8 ms·

Revamped Cyprus deal to close bank, force losses

84 points by niggler 14y ago

joering2 14y ago
Do yourself a favor; withdraw ALL your money from banks and buy a safe; keep it at home in safe bolted to the ground, fireproof; the type with remote off-trigger so with a gun to your head you can't open it for a burglar. Preferably replace most with silver coins the 25c 90% silver ones. Do not buy gold in large quantities as when buying food on a daily basis it will be hard to "break" a bar of gold. Once successfully pushed in Cyprus, US will be the next one. Why you think they buying millions of rounds of ammunition? Street tanks bought by DHS (not a military part of government). And if you think about it, it makes perfect sense! Only by taking 25% of peoples assets can safe America, safe Social Security, safe Medicare, Medicaid, etc. Pres Obama already prepared it for you -- "you haven't built your business" yourself; the money you have is not really yours; it should be obvious!
- niggler 14y ago
  Let's make one thing clear: in the spectrum of possibilities, a massive inflationary event (where the purchasing power of the dollar is significantly impaired) is far more likely than any government agency raiding everyone's bank accounts, and keeping cash at home won't protect you from it
  - omegaworks 14y ago
    Do you think the crazy Bitcoin-to-dollar conversion might be foreshadowing this somehow?
    - niggler 14y ago
      BTC is far from a stable and accepted currency, and the fluctuations in USDBTC are still being driven by developments in the bitcoin community (e.g. good press, bad press, technical issues, new sites that accept BTC).
      - cpeterso 14y ago
        Yesterday in Palo Alto, California, John Schultz was mugged for 10 Bitcoins, a volatile new digital currency based on complicated calculations. “It was terrifying”, John exclaimed, “he handed me a pen and waited patiently for 45 minutes while I wrote down the encrypted text required to retrieve the money”. The stolen Bitcoins were valued at $415 at the time of the mugging, but fluctuated between $600 and $3 during the time John was walking home. http://nickcammarata.com/man-mugged-for-10btc http://nickcammarata.com/man-mugged-for-10btc
        oleganza 14y ago
        This proves the opposite. It is much harder to steal bitcoins than cash or bank deposit. You have to infect the computer, break the password, and know where to go in the first place.
    - khuey 14y ago
      No.
  - joering2 14y ago
    > than any government agency raiding everyone's bank accounts, and keeping cash at home won't protect you from it Why not? They will be busy going through houses from the "citizen armed lives here" list. Don't keep cash; I said keep most in silver coins. Don't keep in bank ready to be raid; keep at home in safe.
- mmanfrin 14y ago
  It is mildly distressing that this is at the top. For those of you upvoting thinking it's satire, see his profile: recently finished coding: http://drudgenewsletter.com
  - jewbacca 14y ago
    I upvoted it because it's very interesting to see what joering2 said, which I've only ever seen dismissed with a chuckle by people who don't already agree with it, debated in this context, on HN. I'm a firm believer that genuinely and seriously entertaining stupid questions, unpopular opinions, and fringe theories, is the most effective (and engaging) way to learn something new with some immediate depth. Which is what I'm here for. I upvoted joering2 because the developing conversation it set off between rdl and mynameishere is the most interesting and novel content in this thread so far. It is debatably off-topic though.
- rdl 14y ago
  This is horrible advice. It's worth keeping physical currency immediate needs in the case of a storm, earthquake, banking glitch, etc. (For most people, maybe $500-1000; the crazy thing is I know plenty of people who do nothing but use credit cards and just have $0-20, which sucks even if their bank just freezes their ATM account or credit card for 3 days!) Otherwise, physical currency is exposed to the most serious risks (devaluation, inflation), plus physical loss, plus is relatively inconvenient to use. If you want a hedge against USD shenanigans, the things to do are: 1) Reduce ongoing liabilities (debt or expenses), particularly those which might adjust 2) Invest in income-producing assets which have pricing power 3) Potentially, hedge by investing in assets in foreign currencies or non-currencies, or assets in foreign countries, etc. #1 and #2 are generally reasonable no matter what (buying energy efficient appliances, buying foods/etc. in bulk, education, being in good health, improving your skills, building products or companies...)
  - mynameishere 14y ago
    Reduce ongoing liabilities (debt FYI, during the Weimer inflation, it was those who went into debt (ie, shorted the Mark) and bought real assets who profited the most. There's no real good advice during a currency collapse for unsophisticated investors. Filling your basement with Jack Daniel's whiskey is as good as anything. That said, a FRN crisis, if any, is many years off.
    - rdl 14y ago
