Welcome to Dogpatch

Getting ready to do some traveling so my already light blogging will go lighter, unless I can get that damn IPAD to work right.

Anyhow, I have been in a deep funk for several days now. I was going to write another of my little autobiographical pieces of life in the Great Abroad, but I am in a foul mood. That mood was not helped by my pre-travel haircut this afternoon. I hate haircuts. I hate going to "hair salons." I guess barbers have gone the way of travel agents, telephone repairmen, dodo birds, and conservative Republicans. The nice but chatty lady who cut my hair insisted on playing, "Guess how old." OK. It started with her. She looked fifty-five or sixty to me, so I "guessed" thirty-five; she, I note, was holding a razor in her hands, and I was unarmed. That pleased her, but my answer instead of putting paid to the silly game, lead her to expand the exercise to make me "guess" the ages of all the other hairstylists in the shop. I, of course, low-balled my estimates, as I just wanted to get out of there. As you can guess, it happened: She pointed at one lady who looked fifty-five or so, and naturally I "guessed" forty-five. She, of course, was not yet forty. That produced no end of uproar in the shop as all the others ribbed her without mercy. I was lucky to escape with my ears and jugular intact.

To make things infinitely worse, I have resumed reading and watching the news reports. Bad idea. I have been reading about the crisis in Cyprus. Not too many years ago, of course, "crisis in Cyprus" would have meant some anti-British riots, or a clash between Greeks and Turks with hapless UN "Peacekeepers" doing what they do best, being hapless. Such as story would have been a local "crisis" with perhaps some implications for NATO, and produced lots of speechifying at the UN. Now, of course, thanks to the wondrous EU and their euro obsession, a "crisis in Cyprus" has an impact on my retirement savings. We have, it appears, returned to the days of the global implications of the assassination of the Archduke--seemingly small developments in small countries can have global implications.

The euro is on German life support; the now straining but still impressive German economy has been called upon repeatedly in the past few years to save the euro. Every few months it seems, there is a "unique" crisis in the EU that requires a "once only" remedy to save country X, Y, or Z from collapse and save the "Euro Project." That "once only" remedy always seems to require the frugal and hard-working German ants to cough up the cash to save their grasshopper neighbors. There seems no end to the "unique, once-only, never-again" crises requiring the assistance of the Great German ATM.

You can look up endless stories on the crisis in Cyprus; I won't bother repeating all that. Suffice it to say that this week's crisis requires a bank bail-out of some €10 billion. Cyprus, not unlike some Caribbean islands, Panama, and Monaco, has an opaque and huge banking sector way out of proportion to the size of its population and economy.  Clearly, a great deal of money from high tax countries goes to hide there. As the press never tires of repeating, a lot of Russian money goes there, and that seems to have upset people who apparently prefer that Russian money be taxed so that Putin can do "good" things with it. Part of the bail out deal contains a proposal to tax bank deposits in Cyprus from about 6.7% to about 10%, depending on the size of the deposit. In other words, a wealth tax. People are told to resist wild consumption, to scrimp and save, and then once taking that advice, the bureaucrats come along and take yet another slice. Fair, right? Punish those who save. Makes sense?

Regardless of whether you have sympathy for Russian billionaires (Note: I rather have them put their money in Cyprus than in Putin's coffers, but that's just me) the idea that the bureaucrats feel entitled to your money EVEN after you already have paid your income taxes should put you off your breakfast. I find extremely repellent that the government takes a chunk of your estate after you die and that it also now feels entitled to take a slice of the money you have left after you've paid taxes. There is no allegation I have seen that says that the Cypriots and others who have deposited their money in the banks have done or been convicted of something criminal.

All that philosophy aside, if you haven't been put off your breakfast by issues of fairness, consider the incredible stupidity of the bureaucrats who announced this policy. What did they think would happen? Panic, run on the banks, anybody? Anybody? Bueller? If you're going to steal somebody's money don't tell them ahead of time. Now there is a huge uproar and talk of the bureaucrats backing off. I see. Who will feel safe even if THIS time they don't raid the accounts of savers? Would you believe them? The cat is out of the bag; their intentions are clear. Trust is destroyed, and trust is the essence of banking and, of course, of the paper, i.e., fiat, money we now have all over the world. Our money, be it the dollar, the pound, the euro, the yen, works because we trust that it works; we take it in payment for what we sell because we trust that others will take it in payment for what they sell. That's it. That's the mystery of paper money: it is a faith-based institution. We use and save that money in accord with certain rules. When the powers that be suddenly talk about changing the rules in the middle of the game, we begin to question that money, and whether we should trust it to the institutions set up to handle it for us. Savers in Spain, Greece, Portugal, and Italy are already looking askance at their own savings institutions and we could see a run on those banks this week if people become convinced the Eurocrats are desperately seeking money anywhere and everywhere. How long before somebody gets the same idea on this side of the Atlantic?

All this debate, of course, ignores the big elephant in the back seat of the Audi: the euro. The only way to put the weaker economies of Europe on the road to mending is to get rid of the euro. It is, no doubt, an incredibly complicated thing to do and involves a lot of economic and political pain. Countries such as Spain, Portugal, Italy, Greece, Cyprus, and others, nevertheless, would be much better off with their own currencies which would float to their real values in terms of the currencies of their trading partners. Not doing that means we are going to be whip-sawed by these crises every few months.

Another elephant is the issue of borders. Yes, borders are good things. They promote competition. Even inside the US, our state borders mean that money and people, for example, can escape the insane tax and regulatory climate of California and New York and head to saner climes, e.g., Texas, North Dakota, Florida. Imagine if all states were required to have the same tax and regulatory environment: Do you think it would be closer to that in Texas or that in New York?

As Li'l Abner said long ago, "The country is in the very best of hands."

Anyhow, be back in a few . . .