Steve Forbes, of Forbes Magazine, has written an op-ed on the Cyprus bank default entitled “Here’s Why Cyprus Could Be a Disaster for All of Us!” Forbes.com A bit flashy for a headline but probably no worse than what over financial writers have been saying about the situation. So I figured we are finally going to see some unanimity between the right and the left. Conservative economists don’t think the Cyprus deposit tax is a good idea. Liberal economists don’t think the Cyprus deposit tax is a good idea. A significant portion of everyone who have read Milton Friedman and Anna Schwartz’s A Monetary History of the United States don’t think a deposit tax is a good idea. Maybe, hopefully, we can finally all agree that European austerians are crazy. So what does Steve Forbes have to say?
What in the world is going through the minds of European officials with their crazy, destructive demands with Cyprus? Seizing a portion of peoples’ bank deposits is the kind of thing one would expect from Argentina or other kleptocratic third-world governments. It sets an awful precedent shredding the rule of law, which is the bedrock of a free and vibrant society. The fact that Cyprus is small is irrelevant. The germane fact is that it was Western Europe, supposedly a strong believer in the rule of law, that engaged in this Hugo Chavez-like move. Now, it’s not inconceivable that President Obama or somebody with a similar ideology could propose seizing and integrating people’s 401K plans into Social Security. And in a panic, Congress would go along.Huh, Obama is going to nationalize 401k accounts? This is the same president who refused to nationalize the banks when he had the chance. I don’t know about “a similar ideology” but the Daily Kos is a fairly good representation of the American left. I suppose there might be some poster somewhere on the site with that idea, but if there is he or she isn’t getting any traction. Does the right really think American Progressives would go in for that form of asinine idea? Memo to Steve Forbes, we don’t like 401k’es because they provide inferior returns to the average investor than defined benefits plans. That’s a pretty capitalist critique.
So how does Forbes end his op-ed?
The poor judgment of the political and economical leadership of the West today rivals that of their predecessors of the 1930s and 1970s. Under their misguided policies the wealth-creating private sector is continually squeezed with growth-killing taxes and regulations and the power of Big Government expands. Most countries have made, at best, small reforms when big ones – especially on the tax cutting front – are needed.Last time I looked the Great Depression stated in 1929 (unless you were a farmer in which case it started about a decade earlier). I expect Mr. Forbes would be hard pressed to find many growth killing regulations in the Harding, Coolidge or Hoover administrations. A lack of government intervention, the absence of deposit insurance, caused a collapse of the banking system in the depression. A default on deposit insurance, the result of austerity overrunning sanity, is the cause of the current Cyprus crisis. Tax cuts (at least in the sense Mr. Forbes likely means them) are not germane to the situation.
The scary thing is that Steve Forbes is a business leader in a time of economic crisis. He seems incapable of putting aside domestic political ideology to comment upon a European crisis.