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erm67
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PostPosted: Sun Mar 17, 2013 12:07 am    Post subject: Bailing out Cyprus Reply with quote

There is no money for bailouts, what to do?

http://www.washingtonpost.com/blogs/wonkblog/wp/2013/03/16/why-todays-cyprus-bailout-could-be-the-start-of-the-next-financial-crisis/

Quote:
Early Saturday, the nation reached an agreement with international lenders for bailout help. Part of the agreement: Bank depositors with more than 100,000 euros ($131,000) in their accounts will take a 9.9 percent haircut. Even those with less in savings will see their accounts reduced by 6.75 percent. That’s right: Anyone with money in a Cypriot bank will have significantly less money when the banks open for business Tuesday than they did on Friday.


That's the way to go.

BTW we did that in Italy too in 1992, but it was only 0.6%.
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PostPosted: Sun Mar 17, 2013 12:20 am    Post subject: Reply with quote

Cyprus must be treated with care by Europe. It will be strategically important in holding off the coming Islamic horde.
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PostPosted: Sun Mar 17, 2013 1:56 am    Post subject: Reply with quote

BoneKracker wrote:
Cyprus must be treated with care by Europe. It will be strategically important in holding off the coming Islamic horde.


How do you figure? Cyprus isn't even close to UK.
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PostPosted: Sun Mar 17, 2013 2:32 am    Post subject: Reply with quote

Recently, for a few years now, investment firms in the US have been required to report investor's holdings. I have feared something of this nature here.
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PostPosted: Sun Mar 17, 2013 2:55 am    Post subject: Reply with quote

flysideways wrote:
Recently, for a few years now, investment firms in the US have been required to report investor's holdings. I have feared something of this nature here.

Here it would be "progressive", though (i.e., based on your total assets, per the Big Brother Database at the Obama Data Center, minus things Big Brother says are "tax deductible", such as Government bonds, a good portion of Federal employees' income, or investments in companies owned by people who gave money to Obama), and the Supreme Court would rule that it's not a violation of anyone's rights, because it's a "Tax" (specifically, the "Fair Share Tax").

Oh my God, I'm probably giving somebody ideas... :o
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PostPosted: Sun Mar 17, 2013 3:17 am    Post subject: Reply with quote

bogamol wrote:
BoneKracker wrote:
Cyprus must be treated with care by Europe. It will be strategically important in holding off the coming Islamic horde.


How do you figure? Cyprus isn't even close to UK.


:lol: :lol: :lol:
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PostPosted: Sun Mar 17, 2013 3:23 am    Post subject: Reply with quote

Okay, now I get it. :lol:
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PostPosted: Sun Mar 17, 2013 7:13 am    Post subject: Reply with quote

The islamic horde already occupied the half of cyprus and no one cares about that :-)
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PostPosted: Sun Mar 17, 2013 3:51 pm    Post subject: Many Politicians' Moral Certitude Reply with quote

For many politicians it is a morale certitude that all others exist to serve them.

Gonna be interesting to see where this goes.

So, UK money to subsidize it too.

This is not going to end well, for the people. That's ok there is no such thing as Natural Rights.
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PostPosted: Sun Mar 17, 2013 4:40 pm    Post subject: Reply with quote

Merged.
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PostPosted: Sun Mar 17, 2013 4:55 pm    Post subject: Reply with quote

Dood,

This one is so hijacked and off topic ...
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PostPosted: Sun Mar 17, 2013 5:51 pm    Post subject: Re: Bailing out Cyprus Reply with quote

erm67 wrote:
There is no money for bailouts, what to do?

Print money and socialize the cost of a retarded, Germany-led ECB policy. There is no alternative at this point.

erm67 wrote:
That's the way to go.

I couldn't disagree more. This is an incredibly stupid decision that will result in a scare all over Southern Europe, if not outright violence.

Try this in Spain and rest assured that we'll take the Iceland route, crushing the Eurozone (and beyond) in the process.
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PostPosted: Sun Mar 17, 2013 7:23 pm    Post subject: Re: Bailing out Cyprus Reply with quote

Amaranatha wrote:
erm67 wrote:
There is no money for bailouts, what to do?

Print money and socialize the cost of a retarded, Germany-led ECB policy. There is no alternative at this point.

Print money = devalue the currency = the purchasing power of all bank accounts through the EU will be reduced

Tax all bank accounts in a trouble country = the purchasing power will be reduced only in the bank accounts of the troubled country

Isn't it fairer that way? The money could be used for example to pay useless airports ....

Amaranatha wrote:
erm67 wrote:
That's the way to go.

I couldn't disagree more. This is an incredibly stupid decision that will result in a scare all over Southern Europe, if not outright violence.


