Cypress in Default

[WelshBloke]

ECB could of rescued depositors along with the Cypriot government and allowed investors and bondholders to eat the loss. In the end however Cyprus and its government bent a knee to the ECB whose only interest has now been revealed and that is to save investors over depositors. Congratulations EU you have a central banking system which has revealed its true blooding sucking form. Anyways the joys of fractional reserve banking, fiat currency and all its manipulations at the behest of central banks, etc continue to keep on giving.

So you're not against a bailout, its just the way they are doing it that you're against?

 

[DucatiMonster696]

So you're not against a bailout, its just the way they are doing it that you're against?

Ideally there should be a run on these banks, these banks should be forced to go bankrupt and close down. This is how you clear out mal-investments in a economy and banking system rather than propping up these toxic mal-investments to continue spreading their cancer through the economic system itself via bailouts.

This is how true capitalism works in that private entities are allowed to succeed but also allowed to fail. Failure is important in capitalism so that others can gain experience, knowledge and benefits from the failure(s) itself which other entities in the marketplace can and should be able to use in order to help them move up the ladder of success based on sound and clear reasoning of what works vs what doesn't work in the marketplace.

However dealing with the fact that there is a interventionist ECB and they are offering a "bailout" than if they are are going to "bailout" anyone it should be depositors so that they can withdraw their funds and put that money into solvent banks (aka "good banks" who should be reaping the rewards for not failing) and that should be the only form of "bailout" if it were to be done for notions of ethical, moral and social reasons. As it stands now investors and these cancerous banks are the only real winners because they continue on marching never learning a damn thing or facing any major financial consequences for their actions.

 

[DCal430]

Theres a fair amount.

How much is in Swiss banks is fairly irrelevant to the issue though.

Yea I said it was around 30% which is around 1/3, it still is far from the majority and the people most affected will be cypriots.

 

[Greenman]

For the average Cypriot?

Would you rather lose 10-20% of your savings or 100% of your savings?

I don't see how anyone will get any of their money. The day the banks reopen there will be a run on them, if they limit withdrawals, the run will take longer, but it will happen just the same. No sane person would leave anything but pocket change in a bank that just stole a fifth of their savings. That money is gone.

 

[WelshBloke]

I don't see how anyone will get any of their money. The day the banks reopen there will be a run on them, if they limit withdrawals, the run will take longer, but it will happen just the same. No sane person would leave anything but pocket change in a bank that just stole a fifth of their savings. That money is gone.

A run on the banks means that everyone takes their money out yes?

So that means that people will have the money yes?

 

[EagleKeeper]

A run on the banks means that everyone takes their money out yes?

So that means that people will have the money yes?

The banks though will have nothing to all for lending capital to the businesses that need it to do rollovers or expansion.

Easy to borrow 100 or 1000 Euros from friends/family. Impossible to get 100,000 EU9.

 

[OverVolt]

There is a joke to this stuff.

Cypress is broke they just haven't figured it out yet

You can say that for about 90% of the western world. All the games they play, wow. They are flat broke and just won't admit it. And so everyone suffers as a result.

The first step to rebuilding their wealth would be to just admit that they are poor and have work to do, like Iceland did.

 

[OverVolt]

A run on the banks means that everyone takes their money out yes?

So that means that people will have the money yes?

The background for my phone is a picture of Spain, with a view like that over in Europe I guess I wouldn't care how poor I was either.

Anyway from what I understand the deposits in Europe are not really protected like they are in the US with the FDIC?

The other logic is that if the ECB is trying to tax savings accounts, then people just won't save with the bank. The problem is that a bank without deposits will be leveraged out the wazoo, not smart.

Hell they tried to charge me $8 a month and I would've changed banks. If they charged me a tax on my savings Its going under the mattress. With 6%-15% of my savings I can buy my own nice vault eh?

