The news about the Cyprus banks has been on the radar screen recently. Somehow, the most frequently asked question is what will Russian oligarchs do about it, because it’s them who have created an offshore world of their own there. Will they seek new offshore havens? Get the money back to Russia? Stay in Cyprus and adapt to the new realities of life on the island? In fact, the oligarchs and their money are an issue of minor importance. It all brings more serious things in focus, like, for instance, the future of world banking system that had became sick a long time ago. The Cyprus events produce evidence the system is at death’s door…
Now, about the signs testifying to the assertion.
First.The banking system has lost the makings of an entity sticking to market laws. The last financial crisis has produced ample evidence of it. The banks displayed lack of vitality. If not for states lending a helping hand, there would have been no banks anymore, they would have all gone to the wall and vanished by now. Buying out dubious bad debts, acquiring shares in capital stock, granting various stabilization loans, the US and Western Europe injected flows of money into the system.
The US has injected around two trillion dollars of taxpayers into the banking sector. In fact, it was nothing else, but the nationalization of the largest financial bodies, the Wall Street topping the list. The banks nationalization in the United Kingdom was no less impressive.
True, the nationalizations in question have not been measures of strategic scope, but rather actions of tactical level. Gradually the state has started to pull out of banking sector and the situation has by and large returned to what it was in 2007-2008. Such state intervention was called “banking socialism” in the West. A taxpayer is being made accustomed to the idea it’s him who has to bail out large banks. Everybody knows the phrase "Too Big to Die”. It is addressed to Wall Street and London City. Still, the “banking socialism” appears to be too egregious against the background of comprehensive economic liberalism and stokes protest among 90% of people.
Second.For many centuries money-lenders have lobbied banking secrecy laws. It has always been a lynchpin of Western democracy and capitalist financial system.Nowadays the banking secrecy is vanishing in the hays. US financial regulators (first of all the U.S. Securitiesand Exchange Commission), the US Justice Department and US Tax Services launched an attack against Switzerland, or its banks to be more precise. This country has always been known to be a bastion of banking secrecy. The attack boiled down to providing information on those who evaded paying taxes to the US government. The struggle lasted for around three years. Switzerland gave up. The banking secrecy institute doesn’t exist anymore there. The success has inspired the United States. Foreign Account Tax Compliance Act – FATCA went into effect on January 1 2013. Actually, it requires all banks in the world to be the agents of US Tax Services. The law is an attempt to establish a direct control by the United States over world banks and financial bodies. It goes without saying, that if the attempt is a success, there will be no banking secrecy in the world anymore.
Third. Banks have stopped to make profits as loan granting institutions. It’s not a phenomenon taking place only during crisis, but rather a fact of everyday life in the days of what we call normal economic growth. The reason is simple. The United States Federal Reserve System, the European Central Bank, the Bank of England, the Bank of Japan let the printing press go in full swing after the last financial crisis. It had been considered to be a crime before. Now it is called “quantity alleviation”, sounds smart and nice to ear. Money has become cheap and accessible. It cannot be expensive when the annual interest rates in the US and Japan are at zero level (0.25%). Abundance leads to low interest rates for commercial banks. A profit from granting loans becomes an illusion. Banks become something hard to find a definition for instead of being institutions dealing with deposits and loans as they used to be. They convert into kind of transit-distribution entities rechanneling the production of printing presses into far away corners of the world to buy real assets. First of all, I mean undercover FBI activities in 2007-2011.
It has been mentioned many a time. Let’s remember the details. The Federal Reserve System gave out $16 trillion in loans to American and foreign banks in the given period of time. According to the audit conducted in the summer of 2011, the loans were never included into the Federal System’s balance sheets. Besides, the loans were granted without the approval by Congress, as required by law. Finally, not a dime had been redeemed by the time of audit. The debts appear not to be paid back till now. Looks like colossal sums of money were directed to different parts of the world to buy assets that had abruptly lost values in the interests of the Federal System’s share-holders, that is the Rockefellers and the Rotshields. It’s like feast in time of plague. The banks failed to become deposit-lending institutions again.
Fourth. The latest events in Cyprus serve as final symptoms of lethal disease. World banksters (they are called this way for behaving more like gangsters)have lost any shame. They have stuck the paws into the pockets of clients, ignoring such “prejudices” as national and international law. From legal point of view, the introduction of taxes on bank deposits is an encroachment on the rights of clientele – the very same private property that should be protected at any cost as they have said so many times. It’s not income taxes on deposits (a normal thing in many countries), but the partial confiscation of money that fully belongs to clientele according to the contracts between banks and customers. Nothing else but confiscation was meant according to the order given by some murky structures of the European Union; the order of this kind could have been given only by global banksters.
The Cyprus confiscation brings something to mind. For instance, the confiscation of foodstuffs by Bolsheviks in the times of Civil War in Russia. Or the order by Franklin Delano Roosevelt in 1939 demanding all gold was to be given to the state by legal entities and individuals in a month. Actually, it is banking Bolshevism what we are facing. It has corresponding features. One is ample financial flows from the state to banks; the other is the confiscation of deposits. It’s limited by Cyprus so far. But it’s just a probe to start with.
Banks lose confidence in the world. Nobody wants to deal with banksters of one’s own accord. Is it the end of world banking system? I doubt it. People can me made deal with banks. Coercion is not excluded. There is too much Bolshevism in the behavior of contemporary banksters. It brings to mind Financial Capital by Rudolf Hilferding, the book written half a century ago. Hilferding praised the bankers management skills that helped to establish the formation of a more stable “organized capitalism”. He saw little difference between this type of capitalism and socialism. The kind of socialism Leon Trotsky Bronstein dreamed of. The system of internment camps. There is a solid ground to believe the banksters have rushed to drastically reform world banking system to make it match the new world order. New world order could be compared to “organized capitalism”. Or camp socialism. Whatever you prefer.
P.S. Late on March 19 the news came the parliament of Cyprus defeated a controversial bailout proposal that would have taxed bank deposits. Still the need to drastically change the world banking system remains. Probably the attempts to impose this kind if tax will be repeated, if not in Cyprus, then in some other country. One way or another, the probe is launched. Now about the deposits. For centuries bankers have made fortune on deposits. The profit has been received thanks to interest rates. These days appear to be coming to the end. For instance, large Swiss banks started to introduce commissions for putting money in deposits. This example may be followed by bankers of other countries. The commission is actually a tax paid not to the state but to a private structure dealing with deposits and loans with government’s permission (license). No matter what happens in Cyprus, the world banking system is in for great shocks and unavoidable transformation.