David Hines
Coppers on the Dollar...or Euro
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By David Hines
May 9, 2013

Copper has long been the poor man's silver. When aristocrats traded with the latter and nobles traded with gold, common folk produced copper coins for trade. Long before the first coinage, copper was highly valued. One can't make bronze without it, and bronze built civilizations.

A prime ancient source of the metal was an island in the eastern Mediterranean, currently in the news. Indeed the very name of the place is believed to derive from an ancient word for "copper." Copper was the metal associated with the goddess Aphrodite, who was also said to have come from the island. There are still ruined temples to her there.

People the world over were outraged that Cyprus was about to impose a tax on bank deposits – 10% on large depositors, 6.75% on less well-heeled bank customers. To alleviate the government's insolvency, international agencies insisted upon the tax – not only on citizens of the island, but on all depositors.

Attempts have been made to portray Cypriots to be deserving of their banking fate. Russian mobsters launder money there. Europeans make deposits for the higher yields than are obtainable by keeping their money at home. Retiring Brits seek a tax haven removed from the high taxes in the UK, a haven which also has the advantage of Mediterranean sunshine. We're expected to not notice that the tax was not to be imposed upon specific persons but rather was to be generally applied. Ordinary Cypriots would have their savings confiscated along with mobsters and expatriates. Those ordinary people were to pay for the sins of others, Russian mobsters and irresponsible banksters alike.

The same people who were outraged don't blink an eye when politicians and central bankers speak matter-of-factly about an annual inflation tax of a few percent.

The problem the central bankers created for themselves was in exercising some uncharacteristic political honesty. Instead of (or rather in addition to) taxing on the installment plan, they proposed taking it in one lump sum. Though the ongoing inflation tax taxes more in the long run, people find it easy to live with.

This psychological fact has long been noted and utilized. Americans once had to pay their income taxes in one lump sum. They saw directly what they were paying. Then it was proposed to withhold a portion with every paycheck. The tax became less visible, hence more palatable. Some even came to view the IRS as a non-interest-bearing savings account. It's the oft-cited trope about the frog who doesn't notice he's being boiled if the heat is turned up slowly enough.

The Cyprus banks lent heavily to Greece, and are now left in the lurch. Unlike the US regime, the Cyprus government can't print more of its currency; euro printing is beyond its control. Some suggest that Cyprus take the unprecedented and untested move of leaving the European Union so that it can print its own drachma at will. Such a move could well threaten the European Union itself. Other members may be tempted to leave as well. Is there a European Lincoln who shall invade seceding states?

The situation on Aphrodite's island is a mini-drama of a common conflict – workers who want to build their nest eggs, and profligate governments who want cheap money. The producers in this case are the Germans; the spenders are the Cypriot and Greek governments. (It may seem odd to describe a continent-wide issue as "mini," but in the long stretch of time it's an acute symptom of a chronic ailment.)

As with the US bankster bailout, the common people of Cyprus are to pay for the recklessness of bankers in cahoots with governments. The productive sector is to pay for the machinations of the money-pushers and the nonproductive sector. The lesson is not lost on all people. In other European nations with large government debt and shaky banks, some are withdrawing their money and seeking safer havens. If the European authorities and the IMF are willing to demand a tax on Cypriots, why not Spanish, Italians, and Irish as well?

And why not Americans? The US government is, after all, the prime player in the IMF, one of the agencies that insisted on the Cyprus tax. If they found it good for Cypriots, why not for the US?

The manipulators may have overstepped; they are fostering the bank runs they sought to evade. Productive and frugal workers have had a shot across the bow – their hard-earned savings are not safe. The inflation tax was not obvious to many; nominal amounts remain the same or minimally grow with added interest, but don't account for the loss of purchasing power. Taking a couple years' worth of inflation tax in one lump sum, though, may drive the point home: governments and banksters survive at the expense of the frugal with retirement expenses ahead of them.

Cyprus got its name because it was an ancient source of copper. Now its residents don't even use copper for trade; instead they spend fiat money in the form of the euro. It may well come to pass that even copper pennies will be worth more than euros – or dollars.

© David Hines

 

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David Hines

Born in a mill town, David Hines has seen work as a furniture mover, computer programmer/analyst, and professional musician... (more)

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