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The madness of the bailout in Cyprus

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Re: The madness of the bailout in Cyprus

#141

Post by wintersFright »

seanmcdirmid wrote: post #131
wintersFright wrote: post #118

Earlier quoted context omitted.

'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…

Gold has little intrinsic value (well, you can make pretty things with it), its value is what people assign to it for the purposes of trade. So it most definitely is a fiat metal. If it was something like copper, there would be some intrinsic worth, but it isn't convenient to carry around while there is only so much intrinsic demand for copper! Gold has failed just as often as fiat currencies have. When the Spanish c…

ok I get what you're saying but your use of 'fiat' to describe gold is not the right word to use. fiat means by government decree. gold is valued by people as a wealth asset - and I agree it's value only comes from the knowledge that other people will trade something in the future for it - but the mona lisa is just a bit of cloth with some paint. pretty useless yet priceless - because there are many in line would would gladly exchange their vast excess of fiat currency for it.

I'm not arguing fiat currency will disappear, it obviously won't. It's just not the correct vehicle for saving. You must not save in the same instrument of the debtors. It leads to you being wiped out when the debtors default as the credit system grows beyond the ability for it to be paid back (eg: see China's trillions of US Treasuries - those are claims that the US economy cannot and will not service).

re: Spain: It was silver that was debased not gold I think.

re: gold failed: Physical gold didn't fail. Gold backed currency failed. Governments always print more tickets to gold than they own. The last big paper gold failure was Nixon in 1974 after they overspent on the Vietnam war.

I wouldn't recommend getting into paper gold to escape a currency collapse. Physical, unambiguously owned metal is the insurance, the vehicle that will transition you through to the otherside.

Re: The madness of the bailout in Cyprus

#142

Post by omgyeah »

moe wrote: post #92
znowi wrote: post #31

I say let them default. Can't manage your assets - go out of business. Employ shady schemes - go to jail. Now this would be fair.

Wait a second. So I lend you a thousand dollars, for a nice interest rate. Then you go bankrupt or just disappear. And in this dire situation I should not be allowed to collect $1 from a thousand random citizens to compensate my loss? What an absurd concept.

Unlike people, countries don't disappear. They have many (natural) resources standing still on the earth. Which can be used to pay back loan.

But greed is good. I can have both the other country's natural resources and $1,000 from my citizens. Win-win for me. Lose-lose for everybody else.

Re: The madness of the bailout in Cyprus

#143

Post by tempestn »

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…

Diversification and multiple pots seems like the best reasonable option. At the very least, one's investment portfolio should be internationally diversified. If you were really concerned, actually holding a portion of those assets in an offshore account might make sense. Regardless, rather than trying to protect all assets, the goal would be to maximize the chances that you would always be left with at least a sufficient amount.

Re: The madness of the bailout in Cyprus

#144

Post by wintersFright »

scotty79 wrote: post #120
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.

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

when credit collapses (which is what this is) then the price of things bought on credit will collapse. Real estate will not be a good store of value in the short term. Long term it is an excellent asset but don't think it will hold value though this. Bitcoin....you have seen the volatility on it lately? And the other week the miners were all asked to rollback a recent build because the crypto broke? Bitcoin is for speculation, not wealth preservation.

Re: The madness of the bailout in Cyprus

#145

Post by omgyeah »

tomjen3 wrote: post #139
znowi wrote: post #31

I say let them default. Can't manage your assets - go out of business. Employ shady schemes - go to jail. Now this would be fair.

We should have let them default when the crisis started, but no because our government are traitors to the people whom they have to protect.

You should definitely have done that. But you'd won much less out of it. Now you can gain more.

Re: The madness of the bailout in Cyprus

#146

Post by justincormack »

caf wrote: post #83
mixmax wrote: post #55

Earlier quoted context omitted.

It's a good point, so I did a quick google search and it appears that in most countries the insurance is paid out by a seperate insurance fund that all banks pay in to over time. Presumably the fund is reinsured with lloyds, Berkshire Hathaway or something similar. So it's independent of the banks and the state. I couldn't find anything specifically for Cyprus, so I'm not sure what the situation is there, but it's pr…

There's no reinsurance, and the rules only ensure that there will be enough funding to cope with a single "medium-sized bank failure" ... by 2020.

Indeed and most countries don't have medium sized banks, they tend to have big ("too big to fail") and small ones. When a bank failed in the Netherlands (SNS Reaal) the other week the government said that it would have cost EUR 30bn to the fund which would have crippled the 3 remaining large banks. Iceland had a similar system where the deposit insurance fund could not cover any of the banks failing, as they were all too big. The two big banks in Cyprus are huge.

Re: The madness of the bailout in Cyprus

#147

Post by omgyeah »

grannyg00se wrote: post #23
stefantalpalaru wrote: post #7

It's not just the banks. Cyprus has a huge public debt[1]. The measure is also not the first of its kind in the EU - Italy did it in 1992 to cover a financial emergency. They took "only" 0.6% from all bank accounts back then. [1] http://www.cyprus-mail.com/cyprus/highest-annual-increase-go...

According to wikipedia, Cyprus' public debt is less than Greece's, Italy's, USA's, Canada's, Germany's, and many others.

Yeah, but Cyprus, Greece, Italy, Portugal and Spain don't have any nukes ;)

Re: The madness of the bailout in Cyprus

#148

Post by justincormack »

moe wrote: post #78
caf wrote: post #49

Earlier quoted context omitted.

That guarantee is clearly a dead letter in the case of Cyprus anyway, because there's no way that their government can make good on that promise in the face of multiple large bank collapses. I already said that I agree it was a bad move due to the effect on confidence.

That guarantee is clearly a dead letter in the case of Cyprus anyway, because there's no way that their government can make good on that promise in the face of multiple large bank collapses. That's where the EU steps in, or rather: was supposed to step in. We were promised that our small savings accounts ( This came with the implied assumption that when shit hits the fan, they will shave what they need from the big a…

No this has not been implemented yet. We are promised it will be in future, once the ECB is the bank regulator.

Re: The madness of the bailout in Cyprus

#149

Post by ikassinopoulos »

The problem is worse as far as it concerns loans here in Cyprus. Let's say I have a loan for 100k to buy a new house. Now I have 90k, I still owe 100k to the bank and I cannot afford to buy the house without a new loan. The same goes for startup fudings, student loands and who knows what else. there is no control over special cases and most of the wealthy ones have already moved their money to foreign banks a few weeks ago. Jobs and salaries are still safe and people will not be on the street. Even I as a student not currently in Cyprus had my account frozen and lost some 100s of euros. I hope the country is now in a way saved but this is still a disaster for some of us. However I don't feel the same for the eurozone and don't see how it is possible to keep Italian banks from drying out during the next few weeks.

Re: The madness of the bailout in Cyprus

#150

Post by seanmcdirmid »

omgyeah wrote: post #138
seanmcdirmid wrote: post #113

Earlier quoted context omitted.

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?

Maybe you could sell some of your parents organs and buy a new car? What is a better option? Maybe don't buy a new car? Let them rot. They're too far away. I can't smell the foul scent. I don't care.

I'm sure the Cypriots don't want to rot, so why not take the EU bail out? Yes, they lose 6-10%, but that is much better than 100%. And the Russia mafia won't be that angry.
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