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The madness of the bailout in Cyprus

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Re: The madness of the bailout in Cyprus

#201

Post by icebraining »

gasull wrote: post #173
icebraining wrote: post #126

Earlier quoted context omitted.

The Euro losing 10% of value in relation to what? USD? Yen? And even if the dollar loses 10% of the value vs every other currency, it's not true that you can only buy 90 beans, because you're not the only one with dollars: there are farmers who sell in dollars, and buy their stuff in dollars, and so will probably keep their prices. When everyone you trade with uses the same currency as you, there's no value to be los…

This is not true. Currency depreciation leads to price inflation. That's why your dollars (or euros) buy less things year over year.

Currency depreciation by increasing the supply is not the same as losing value relative to other currencies, which was what happened to BItcoins (since the supply is constant).

And while both depreciations lead to price inflation, an loss of X% in the latter doesn't lead to an increase of the same amount in price inflation, because not all products completely depend on imports from other economic zones.

Re: The madness of the bailout in Cyprus

#202

Post by justincormack »

jpdoctor wrote: post #195
justincormack wrote: post #191

Earlier quoted context omitted.

There are almost no bondholders. The junior bondholders have probably been wiped out, it is unclear. The senior bondholders there are (very few) are secured (covered bonds) which are senior to depositors.

> which are senior to depositors. Not for any definition of "depositor insurance" that I'm familiar with. The whole point was that the investors of the bank would lose their money first, then a gov't agency would make good on the deposits. Anything less is a return to the days of unstable swings banking and deflationary depressions. Or perhaps the wizards at the EU thought/didn't care that Cyprus would join Greece in…

Depositor insurance is not about legal seniority in debt, it is about an insurance scheme that is made available (usually funded by a levy on banks). Covered bonds own a specific pool of assets. But the issue now is that there is legal restructuring, or taxes like this, without any bankruptcy, so it is a bit random what happens...

Re: The madness of the bailout in Cyprus

#203

Post by paulhauggis »

omegaworks wrote: post #12
[deleted] wrote: post #6

[deleted]

Actually, what's preventing someone from just putting their savings in bitcoin, waiting on the tax issues to pass, and moving it back?

The fact that bitcoin is even more volatile would stop me. If you are going to do that, why not just buy gold or silver?

Re: The madness of the bailout in Cyprus

#204

Post by paulhauggis »

gasull wrote: post #184
tnuc wrote: post #26

Even after the tax is taken out there will be a huge run on all banks in Cyprus. If I was in Cyprus, I would be buying gold and burying it somewhere safe :)

Bitcoins are better for that matter since you don't have to worry so much about storage. You can easily cross a border with them. Or you can create a brainwallet (basically a passphrase that recreates a wallet), delete any data of the bitcoin wallet from your electronics, cross the border, then recreate the wallet from the passphrase. https://en.bitcoin.it/wiki/Brainwallet

This is bad advice. Bitcoin isn't stable enough yet to put my life savings into it.

Re: The madness of the bailout in Cyprus

#205

Post by feee »

onemorepassword wrote: post #152
ameister14 wrote: post #46

Earlier quoted context omitted.

The thing is, your country signed an agreement to help them if they need it. You don't get to punish them for the fact that you are upset to have to meet your obligations.

"They" signed an agreement to be honest in reporting their situation and meeting their obligations. Instead, "they" lied and cheated, and effectively nullified any mutual agreement. The only reason why they're still getting the help is because the alternative would be much worse.

Cyprus didn't lie about their fiscal situation; Greece did. Don't get your shit all mixed up.

Re: The madness of the bailout in Cyprus

#206

Post by paganel »

Shivetya wrote: post #166
mixmax wrote: post #42

Earlier quoted context omitted.

