Analyst's note: Absolutely must consider. The headline is bad enough, but it is NOT beyond question that the U.S. Congress could find itself going the route of Greece in such matters. See the chart below to appreciate the similar condition caused by too much U.S. national debt compared to other known trouble spots. Our feds already know that taxing the rich here in the U.S. will not solve the spending problems created in Washington .... even if they took all their wealth.
Margaret Thatcher, in a TV interview for Thames TV This Week [[1]]on Feb. 5, 1976, Prime Minister Thatcher said, "...and Socialist governments traditionally do make a financial mess. They [socialists] always run out of other people's money. It's quite a characteristic of them."
[....] Depending on whether the Cypriot government finalizes the deal, which is still pending, this means that every depositor will have a portion of his money confiscated by the government when the banks reopen Tuesday morning.
“Accounts under 100,000 euros will have 6.75% of the funds seized. Accounts over 100,000 euros will have 9.9% seized,” Business Insider’s Henry Blodget explains.
After these funds are seized, the EU’s emergency lending facility and the International Monetary Fund, headed by Christine LaGarde, will drop €10 billion on keeping the banks in Cyprus running.
Unsurprisingly, after Cypriots learned of the surprise deal, many rushed to empty their bank accounts. However, according to various reports, ATMs have not been functioning properly and the government has made it impossible to transfer money outside of the country’s borders.
[....] most bank bailout efforts in the past have put the burden on bondholders — not the actual depositors. Furthermore, it has usually been the goal to protect depositors to keep them withdrawing their funds en masse, creating a “run on the bank.”
[....] Cypriots (as well as Russians and other non-residents who have stashed massive amounts of cash in Cyprus banks) are not going to be happy if the country goes forward with the proposed bailout deal.
[....] The destruction of its banking sector would be a disaster for the EU economy, and a disaster for the EU economy would translate into a disaster for anyone who does business with them: The U.S., China, Japan, etc.
Considering that the U.S. did roughly $265 billion in exports and $380 billion in imports with the European Union in 2012, a crippling EU banking crisis would most certainly send shockwaves through the U.S.
[....] But would Congress ever go the Cypress route?
Obviously, we can’t really answer that question, but “it was ‘absolutely certain’ as recently as 48 hours ago that Cyprus too would see no depositor ‘bail in’ either,” the Hedge points out.
“What is known,” the report continues, “is that…the necessary debt-reduction needed in the US to reach a sustainable debt level, was over $8.2 trillion using debt numbers as of 2009 … Since then consolidated US debt has risen by over $5 trillion.”
Courtesy Zero Hedge
“Which means that if, indeed, the US proceeds with its own wealth tax, then deposits may well be one ‘wealth class’ that gets impaired,” it continues.
“Of course, since in the US other financial assets, namely the stock market, account for a far greater proportion of household net worth, it is quite possible that instead of impairing deposits at US banks, which already subsist solely due to the Fed’s $2 trillion in excess reserves, the government may instead choose to generously tax simple 30% of all of your stock holdings, and achieve the same ‘wealth transfer’ result,” the report adds
