Last year, the world saw what happens when an economy crumbles: the government confiscates the wealth of its citizens through their personal savings accounts. In April, the nation of Cyprus forcefully took deposits from its citizens in order to stave off complete economic collapse.
In a dire warning, Marc Faber, contrarian investor and publisher of the Gloom, Boom & Doom Report, predicted Cyprus’s situation would happen everywhere.
Well, he might be correct.
A document from the European Union obtained by Reuters stated that leaders feel they could use the savings from 500 million citizens to fund long-term investments in order to improve the economies of 28 countries. In addition, rather than seeking funding from financial institutions, the citizens’ money could be used to allocate required resources to small companies, infrastructure projects and other investment endeavors.
“The economic and financial crisis has impaired the ability of the financial sector to channel funds to the real economy, in particular long-term investment,” the document notes.
Later this year, the EU will solicit the opinion of an insurance watchdog on a potential proposed law “to mobilize more personal pension savings for long-term financing.” Furthermore, the EU will complete a study determining the legitimacy of implementing an EU savings account in which the funds deposited by individuals could be utilized to invest in small private enterprises.
Another element in the plan looks to revise and perhaps even hide the balance sheets of banks.
“The document said investors and asset managers also have a role and it will propose a revision of EU rules on shareholder rights to ‘ensure better disclosure of institutional investors’ engagement and voting policies,’” the news outlet noted.
“More controversially, the Commission will consider whether the use of fair value or pricing assets at the going rate in a new globally agreed accounting rule “is appropriate, in particular regarding long-term investing business models.”
Other additional measures consist of assisting crowdfunding.
Indeed, if this initiative sounds familiar, it’s because it probably is. During this year’s State of the Union address, President Obama introduced the MyRA retirement savings bond program. Although the president claims this is meant to help lower- and middle-class Americans to save for retirement, it is actually meant to fund the the trillions of dollars in long-term bonds the Treasury Department has been buying since the Great Recession.
All MyRA contributions will be directly invested in United States government debt, but it is guaranteed and will pay the present Treasury rate. However, it’s not tax-deductible and the government gets its cut immediately.
Here is what John E. Girouard wrote in Forbes earlier this month:
“As a financial advisor for more than three decades, I know that automatic saving is the single most important tool in building a retirement fund. But the MyRA idea is just another example of how government controls so much of what we can and can’t do with our retirement savings by dialing up or down the tax rules.”
The U.S. and EU aren’t the only states looking to possibly confiscate its citizens’ deposits. We reported last year that Canadian policymakers were establishing an international bail-in platform to ward off potential big bank failures in the future. Then head of the Bank of Canada Mark Carney did not guarantee that depositors would be safe.
It doesn’t seem anyone’s hard earned money is safe in this world anymore.