The story about the Cypriot government’s attempt to avoid default by taxing bank deposits is a classic illustration of our life “under management” by an entity like the state—how events usually unfold, and what people think (and do) about them.
Consider the government of Cyprus. It has accumulated debts and now cannot pay them off. This, so to speak, is the root of the problem. Why does it need debts? To finance its activities. Why does it engage in these particular activities? Because it decided so itself. Who would be paying off these debts if there were no default? Obviously, the taxpayer. Who will pay new debts if the government “accepts assistance” from the European Union or Russia? Again, the taxpayer. He will pay regardless of the solution—tax increases, confiscation, nationalization—anything. Different ways of covering financial holes differ merely in who bears the burden. In one case, redheads pay more; in another, people with long noses. But in every case, it will be citizens, not officials.
That is, the government creates work for itself, takes money to do it, fails, takes more… and citizens always pay for this pleasure. The worst that awaits the government is resignation and, ouch-ouch-ouch, perhaps someone will suffer damage to their political career. But note: resignation applies only to elected officials. And they constitute a negligible part of the government and the state as a whole. All the rest of the bureaucratic apparatus remains in place. And it is these people who produce that aggregate “state interest” that manifests in the search for new “fronts of work.” So what will become of all this? Here it is: you will pay to solve our problems, and we will continue as before.
Now consider this: despite the fact that the “deposit tax” was supposedly kept under wraps, Cyprus’s banking sector is paralyzed. Why? Because people, terrified by the prospect of a new tax, are trying to withdraw their money from banks. So what if they withdraw? It’s their money, after all. But the trouble is that the money isn’t there. The bank loaned it out to third parties, and in case of panic, it simply cannot return depositors their property—because withdrawals in such a situation exceed the “average” ones the bank can cover by shuffling funds from one pocket to another. Why doesn’t the state punish banks? After all, this is theft. Indeed it is—legalized theft called “fractional reserve.” Nobody else is permitted to steal, but banks can. This theft enables the state to create a monetary monopoly system with a central bank at its head, and to produce money out of thin air in the most literal sense. Without “fractional reserve,” such a system would simply be impossible.
And now, the most wonderful part. The state is constantly fighting something, prohibiting everything, regulating everything. People call this “insanity,” but they endure it because they’ve been told there is no other way. But here’s what’s interesting—this insanity exists only for us. For the state, there is no insanity whatsoever. For example, Russian President Medvedev openly admits that accounts of Russian state structures are frozen in Cyprus. Not those damned oligarchs’ accounts—no, the state’s. Why do people keep accounts in Cyprus? Because they don’t want to keep them in Russia (Ukraine, etc.), since there exists a host of factors (i.e., insanity) that make this unprofitable. And what does the state do? It also operates through Cyprus. It knows the insanity it produces at home, and it believes it’s better to work far from it. Insanity—for us.
Let’s sum up. The state, to sustain the front of work it invented for itself, borrows money. The front of work, and the loans, are paid for by taxpayers. When problems arise in this process, taxpayers pay even more. For example, part of their property will be seized in the form of a tax on bank deposits. And if they want to withdraw their money, it won’t be given to them, because this money simply doesn’t exist. And it doesn’t exist because the state monetary monopoly system is arranged this way. Yet nobody raises any claims against the state. No, in the Cyprus story everyone discusses the damned oligarchs, from whom, properly speaking, everything should be taken. Hit of the season—a picture from supposedly the International Herald Tribune, in which a new Russian in a fur coat, standing in front of a Cypriot bank, says over the phone, “Vladimir, the washing machine broke!” That’s what concerns people. I don’t know about you, but I consider this the complete and final victory of the state over the ability to think, compare, and evaluate facts. Just a celebration of sorts.