As I said it was done in Italy in 1992, (only 0.6%) as an alternative to devaluation, and it worked, the shock and subsequent scare convinced most people to invest their money instead of letting it inactive on bank accounts fearing losses. The effect on the economy was good and led to a boom in investments and GDP growth.

Rich right wing aka Berlusconi sitting on piles of inactive money are still scared to this day of the possibility and no-one has money sleeping in bank accounts.
I think the Cyprus move is meant more to scare the rest of the EU. We need growth, so get out the money and invest in something :-)

Amaranatha wrote:

Try this in Spain and rest assured that we'll take the Iceland route, crushing the Eurozone (and beyond) in the process.


Spain is not going anywhere for the next 20 years, you really think it will take less time time to recover from a housing bubble like that outside the euro?
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PostPosted: Mon Mar 18, 2013 1:42 pm    Post subject: Re: Bailing out Cyprus Reply with quote

erm67 wrote:
Amaranatha wrote:
erm67 wrote:
There is no money for bailouts, what to do?

Print money and socialize the cost of a retarded, Germany-led ECB policy. There is no alternative at this point.

Print money = devalue the currency = the purchasing power of all bank accounts through the EU will be reduced

Tax all bank accounts in a trouble country = the purchasing power will be reduced only in the bank accounts of the troubled country

Isn't it fairer that way? The money could be used for example to pay useless airports ....

Amaranatha wrote:
erm67 wrote:
That's the way to go.

I couldn't disagree more. This is an incredibly stupid decision that will result in a scare all over Southern Europe, if not outright violence.


As I said it was done in Italy in 1992, (only 0.6%) as an alternative to devaluation, and it worked, the shock and subsequent scare convinced most people to invest their money instead of letting it inactive on bank accounts fearing losses. The effect on the economy was good and led to a boom in investments and GDP growth.

Rich right wing aka Berlusconi sitting on piles of inactive money are still scared to this day of the possibility and no-one has money sleeping in bank accounts.
I think the Cyprus move is meant more to scare the rest of the EU. We need growth, so get out the money and invest in something :-)

Amaranatha wrote:

Try this in Spain and rest assured that we'll take the Iceland route, crushing the Eurozone (and beyond) in the process.


Spain is not going anywhere for the next 20 years, you really think it will take less time time to recover from a housing bubble like that outside the euro?


the problem is that the ECB is supposed to control inflation and germany hates inflation. the problem is that cyprus should devalue its own currency, if it had one. Presumably bond holders will be wiped out in this? The other problem is politics. Many accounts in Cyprus are by wealthy russians looking for offshore banking. I think many europeans aren't into bailing out wealthy russians.

When I first moved to the UK, we were trying to find a place to put our money. We arrived shortly after northern rock was nationalised. I was looking online and found a great little icelandic bank with incredible interest (I think it was 2 percent higher than any british bank). I looked into it, however, and the banking scare was starting and i thought that perhaps safer is better. We decided to go with a british bank.
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PostPosted: Mon Mar 18, 2013 2:15 pm    Post subject: Re: Bailing out Cyprus Reply with quote

juniper wrote:

the problem is that the ECB is supposed to control inflation and germany hates inflation. the problem is that cyprus should devalue its own currency, if it had one.

Look this story 'you could devalue your currency if you had one' it is not working, esp. in countries that abused currency devaluation in the past. What do you think it happened when Italy devalued 20% the lira in the '80? The next day most goods were 20% more expensive FOR EVERYBODY. Also Spain remember very well the wild devaluations. If used as an argument against the euro is not working since it probably becomes quickly an argument pro-euro, if used as a better alternative in the case of Cyprus is even weaker since it would mean make everybody poorer instead of making the rich poorer.
juniper wrote:

Presumably bond holders will be wiped out in this? The other problem is politics. Many accounts in Cyprus are by wealthy russians looking for offshore banking. I think many europeans aren't into bailing out wealthy russians.

When I first moved to the UK, we were trying to find a place to put our money. We arrived shortly after northern rock was nationalised. I was looking online and found a great little icelandic bank with incredible interest (I think it was 2 percent higher than any british bank). I looked into it, however, and the banking scare was starting and i thought that perhaps safer is better. We decided to go with a british bank.


Cyprus holds more than 900% of its GDP in bank accounts, only Luxembourg holds more in the EU. It's a tax heaven with a banking bubble ready to explode, with all that money in the banks they are bankrupt and want money from me. Why? All that money is not beneficial to their economy, and hids money that could be used to fuel growth.
This means that their banking system is rotten, better defuse the bubble before it explodes.
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PostPosted: Mon Mar 18, 2013 5:17 pm    Post subject: Reply with quote

Bye bye EU.