There are pan-European laws that if a bank goes under you get the funds up to €100.000 you had in the bank reimbursed by the state. The reason for this is that is that banks are the financial glue of society, and for better or worse we can't live without them. Bankruns can bankrupt a bank in a day, thus it's incredibly important that people feel secure in knowing that the money they have in the bank is secure no matt…

Put to test? I would say that it has been totally voided. The people, by the people I mean the little guy, just got rolled. Considering how well politicians like to play the class warfare card I am surprised even they went for it. Are those in Brussels just tone deaf? I am quite sure no politician here in America would have the guts to pull this, but I do not know how answerable those in Brussels are to the common ma…

> I am quite sure no politician here in America would have the guts to pull this

I'm European and just after this was announced I was thinking what would happen if something similar would be enforced in the States. My conclusion was that that this would be one of the few acts by the US Government that would cause civil unrest.

Re: The madness of the bailout in Cyprus

#207

Post by icebraining »

tptacek wrote: post #199
icebraining wrote: post #128

Earlier quoted context omitted.

What Cypriot assets? They lost Euros , which happens to be the same currency that their trading partners use, so there's no value to be gained relative to them. And no, I haven't assumed that Bitcoin will regain in its 30% in value - it already has . But that it can gain (or lose!) so much value relative to the common currency is a big difference, since the common currency can't gain or lose value against itself.

If you believe that, and are given a choice between (a) an asset which is going to lose 30% of its value but then gain it back and (b) a confiscatory 6% tax on cash, you still prefer (b); you eat the tax, wait for the devaluation of bitcoin, buy bitcoin, and enjoy the appreciation. Of course, that's a silly hypothetical, because the reality is that bitcoin (or gold) is just as likely to stay devalued longer than you…

I'm not saying buying Bitcoins is a good move; I myself own none. I'm saying the two situations aren't similar.

Re: The madness of the bailout in Cyprus

#208

Post by jpdoctor »

justincormack wrote: post #202
jpdoctor wrote: post #195

Earlier quoted context omitted.

> which are senior to depositors. Not for any definition of "depositor insurance" that I'm familiar with. The whole point was that the investors of the bank would lose their money first, then a gov't agency would make good on the deposits. Anything less is a return to the days of unstable swings banking and deflationary depressions. Or perhaps the wizards at the EU thought/didn't care that Cyprus would join Greece in…

Depositor insurance is not about legal seniority in debt, it is about an insurance scheme that is made available (usually funded by a levy on banks). Covered bonds own a specific pool of assets. But the issue now is that there is legal restructuring, or taxes like this, without any bankruptcy, so it is a bit random what happens...

> Depositor insurance is not about legal seniority in debt

It absolutely is. When a bank fails, the regulating institution steps in and performs the capital restructuring. The statement of depositor insurance is that they are to be made whole, even if the regulatory institution must dip into the depositor insurance fund.

The EU restructured the Cyprus banks, but they did not haircut the bondholders for the difference, as has been done in every other bank failure since the Great Depression.

Re: The madness of the bailout in Cyprus

#209

Post by feee »

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...

Cyprus' public debt took off after they were downgraded by Moody's and friends last year (meaning they were no longer able to borrow). This happened because the EU--in their infinite wisdom--wrote off a €4b loan (in bonds) Greece owed to Laiki (a Cypriot bank). So that's €4b the government lost overnight, and round about €10b it's "lost" since 'cos they can't trade.

Public debt for 2011 was 71.1 of the country's GDP.[1]

[1] http://www.centralbank.gov.cy/media/pdf/AnnualEconomicIndica...

Re: The madness of the bailout in Cyprus

#210

Post by tptacek »

icebraining wrote: post #207
tptacek wrote: post #199

Earlier quoted context omitted.

If you believe that, and are given a choice between (a) an asset which is going to lose 30% of its value but then gain it back and (b) a confiscatory 6% tax on cash, you still prefer (b); you eat the tax, wait for the devaluation of bitcoin, buy bitcoin, and enjoy the appreciation. Of course, that's a silly hypothetical, because the reality is that bitcoin (or gold) is just as likely to stay devalued longer than you…

I'm not saying buying Bitcoins is a good move; I myself own none. I'm saying the two situations aren't similar.

I think you're making a moral comparison, not a practical one.
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