      The difference is fixed-rate, vs. things which could adjust. It's all about being on the right side of optionality :) It's better to own a subsistence farm than to have something which requires purchasing market-priced inputs and to sell at long fixed-term prices. Similarly having long term fixed-rate debt (mortgage) is better in a market where rates go up than having to refinance every few years with short-term debt (or, say, rent, in a place where there's no rent control). But a disadvantage of owning vs. renting is that you can't move as easily to take advantage of opportunities. Reducing mandatory ongoing/recurring market-rate purchases seems like a win; usually that requires either spending capital now or some form of (ideally, fixed-rate) debt. Like borrowing at 3% to buy a fuel-efficient car or live close to work/transit is probably worthwhile, if you get 10-15mpg now and need to commute to work.
- dualogy 14y ago
  Cyprus or individual Euro countries can't "print" the currency to save all bad debt -- the US can, and does. So, ahem, snicker, not to worry! ..rright?
  - w-ll 14y ago
    "Vires in Numeris"
  - yxhuvud 14y ago
    Correct. USA is limited by inflation, not debt level.
  - fulafel 14y ago
    The EU can, but currently doesn't. Because of dogma (the whole austerity debacle).
    - paganel 14y ago
      > Because of dogma (the whole austerity debacle). They don't because in the long run you have to actually produce wealth that would sustain your money-printing instinct. This is the best opportunity for Europe to actual implement structural reforms that would give them a chance to compete long-term, as an European I do hope they don't fuck it up.
      - fulafel 14y ago
        A better "because" post from Dr. Simon Wren-Lewis from Oxford - the right thing sounds just too good to be true at the moment: Here are some better reasons http://mainlymacro.blogspot.ie/2013/03/the-power-of-austerity-over-politicians.html http://mainlymacro.blogspot.ie/2013/03/the-power-of-austerit...
- deleted 14y ago
  [deleted]
OGinparadise 14y ago
It appears that they are no shortcuts, or getting rich with banking by becoming a low tax banking center (see Ireland, Iceland and now Cyprus). And that will work against you when you need help from "normal" countries. Cyprus got absolutely no mercy from them, take it or leave the EU. They cannot leave EU so they must do anything else asked.
- Volpe 14y ago
  Why can't they leave the EU?
  - OGinparadise 14y ago
    Number 1 reason: Turkey http://en.wikipedia.org/wiki/Turkish_invasion_of_Cyprus http://en.wikipedia.org/wiki/Turkish_invasion_of_Cyprus ! Being in EU offers them protection from Turkey and bragging rights ("we're Europeans...a civilized country..." Turkey occupies roughly half of the country and has more soldiers than Cyprus has inhabitants. If they left EU, in addition to the huge mess created, they would lose whatever protection EU membership offers them. A tiny country, in a strategic location and surrounded by enemies needs a big brother. Just this week: "“The idea of the Greek Cypriot Administration of Southern Cyprus (GCASC) to offer the natural resources of the island as collateral for a solidarity investment fund or any other borrowing scheme to be established due to its current economic crisis, ignoring the inherent rights of the Turkish Cypriots who are co-owners of the Island, is a dangerous manifestation of the illusion of being the sole owner of the Island, which may lead to a new crisis in the region,” the Foreign Ministry said in a statement on Saturday." http://www.ekathimerini.com/4dcgi/_w_articles_wsite1_1_24/03/2013_489666 http://www.ekathimerini.com/4dcgi/_w_articles_wsite1_1_24/03... Number 2 reason: Integration with EU, such as travel, bank deposits, pensions etc etc. decoupling would mean a huge mess. Number 3: If the left, their banks and econ would collapse anyway, so they still lose with no possible upshot.
    - deleted 14y ago
      [deleted]
    - seanhandley 14y ago
itsprofitbaron 14y ago
To add some context to this situation, Cyprus is a country of 1.1 Million people and it's banks have 68 Billion Euros in its accounts (of which 38 Billion is in accounts over 100k Euros) and as highlighted by their own GDP, its an amount of money which couldn’t be sustained or created on its own. Germany and France have argued that, Cyprus's offshore-haven business model wasn’t sustainable with, Bank of France Governor, Christian Noyer saying that "Cypriot banks have for years been taking the kinds of risks that are not allowed in France"[1] The reason why Cyprus are getting a deal like this is because of the accusations of Money Laundering - an accusation which has led to Cyprus opening an investigation into[2] which is mainly due to the fact that, a Russian accountant (Sergei Magnitsky) was killed in jail in 2009 after revealing “that $31 million of the tax money was moved out of Russia using five Cypriot banks: Alpha Bank, Cyprus Popular Bank, FBME Bank, Privatbank International and Komercbanka”[2] and because, Cyprus are still heavily exposed to Greece. In fact, “the exposure of domestic [Cypriot] banks to Greece amounted to €28 billion, or one-third of total assets and 170% of GDP. Of the €28 billion, government bonds amounted to €4.7 billion; the rest were loans to Greek residents”[3] The initial plans were to apply a levy on all accounts in Cyprus (up to 10% although, this was then rumoured to be 25% on everyone’s savings above 100k Euros) which was rejected. Then there was a suggestion to nationalize semi-state pension funds although, Germany amongst others were against this idea suggesting that this could be even more painful for ordinary Cypriots than a deposit levy. The plan now appears to be involving nationalizing state pensions and split failing lenders into good and bad banks which is highlighted by the article, with Laiki (Cyprus’s number 2 bank becoming a ‘bad’ bank). It’s an interesting scenario from an economical standpoint although, Cyprus should have received a bailout as part of the Greek bailout due to their significant exposure to the Greek economy, regardless if they are an offshore-haven or not. [1] http://www.ibtimes.co.uk/articles/449633/20130324/cyprus-seeks-11th-hour-deal-to-avert-financial-collapse.htm http://www.ibtimes.co.uk/articles/449633/20130324/cyprus-see... [2] http://euobserver.com/magnitsky/118524 http://euobserver.com/magnitsky/118524 [3] http://www.iif.com/emr/resources+2662.php http://www.iif.com/emr/resources+2662.php
