Combs Spouts Off

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The war against savers escalates

Posted by Richard on March 17, 2013

A while back, people who worry about the growing mountains of sovereign debt pointed to Greece as the canary in the coal mine. We have a new canary, and he’s got a bad cough: Cyprus. The Eurocrats are funding a bailout of Cyprus by doing what debt-laden governments with no respect for the rule of law or the sanctity of contracts usually end up doing eventually: seizing the assets of savers.

I’m not shedding any tears for the Russian klepto-billionaires who parked their ill-gotten riches in Cyprus. And maybe only a few for the Cypriots who until now believed they could get something for nothing through the miracle of endless government borrowing. But prudent and frugal folks throughout the heavily-indebted nations of Europe must be wondering when the EU will come after their savings. Under the mattress or in a hole in the back yard must be starting to look like better options than a bank account.

Think it can’t happen in the good old USA? It already has. In April 1933, a month after taking office, FDR issued an executive order (under the “Trading with the Enemy Act of 1917”) outlawing the private ownership of gold coins, bullion, and gold certificates. Owners had a month to turn it all in or face 10 years in prison. They were reimbursed at face value — the owner of a $20 gold double eagle (which contained gold worth $19.99 at the time) was given $20 in currency. But once all the gold had been turned in, FDR quickly devalued the dollar by 59%. That double eagle, had the owner been allowed to keep it, would have been worth $35. Essentially, this was a confiscation of wealth that makes the Cyprus “haircut” look picayune.

More recently and on a smaller scale, when the Obama administration turned GM into Government Motors, they abrogated contracts and confiscated the assets of bondholders in order to turn them over to their friends in the UAW.

And for some time now, left-wing activists and Obama administration officials (but I repeat myself) have been talking about how “unfair to poor people” 401k and IRA accounts are and suggesting that the government should do for retirement accounts what it’s doing for health care: take over.

Fiat money allows governments to confiscate wealth slowly and stealthily by inflating the currency, thus shrinking both your savings and their debt. But if (when) things start to go out of control and panic sets in, they’ll come after your savings more directly and immediately. You might want to be prepared.

HT: Instapundit (via email from David Aitken)

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