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The madness of the bailout in Cyprus

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Re: The madness of the bailout in Cyprus

#111

Post by seanmcdirmid »

khuey wrote: post #94
moe wrote: post #82

Earlier quoted context omitted.

So, what do you propose he should do with his money? I have a hunch your little smarty-pants speech didn't help him one bit.

Yeah, you're right, the tone is unhelpful. My point is that there's nothing you can do with your money to ensure that it always has value, regardless of the magnitude of the crisis. There's always some risk. You can store your money in insured bank accounts, but we can see how well that's working out in Cyprus. You can store cash under your mattress, but high inflation will destroy its real value. You can buy gold an…

Exactly, swapping a fiat paper currency for fiat metal is not useful.

If you are a pessimist, buy guns, bullets and non perishable food, or invest in a secret mountain farm/retreat.

Or you could just work within the system and try to help keep it from failing by running on the bank.

Re: The madness of the bailout in Cyprus

#112

Post by seanmcdirmid »

caf wrote: post #51
dougk16 wrote: post #40

Earlier quoted context omitted.

I've been thinking about this lately, and, at the risk of sounding like a doomsday kook, this seems to make sense to me (perhaps in a milder sense) no matter where one lives. My plan is, if I ever get over $X in my account, where X is some reasonable buffer to pay bills, etc., that I'll just buy gold with the overage[1]. Back in the day you'd at least get reasonable interest by keeping money in a bank, but nowadays i…

This does depend on where you live. In some places, mortgages are offered with "offset accounts", where your positive balance in the account offsets your outstanding debt on the mortgage, and in doing so reduces the interest accruing on the loan. This means that your excess funds effectively earn the mortgage rate of interest (and since interest avoided isn't "income", this isn't taxed as deposit interest would be ei…

Sounds similar to America's interest exemption.

Re: The madness of the bailout in Cyprus

#113

Post by seanmcdirmid »

bitcartel wrote: post #90
st0p wrote: post #73

Earlier quoted context omitted.

I can't agree with your last sentence. We've all had the profits of having banks providing liquidity (common, all that Russian money into the Cyprian economy has been great for all of Cyprus). Now that system has failed and the big guys aka the banks are just as clueless as the little guys. Do we need to rethink how our economy works? Yes. Do we need to help Cyprus, Italy, Spain? Yes. Partially because it is in out b…

It's theft, plain and simple. The Cypriot people are not being asked if they want to sacrifice their savings - it is being taken from them by force!

Well, the euro zone doesn't have to help Cyprus put and just let them collapse. Maybe Greece could sell the other half of Cyprus to turkey to get some extra needed cash...what is a better option?

Re: The madness of the bailout in Cyprus

#114

Post by vacri »

bitcartel wrote: post #90
st0p wrote: post #73

Earlier quoted context omitted.

I can't agree with your last sentence. We've all had the profits of having banks providing liquidity (common, all that Russian money into the Cyprian economy has been great for all of Cyprus). Now that system has failed and the big guys aka the banks are just as clueless as the little guys. Do we need to rethink how our economy works? Yes. Do we need to help Cyprus, Italy, Spain? Yes. Partially because it is in out b…

It's theft, plain and simple. The Cypriot people are not being asked if they want to sacrifice their savings - it is being taken from them by force!

Good old libertarians - everything is about money and force.

The money isn't being taken by force. Money is a social construct, and the people in charge of taking care of that social construct are fiddling with the numbers. There are no jackbooted thugs going into people's homes and relieving them of physical property, which is what you're alluding to.

Whethere it's morally right or not (or somewhere in-between) is a wholly different question, which isn't helped by hyperbole like you're presenting here.

Re: The madness of the bailout in Cyprus

#115

Post by seanmcdirmid »

srid68 wrote: post #102
st0p wrote: post #71

Earlier quoted context omitted.

So what do you propose? We sit back and do nothing?