It has to do with fractional reserve banking. They can't make loans without deposits to back them. Because of the multiplicative effect of loaning out $900 based on say $100 in deposits, debt in this way creates money.

So the money supply dries up when the rate of lending decreases and there is not enough money in circulation to repay existing loans with interest. So a wave of defaults hits from the bottom up, and no one can get loans to purchase the defaulted businesses, houses, cars, etc. Then you get a full blown economic depression.

 

[DCal430]

A run on the banks means that everyone takes their money out yes?

So that means that people will have the money yes?

No a run means the people who pulles out first will get money, most will get next to nothing.

 

[OverVolt]

No a run means the people who pulles out first will get money, most will get next to nothing.

How can he be in the Euro and so naive.

I think they are all like this, we have stories from our great grandparents about how 1929 went down. So we aren't naive and demanded FDIC insurance. Those poor EU bastards truly do not know what they are in for, and the writing is on the wall.

 

[WelshBloke]

No a run means the people who pulles out first will get money, most will get next to nothing.

Which is still more than if the banks crash.

 

[WelshBloke]

How can he be in the Euro and so naive.

...

I'm not in the Euro zone.

I don't think it's naive to say that the average Cypriot would be better off with a 10% fee on their bank accounts rather than their banking sector going bust.

 

[OverVolt]

I'm not in the Euro zone.

I don't think it's naive to say that the average Cypriot would be better off with a 10% fee on their bank accounts rather than their banking sector going bust.

You'd probably think otherwise if you were actually in Cyprus. Its a good thing you aren't in the Eurozone!

If there is a risk no matter how tiny that your deposits could get taxed (say you live in Greece, Italy, Spain, etc and you are watching Cyprus), and if your deposits are under your mattress, there is no risk they will be taxed. What do you think people are going to do?

The 10% deposit tax won't save the bank, it will ensure its demise.

 

[DucatiMonster696]

You'd probably think otherwise if you were actually in Cyprus. Its a good thing you aren't in the Eurozone!

If there is a risk now matter how tiny that your deposits could get taxed (say you live in Greece, Italy, Spain, etc and you are watching Cyprus), and if your deposits are under your mattress, there is no risk they will be taxed. What do you think people are going to do?

The 10% deposit tax won't save the bank, it will ensure its demise.

Well at the rate of the interest rate manipulation and inflationary measures in the US, the EU and UK are going money would be better off under a mattress or significantly better off being invested in precious metals or dare I say it put into the stock market but that itself (without any benefit of sound and solid investment strategies) is going to see your money shuffled away faster than keeping it under the mattress or buying up silver or gold as a means to store your wealth and watch it grow in value over the long run.

As it stands now rate of return on interest from a savings account is completely and utterly pathetic. No one is "saving" anything in the traditional sense in which interest is significant enough to having a savings account with these bank earn enough interest to overcome fees (if any) and the effects of inflationary monetary policies.

 

[Svnla]

<snip>
My next stupid question is, why do governments always see borrowing as the solution to being to far in debt?

I do not understand it either. Just look at the rate we (US) are borrowing, especially the last 20-30 years. It is sickening.

Case in point: http://en.wikipedia.org/wiki/File:USDebt.png

 

[Fern]

-snip-

Anyway from what I understand the deposits in Europe are not really protected like they are in the US with the FDIC?

I'm not entirely sure, but I thought they were and that's one reason for the 100K exemption. I.e., banks accounts of 100K and less are covered so to tax them would have violated their FDIC-type guarantee.

Fern

 

[OverVolt]

Well at the rate of the interest rate manipulation and inflationary measures in the US, the EU and UK are going money would be better off under a mattress or significantly better off being invested in precious metals or dare I say it put into the stock market but that itself is going to see your money shuffled away faster than keeping it under the mattress or buying up silver or gold as means to store your wealth and watch it grow in value over the long run.

As it stands now rate of return on interest from a savings account is completely and utterly pathetic. No one is "saving" anything in the traditional sense in which interest is significant enough to having a savings account with these bank earn enough interest to overcome fees (if any) and the effects of inflationary monetary policies.

