
The US derivatives market contains $700trn of debts. Global GDP stands at $69.4trn a year. This means that primarily Wall Street and the City of London have run up phantom paper debts of more than ten times of the annual earnings of the entire planet.
Not only can Wall Street not pay it back, the combined earning power of the earth could not pay it back in less than ten years if every last cent of our productive power went solely to pay off this debt.
It is important to note that this debt wasn’t used to invest, it wasn’t used to build roads or schools or hospitals, or create breakthroughs in science and technology or feed the poor. This debt was invented purely to make a small pool of people filthy rich. It was made because banks realised they could effectively print their own money, by creating debt.
Public Debt and Deficit
We are witnessing the deliberate transformation of a private debt crisis into a public debt crisis. Neoliberalism not only caused the Financial Crisis, but also the conditions of public and private indebtedness which made it impossible to resolve.
Cyprus currently has public debts worth 127% of its GDP. While this sounds quite terrible, it’s not far off other countries who have supported their banking sector over their real economy.
The US national debt now stands at over $16trn, more than 100% of its GDP. Public debt, as a percentage of GDP of the OECD countries as a whole (the 34 leading economic powers inc US, UK, Germany, Japan etc) went from 70% in the 1990’s, to more than 100% in 2011 and is estimated to hit 220% by the end of 2013.
This is the result of a coordinated, deliberate policy of reducing tax revenues on corporations and wealthy individuals, increasing corporate subsidies and the privatisation of public services – the costs of which have been hidden from the public by increased public debt.
We’ve hit crisis and it is the public programmes who are taking the blame and the hit rather than the flagrant corruption, the waste of tax payer money, the tax evasion and the bailouts which got us here in the first place.
What Does it Mean for the Rest of Us?
The global 99% need to watch the developments in Cyprus very closely. The government of Cyprus passing this measure will mean the effective end of private wealth for the 99%. It sets the precedent of governments legislating away a person’s right to their own money, at the direct request of this renegade banking system. It says that at the request of the Banks, any government can flip a switch and confiscate money direct from the accounts of its citizens. If anyone was hanging on to Capitalism for the sake of private property and wealth laws….it’s time to give up the ghost. It is over.
It is time to withdraw our money from this system now. We cannot afford to wait for the legislation to hit the shores of Britain, the US and elsewhere. Let us not even indulge in wistful dreams that it won’t happen to us all. It will.
Zeitgeist Moving Forward – you can watch this free online and start thinking about what alternatives might look like.
Upskill for Off the Grid – learn the skills required for self sufficiency and end your dependency on this system. Learn to grow food, build sustainable living structures, grow food and harness renewable energy sources.
Move Your Money – move your money out of the bankrupt unethical banks.
Occupy London – join the Occupy Movement and be a part changing the world.
Occupy Wall Street – join the Occupy Movement and be a part changing the world.