The recession of 2008 is said to have been caused by a collapse in the derivatives market, particularly what are called securitized mortgages. In the U.S., banks lent money on overvalued real estate. Then the banks would group a bunch of these mortgages into an investment product, tie them up with a pretty bow and sell them to unwary investors; other banks, pension funds or individuals.
It is said that derivatives – mutual funds, hedge funds, futures, etc.- are a way of transferring risk. Warren Buffet goes further, calling them “weapons of financial mass destruction,” time bombs just waiting to explode, as they did in the recession of ’08.
Responses to the crisis of ’08 varied. In the U.S., the Federal Reserve simply printed more money and this was used to bail out the banks. In Canada, Harper rescued the banks with public money, part of his Economic Action Plan. In effect, Canadians just paid some of their taxes to the big banks, absolving them of responsibility for the problems they had created. After all, they were “too big to fail.”
Cyprus was a different story. A small, European country, its banks also got into trouble. However, the European Union and the International Monetary Fund imposed a different solution; a bank buy-in scheme in which the banks were allowed to confiscate the assets of depositors in order to rescue themselves. The Guardian newspaper said, “The private savings of tax payers and uninsured depositors were robbed of their lifelong hard-earned bob in order to save those share and bond holders.”
Cyprus has been seen as a test case but bank buy-ins are now policy.
On page 145 of Canada’s 2013 budget, one of Harper’s omnibus bills, rammed through without proper debate, the plundering of bank deposits has been set into law as the solution to future economic crises. Harper has also signed an agreement with the G20 countries to the same effect. The big banks won’t be allowed to fail, because they will be allowed to plunder bank accounts, as they did in Cyprus.
If the Harper gang were truly conservatives, instead of co-conspirators with the international banking elites, they’d be imposing strict regulations on the types of investments that banks are able to offer instead of concocting Hood-Robin rescue plans to snatch our hard-earned savings.
Who, in his right mind, would believe that such a plan could make the banks any less reckless?