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Cypriot Bailout Sends Shivers Throughout the Euro Zone

nytimes.com

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Re: Cypriot Bailout Sends Shivers Throughout the Euro Zone

#61

Post by danenania »

Atropos wrote: post #14
mixmax wrote: post #7

"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…

Unfortunately, our lovely world financial system is so precariously poised that a small pebble falling can quickly become an avalanche.

Though as they relate to market psychology, first in the other troubled nations of Europe, but secondarily for the entire world, the actions taken in Cyprus don't exactly resemble the dropping of a pebble. They're more like exploding a few sticks of dynamite on the already teetering mountaintop.

This will go down in history as a huge and pivotal economic policy blunder if it goes through.

Re: Cypriot Bailout Sends Shivers Throughout the Euro Zone

#62

Post by [deleted] »

etherael wrote: post #52
eurleif wrote: post #51

Earlier quoted context omitted.

Is anyone of any importance seriously clueless enough that they can't predict the consequences of taking money out of everyones' bank accounts? And if so, what is wrong with the system that allows morons of that magnitude to gain power?

It sounds unbelievable enough that I really can't help but wonder if they're doing it on purpose. But assuming that were true, what have they to gain from doing so?

[deleted]

Re: Cypriot Bailout Sends Shivers Throughout the Euro Zone

#63

Post by mikecane »

jk4930 wrote: post #27
mikecane wrote: post #3

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.

No. We'll see some bank runs mostly in southern countries, but the deposits are power law distributed and thus the financial majority (in sum, not in numbers of accounts) will probably act more rational than members of the frightened, over-emotional masses that withdraw their 5-10K or so. The rational will transfer their accounts to more stable banks, e.g., in Germany and won't put their money under the mattress. Of…

>>>The rational will transfer their accounts to more stable banks, e.g., in Germany

Ah, so Cyprus will just collapse on its own then without any repercussions elsewhere? I don't think so.

Re: Cypriot Bailout Sends Shivers Throughout the Euro Zone

#64

Post by Turing_Machine »

mixmax wrote: post #7

"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…

Agreed, but I wouldn't necessarily restrict it to the southern countries.

Everyone across the entire Eurozone now knows that their bank deposits can be confiscated without warning.

If I were a bank teller, I think I'd call in sick tomorrow. It's not going to be pretty.

Re: Cypriot Bailout Sends Shivers Throughout the Euro Zone

#65

Post by bitcartel »

cft wrote: post #50
mixmax wrote: post #7

"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…

I believe the decision was based on German unwillingliness to bail out Russian "hot money" , which they believe is the majority of Cypriot bank cash deposits. They grossly miscalculated the public reaction however.

Given the inevitable public backlash, looks like they're already back-peddling, or worse, just making things up as they go along.

"The Cypriot government on Sunday discussed with lenders the possibility of changing the levy to 3.0 percent for deposits below 100,000 euros, and to 12.5 percent for above that sum, a source close to the consultations told Reuters on condition of anonymity."

"According to a draft copy of legislation, failing to pay up would be a criminal offence liable to three years in jail or a 50,000 euro fine."

http://www.reuters.com/article/2013/03/17/us-cyprus-parliame...

Re: Cypriot Bailout Sends Shivers Throughout the Euro Zone

#66

Post by Turing_Machine »

Atropos wrote: post #46
jpdoctor wrote: post #38

Earlier quoted context omitted.

> What exactly is your point? The euro is up 16% because there are more dollars in circulation chasing the same number of euros. Same for the pound. A deflationary environment in Europe (what are prices doing in Greece? What is the Spanish unemployment rate?) is exactly what you would expect, and the Euro up 16% against the USD and 23.3% against the UK pound is evidence of that. Or to put it another way: You quote ev…

You do realize that I quoted numbers for the last 10 years? Since the Eurocrisis started, the Euro has losses of around 6-10% against the other major currencies, so your deflationary argument isn't really sound. All I wanted to say is that in the long run, foreign exchange rates express some form of judgment about the soundness of a currency. The markets still consider the Euro a very sound and safe currency - at lea…

"You do realize that I quoted numbers for the last 10 years?"

No, you didn't. You compared two isolated data points.

If you look at the actual graph of the last ten years, the Euro has been both considerably higher and considerably lower against the dollar over that period.

Re: Cypriot Bailout Sends Shivers Throughout the Euro Zone

#67

Post by Turing_Machine »

hippich wrote: post #43

From fbme.com (large bank in Cyprus): 16 Mar 13 2.00pm 17 March 2013 The authorities in Cyprus have announced the delay of a Parliamentary debate on the provisional agreement signed by European Union finance ministers for a bailout package for the Government of Cyprus. Though there is considerable media speculation on the detail, some of it no doubt unfounded, the Cyprus authorities have yet to confirm arrangements w…

"The more he spoke of his honor, the faster we counted our spoons." -- Ralph Waldo Emerson

Re: Cypriot Bailout Sends Shivers Throughout the Euro Zone

#68

Post by skinnynerd »

InclinedPlane wrote: post #54
niggler wrote: post #28

Earlier quoted context omitted.

" the economic differences between regions in the US aren't nearly as large as in the eurozone" 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…

This works in the US because there isn't actually that great a disparity between the wealthiest and poorest states in the US, whereas the disparity is much, much greater in the eurozone. More so, the "poor" states in the US are still pretty wealthy even compared to some of the wealthiest European countries, whereas the poor countries in the eurozone are quite poor on an absolute scale (Estonia and Slovakia have a per…

Take a look at this table http://www.economist.com/blogs/dailychart/2011/08/americas-f... to see how income is distributed in the US between the states. New Mexico has received over two-and-a-half times its 2009 GDP more in federal spending than it has sent in taxes over a twenty year period. The equivalent for Europe would be akin to Greece getting over $760 billion. Yeah, Europe has to work on its "union" aspect a bit.

Re: Cypriot Bailout Sends Shivers Throughout the Euro Zone

#70

Post by tptacek »

eurleif wrote: post #51
cft wrote: post #50

Earlier quoted context omitted.

I believe the decision was based on German unwillingliness to bail out Russian "hot money" , which they believe is the majority of Cypriot bank cash deposits. They grossly miscalculated the public reaction however.

Is anyone of any importance seriously clueless enough that they can't predict the consequences of taking money out of everyones' bank accounts? And if so, what is wrong with the system that allows morons of that magnitude to gain power?

I don't understand this question. What was the alternative? As people keep pointing out, Cypriot banks are overwhelmingly funded by their depositors. You can't just go after the bondholders in this case. And "do nothing" would have been worse, possibly by an order of magnitude, for depositors.
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