Anyone living in Ireland, Portugal, Greece, Spain, or Italy with more than pennies to their name should withdraw all of their monies from the banks before Germany robs them blind. This, of course, is called a "run on the banks". The failed idea of the EU is now staring at death's door.
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PostPosted: Mon Mar 18, 2013 5:43 pm    Post subject: Reply with quote

Muso wrote:
Bye bye EU.

Anyone living in Ireland, Portugal, Greece, Spain, or Italy with more than pennies to their name should withdraw all of their monies from the banks before Germany robs them blind. This, of course, is called a "run on the banks". The failed idea of the EU is now staring at death's door.


It does seem that there are way too many plates spinning at the moment, also withdrawing cash isn't going to help - 'cause it's
worthless, or will be, if this lot implodes.

Some of us warned about this.
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PostPosted: Mon Mar 18, 2013 5:59 pm    Post subject: Reply with quote

Invest in rare metals and alike, you know, the stuff that cannot be printed out of thin air, or its value set towards something else printed out of thin air.

Bye bye fiat currency + debt based economy more like, you really think BRICS countries will let this whole charade slide once their interests are threatened?
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PostPosted: Mon Mar 18, 2013 6:47 pm    Post subject: Reply with quote

John-Boy wrote:
Muso wrote:
Bye bye EU.

Anyone living in Ireland, Portugal, Greece, Spain, or Italy with more than pennies to their name should withdraw all of their monies from the banks before Germany robs them blind. This, of course, is called a "run on the banks". The failed idea of the EU is now staring at death's door.


It does seem that there are way too many plates spinning at the moment, also withdrawing cash isn't going to help - 'cause it's
worthless, or will be, if this lot implodes.

Some of us warned about this.


++

Prenj wrote:
Invest in rare metals and alike, you know, the stuff that cannot be printed out of thin air, or its value set towards something else printed out of thin air.


++

Indeed.
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PostPosted: Mon Mar 18, 2013 7:57 pm    Post subject: Reply with quote

Europe is risking a bank run

Quote:
Creditor nations will now insist bank rescues must be co-funded by depositors

Sir Mervyn King once said it was not rational to start a bank run but rational to participate in one once it has started. The governor of the Bank of England was right, of course. On Saturday morning, the finance ministers of the eurozone may well have started a bank run.

With the agreement on a depositor haircut for Cyprus – in all but name – the eurozone has effectively defaulted on a deposit insurance guarantee for bank deposits. That guarantee was given in 2008 after the collapse of Lehman Brothers. It consisted of a series of nationally co-ordinated guarantees. They wanted to make the political point that all savings are safe.

I am using the expressions “in all but name” and “effectively” because legally, Cyprus is not defaulting or imposing losses on depositors. The country is levying a tax of 6.75 per cent on deposits of up to €100,000, and a tax of 9.9 per cent above that threshold. Legally, this is a wealth tax. Economically, it is a haircut.

I myself had favoured a haircut, or tax, on deposits of more than €100,000 – the portion not covered by the deposit insurance guarantee. There is no moral or economic reason to protect foreigners who have decided to park large sums in a Cypriot bank account for whatever reason. Such a haircut would also have been in line with the philosophy of deposit insurance. Its purpose is not to provide absolute certainty, but to prevent bank runs, which is what happens when you go after small depositors. Well-designed deposit insurance schemes thus impose ceilings.

I just could not believe it when I heard that eurozone finance ministers went after the small depositors in Cyprus. I understand the purely technical reason why they did it. The eurozone could not agree a full bailout, which would have cost €17bn.

The Germans rejected a loan which they were certain Cyprus would invariably default on. So the sum was cut to €10bn. A depositor haircut was the only way to co-finance this. When they did the maths, they found the big deposits would not have sufficed.

So they opted for a wealth tax with hardly any progression. There is not even an exemption for people with only very small savings.

If one wanted to feed the political mood of insurrection in southern Europe, this was the way to do it. The long-term political damage of this agreement is going to be huge. In the short term, the danger consists of a generalised bank run, not just in Cyprus.

As in the case of Greece, the finance ministers said: “Don’t worry, this is a unique situation”. This is true only in a very narrow legal sense. The bond haircut in Greece is indeed different to the depositor haircut in Cyprus. And when they repeat this elsewhere, it will be unique once more.

Unless there is a last-minute reprieve for small savers, most Cypriot savers would act rationally if they withdrew the rest of their money simply to protect them from further haircuts or taxes. It would be equally rational for savers elsewhere in southern Europe to join them. The experience of Cyprus tells them that the solvency of a deposit insurance scheme is only as good as that of the state. In view of Italy’s public sector debt ratio, or the combined public and private sector indebtedness of Spain and Portugal, there is no way that these governments can insure all banks’ deposits on their own.

