Reverse Robin Hood Reversal

Traditionally, banks mediate between borrowers and lenders, transferring surplus cash from flush A to want some cash B. In the process they transmogrify time, turning short term deposits like the balance on a current account, into longer term lends e.g.  mortgages. The credit crunch revealed banks operated as time-machines in a different way transferring money from millions of taxpayers after 2007 into the pockets of millionaire property and private equity investors in the run up to the credit-crunch.

Well when I say investors, I mean speculators. And clearly, some people benefitted from this redefinition of financial intermediation more than others. Well, a few rather than some and they were typically already doing very well thank you very much.

More generally, anyone who owned things, if they weren’t too greedy or dumb enough to attribute capital gains to their financial acumen as opposed to an unsustainable bubble, did well.

At this point we set sail across the azure seas to Cyprus where another massively overblown banking sector has imploded. And as usual the EU cocked things up with its early negotiations; all that was certain about the initial proposal to impose a tax on all savings was that it set neon signs up across Europe saying “bank runs now”. Now though the details of what appear to be the final arrangements look like the first, fair response to the credit crunch.

Obviously, yer average Cyprus punter can expect the full Greek treatment in due course; public spending cuts here, pay freezes there, mass unemployment, emigration and privatisations left, right and centre etc.,. But, limiting the savings tax to the rich, the starting point for all this is that the people who benefitted from and contributed the most to what went wrong are getting the shaft. So at least, unlike here, there’s that small crumb of consolation.

Did I say fair? I meant to say the imposition of a more realistic risk-reward structure will serve to disincentivise moral hazard, encouraging markets to work more efficiently and capital to be more effectively allocated. See? Its not just "common sense", "good economics" spouting Tories that can come out with the econ-chat to tart up their prejudices.

P.S. Its noticeable that this is essentially about the Russians i.e. "our" oligarchs still get saved, each and every, fecking time.