Stephen J. Guilfoyle “Sarge” was previously the U.S. Economist at Meridian Equity Partners from 2007 following a long career at Credit Suisse. Stephen has worked on the trading floor of the NYSE continuously since July 1987 and actively serves as a Sergeant in the National Guard.
Something significant happened over the weekend that I think most sentient beings will have trouble wrapping their heads around. Global equities and U.S. futures markets are reflecting the fear right now. Just in case you were sleeping under a rock, this weekend, Cyprus, needing to raise some dough in order the receive bail-out money, has decided to “tax” the savings accounts of it’s citizens. Those that have saved 100K euros will will be taxed 10%, it will be 6% to 7% for those who have saved less. In other words, if you, as the average Cypriot did the right thing, and saved money for your family by living within your means, then you will be penalized to greater extent than your less responsible neighbor who went on vacation twice a year, and always had a new car. I make a joke here, but this is serious folks. Very serious.
This is where democracy ends, and tyranny starts. Call it a tax if you want, I call it theft. Italy is in political turmoil, Greece is still a mess, not to mention Spain’s situation. What if this most horrible idea actually catches on? What if irresponsible governments decide that this is the way to solve their reckless habit of over-spending, or not to mention, their banking sector’s debt problems? Could it happen here in the U.S.? Never say never. Would you trust these leaders? I do not. Taxing income, evil as it is, is at least a necessary evil, that we all have accepted because we do need a national defense, we do need our roads paved, we do need law and order. Money in the bank has already been taxed, and while not every country abides by the same constitution, there is something completely immoral going on here.
What if there is a run on Cypriot banks once they unfreeze everyone’s accounts this morning? Yes, they immediately froze everyone’s money until they could “steal” their cut. What if this causes a run on European banks in general? I mean if the E.U. will allow something like this in one of their member nations, why not all of them? You now know that when they need your property, they will not respect your ownership. Where, oh where is a safe haven? You really can’t feel safe if you live in any EMU nation right now. Expect the marketplace to be disrupted today. There will be a severe sell-off unless smarter heads prevail, and this unacceptable deal is somehow undone. Other nations have completely run wild in the streets over austerity. Can you imagine what Cypriots are going to be like? Enjoy the day gang, I don’t think I will.
This post originally appeared at Guilfoyle’s Market Recon.
Follow the Sarge on Twitter here: @Sarge986