Felix Salmon has been following the bizarre Cyprus bailout plan and its coverage in the US and hightlights a New York Times report that sheds a revealing light on the lens through which the elite media in the US views things.
[NYT business reporter] Andrew Ross Sorkin defends the Cyprus deal today, on the grounds that (a) Cyprus is “tiny”, and “largely irrelevant to the global economy”; (b) Cyprus is a genuinely unique case; (c) it would be grossly unfair not to bail in Russian depositors, who are generally losing less than they’ve made in interest over the past few years; and (d) the Greek alternative “will not work in Cyprus”, and that therefore (this last bit is only implied, never stated outright) the current plan is really the only option.
Notably, Sorkin doesn’t attempt to defend the most indefensible part of the plan — the confiscation of wealth from depositors with sovereign deposit guarantees. While hedge-fund bondholders will get paid their full $1.4 billion on June 3, the date of Cyprus’s next coupon payment, small depositors with just a few hundred or a few thousand euros in savings will lose money which the Cypriot government had promised them was safe. Why is the government’s promise to foreign hedge funds more important than its promise to its own citizens? Sorkin never attempts an answer to that one.
That question likely never even occurred to Sorkin because for the global elites, the health of the global financial markets is the most important thing and everything else is secondary. So in their eyes ‘tiny’ Cyprus and its even tinier depositors are not worth a hill of beans and should be honored to serve as sacrificial pawns in order to keep happy the creditors who shift vast sums of money around the globe. Even though both the small depositors and the big hedge funds lent money to the banks, in their eyes only the hedge funds interests must be protected.
Meanwhile, the banks are closed until Thursday and parliament has rejected the bailout plan with not a single vote in favor, and 36 against with 19 abstentions. I am frankly mystified by the whole thing. How could the Cypriot president announce this plan, that depends so crucially on surprise, without having guaranteed parliamentary approval? Or did he get secret assurances that fell apart when the parliamentarians sensed the anger of the public? What options does he have on Thursday when the banks are said to reopen?
The people of Cyprus are getting their torches and pitchforks ready. Good for them.