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It would be pretty ironic if the Cyprus bailout of 2013 will noted in history books as the event that lead to the collapse of 21st century banking (next up bank runs). Is it probable? No. Is it possible? Maybe.
Here are your options: lose all of your money or lose 10% of your money. What do you choose?
Would love to see some macroeconomics views on this.
Earlier quoted context omitted.
Smug US/UK commentators have now been shouting for 3+ years about how incredibly stupid the EU is, how the Euro will break up in two weeks... But why is the Euro up 16% against the USD and 23.3% against the UK pound over the last 10 years? Why are German bond yields lower than the US bond yields, and why do some stable eurozone countries still possess a triple AAA rating by all credit agencies, in opposition to the U…
> But why is the Euro up 16% against the USD and 23.3% against the UK pound over the last 10 years? You think it is something other than supply and demand? The Fed and BoE can print; The ECB cannot. The result (which is related to printing) you failed to quote: Greek deflation. It's not complicated.
Individual (small) countries may fail, the system will be fine, and misinformed doomsayers will - as always - end up making fools of themselves.
Earlier quoted context omitted.
Here are your options: lose all of your money or lose 10% of your money. What do you choose?
Option 1: Make rational decisions and rely on everybody else being rational Option 2: Panic and make rash decisions
Earlier quoted context omitted.
Here are your options: lose all of your money or lose 10% of your money. What do you choose?
I also think that there are two clear options: Cyprus gets a bailout under ECB terms or Cyprus doesn't get a bailout and faces insolvency. It seems that the government decided that the first option is preferable to the second one. The second option would almost certainly lead to civil unrest, because it would probably mean that teachers, doctors and other public employees (also pensioners) wouldn't get payed next mon…
They can't reopen the banks without limiting the amount of money people can withdraw. Thus the death spiral of the entire worldwide financial system begins.
Of course, it's a bit dirty to grab the money from those <100K too, it destroys trust, no question. But the essential players and movers were protected, that's why we created this small injustice (yes small, compared to what's possible).
"After five years of bailouts financed largely by austerity-weary European taxpayers, wealthy nations like Germany and the Netherlands have decreed that from now on when a bank or country fails, it will be bond investors and perhaps even bank depositors who will be forced to pick up a big share of the bill. " This is so incredibly stupid that it would be funny if it wasn't so tragic. They're basically telling everyon…
It's just another example of what's fundamentally wrong with the Euro. If you compare to the US, which is a continent sized country with a lot of diversity, you'll see some big differences. For one, the economic differences between regions in the US aren't nearly as large as in the eurozone. For another, the authority which regulates currency is also in control of taxation and government spending at a federal level,…
I think the origin of this and other problems is the lack of a significant EU-wide tax system. The US federal tax system serves as a wealth distribution mechanism (some states like NY and CA pay much more than they receive, and other states like OK receive much more than they pay). A similar system in europe would help the net import nations like Cyprus and greece.
"After five years of bailouts financed largely by austerity-weary European taxpayers, wealthy nations like Germany and the Netherlands have decreed that from now on when a bank or country fails, it will be bond investors and perhaps even bank depositors who will be forced to pick up a big share of the bill. " This is so incredibly stupid that it would be funny if it wasn't so tragic. They're basically telling everyon…
Smug US/UK commentators have now been shouting for 3+ years about how incredibly stupid the EU is, how the Euro will break up in two weeks... But why is the Euro up 16% against the USD and 23.3% against the UK pound over the last 10 years? Why are German bond yields lower than the US bond yields, and why do some stable eurozone countries still possess a triple AAA rating by all credit agencies, in opposition to the U…
If the UK pound falls by X% against most other currencies, this is equivalent (in the long term) to all inhabitants of the UK losing X% of their income.
How safe are bank deposits in northern coutries? Germany, uk?
As for other countries they're as safe as their "full faith and credit" and any depository insurance that it covers.