Beware of the Monetary Mobsters!

Last month the IMF came up with a ‘brilliant plan’ to solve the crisis in Europe. As the old continent suffers from record unemployment and a debt pile that has gotten out of control in several (mostly) Southern European countries, the idea is to target savings with a wealth tax.

The IMF came up with the idea, or ‘theoretical exersize’ as the officials like to call it, to introduce a one time off tax levy, or wealth tax, on all savings accounts. Calculations by the IMF had shown that a modest 10% would get European governments out of the woods.

Now of course this ‘theoretical exersize’ got people in Europe furious. And with good reason. At least, so it appears to be. After all: life savings is money that has been taxed,pretty severily already in most parts of Europe. Savings are no more or less the Holy Grail to most and suggesting these life savings aren’t save is like swearing in the church.

The ‘theoretical exersize’ is by no means just what governments and the IMF like us to believe.The plans are out there, leaking this through to the media is no more than a matter of testing the water tempeture.

Let’s not forget: this legal robbery by a government has already been taking place in Cyprus. Consumers on this tiny island were confronted, on a friday night of course, by bank accounts being unaccessable, ATM’s without euro’s, restrictions on making payments abroad and a one off tax levy on all bank accounts.

And although people got angry, and scared, no big riots broke out!

Cyprus was the first test, a blue print or template for what’s coming for the rest of the Eurozone. Not today or tomorrow, consumers are on the edge for now as the IMF report was publiced fairly recently, but at one point in the near future savings will be the target for a wealth tax. That’s only a matter of time.

Now one could argue about the fairness of this wealth tax. After all, people that were smart enough to put some money aside get punished for doing so. People that spent all their money would dodge the bullet.

This is of course a complet dossier.Governments in Europe strongly prefer Europeans to put their savings to work. Either by investing their money, or by spending it to give the economy a boost. At this point in time, people who are saving money, are part of the problem. It maybe a shocker, but for the first time we would like to say: listen to your government, invest your worthless cash in real assets… before they come and collect.

Europe is in some ways different from the USA. Perhaps one of the most important differences is the Fed. Europe has of course it’s own central bank: the ECB. But contrairy to the way the Fed acts with printing dollars like at high speed and ballooning it’s balance sheet, the ECB has a very different appraoch. The balance sheet has been shrinking for quite some time and the desire to print euro’s to fix the fragile economy just isn’t there. Germany, effectively the Eurozone’s ‘paymaster’, will never agree on quantitative easing, Fed-style.

This all leaves Europe with very few options. The debt level within the Eurozone has risen to a level which is unsustainable. Debt rises with €100 million… per hour. The debt-to-GDP ratio has already surpassed the 90% level and will inevitibly reach the 100% plus in a few years.

debt to gpd US versus Europe

Now debt by government is of course not just the government’s problem, but a problem for all consumers living within the Eurozone. As the most health way to get out of the woods, a strong economic recovery, is far out of site, something else and drastic has to happen to get out of the woods.

One of the few ways out of this economic mess, will be a wealth tax. Will this be a one time thing? We highly doubt it, as it won’t stop European governments from over spending. Lessons learned? Again, highly unlikely. The people responsible for (over)spending in the last couple of decades will still be in charge, after all Europeans take a hit on their savings.

Will the wealth tax do the trick? That is also higly unlikely. It will help bring the debt levels back to a more sustainable level, creating some room for the battered European economies to grow, but it won’t be enough. So this means after taking a chunk out of people’s savings, the next step for European governments will be confiscate a big part, or even all?! At this point, Europe looks like a dying continent and a sitting duck for the monetary mobsters…  

Prepare yourself for the next phase of the Global Debt Crisis!

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