- marshray 14y ago
  1.1 Million people and it's banks have 68 Billion Euros in its accounts So 62k Euro per captia? That doesn't sound like an insane amount. an amount of money which couldn’t be sustained or created on its own ... "Cypriot banks have for years been taking the kinds of risks that are not allowed in France" Since when has taking cash deposits been risky? This reasoning sounds completely backwards to me. Why would a country with 68B Euros on deposit be begging for a 10B Euro bailout? All I can figure is the US, Germany, and France don't like Cyprus taking less taxes and asking fewer questions and they don't want it to be a reliable place to shift your revenue or deposit your money.
bitcartel 14y ago
There is a very important question here: What is the relationship between you and the bank? Up until recently, it has been considered sacrosanct that deposit holders be protected, no matter the cost. The convention and social contract has been that you deposit money for safe-keeping in a bank. We have seen this over the past few years across both Europe and the US, as insolvent banks have been bailed-out, nationalised, given secret loans, so that deposit holders are wholly protected. With Cyprus, this widely held belief is now in tatters. You as a deposit holder are now a creditor of the bank. As soon as you lend your money to the bank, it is no longer yours. The bank will provide you with interest for the duration of the loan. If the bank is no longer a going concern, you will no longer receive special treatment, but instead you must get in line with other creditors. Some may argue that this has always been the case[1], however it will be a genuine shock to many people, and any faith in deposit guarantee schemes has been dealt a severe blow when a week ago, the EU urged Cyprus to collectively punish all deposit holders regardless of balance. [1] For those in the UK, the House of Lords said in Foley v Hill 1848 http://www.uniset.ca/other/css/9ER1002.html http://www.uniset.ca/other/css/9ER1002.html "Money, when paid into a bank, ceases altogether to be the money of the principal... The money placed in custody of a banker is, to all intents and purposes, the money of the banker, to do with it as he pleases... he is, of course, answerable for the amount, because he has contracted, having received that money, to repay to the principal, when demanded, a sum equivalent to that paid into his hands... the banker is not an agent or factor, but he is a debtor."
- niggler 14y ago
  " it has been considered sacrosanct that deposit holders be protected, no matter the cost. " In 2011 and 2012, in the US, protecting the deposit holders was deemed sufficiently important that FDIC deposit insurance was extended to unlimited protection (now it is up to 250K)
  - bitcartel 14y ago
    It appears nothing is more important than the banks. "Back in December 2012 the FDIC and the BoE published a joint paper outlining their new approach for how to resolve any future collapse of one of the Too-Big-To-Fail banks... 'deposit guarantee schemes may be required to contribute to the recapitalization of the firm'[1][2] ...the new system raids the Deposit Protection scheme, gives it to the bank instead of you and when that fails to save the bank…then what? The bank fails again and there is no money left in the Deposit Guarantee scheme." [1] http://www.golemxiv.co.uk/2013/03/plunderball-the-new-euro-banking-game/ http://www.golemxiv.co.uk/2013/03/plunderball-the-new-euro-b... [2] http://www.bankofengland.co.uk/publications/Documents/news/2012/nr156.pdf http://www.bankofengland.co.uk/publications/Documents/news/2...
atsaloli 14y ago
Wealth redistribution in action.
seanhandley 14y ago
The problem is that there is no competition in banking. A bank is a private company and should be allowed to go out of business as a result of poor decisions and speculation. In a true free market, there would be no bailout. What we have now is a cartel of banks with government-approved protection by central banks, a system that encourages recklessness and a money-system backed by nothing but debt. Propping it up is just delaying the inevitable and allowing the very wealthy more chances to take ownership of property and assets for bargain prices while the general public pay more through inflation of currency, commodity prices and house prices. We don't need bailouts. We need better education of the population about how private banking is in control of our economy so that it becomes clear in everyone's minds that the whole monetary system needs reform. The system as it stands is mathematically guaranteed to transfer value from the bottom to the top. This is as true for individuals as it is for countries as a whole. Cyprus will never pay off this national debt with the system as it currently stands and so will sit in the pocket of the IMF, and ultimately the US Federal Reserve. "Bailout" is one way of putting it. So is "legalised plunder".

84 points by niggler 14y ago

Do yourself a favor; withdraw ALL your money from banks and buy a safe; keep it at home in safe bolted to the ground, fireproof; the type with remote off-trigger so with a gun to your head you can't open it for a burglar. Preferably replace most with silver coins the 25c 90% silver ones. Do not buy gold in large quantities as when buying food on a daily basis it will be hard to "break" a bar of gold. Once successfully pushed in Cyprus, US will be the next one. Why you think they buying millions of rounds of ammunition? Street tanks bought by DHS (not a military part of government). And if you think about it, it makes perfect sense! Only by taking 25% of peoples assets can safe America, safe Social Security, safe Medicare, Medicaid, etc. Pres Obama already prepared it for you -- "you haven't built your business" yourself; the money you have is not really yours; it should be obvious!

niggler 14y ago
Let's make one thing clear: in the spectrum of possibilities, a massive inflationary event (where the purchasing power of the dollar is significantly impaired) is far more likely than any government agency raiding everyone's bank accounts, and keeping cash at home won't protect you from it
- omegaworks 14y ago
  Do you think the crazy Bitcoin-to-dollar conversion might be foreshadowing this somehow?
  - niggler 14y ago
    BTC is far from a stable and accepted currency, and the fluctuations in USDBTC are still being driven by developments in the bitcoin community (e.g. good press, bad press, technical issues, new sites that accept BTC).
    - cpeterso 14y ago
      Yesterday in Palo Alto, California, John Schultz was mugged for 10 Bitcoins, a volatile new digital currency based on complicated calculations. “It was terrifying”, John exclaimed, “he handed me a pen and waited patiently for 45 minutes while I wrote down the encrypted text required to retrieve the money”. The stolen Bitcoins were valued at $415 at the time of the mugging, but fluctuated between $600 and $3 during the time John was walking home. http://nickcammarata.com/man-mugged-for-10btc http://nickcammarata.com/man-mugged-for-10btc
      - oleganza 14y ago
        This proves the opposite. It is much harder to steal bitcoins than cash or bank deposit. You have to infect the computer, break the password, and know where to go in the first place.
  - khuey 14y ago
    No.
- joering2 14y ago
  > than any government agency raiding everyone's bank accounts, and keeping cash at home won't protect you from it Why not? They will be busy going through houses from the "citizen armed lives here" list. Don't keep cash; I said keep most in silver coins. Don't keep in bank ready to be raid; keep at home in safe.
mmanfrin 14y ago
It is mildly distressing that this is at the top. For those of you upvoting thinking it's satire, see his profile: recently finished coding: http://drudgenewsletter.com
- jewbacca 14y ago
  I upvoted it because it's very interesting to see what joering2 said, which I've only ever seen dismissed with a chuckle by people who don't already agree with it, debated in this context, on HN. I'm a firm believer that genuinely and seriously entertaining stupid questions, unpopular opinions, and fringe theories, is the most effective (and engaging) way to learn something new with some immediate depth. Which is what I'm here for. I upvoted joering2 because the developing conversation it set off between rdl and mynameishere is the most interesting and novel content in this thread so far. It is debatably off-topic though.
rdl 14y ago
This is horrible advice. It's worth keeping physical currency immediate needs in the case of a storm, earthquake, banking glitch, etc. (For most people, maybe $500-1000; the crazy thing is I know plenty of people who do nothing but use credit cards and just have $0-20, which sucks even if their bank just freezes their ATM account or credit card for 3 days!) Otherwise, physical currency is exposed to the most serious risks (devaluation, inflation), plus physical loss, plus is relatively inconvenient to use. If you want a hedge against USD shenanigans, the things to do are: 1) Reduce ongoing liabilities (debt or expenses), particularly those which might adjust 2) Invest in income-producing assets which have pricing power 3) Potentially, hedge by investing in assets in foreign currencies or non-currencies, or assets in foreign countries, etc. #1 and #2 are generally reasonable no matter what (buying energy efficient appliances, buying foods/etc. in bulk, education, being in good health, improving your skills, building products or companies...)
- mynameishere 14y ago
  Reduce ongoing liabilities (debt FYI, during the Weimer inflation, it was those who went into debt (ie, shorted the Mark) and bought real assets who profited the most. There's no real good advice during a currency collapse for unsophisticated investors. Filling your basement with Jack Daniel's whiskey is as good as anything. That said, a FRN crisis, if any, is many years off.
  - rdl 14y ago
    The difference is fixed-rate, vs. things which could adjust. It's all about being on the right side of optionality :) It's better to own a subsistence farm than to have something which requires purchasing market-priced inputs and to sell at long fixed-term prices. Similarly having long term fixed-rate debt (mortgage) is better in a market where rates go up than having to refinance every few years with short-term debt (or, say, rent, in a place where there's no rent control). But a disadvantage of owning vs. renting is that you can't move as easily to take advantage of opportunities. Reducing mandatory ongoing/recurring market-rate purchases seems like a win; usually that requires either spending capital now or some form of (ideally, fixed-rate) debt. Like borrowing at 3% to buy a fuel-efficient car or live close to work/transit is probably worthwhile, if you get 10-15mpg now and need to commute to work.
dualogy 14y ago
Cyprus or individual Euro countries can't "print" the currency to save all bad debt -- the US can, and does. So, ahem, snicker, not to worry! ..rright?
- w-ll 14y ago
  "Vires in Numeris"
- yxhuvud 14y ago
  Correct. USA is limited by inflation, not debt level.
- fulafel 14y ago
  The EU can, but currently doesn't. Because of dogma (the whole austerity debacle).
  - paganel 14y ago
    > Because of dogma (the whole austerity debacle). They don't because in the long run you have to actually produce wealth that would sustain your money-printing instinct. This is the best opportunity for Europe to actual implement structural reforms that would give them a chance to compete long-term, as an European I do hope they don't fuck it up.
    - fulafel 14y ago
      A better "because" post from Dr. Simon Wren-Lewis from Oxford - the right thing sounds just too good to be true at the moment: Here are some better reasons http://mainlymacro.blogspot.ie/2013/03/the-power-of-austerity-over-politicians.html http://mainlymacro.blogspot.ie/2013/03/the-power-of-austerit...
deleted 14y ago
[deleted]

OGinparadise 14y ago

It appears that they are no shortcuts, or getting rich with banking by becoming a low tax banking center (see Ireland, Iceland and now Cyprus). And that will work against you when you need help from "normal" countries. Cyprus got absolutely no mercy from them, take it or leave the EU. They cannot leave EU so they must do anything else asked.