Yea it is a conundrum where to put your money. I think stocks are best as well, but they are easily taxable.

I think they won't come for stocks, because it would piss off the 1% too much. Quite the opposite alot of the QE money ends up in stocks and benefits them I think.

Then I see stuff like France's 75% tax on the wealthy and think welllllll maybe not, that could easily happen in the US because sentiment is trending that way.

I missed the current rally, and I'm not buying the top, but after the next big dip I think it all goes into stocks. Cash is King became Cash is Trash pretty quickly.

 

[WelshBloke]

You'd probably think otherwise if you were actually in Cyprus. Its a good thing you aren't in the Eurozone!

If there is a risk no matter how tiny that your deposits could get taxed (say you live in Greece, Italy, Spain, etc and you are watching Cyprus), and if your deposits are under your mattress, there is no risk they will be taxed. What do you think people are going to do?

The 10% deposit tax won't save the bank, it will ensure its demise.

You don't seem to understand the situation there at all.

No one can get their money out (well not much anyway). They can't stash it under the mattress.

If the bank goes bust they will lose everything.

If there's a 10% fee (or some other arrangement) they will be able to get their money.

 

[Fern]

So, from what I'm reading this banking failure is cased by banks' investment in Greek bonds? I thought I read back then that banking institutions were exempt from the 'haircut' on bond values imposed on regular investors. If so, I don't understand how this can be blamed on investments in Greek bonds.

Also, if I was Greek I wouldn't be visiting Cyprus anytime soon. I bet the Cypriots are mad as h3ll about this.

Fern

 

[OverVolt]

You are supposed to take it out BEFORE this happens because it was truly inevitable all along if you're paying attention.

Cyprus has probably shocked people in Italy, France, Spain, etc. and the other "so-so" Eurozone countries into rethinking where they stash their cash.

Its too late for Cyprus they are learning the hard way.

 

[DCal430]

You don't seem to understand the situation there at all.

No one can get their money out (well not much anyway). They can't stash it under the mattress.

If the bank goes bust they will lose everything.

If there's a 10% fee (or some other arrangement) they will be able to get their money.

No they won't if their is a run. No fee will work if people run on the bank.

 

[DCal430]

So, from what I'm reading this banking failure is cased by banks investment in Greek bonds? I thought I read back then that banking institutions were exempt from the 'haircut' on bond values imposed on regular investors. if so, I don't understand how this can be blamed on investments in Greek bonds.

Also, if I was Greek I wouldn't be visiting Cyprus anytime soon. I bet the Cypriots are mad as h3ll about this.

Fern

Only some banks were exempt, Nearly all of the cypriot bank losses are from the greek haircut.

 

[WelshBloke]

No they won't if their is a run. No fee will work if people run on the bank.

So which is best?

Get none of your money when the bank goes bust.
Get some of your money in a disorderly bank run.

 

[OverVolt]

So which is best?

Get none of your money when the bank goes bust.
Get some of your money in a disorderly bank run.

Its a no win choice honestly that's why its too late for Cyprus. Its the decisions that people in Spain and Greece make after seeing Cyprus that could cause even more problems.

If I were in Spain I'd be posting on ATOT on my bed stuffed with Euros, heh. So that what happens to the people of Cyprus doesn't happen to me.

I see your point of the 10% being in their best interest in Cyprus, but is it really in the best interest of the banks if the people of Spain pull all their money too? It sends a signal to everyone in the Euro: get your money out now while you can.

Which is REALLY dumb for the banks and the people in charge to send that message. When I first heard about it I couldn't believe the banks/politicians were so dumb to try something like that. Its a total disaster and I'm glad I'm not anywhere near Europe.

 

[Svnla]

Not sure if anyone already asked or not but is this for the whole Cyprus or just the Greek controlled area Cyprus?