They could have made the bank bond holders (rich foreign banks) take losses without affecting the normal depositors. How can you think getting a bigger loan to pay current loan is a good strategy. It will work only if the economy improves. If the economy tanks, it is not going to work. It is only going to increase the losses for the lenders ultimately.

There were no foreign rich bond holders to punish. Cyprus took more money in then it could possibly ever use (as haven like Iceland), and then bought Greek bonds with it. The only creditors here are depositors. So...

Re: The madness of the bailout in Cyprus

#116

Post by znowi »

JumpCrisscross wrote: post #98

When a sovereign fails, its banks fail, and private sector losses are virtually assured. The question is who bears the burden. Roughly half the deposits in Cypriot banks, with assets five times its GDP, are of Russian, Greek, or British origin [1]. They were attracted by high deposit rates (roughly double EMU average) and a system tolerant of likely tax evaders. >" This whole thing is entirely unfair for the people l…

No doubt you know your trade. The problem is that it's more of a witchcraft and the way you smoothly lay things out here in the complex intricacies of the financial sector evades people from the simple fact that the banks fucked up. And the question of who bears the burden is only a question for the banking industry, in how to leverage public funds to cover their losses.

Re: The madness of the bailout in Cyprus

#117

Post by scotty79 »

That's basically end of banking on Cyprus. Who will keep money at the place that arbitrarily decides to steal 6.75% of it (or 9.9% if you are rich)?

Also if I lived in Portugal or Spain I'd be on my way to the bank right now. Well actually I'd just transfer almost all of my money to mtgox (or some european market) and buy bitcoins.

Re: The madness of the bailout in Cyprus

#118

Post by wintersFright »

seanmcdirmid wrote: post #111
khuey wrote: post #94

Earlier quoted context omitted.

Yeah, you're right, the tone is unhelpful. My point is that there's nothing you can do with your money to ensure that it always has value, regardless of the magnitude of the crisis. There's always some risk. You can store your money in insured bank accounts, but we can see how well that's working out in Cyprus. You can store cash under your mattress, but high inflation will destroy its real value. You can buy gold an…

Exactly, swapping a fiat paper currency for fiat metal is not useful. If you are a pessimist, buy guns, bullets and non perishable food, or invest in a secret mountain farm/retreat. Or you could just work within the system and try to help keep it from failing by running on the bank.

'fiat' metal = metal by government decree?? fiat currency is intrinsically overvalued as it is valued by decree - by the threat of legal violence if you don't use it. There are no fiat metals.

Your pessimist view is at the extreme end of the spectrum. Individual fiat currencies have eventually failed ever since they were invented. Each time a currency dies there are winners and there are losers, but it doesn't go all Mad Max - a new transactional currency is used (Zimbabwe) or they lop a few zeros off and keep going.... Well maybe the dog food eating bit of Mad Max is true for the losers whose wealth was stored in the currency that failed.

Re: The madness of the bailout in Cyprus

#119

Post by wintersFright »

DJN wrote: post #107
caf wrote: post #51

Earlier quoted context omitted.

This does depend on where you live. In some places, mortgages are offered with "offset accounts", where your positive balance in the account offsets your outstanding debt on the mortgage, and in doing so reduces the interest accruing on the loan. This means that your excess funds effectively earn the mortgage rate of interest (and since interest avoided isn't "income", this isn't taxed as deposit interest would be ei…

That sounds really interesting. Can you provide a link to an example or source of additional info. Thanks

offset accounts are common in Australia http://www.news.com.au/money/banking/offset-accounts-help-lo...

Re: The madness of the bailout in Cyprus

#120

Post by scotty79 »

moe wrote: post #82
[deleted] wrote: post #61

Earlier quoted context omitted.

[deleted]

So, what do you propose he should do with his money? I have a hunch your little smarty-pants speech didn't help him one bit.

Real estate is proven value store and investment. Personally I'd just buy bitcoins.
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