As we’ve been saying at the time, the spoliation of bank accounts in Cyprus this last March to save their banks was but a general rehearsal. We’ve also learned that there is a european proposal on the table to have depositors of over 100,000 euros contribute should there be a bank bailout in a Eurozone country. And now, the IMF is contemplating a 10% tax on all deposits (for every household, not only those over 100,000 euros) in order to diminish the sovereign debt.
In its last report on public finances, the IMF is clearly eying this solution (page 49). Since the public debt of the major european countries surpasses 100% of their GDP, a red line, the institution led by Christine Lagarde is contemplating a 10% tax on all private savings. Just like that. A giant hold-up.
This idea is making inroads, it’s just a matter of getting used to it. The differences are meaningless. For Cyprus, it was a matter of saving the banks, and the IMF, here, is looking to diminish the sovereign debt. The result is about the same, since the countries and their banks have incestuous relationships (european banks own a large part of the public debt). The IMF doesn’t even mention the 100,000 euro limit, which is just a smokescreen. In case of a crisis, everyone will be hurt. On the other hand, no one takes any responsibility... Is the European Union contemplating taking down or dismantling the TBTF banks to lower systemic risk? Not at all. Is the FMI demanding, as counterparty, that the States slim down and balance their budgets? Ditto. They’re just trying to plug a hole that’s getting deeper and deeper.
This 10% spoliation of the savings proposed by the IMF would only bring us back to the same public debt/GDP ratio of 2007, before the crisis. But even then, at that time, the debt was approaching the red zone and most european countries already had budget deficits. Much ado for not much! Plundering european depositors just to get back to the same situation of a few years back... without changing anything to the functioning of the financial system and the public sphere!
And now, with this idea of savings spoliation being validated by one of the most prestigious international institutions, we should expect it to be more and more on the minds of our leaders. We have to draw all the consequences from it: our bank accounts are less and less safe. What to do? We should definitely turn to tangible assets (to avoid this particular tax... but not income tax) like real estate, artwork, farmland, commodities... and gold, of course, the safest, simplest and most liquid asset. Better start thinking about it now before the hatchet falls... then, it’ll be too late.
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Philippe Herlin Finance Researcher / Doctor in Economics
Philippe Herlin is a researcher in finance and a doctor in economics of the Conservatoire National des Arts et Métiers in Paris. A proponent of extreme-risk thinkers like Benoît Mandelbrot and Nassim Taleb, and of the Austrian School of Economics, he will be bringing his own views on the actual crisis, the Eurozone, the public debts and the banking system. Having written a book on gold that has become a reference (L’or, un placement d’avenir, Eyrolles 2012), he wishes to see gold play a growing role in our economies, all the way to its full re-monetization.