The Cyprus rescue has shown that the creditor nations will insist from now that any bank rescue must be co-funded by depositors.

The really puzzling thing is why did people not withdraw their money before? Did they not read the newspapers? Maybe they trusted the new president of Cyprus, who had promised them that he would never accept this? And why has there been so little deposit flight elsewhere in southern Europe? Did they, too, trust their governments? More importantly, will they continue to do so now?

There are some institutional impediments against bank runs within the eurozone. Some countries impose daily withdrawal limits, ostensibly as a measure against money laundering. Nor is it easy to open a bank account in a foreign country. In many cases, you need to have residency. You may need to travel there in person, and you need to speak the local language – or at least English.

But I would not take too much comfort from those impediments. Once fear reaches a critical mass, people will act, and then a bank run becomes a self-perpetuating process. There has been a lot of complacency about the eurozone crisis in the past eight months.

Many people even thought the crisis was over because Mario Draghi, president of the European Central Bank, gave a lender-of-last-resort guarantee. Bank depositors now understand that if the crisis was over, then that was only because the eurozone had found a new source of funding: their savings.

I have no idea whether or not there will be a bank run in the next few weeks. But surely it would be rational.

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PostPosted: Mon Mar 18, 2013 8:24 pm    Post subject: Re: Bailing out Cyprus Reply with quote

erm67 wrote:

Look this story 'you could devalue your currency if you had one' it is not working, esp. in countries that abused currency devaluation in the past. What do you think it happened when Italy devalued 20% the lira in the '80? The next day most goods were 20% more expensive FOR EVERYBODY. Also Spain remember very well the wild devaluations. If used as an argument against the euro is not working since it probably becomes quickly an argument pro-euro, if used as a better alternative in the case of Cyprus is even weaker since it would mean make everybody poorer instead of making the rich poorer.


that was probably worse for italians, but not everyone else. devaluing your currency is a way it can be done. no everyone's hands are tied.

Quote:

Cyprus holds more than 900% of its GDP in bank accounts, only Luxembourg holds more in the EU. It's a tax heaven with a banking bubble ready to explode, with all that money in the banks they are bankrupt and want money from me. Why? All that money is not beneficial to their economy, and hids money that could be used to fuel growth.
This means that their banking system is rotten, better defuse the bubble before it explodes.


right. so how do you stop that? You can see that creating a banking haven in your country might be a good option. but then this happens.
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PostPosted: Mon Mar 18, 2013 8:33 pm    Post subject: Reply with quote

Oh, no, the World is coming to an end! The end of the EU! :roll:
A hair cut is just what money launderers need. We should flambé them. Let's see what these people do now to the corrupt government on Cyprus. I have already ordered pizza with Cyprian olives.
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PostPosted: Mon Mar 18, 2013 8:55 pm    Post subject: Re: Bailing out Cyprus Reply with quote

juniper wrote:
erm67 wrote:

Look this story 'you could devalue your currency if you had one' it is not working, esp. in countries that abused currency devaluation in the past. What do you think it happened when Italy devalued 20% the lira in the '80? The next day most goods were 20% more expensive FOR EVERYBODY. Also Spain remember very well the wild devaluations. If used as an argument against the euro is not working since it probably becomes quickly an argument pro-euro, if used as a better alternative in the case of Cyprus is even weaker since it would mean make everybody poorer instead of making the rich poorer.


that was probably worse for italians, but not everyone else. devaluing your currency is a way it can be done. no everyone's hands are tied.


Bullshit, devaluation is devaluation no matter where you live, oil prices are going to increase just like the price of every imported good. If an eurozone country really wants that it is not a problem, just tax everything there, same effect but localized.

juniper wrote:

Quote:

Cyprus holds more than 900% of its GDP in bank accounts, only Luxembourg holds more in the EU. It's a tax heaven with a banking bubble ready to explode, with all that money in the banks they are bankrupt and want money from me. Why? All that money is not beneficial to their economy, and hids money that could be used to fuel growth.
This means that their banking system is rotten, better defuse the bubble before it explodes.


right. so how do you stop that? You can see that creating a banking haven in your country might be a good option. but then this happens.


Learn the lesson, don't put your money in a banking heaven in bankrupt country. That money from foreign investors in cyprus bank accounts, is not beneficial in any way to Cypriotes. You thinks Cyprus would be less or more bankrupt without the bank heaven? It would be just the same.
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PostPosted: Mon Mar 18, 2013 9:03 pm    Post subject: Reply with quote

wildhorse wrote:
Oh, no, the World is coming to an end! The end of the EU!


Not the former, we may entertain debate over the later.
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PostPosted: Tue Mar 19, 2013 9:05 pm    Post subject: Reply with quote

And they've gone and rejected the bailout T&C's
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