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The madness of the bailout in Cyprus

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Re: The madness of the bailout in Cyprus

#211

Post by paganel »

grey-area wrote: post #159
st0p wrote: post #29

To quote the article: "This is why The IMF and the ECB has stepped in and bailed out the banks. Rumor has it that without the bailout Cyprus two largest banks would be bankrupt in a matter of days. A situation no economy can survive, especially not one with a disproportionally large banking sector." I don't see the problem to be honest. We (I live in the Netherlands) are paying a lot of money to help them out, which…

I don't see the problem to be honest. We (I live in the Netherlands) are paying a lot of money to help them out, which is okay. But yeah we're asking the inhabitants of Cyprus for a sacrifice too. The 10% tax is a very crude way to implement this, but dire times need dire actions. I don't think it's hyperbole to suggest that this sort of action could lead to pan-european war in the next decade. It radically undermine…

> If you undermine the social contract and rule by fiat, as the EU has in Greece and Cyprus, it leads to extremism, break down of social order, an ever more polarised political situation, and ultimately revolution and/or dictatorship

Mostly unrelated and that kid was really stupid, but just the other day a 20-year old Greek footballer used the Nazi salute after scoring a goal for his team (http://www.bbc.co.uk/news/world-europe-21822165). Like I said, that kid is beyond stupid, but I think it shows that some sort of extremism (right-wing, left-wing) is slowly making its way onto the front scene.

Re: The madness of the bailout in Cyprus

#212

Post by paganel »

konstruktor wrote: post #123
omgyeah wrote: post #41

Earlier quoted context omitted.

I wish you won't ever see the consequence of dire actions against you or your family. You have no idea how it feels like. You have no idea how unfair it is. In case that you have not realized it, you are not paying any money. You are loaning with loan-shark rates. Have you ever heard of a loan-shark losing money? Things are much more complicated than black or white. Greece and Cyprus are not independent countries. Th…

As a citizen of a fiscally responsible EU country, reading shit this makes me very angry and eradicates leftover trace amounts of solidarity.

I hope that country is not Austria (which ran to the the EU like a little girl when shit starting hitting the fan in early 2009, asking for help for Eastern Europe countries so that the latter won't go belly-up, that would have meant Austria going belly-up), the Netherlands or Belgium (both countries with a very high level of private-sector debt, approaching Cyprus, pls see this: https://media.economist.com/sites/default/files/imagecache/2...), to say nothing of France.

The only European country still standing on its feet without any outside help is Germany, but that could end very quickly end once every other country around her begins the slide into depression. For better or worse, we're all in this together.

Re: The madness of the bailout in Cyprus

#213

Post by moe »

tatsuke95 wrote: post #176
omgyeah wrote: post #142

Earlier quoted context omitted.

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.

> "They have many (natural) resources standing still on the earth. Which can be used to pay back loan." Like the German war reparations after WWI? That worked out well for everyone.

If you feel a need to invoke Godwin you should at least try to be intellectually honest.

The citizens in the tumbling EU-nations are paying what they perceive as unfair reparations already (Justification: "You lived beyond your means" - most citizens most certainly didn't). The radicalization is already happening (cf. elections in Greece and Italy).

You make it sound like taking 6.75% out of the small guy's savings account would somehow be better than stretching out the pain or (god forbid!) claiming the wealth back from those who extracted it in the first place.

Re: The madness of the bailout in Cyprus

#214

Post by reinhardt »

grey-area wrote: post #159
st0p wrote: post #29

To quote the article: "This is why The IMF and the ECB has stepped in and bailed out the banks. Rumor has it that without the bailout Cyprus two largest banks would be bankrupt in a matter of days. A situation no economy can survive, especially not one with a disproportionally large banking sector." I don't see the problem to be honest. We (I live in the Netherlands) are paying a lot of money to help them out, which…

I don't see the problem to be honest. We (I live in the Netherlands) are paying a lot of money to help them out, which is okay. But yeah we're asking the inhabitants of Cyprus for a sacrifice too. The 10% tax is a very crude way to implement this, but dire times need dire actions. I don't think it's hyperbole to suggest that this sort of action could lead to pan-european war in the next decade. It radically undermine…

> If you undermine the social contract and rule by fiat, as the EU has in Greece and Cyprus, it leads to extremism, break down of social order, an ever more polarised political situation, and ultimately revolution and/or dictatorship (see France late 1780s, Russia 1900-1917, Germany 1920-30s).

Hopefully irrelevant factoid: Cyprus is the 6th country in the world in number of guns per capita [1].

[1] https://en.wikipedia.org/wiki/Number_of_guns_per_capita_by_c...

Re: The madness of the bailout in Cyprus

#215

Post by kitsune_ »

st0p wrote: post #29

To quote the article: "This is why The IMF and the ECB has stepped in and bailed out the banks. Rumor has it that without the bailout Cyprus two largest banks would be bankrupt in a matter of days. A situation no economy can survive, especially not one with a disproportionally large banking sector." I don't see the problem to be honest. We (I live in the Netherlands) are paying a lot of money to help them out, which…

You have it the wrong way. You are paying exactly nothing to "help them out". Money is being borrowed through the EFSF and EFSM and being lent to Ireland et al. This money goes directly to the bondholders of the defunct banks. These bondholders are the major German, Dutch and French banks. Deutsche Bank would have defaulted if the Irish or Spanish banking system went under.

In essence, The Irish have bailed out Germany and the rest of Europe. In the case of Ireland, they are now sitting on 80+ billions of Euros of debt that they have to pay back.

And remember: There was no haircut for the bondholders.

Re: The madness of the bailout in Cyprus

#218

Post by omgyeah »

konstruktor wrote: post #200
bitcartel wrote: post #90

Earlier quoted context omitted.

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!

Their elected officials accepted a deal that involved this haircut. That's hardly by force.

Exactly!

The problem is that the elected officials promised the exact opposite, in order to get elected.

Re: The madness of the bailout in Cyprus

#219

Post by crag »

dougk16 wrote: post #40
chailatte wrote: post #2

If I were in Greece, Italy, Spain, or Ireland, I think I would pull out all my bank deposits but the bare minimum cash needed to cover obligations.

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…

" I'll just buy gold "

This only works if you physically have the gold. Having a note stating how much gold you own, which is housed someplace beyond your reach isn't security. You are still relying on the market/bank.

And even if you did have the gold, this presents a slew of other problems; security and storage are two that come to mind.

Re: The madness of the bailout in Cyprus

#220

Post by bjornsing »

jpdoctor wrote: post #208
justincormack wrote: post #202

Earlier quoted context omitted.

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…

I wholeheartedly agree. And this in my mind is what the whole story comes down to. I've written about it here: http://bit.ly/1103Gkq.

But to summarize, when both the banking system and the government is insolvent it's relatively obvious to me that loses should be imposed in this order:

1. First bank shareholders should be wiped out(!),

2. then junior bondholders,

3. then senior bondholders and uninsured depositors,

4. then government bond holders,

5. and finally, only if the above doesn't cover it, insured deposit holders will have to take a haircut.

What we're seeing now is more or less a jump straight to 5.

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