For the People, By the People … Not in Cyprus

Wednesday, 20 Mar 2013 07:40 AM

By Ashish Advani

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The confiscation of wealth has begun. At least in Cyprus it has.

I have been writing to you for a long time now about how the governments in the developed countries are bankrupt. The shell games that governments play with its citizens are well-documented throughout ancient and modern history. This problem is only getting worse.

At the highest level, what is the value of paper money? The paper money system (ever since it was delinked to gold) is based on the faith and trust in the government behind it. The value of one’s currency is only as strong as your ability to trust your government.

Since the financial crisis hit the world back in 2008, we have observed the lack of credibility and faith in governments. As the tide of excessive credit in the world receded, we could see who was swimming naked in the financial oceans. Governments, which aided the credit-fueled expansions by feeding its citizens the drug of easy credit, have all started showing signs of decay and declaring bankruptcy.

First to go are the smaller nations like Iceland, Greece, Ireland, Spain and now Cyprus. Soon the bankruptcy wave will spread to larger nations like Italy, France and Britain. Finally, we will see the largest nations fall prey to the wave of defaults. We have already seen the AAA credit rating of the United States, France, Britain and other large countries fall. That is the first step in the draconian measures that will get imposed on its citizens.

While I do not cast all governments as evil, I do cast their passion to rescue its citizens as misguided bungling. The governments are delusional in expecting that they can resolve all the ills that afflict us, and their attempts at rescues are nothing short of incompetence. Ludwig von Mises comes to mind: "There is no means of avoiding the final collapse of a boom brought about by credit expansion." Yet the governments keep trying to avoid it.

First they aid the credit expansion-induced overindulgence and when the game is up, they create hostile laws to make us pay for their overindulgences.

Let’s take the unlimited printing of money that all governments have undertaken. Let’s talk about the purchase of its own debt with its largesse of printed money. Let’s talk about imposing a tax on savings in the bank accounts. If we as citizens were to undertake any of these activities on our own, we would certainly be hauled off to jail.

This new imposition of tax on savings in Cyprus is nothing short of robbery that the governments want to impose on its citizens. We have elected governments, which by definition are governments elected by the people, for the people. In this case, the government elected in Cyprus is by the people but NOT for the people.

Thank goodness for now the people have rejected this attempt, but this is a real wake up call to what extent governments will go to grab our hard-earned money.

Unfortunately this kind of robbery is not unusual for governments. From the ancient days of Roman, Spanish, Ottoman, British and all other empires, governments have imposed draconian laws to loot the citizenry when they are done spending all the money they can get their hands on.

It is time to kick our dependence on our governments to rescue us. It is time to really diversify our holdings in multiple jurisdictions and away from fiat currencies. It is time to invest in commodities, hard assets and other forms of wealth. Make sure you diversify away from stocks and bonds in the United States to multiple assets classes in multiple jurisdictions.

It’s time to take our own wealth protection seriously.

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