The U.S. government is very unlikely to just seize money wholesale from people's bank accounts, as is being done in Cyprus. But does that mean that your life savings are safe? No. There are more sophisticated ways for governments to take what you have put aside for yourself and use it for whatever politicians feel like using it for. If they do it slowly butFinancially aware / literate Americans realize that inflation, either the government's official inflation rate, or the actual, much higher figure , stands somewhere between 5-10% annually. This is equivalent to half a Cyprus each year, year upon year, for decades. But hey, I suppose this way, the government tick gets its bailout money without spooking the host...of which in Cyprus, the government failed to secure its bailout money (moneyed Russians pulled their deposits via other means) while practically financially slaughtering the common Cypriot.
steadily, they can take a big chunk of what you have sacrificed for years to save before you are even aware, much less alarmed.
That is in fact already happening. When officials of the Federal Reserve System speak in vague and lofty terms about "quantitative easing," what they are talking about is creating more money out of thin air, as the Federal Reserve is authorized to do - and has been doing in recent years, to the tune of tens of billions of dollars a month. When the federal government spends far beyond the tax revenues it has, it gets the extra money by selling bonds. The Federal Reserve has become the biggest buyer of these bonds, since it costs them nothing to create more money. This new money buys just as much as the money you sacrificed to save for years. More money in circulation, without a corresponding increase in output, means rising prices. Although the numbers in your bank book may remain the same, part of the purchasing power of your money is transferred to the government.
Is that really different from what Cyprus has done?
Monday, April 1, 2013
The Answer Is No
Finally, someone in the more or less mainstream press is publicly articulating that what happened the other day in Cyprus doesn't have to happen here, because Americans have been bailing out the FedGov via the Fed since 1913. They just don't quite realize it: