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April 16, 2014 / 16 Nisan, 5774
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Posts Tagged ‘wealth’

Cyprus: When the Law Prescribes Theft

Sunday, March 31st, 2013

Who will shoulder the pain from the Cyprus bailout deal?

The first-order sufferers will be small businessmen (mostly Russian) and upper-middle Cypriots and foreign residents with their money in Cypriot banks.  But the whole region will take a longer-term blow from the loss of Cyprus as a place for upstart businesses to park capital.  Capital that can’t be parked cheaply in the E.U. won’t be invested in the E.U. – at least not by the smaller, less financially “connected” entrepreneurs who drive economic dynamism and growth.

The big Russian firms that bank with the Russian Commercial Bank in Cyprus have protection in the deal, although they will have more trouble moving capital around under the “capital controls” to be implemented, which hwill keep depositors from draining their accounts.  Russia has been relatively quiet and mild on the terms of the Cyprus deal, largely because the biggest Russian depositors in Cyprus bank with the Russian Commercial Bank and won’t be hit with the 40% “amputation” tax on their accounts.  For the average traditionally-autocratic government, smaller entrepreneurs are always easier to accept as roadkill.  They may create jobs and revenue, but they aren’t in a position to line politicians’ pockets and they’re not easy to marshal as a means of geopolitical leverage – unlike, say, Gazprom.

It will hurt the E.U. for Russians to flee Cyprus; it will hurt equally for only the biggest, most state-connected Russians to remain in Cyprus.  All the Russians won’t necessarily flee,  but if nothing else changes, and the bank deal defines the future, the dynamism of the Russian economic presence in Cyprus will be bled off.  The economy of Cyprus will become more of an elephants’ dance than a coyote squabble, even with the gas eventually coming up from the ocean floor.  Cyprus will go further down the road taken by too much of the E.U., discouraging entrepreneurship and overserving itself on the future obligations.

Italy and Spain are obvious others to bring up, of course, and everyone is doing that.  Besides serious debt and bank-solvency problems, they have already gone further down the controlled-economy road than Cyprus has (which is the main reason for their debt and solvency problems).  Their big-name companies, the international giants, are incapable of growing the economy, because it doesn’t work that way.  The big firms aren’t the future.  Small entrepreneurship is always and everywhere the future, and in Italy and Spain, engaging in it openly is discouraged by regulation and the tax code.

There is a regional aspect to this, of course; a difference among points of the compass, inside both countries, and between city and hinterland.  Such differences are creating fault lines throughout the E.U.  Those gaps aren’t going to narrow any time soon.  Now is a good time for the E.U. to take stock and recognize that the entire Cyprus problem, like the Greece problem, was created by the actions of government.

Left to their own devices, people coming together for economic activity don’t do this to themselves.  Failure is liquidated; it is not enshrined in policy.  But governments do the opposite, propping up and enabling failure for as long as they can, because they insist for political reasons on the policies that make it inevitable.  Government’s perspective is always political, and therefore inimical to economic efficiency.  The more government is chartered to control, the richer a society has to be to afford it.  And unfortunately, there’s a kind of “peak government” rule to this: a society in which government controls too much cannot stay rich.

The U.S. is headed down this path too, but most of the E.U. is already further down it.  The E.U. and its individual nations created this problem through policy.  There’s a political relief-valve aspect to making “the Russians” pay for it (although the FT article linked to above points out that at-risk Russians expect to find ways to get their money away from the amputator’s saw).  But the Cyprus crisis illustrates nicely that the cost of over-regulatory government will lead to outright theft from the people.  Policy as cosmically comprehensive as that in the E.U. model will indebt everyone, until theft seems to be the only option left.

This isn’t a condition for stability.  Moscow hasn’t given up on Cyprus, which still sits enticingly athwart Turkey and Europe.  The Cyprus deal won’t last very long – not while Cyprus and the E.U. remain in the vise of the E.U.’s negative, defensive policies.  (If the Russians sneak enough of their money out, the Cyprus deal won’t last long enough to auction off the office supplies with the Laiki logo).

Government Money

Wednesday, March 20th, 2013

Time and time again, the liberal defenders of government power have attacked any call for reform as a plot by the wealthy. Even now New York Times editorialists pound their keys about the “Concentration of Wealth,” invoking presidents from Andrew Jackson to Theodore Roosevelt. But in our America, the “Concentration of Wealth” is not found in the hands of a few billionaires. It is found in the hands of the government.

The editorialists talk about the income gap and how much wealth is held by the top one percent of the country, but they are leaving something out. Their statistics deal with individuals, not institutions. And it is institutions which threaten our liberties, not individuals.

The top 10 wealthiest men and women in America barely have 250 billion dollars between them. That sounds like a lot of money, until you look at annual Federal budgets which run into the trillions of dollars, and the country’s national debt which approaches 15 trillion dollars. And that’s not taking into account state budgets. Even Rhode Island, the smallest state in the union, with a population of barely a million, has a multi-billion dollar budget.

As the 10th richest man in America, Michael Bloomberg wields a personal fortune of a mere 18 billion dollars, but as the Mayor of the City of New York, he disposes of an annual budget of 63 billion dollars. In a single year, he disposes of three times his own net worth. A sum that would wipe out the net worth of any billionaire in America. That is the difference between the wealth wielded by the 10th wealthiest man in America, and the mayor of a single city. And that is the real concentration of wealth. Not in the hands of individuals, but at every level of government, from the municipal to the state houses to the White House.

While liberal pundits pop on their stovepipe hats, fix their diamond stickpins and cravats, and trade in 19th century rhetoric about the dangers of trusts and monopolies– the power in 20th century America lies not in the hands of a few industrialists, but with massive monopolistic trust of government, and its network of unions, non-profits, lobbyists and PAC’s. The railroads are broken up, offshore drilling is banned, coal mining is in trouble and Ma Bell has a thousand quarreling stepchildren– now government is the real big business. How big?

The 2008 presidential campaign cost 5.3 billion dollars. Another 1.5 billion for the House and the Senate. And that’s not counting another half a billion from the 527′s and even shadier fundraising by shadowy political organizations. But that’s a small investment when you realize that they were spending billions of dollars to get their hands on trillions of dollars.

Do you know of any company in America where for a mere few billion, you could become the CEO of a company whose shareholders would be forced to sit back and watch for four years while you run up trillion dollar deficits and parcel out billions to your friends? Without going to jail or being marched out in handcuffs. A company that will allow you to indulge yourself, travel anywhere at company expense, live the good life, and only work when you feel like it. That will legally indemnify you against all shareholder lawsuits, while allowing you to dispose not only of their investments, but of their personal property in any way you see fit.

There is only one such company. It’s called the United States Government.

It wasn’t always this way. There used to be limitations on executive and legislative power. But those limitations are gone along with the top hat and the diamond stickpin. Under an ideological cloak of darkness, politicians act as if they can do anything they want. Public outrage is met with alarmist news stories about the dangers of violence, as if this were the reign of the Bourbon kings,  not a democratic republic whose right of protest is as sacrosanct as its flag and its seal. Instead the republic is dominated by political trusts, party machines, media cartels, public sector unions and a million vermin who have sucked the cow dry and are starting in on its tender meat.

Printed from: http://www.jewishpress.com/indepth/columns/daniel-greenfield/government-money/2013/03/20/

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