Volpe 14y ago
Why can't they leave the EU?
- OGinparadise 14y ago
  Number 1 reason: Turkey http://en.wikipedia.org/wiki/Turkish_invasion_of_Cyprus http://en.wikipedia.org/wiki/Turkish_invasion_of_Cyprus ! Being in EU offers them protection from Turkey and bragging rights ("we're Europeans...a civilized country..." Turkey occupies roughly half of the country and has more soldiers than Cyprus has inhabitants. If they left EU, in addition to the huge mess created, they would lose whatever protection EU membership offers them. A tiny country, in a strategic location and surrounded by enemies needs a big brother. Just this week: "“The idea of the Greek Cypriot Administration of Southern Cyprus (GCASC) to offer the natural resources of the island as collateral for a solidarity investment fund or any other borrowing scheme to be established due to its current economic crisis, ignoring the inherent rights of the Turkish Cypriots who are co-owners of the Island, is a dangerous manifestation of the illusion of being the sole owner of the Island, which may lead to a new crisis in the region,” the Foreign Ministry said in a statement on Saturday." http://www.ekathimerini.com/4dcgi/_w_articles_wsite1_1_24/03/2013_489666 http://www.ekathimerini.com/4dcgi/_w_articles_wsite1_1_24/03... Number 2 reason: Integration with EU, such as travel, bank deposits, pensions etc etc. decoupling would mean a huge mess. Number 3: If the left, their banks and econ would collapse anyway, so they still lose with no possible upshot.
  - deleted 14y ago
    [deleted]
  - seanhandley 14y ago

itsprofitbaron 14y ago

To add some context to this situation, Cyprus is a country of 1.1 Million people and it's banks have 68 Billion Euros in its accounts (of which 38 Billion is in accounts over 100k Euros) and as highlighted by their own GDP, its an amount of money which couldn’t be sustained or created on its own. Germany and France have argued that, Cyprus's offshore-haven business model wasn’t sustainable with, Bank of France Governor, Christian Noyer saying that "Cypriot banks have for years been taking the kinds of risks that are not allowed in France"[1] The reason why Cyprus are getting a deal like this is because of the accusations of Money Laundering - an accusation which has led to Cyprus opening an investigation into[2] which is mainly due to the fact that, a Russian accountant (Sergei Magnitsky) was killed in jail in 2009 after revealing “that $31 million of the tax money was moved out of Russia using five Cypriot banks: Alpha Bank, Cyprus Popular Bank, FBME Bank, Privatbank International and Komercbanka”[2] and because, Cyprus are still heavily exposed to Greece. In fact, “the exposure of domestic [Cypriot] banks to Greece amounted to €28 billion, or one-third of total assets and 170% of GDP. Of the €28 billion, government bonds amounted to €4.7 billion; the rest were loans to Greek residents”[3] The initial plans were to apply a levy on all accounts in Cyprus (up to 10% although, this was then rumoured to be 25% on everyone’s savings above 100k Euros) which was rejected. Then there was a suggestion to nationalize semi-state pension funds although, Germany amongst others were against this idea suggesting that this could be even more painful for ordinary Cypriots than a deposit levy. The plan now appears to be involving nationalizing state pensions and split failing lenders into good and bad banks which is highlighted by the article, with Laiki (Cyprus’s number 2 bank becoming a ‘bad’ bank). It’s an interesting scenario from an economical standpoint although, Cyprus should have received a bailout as part of the Greek bailout due to their significant exposure to the Greek economy, regardless if they are an offshore-haven or not. [1] http://www.ibtimes.co.uk/articles/449633/20130324/cyprus-seeks-11th-hour-deal-to-avert-financial-collapse.htm http://www.ibtimes.co.uk/articles/449633/20130324/cyprus-see... [2] http://euobserver.com/magnitsky/118524 http://euobserver.com/magnitsky/118524 [3] http://www.iif.com/emr/resources+2662.php http://www.iif.com/emr/resources+2662.php

