Samizdata

This article from John Phelan, at The Commentator, is worth reading:

Functioning banks certainly are a key part of a modern financial system but why should the same be said of the toxic zombies who are blundering round the current financial landscape?

And how did these rotten banks get so big in the first place? It’s because governments and central banks prop them up. Bad banks rarely go out of business, they just lumber on, soaking up and destroying more wealth. Goldman Sachs and JP Morgan were bailed out five times in the 20 years before 2008.

The second lesson is that there really is no such thing as private property. In extremis the government considers itself entitled to any amount of your property it desires even if, as in the Cypriot case, it means revoking its own commitments to protect bank deposits.

But then this is the logical outcome of taxation. If you think that a shortage of government revenue can be solved by the government simply helping itself to someone else’s revenue you really can’t have a philosophical problem with this. If you believe in the 50p tax rate this is where you end up.

The last paragraph is particularly telling. It is good, in a grim sort of way, that people have been alarmed at the idea of governments grabbing savings. But what on earth do people think governments do already? Consider the central banks’ “quantitative easing” policies. Printing money benefits those who get the new money first against those who do not; savers lose out when a government “reflates” an economy. In the UK, for example, inflation – understated by government statistics – is in the low but significant single digits and over a relatively short period, will devastate savings due to the impact of compounding. The proposals from leftist politicians for a so-called “wealth tax” in the UK is merely another form of property rights confiscation, but then again, income taxes are a form of confiscation in that they confiscate the products of work. Confiscation is what governments with a monopoly on the use of physical force do. It is one of their defining characteristics.

Meanwhile, Detlev Schlichter has an interesting new item up about the Cypriot disaster. What is notable about it is that he does not adopt a lazily predictable “bash the eurozone” stance here.

In particular, Schlichter kicks against the assumption that what was proposed – taking a slice of deposits – is somehow uniquely evil:

I am a free market guy. I am in favor of laissez faire so I always like to see placards that read “Hands off”. One could see such placards at demonstrations in Cyprus yesterday: “Hands off Cyprus”. That is great. But be careful what you wish for. A proper hands-off policy means letting the chips fall where they may. That would certainly mean no bailout and thus total collapse of the Cypriot banking system and the Cypriot economy. Don’t forget that Cyprus and its banks and its depositors are still being bailed out with other people’s money here.

That is also what some of my libertarian friends don’t seem to get when they speak, as some of them did yesterday, of another incident of the ‘the state stealing from its citizens’ or of confiscating their property. As much sympathy as I usually have with these views, in this instance they are simply mistaken. If this were expropriation it would mean that the act of abstaining from this expropriation – of the expropriator simply doing nothing – would mean that the ‘victim’ keeps his property. But if the EU did nothing in this situation – “hands off”, laissez faire – it would mean that most depositors, including those under €100,000, got wiped out completely. The choice is not between keeping everything and paying a ‘levy’, but between paying a ‘levy’ and losing almost everything.