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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

#71

Post by brisance »

pcrh wrote: post #37
Lazare wrote: post #15

Earlier quoted context omitted.

You know what's even better? In the Cyprus example, bond investors in the banks (who don't have government insurance) are being completely protected from losses). Small depositors (who do have government insurance) are having 6.75% of their savings calculated. That's entirely contrary to the policy you quoted. It's hard to really get your head around how wrong headed this decision is.

The real problem here is not that depositors are getting a "haircut", which they should if they invest in non-profitable bank, but that the insurance on deposits under Euro 100,000 is no longer good. In a theoretical free market, depositors would lose all their money if a bank goes bust, just as stock holders lose their money if a company goes bust. Banks, however, hold a particular role in a modern economy that regu…

Not trying to be a pedant here, but it's not generally true that stock holders lose money if a company goes bust. Lots of publicly listed companies file for Chapter 11 or some form of bankruptcy protection to tide over cash flow problems. The comparison is not quite right although your point is clear.

Re: Cypriot Bailout Sends Shivers Throughout the Euro Zone

#73

Post by [deleted] »

rheide wrote: post #16
codesuela wrote: post #10

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.

Perhaps not the collapse of all banking, but it could well be remembered as the first direct cause of the EU breaking up into separate countries/areas again.

[deleted]

Re: Cypriot Bailout Sends Shivers Throughout the Euro Zone

#74

Post by Nightrider »

adestefan wrote: post #11
codesuela wrote: post #10

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?

Let me ask you this: would you deposit your rent and bill money into a bank you trust to not give it away 90% of the time?

Re: Cypriot Bailout Sends Shivers Throughout the Euro Zone

#75

Post by martinced »

There's something worse that lawyers who can't count. Lawyers who think they can.

The problem is that politician dream up of an european union to make sure no more french / german war would happen. But politicians can't count: they're for the most part lawyers.

So they build this monstrosity: the European Union. A mad bureaucracy / technocracy where every document is translated in 27 languages (including obscure ones): small countries love it because they can send people to get jobs in Brussels at crazy high salaries. For what? Paperwork. Nothing but paperwork.

Then they dreamed up the most stupid thing ever: a common currency (the euro) without a common fiscality. Only stupid lawyers can come up with nonsense like this. Economists did warn them, before the first euro even circulated, that it would end up in precisely the current situation (even the default of Greece and Spain had been forecast).

Nobody listened.

Wanna know what's coming next? It's easy: go read what economists who predicted the current situation are saying. They're from the Milton Friedman school of economics thought. Keynesians lost is and lost it a long time ago. Nothing to learn there: they never predicted anything more than a few years (two or three) before it happened. If you want to predict 15 years+ ahead you have to read Friedman and its disciples.

What coming next is simple: these stupid politicians and lawyers who created all this crazy paperwork and non-sense laws are going to try anything they can, including more and more non-democratic measures, to try to save the euro.

But they can't save it: it's fundamentally flawed. Countries have to get out or the entire eurozone is going to split and go back to national currencies.

The cost is going to be about 15% of the GDP for all the countries exiting.

If the euro ain't split in the few years coming we'll be going to have the BCE defaulting (the BCE basically already became a bad bank, drowning under state debt from states who are going to default) and massive civil unrest: people losing everything.

Here we're talking about a worldwide GDP drop of about 30%.

So either we bit the bullet now and take about a 15% GDP loss by going to national currencies or we try desperately to save the euro and we'll end up creating a much bigger problem.

We're witnessing history. We're seeing a bunch of clueless politicians (who are mostly lawyers) totally f^cking up the entire economy of a continent (and probably of the entire world).

Re: Cypriot Bailout Sends Shivers Throughout the Euro Zone

#76

Post by martinced »

InclinedPlane wrote: post #8
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…

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,…

Indeed. Excepted that this is not a financial crisis. The financial crisis is just a catalyzer. The fundamental issue is state who continuously spend more than what they made because states are run by politicians who can't count (because 99% of them are lawyers and lawyers can't count and they'll only accept advices from economists going their way: that is "more state").

We're now witnessing what happens when states spending more than what they make are running out of money.

Of course socialists are trying to pretend it's a financial crisis and that without the financial crisis in the U.S. nothing would ever have gone wrong with all these highly socialists states in Europe spending more than they're making and creating an ever bigger state debt.

