Shylock
I’ll have my bond. I will not hear thee speak.
I’ll have my bond, and therefore, speak no more.
I’ll not be made a soft and dull-eyed fool
To shake the head, relent and sigh, and yield
To Christian intercessors: Follow not.
I’ll have no speaking. I will have my bond.
Exit Shylock.
Solanio
It is the most impenetrable cur that ever kept with men.
Antonio
Let him alone.
I’ll follow him no more with bootless prayers.
He seeks my life. His reason well I know.
I oft delivered from his forfeitures
Many that have at times made moan to me.
Therefore he hates me.
William Shakespeare, The Merchant of Venice, Act 3, Scene 3.
For almost 50 years, Americans have watched Congress and our Federal Reserve Bank spend and inflate our nation into a level of indebtedness from which we can never return. Entitlements have grown because the aging population has been a stress on the social security system, while the continuing wars in Iraq and Afghanistan have contributed another trillion dollars to the load. Today, our government’s spending consumes two thirds of every dollar taken in by taxation. The federal government has to sell bonds at auction simply to fund day-to-day operations.
But we’re Americans. We can do this forever, right?
This week, Cyprus is giving the world a lesson on how foreign debt leads to loss of national sovereignty when creditors get serious about collecting on their bonds.
The Cypriot banks have outstanding loans or other money at risk totaling €152 billion. This is eight times the size of Cyprus’ gross domestic product. Cyprus owes Greece alone €29 billion, or 160% of their GDP. Last June, Cyprus sought a €4 billion loan from the European Union, the European Central Bank, and the International Monetary Fund. Call them “the Troika.” Everybody else does.
Result: The Fitch rating agency estimated that this loan request would push Cyprus’s debt to GDP ratio from 88% to 100%, and instantly downgraded the island nation’s credit rating to junk status. Ironically, prospective buyers of Cypriot debt demanded a higher rate of return as a result of those downgrades, which made it all that much harder for Cyprus to obtain credit on the world money market.
By November 2012, a bailout deal was confirmed for €10 billion, with Cyprus’s Finance Minister Vassos Shiarly saying that the assistance might reach €17.5 billion. That is an amount almost equal to the country’s entire GDP. Put another way: Every citizen of Cyprus would be deemed to owe €20, 000 to the Troika. Fitch projected that Cyprus’s debt to GDP might rise to 120% by 2014 and again downgraded Cyprus’ credit again, to BB-. On December 21, 2012, the IMF proposed to require creditors of Cyprus to accept a “haircut,” that is, less money for their loans, but that proposal went nowhere.
Meanwhile, the Troika was demanding that Cyprus’s Parliament implement serious cutbacks on government sponsored programs. When a foreign creditors calling the shots in a country’s parliament, “or else,” what is that, but a loss of self-determination?
Then the other shoe dropped: Last Saturday, March 16, 2013, the Troika threatened to pull the plug on the bailout plan entirely unless Cyprus’ banks would agree to take 9.9% of the money from all bank accounts containing over €100, 000, and 6.75% of all deposits under €100,000 and pay that amount over to the Troika, up to €5.8 billion. This is to say nothing of the austerity plans which would pare back the ability of the Cypriot government to take care of its people without the approval of a small cadre of people who could not care less if Cyprus sank into the sea.
On Tuesday, March 19, Cyprus’s Parliament rejected the proposal out of hand. Banks are currently closed into next week. Meanwhile, Cypriot finance ministers are going cap in hand to Moscow and God knows where else (Turkey? Why not?!) looking to raise €5.8 billion to feed the beast without harming depositors to its own banks.
The problem is that unless the island signs off on a radical debt-cutting program, the ECB will withdraw “emergency liquidity assistance” next week. If that happens, it’s going to lead to an immediate financial crash in Cyprus.
The mask is off. The wisdom of the ages is vindicated in modern experience once again. Human nature has not changed since Shylock said: “I’ll have my bond.” There is no limit to the will of a creditor to inflict pain on a debtor, up to and including expropriation, enslavement, and, death itself. “He seeks my life!“ Antonio said. That’s right: Creditors don’t stop until they are paid, and/or until the debtor is dead. And make no mistake: If the banks close and liquidity dries up, people will suffer fatal privations in Nicosia.
The precursors of this naked money grab are going on in the western economies, right now. Every month, the Federal Reserve Bank injects $85 billion into the US economy, each dollar of which decreases the purchasing power of the money you to earn by real labors. The ostensible purpose of these practices is to encourage economic activity by increased spending. How is that working?
Look across the pond: In the winter of 2009, David Cameron and George Osborn called on the British people to decrease borrowing and increase saving. British citizens answered that call, and saved £ 1.1 trillion from March 2009 to date. The immediate effect was to inject liquidity into British banks.
Meanwhile, the Bank of England slashed interest rates from 5% to .5%, and printed £375 billion out of thin air. Consequently, UK bank account holders saw the value of that £ 1.1 trillion fall by £220.4 billion due to inflation. Yes, mortgage rates fell, but the Bank of England itself has admitted that for every pound that has been saved due to artificially low interest rates, £2 has been lost in appreciation to savings and pension funds to savers—money that would have been pumped back into the British economy through spending. The ostensible object of the quantitative easing policy was to spur spending. Alas! The Bank of England does not seem to understand that when you devalue money, it does not encourage people to spend what they have left. Apparently, Oxford and Cambridge don’t teach that dynamic.
Or perhaps the bankers aren’t actually stupid: Interest on British government debt is currently at £47 billion and the British government’s deficit spending is projected to go from £600 million to £1.5 trillion between 2009 to 2017. Perhaps the Bank of England knows that it would devastate the government to allow borrowing costs to float to natural levels. And so they don’t want an economic recovery. Government can’t afford it! Does that sound familiar?
And now, thanks to Cyprus, we know the end game. When push comes to shove, you can’t trust that your money is safe in any bank incorporated under the laws of a debtor nation.
THINK what this means. What is a bank? A bank is a sacred corner of the secular world. It’s a place where the depositor can put hard earned money and know that the money is safe from the creditors of the bank. Here, we have banks in debt, grabbing the monies of their own depositors to cover their own exposure to a “troika”—a banking cartel. By this demand, the Troika is destroying the entire concept of banking, all over the Eurozone. No: There are no banks in the Eurozone, folks. There are just big pots of money, and all of them are vulnerable to confiscation.
I pledge allegiance to the Cartel which rule the United States of America, and to the Republic, which used to stand, and is no more; one nation, under one Cartel, indivisible, with minimal provision for all.
Mark it, people: This is not going to stop here.
“I’ll have my bond.”
God bless America.
