Cyprus II

The dust has settled a bit, and there are more facts revealed. While my friend Gerry has been reading Pat Buchanan and admitting that the experience did not give him apoplexy, I actually read a column by Paul Krugman and agreed with him...until his typical "...That's what's the matter with Republicans..." drivel at the end. So, we have both confessed.

I was pleased that Krugman evidently thought the subject of Cyprus and its potential actions were important enough to talk about, despite the fact that the Cypriot (yeah, that's what you call them) economy is about the size of a good sized city in the US.

Here's the scoop, as far as I have been able to figure it out with the help of a lot of stuff, certainly with Krugman's assistance:

We have heard about the rogue nations who offer scoundrels and politicians (I hear Will Rogers saying, "I just repeated myself") a repository for their ill-gotten gains. Come, ye, all criminals, money launderers and political thieves (whoops, there I go again) and deposit in our banks. Cayman Islands, Panama, some others and now Cyprus. Their deposits far exceeded what you would expect for an economy of that size.

The real estate market over-heated at the same time, and no one has exactly placed the blame on the irresponsible banking system, but it appears likely. Such banking activity is a de-stabilizing force for all the other economies in the world, and since Cyprus is a member of the European Economic Union, it was even worse. The Euro currency was threatened. And, like all normal wastrels, the government of Cyprus wanted the EU to bail them out, and the EU, led by Germany, was reluctant to do so.

So, the scheme that got my blood going was hatched--just take a bunch of money from whoever was silly enough to deposit in a Cypriot bank and believe the idea of a government guarantee of those deposits. Of course I have heard of taxes, inflation and other ways of reducing the wealth of the public, but this was blatant and a bad, bad precedent.

The people of Cyprus thought it was a bad idea, as well, and eventually a deal was cut that retained the confiscation provision, but in a different form and in a manner that did not involve the insured depositors. This is good.

Meanwhile, the economy of Cyprus is in a bad way with the largest segment, banking, weakened and real estate in a tailspin.

Perhaps the lesson will be that rogue nations do not have the latitude to mess with legitimate economies (yes, I know Russian crooks were the biggest depositors and that economy can hardly be ranked as one of the most "legitimate") and that the police actions will come swifter and more decisive when politicians run amok.

I still have a question, though--how did Cyprus get accepted into the EU in the first place?