Seriously who's buying that? When you're borrowing more money than what you make at one point payback time comes.

And payback time is coming for socialists. And they don't like it.

Re: Cypriot Bailout Sends Shivers Throughout the Euro Zone

#77

Post by No1 »

JumpCrisscross wrote: post #20
Lazare wrote: post #15

Earlier quoted context omitted.

You know what's even better? In the Cyprus example, bond investors in the banks (who don't have government insurance) are being completely protected from losses). Small depositors (who do have government insurance) are having 6.75% of their savings calculated. That's entirely contrary to the policy you quoted. It's hard to really get your head around how wrong headed this decision is.

Cypriot banks finance themselves through deposits, not bonds. Less than 0.3% of Laiki's and 2.5% of Cypriot banks' €70 billion in assets are funded by bonds. Further, those bonds were issued under English law. The depositors are governed by local law. Government insurance means nothing when the government is broke (relative to the size of its banks). Nicosia does not have the €30 billion to reimburse accounts covered…

"Cypriot banks finance themselves through deposits, not bonds."

The Cypriot banks are going to find all of their deposits withdrawn as soon as they reopen, so they better figure out a new way to finance themselves.

Re: Cypriot Bailout Sends Shivers Throughout the Euro Zone

#78

Post by scarmig »

martinced wrote: post #76
InclinedPlane wrote: post #8

Earlier quoted context omitted.

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,…

Indeed. Excepted that this is not a financial crisis. The financial crisis is just a catalyzer. The fundamental issue is state who continuously spend more than what they made because states are run by politicians who can't count (because 99% of them are lawyers and lawyers can't count and they'll only accept advices from economists going their way: that is "more state"). We're now witnessing what happens when states…

For all the ranting about socialism, deeply social democratic countries--namely, countries like Germany, Denmark, Norway, Sweden--are doing mostly fine. If not for the Eurozone crisis, I'd say they'd be much better places economically than the USA, let alone a country like Cyprus or Greece. This is despite having more generous public sectors than the Mediterranean.

Nor is it simply corruption, though there's PLENTY of that to go around. Lots of corrupt countries aren't about to spontaneously collapse. But it's not totally crazy to imagine Italy, Spain, and Greece collapsing into chaos by the end of April. Or, if you're a pessimist, by the end of March...

It's sectoral imbalances and a deeply broken EU.

Re: Cypriot Bailout Sends Shivers Throughout the Euro Zone

#80

Post by martinced »

chestnut-tree wrote: post #5

People across Europe will react with horror to this latest development in the Eurozone crisis. This will not strengthen the case for stronger European integration but turn many more against it. Notice too how the supporters of these measures attempt to frame the debate around wealthy foreign tax evaders while minimizing the plight of ordinary Cypriots. This extract from an opinion piece in The Guardian says it all ".…

The problem is that even when people vote nationally against Europe, their corrupted lawyers/politicians still do only what they want: the french voted against entering the eurozone. Yet their leaders decided France would enter the eurozone.

That's totally un-democratic just like what's happening in Cyprus is anti-democratic. Note that this shouldn't come as a surprise: Europe is mostly socialists and socialist only believe in democracy ("social democracy") as a mean to get in power and, once in power, to act in non-democratic ways. This is precisely what's happening: non-democratic confiscation of citizens' money to fund the state (please spare me the propaganda about the banks: it's about saving the european governments).

(I digress but I so wish they weren't in it, because France is f^cked: people unwilling to work more than 32 hours/week, super high sense of entitlement, uncontrollable state debt exploding and they're going to default in a few years, just like Greece).

I do really hope that the U.K. massively vote to get out of the European Union when the referendum shall take place.

Of course they're wagging the dog with "rich russians" and whatnots: later on they'll blame the working people (who have economies) has being responsible of all the evil in Europe.

Not a single time are you going to see socialists do some introspection.

Greece, Spain, Portugal, Italy and France are all going to state default (Greece will indeed default again).

Oh, and Cyprus shall never have a state debt of 100% of their GDP in 2020 as stated for this measure.

There are way too many public servants, way too many state benefits, in all these countries for them to ever be able to repay their state debt.

Socialism inevitably leads to state default and that's what we'll witness soon (we already witnessed it with Greece).

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