So. Creditors of Cyprus’s banks and government have destroyed the country’s Offshore finance sector, and probably the entire economy. Until last week, not everybody in Cayman had even heard of Cyprus, let alone knew it was an Offshore tax-haven. Not a sophisticated tax-haven like Cayman’s is now, but very like Cayman’s used to be thirty or forty years ago.
Could it happen to Cayman tomorrow? Yes it could. We have all the same weaknesses and vulnerabilities.
Could our local commercial banks become so insolvent as to need bailouts by government? Yes. Could our government become so indebted as to need bailouts by Britain? Yes, indeed. That’s why the FCO people are down here at the moment, to stop that happening.
The British government is itself woefully incompetent in the management of its financial affairs. It too – like Cayman’s – suffers from crony-corruption among its politicians and senior Civil Servants. It too has borrowed on the security of its future revenues – revenues that are now projected to fall a long way short of expectations. Our local rulers are not alone in pledging our grandchildren’s incomes as security for irresponsible borrowings – borrowings that finance our bloated civil service and its fat pensions and unlimited lifetime healthcare.
In Cyprus, irresponsible governance required a levy of 10%-40% on individual and corporate bank balances, to assuage the creditors. Could it happen in Cayman?
Yes, it certainly could. All the talk in our government circles is about increasing taxes. The alternative – cutting wasteful government expenditure – receives no serious attention. There is no real intention to go in that direction. Not one single candidate for election has identified one single dollar that could be eliminated from the government budget. From among such cowards will come our next rulers.
But would our elected rulers ever actually steal money from the accounts of bank customers, the way Cyprus’s elected rulers did? Damn right. The legislation and regulations are already in place! You didn’t know that? Think “dormant accounts”. Already, our government has authorised our banks to steal 100% of all accounts they deem “dormant” – inactive for 12 months, I think it is. If that’s not stealing, what is?
To date, the banks have been kind enough to let us re-activate dormant accounts for free. But the law doesn’t say they must. One day they might decide to levy a fee – 10% of the balance? 40%? – and it won’t even need a change in the law. Exactly as happened in Cyprus.
In Cyprus, all Pension Funds will be forced to invest in bonds issued by the government or any of its agencies. Could it happen in Cayman? Could our Pension Funds really be made to buy shares in or lend to Cayman Airways or The Turtle Farm or Pedro’s Castle? Huh. You betcha!
Back in 1987, when the ruling politicians of the day first proposed compulsory pensions, they drafted a law that required all contributions to be handed over to government, for investment by its cronies. I read the draft law; I know what it said. That’s what all the fuss was about with the Chamber of Commerce, back then. (See Confessions of a subversive in this blog’s Archives of last October.) I bet that old draft is being dusted off right now, even as we speak.
The essential difference between Cayman and Cyprus is that we are a British colony and they’re not. As an independent nation, Cyprus had no restraints on its politicians’ and Civil Servants’ incompetence. Britain monitors what our politicians do – belatedly, it’s true, but better late than never – and its FCO team is currently rescuing us from the mess incurred by our two political parties. God save the Queen, eh?