Sunday, March 17, 2013

Cyprus: EZ's "Rogue's Island of Know Ye Men and Know Ye Measures"

In 1785 the tiny state - even then - Rhode Island was known by the rest of the 13 USA states as " Rogues' Island, the home of Know Ye men and Know Ye measures", a derisive phrase coined  for the Rhode Island's people tolerance of fast and loose speculation, pirates and smugglers.  The folks of that time most  like today's Russian oligarchs, arms smugglers, tax dodgers, money launderers, or drug lords, would flock to Rhode Island.   The "Know Ye" phrase came from the scam Rhode Islanders would play using local bank or state issued  paper money  to discharge debts in Rhode Island courts (the phrase "Know ye" was proclaimed by the judge administrating the debt dispute once the debtor presented the court with the deeply discounted paper money so to discharge a debt), effectively getting debts paid down for pennies on the dollar.  The state was infamous as a safe haven for pirates and smugglers, which in particular caused the Continental Congress great concern as tariffs were the revenue source for the new nation.   Fly by night bankers, speculators plunging into the ragged existing states debt - Massachusetts being a favorite state debt of speculators, driven to well under 20 cents on the dollar - and various other financial criminals settled in Rhode Island.   If there was a need back then to launder money - it would have been down in Rhode Island..

In short, the Rhode Island banks and financial system  was very much like today's Cyprus.

But  the ability of the 'Know ye" state to pursue financial  mischief ended in 1790 when Hamilton retired the state debt with the "Assumption of Debt", creating the US Treasury debt, eliminating speculation by providing collateral to exercise hard money seiniorage.  In the same year, the US Treasury under Hamilton also had the Continental Congress pass the "System of Cutters" Act, funding several "revenue" cutters to stop smuggling and enforce tariffs being the origins of the US Coast Guard.

These two actions - the "Assumption of Debt" and the "Revenue Cutter" Acts were the essential steps towards establishing  federalism in the USA, replacing the chaotic confederation that  enabled the criminality  in Rhode Island.

The mischief of the 'Know ye" state was one of the main motivations for the formation of the US Coast Guard and thereby start the process towards assured revenue for the federal government that allowed the conversion of state debt to the new federal debt, and define  federal prerogatives and the USA  national boundary which the 13 states lay within, rather than as a confederacy alongside.  

The Rhode Island fast furious banking ways were effectively outlawed by the creation the Hamiltonian federal monetary policy - and the newly created US Coast Guard was the implementation of eliminating the "tax avoidance" and "money laundering" of the age, by eliminating the Rhode Island smuggling and piracy.   

Rhode Island "Know ye" attributes and actions, via their elimination and remedy, were therefore  important positive  factor in the creation of a federal United States of America 

Just as Rhode Island "Know ye" contributed to the foundation and definition of the current USA federal system, Cyprus's remedy will have the same positive and beneficial impact on the Euro Zone at large, perhaps even being an important factor that in the ends with the creation of federal United States of Europe. That is if it is applied by the ECB.  

Cyprus is a near-criminal or criminal banking haven, a status that is well known to the point of a shared joke - just like the 1785 "Know ye" reputation of Rhode Island. Cyprus is the banking haven of choice for the Russian criminal oligarchy, arms traders, smugglers, and drug financiers.  Illegal activities around the world consider Cyprus first to launder funds, be they gamblers or drug lords or arms merchants.  It is  the rare locale where Middle East people  live in peace - that is if they were of  the criminal class.  

Cyprus is corrupting Europe. it is used as backdoor for the worst of the Russian criminal oligarch gain access to EU passports.

Cyprus is the EZ's  "Rogue's Island - the home of Know ye men and Know ye measures".

The need  for the current Cyprus bailout is the inevitable results of a lax confederate regulatory oversight , with a regional populace looking the other way so as to prosper, for a while at least, as a modern days "Rogue's Island".  The Cyprus stock market, such that it is, has been almost a 100% wipe out as all Cyprus listed companies become either corrupted or under the ax as the Cyprus banks their doors open like whorehouses.

The current bailout remedy proposed, will strengthen trans ECB dominion as its implementation defines ECB federal power and with ECB implementing regulatory oversight,  the EZ national borders are defined, just as the USA broders were defined by the creation of the US Coast Guard by Hamilton.   With Russian oligarchs fleeing with their deposits, a very important step in the "Monnet Process" of evolving towards  a United States of Europe occurs.  Hamilton defined the nature of the new USA federalism  with the conversion of "Rogue's Island" to a federal member state Rhode Island.    Draghi is doing the same with the conversion of Cyprus to becoming a financial federal member of the EZ.

This Cyprus event is all to the good, necessary, and will shortly be seen - if not already - as being a positive.

The Cyprus event has nothing to do with the string of crisis caused by the replacement of equalization payments required to cure intra-EZ trade imbalances with lending, as experienced in Greece and Portugal, and to some degree Italy, nor is it like the Irish and Spanish crisis caused by excess liquidity provided by the same imbalances.  The Cyprus event is singular as it is a regulatory action which in the end will be an important step in defining  a federal EZ.

No comments:

Post a Comment