When a financial institution goes insolvent, the people and businesses that are owed money by that insolvent organization take a loss. Their investment is written down to a lesser amount. This is known as a "haircut."
In Cyprus, where the banks became insolvent investing their protective "reserves" in Greek bonds, the banks have been informed they would get no financial help from the European Union unless they gave their depositors a "haircut" - i.e., unless they took away, through taxation, 60-80 percent of their deposits of more than 100,000 euros (around $130,000).
Now, many businesses keep more than 100,000 euros in their bank accounts to pay employee wages and bills, and these businesses now have a possible 80-percent "haircut" on those accounts. A Dutch official has said that will be the standard to be applied in the future.
In the United States, we are facing a different "haircut" from our savings accounts, but this time it is the long, slow "trim:"
First, our savings accounts and certificates of deposit receive virtually no interest, so our elderly have to keep dipping into their principal to live on.
Second, the value of our dollar has been driven down by massive printing of new paper money by the Fed. A recent Congressional Budget Office report shows the value of the dollar had been reduced by 16 percent between July 1, 2009, and July 1, 2011. And I fear the purchasing power of our dollar has increased its plunge since that date.
Over the past four years, our national debt has increased from $10 trillion to $17 trillion. Unless it is reversed, this debt will destroy our future economy. President Barack Obama appointed the Erskine-Boles committee to study a long-term solution to the problem. The findings of this committee should have been used as a template to discuss possible solutions.
Yet, the presidential committee findings were dismissed and neither the president nor our federal representatives in the Senate or House would even bring it up for discussion. Instead, they are playing "gotcha" while our country is being destroyed.
I see the number of new jobs created in March is the lowest in a year. Yet we are being told the unemployment figure went down to 7.6 percent last month! The reason is that, in despair, so many people have given up and stopped looking for work. Maybe the economy will get so bad that everybody gets discouraged and stops looking, Then we can have 0-percent unemployment!
Very truly yours,
Michael P. Lange,