The Tylers at ZH have released a MUST READ report on why the Cyprus bail-in depositor haircut fiasco that threatens to rock the entire Eurozone could in fact likely occur in the US as our debt crisis climaxes in the coming years. Just as Cypriots are discovering this weekend, holding your wealth and assets in the banking system just one day too long can have devastating consequences as the rule of law disappears in the West.
Politics aside, the bottom line is that the Rubicon has been crossed, and deposits have now been forcefully confiscated in what Europe promises to be a standalone case. What is certain, is that nobody will wait to find out how long it takes before Europe’s class of increasingly more desperate and ill-meaning despots is found to be have lied once more (as it has about everything else since the start of the European crisis). And while the mainstream media will be focused primarily on Europe in the coming days, as BCG and we have warned, the topic of “wealth taxation” is now front and center, and it stars not only Europe, but the US as well. The question then becomes: what does the funding structure of the US private depository institutions look like, and is there any possibility of Cyprus “wealth tax” recurring on the other side of the Atlantic? To answer this question, we present the summary layout of the consolidated US depository system, which according to the Fed’s December 31, 2012 Flow of Funds report had a grand total of $15 trillion in assets, and a matched number of liabilities, of which 72%, or a total of $10.9 trillion was in the form of deposits. So, if the US was to go the Cyprus route, and begin impairing balance sheet liabilities to remark assets, there would be precious little space (with just $4.3 trillion in total other funding liabilities), before one would need to start eating into the deposit base, should Congress decide to implement a very “fair and just” financial asset tax in the US next.
Click here for more from ZH: