Wrong.
If there’s no inflation problem there’s no deficit problem:
The country isn’t facing an immediate debt crisis, House Speaker John Boehner (R-Ohio) said Sunday, but he argued that Congress and the president must reform entitlements to avert one that lies dead ahead.
“We all know that we have one looming,” Boehner said onABC’s “This Week”. “And we have one looming because we have entitlement programs that are not sustainable in their current form. They’re going to go bankrupt.”
As suspected the PSI/bond tax/deposit tax has become more attractive politically than other tax hikes and spending cuts. And it is also deflationary/contractionary, though less so than other taxes. And yes, it destabilizes the banking system in general.
After Negotiations, Cyprus Agrees to a Euro Zone Bailout Package
In the early hours of Saturday morning, after 10 hours of talks, finance ministers from euro area countries, the International Monetary Fund and the European Central Bank agreed on terms that include a one-time tax of 9.9 percent on Cypriot bank deposits of more than $130,000, or 100,000 euros, and a tax of 6.75 percent on smaller deposits, European Union officials said.