marshray 14y ago
1.1 Million people and it's banks have 68 Billion Euros in its accounts So 62k Euro per captia? That doesn't sound like an insane amount. an amount of money which couldn’t be sustained or created on its own ... "Cypriot banks have for years been taking the kinds of risks that are not allowed in France" Since when has taking cash deposits been risky? This reasoning sounds completely backwards to me. Why would a country with 68B Euros on deposit be begging for a 10B Euro bailout? All I can figure is the US, Germany, and France don't like Cyprus taking less taxes and asking fewer questions and they don't want it to be a reliable place to shift your revenue or deposit your money.

bitcartel 14y ago

There is a very important question here: What is the relationship between you and the bank? Up until recently, it has been considered sacrosanct that deposit holders be protected, no matter the cost. The convention and social contract has been that you deposit money for safe-keeping in a bank. We have seen this over the past few years across both Europe and the US, as insolvent banks have been bailed-out, nationalised, given secret loans, so that deposit holders are wholly protected. With Cyprus, this widely held belief is now in tatters. You as a deposit holder are now a creditor of the bank. As soon as you lend your money to the bank, it is no longer yours. The bank will provide you with interest for the duration of the loan. If the bank is no longer a going concern, you will no longer receive special treatment, but instead you must get in line with other creditors. Some may argue that this has always been the case[1], however it will be a genuine shock to many people, and any faith in deposit guarantee schemes has been dealt a severe blow when a week ago, the EU urged Cyprus to collectively punish all deposit holders regardless of balance. [1] For those in the UK, the House of Lords said in Foley v Hill 1848 http://www.uniset.ca/other/css/9ER1002.html http://www.uniset.ca/other/css/9ER1002.html "Money, when paid into a bank, ceases altogether to be the money of the principal... The money placed in custody of a banker is, to all intents and purposes, the money of the banker, to do with it as he pleases... he is, of course, answerable for the amount, because he has contracted, having received that money, to repay to the principal, when demanded, a sum equivalent to that paid into his hands... the banker is not an agent or factor, but he is a debtor."

niggler 14y ago
" it has been considered sacrosanct that deposit holders be protected, no matter the cost. " In 2011 and 2012, in the US, protecting the deposit holders was deemed sufficiently important that FDIC deposit insurance was extended to unlimited protection (now it is up to 250K)
- bitcartel 14y ago
  It appears nothing is more important than the banks. "Back in December 2012 the FDIC and the BoE published a joint paper outlining their new approach for how to resolve any future collapse of one of the Too-Big-To-Fail banks... 'deposit guarantee schemes may be required to contribute to the recapitalization of the firm'[1][2] ...the new system raids the Deposit Protection scheme, gives it to the bank instead of you and when that fails to save the bank…then what? The bank fails again and there is no money left in the Deposit Guarantee scheme." [1] http://www.golemxiv.co.uk/2013/03/plunderball-the-new-euro-banking-game/ http://www.golemxiv.co.uk/2013/03/plunderball-the-new-euro-b... [2] http://www.bankofengland.co.uk/publications/Documents/news/2012/nr156.pdf http://www.bankofengland.co.uk/publications/Documents/news/2...

atsaloli 14y ago

Wealth redistribution in action.

seanhandley 14y ago

The problem is that there is no competition in banking. A bank is a private company and should be allowed to go out of business as a result of poor decisions and speculation. In a true free market, there would be no bailout. What we have now is a cartel of banks with government-approved protection by central banks, a system that encourages recklessness and a money-system backed by nothing but debt. Propping it up is just delaying the inevitable and allowing the very wealthy more chances to take ownership of property and assets for bargain prices while the general public pay more through inflation of currency, commodity prices and house prices. We don't need bailouts. We need better education of the population about how private banking is in control of our economy so that it becomes clear in everyone's minds that the whole monetary system needs reform. The system as it stands is mathematically guaranteed to transfer value from the bottom to the top. This is as true for individuals as it is for countries as a whole. Cyprus will never pay off this national debt with the system as it currently stands and so will sit in the pocket of the IMF, and ultimately the US Federal Reserve. "Bailout" is one way of putting it. So is "legalised plunder".