“My bank account's got robbed by European Commission. Over 700k is lost.”

No the decision has been already made, Laikie is being dissolved, so there won't be any haircut. You will get only Euro 100k

http://www.cyprus-mail.com/cyprus/details-euimf-bailout- agreement-cyprus/20130325

"Laiki will be resolved immediately - with full contribution of equity shareholders, bond holders and uninsured depositors - based on a decision by the Central Bank of Cyprus, using the newly adopted Bank Resolution Framework."

The argument about inflation really depends on what you have to do with the money besides putting it into investments, and what other investment options out there.

It is still consensus that the bond rate + inflation risk is understood much better than any other asset I can think of. I'm talking about the financial term 'risk' here, not the colloquial one that you are using. In financial terms, you can have a loss without any risk and still be happy about the position afterwards...

What's funny is that the FDIC is funded by the banks themselves, the same people who need the bail-outs in the first place. The FDIC insurance fund has about $30 billion, while total US bank deposits are around $5 trillion[1], and outstanding derivatives in the hundreds of trillions with JPMorgan Chase[2] holding $78 trillion worth. Who knows how much of this is toxic?

Working backwards, on your second point, if the FDIC ran out of money, the taxpayer might eventually have to step in, which might not be politically feasible if taxpayers have bail-out fatigue.

"During the savings & loan crisis, the FDIC did not have enough in deposit insurance receipts to pay for the Resolution Trust Corporation wind-down vehicle. It had to get more funding from Congress." [3]

On your first point, the full paragraph provides better context, where they are saying they want to use insurance funds to recapitalize the bank and prevent a bust from happening in the first place. Of course, the bank might need more money, leaving the insurance fund empty, and deposit holders at risk.

"34 The U.K. has also given consideration to the recapitalization process in a scenario in which a G-SIFI’s liabilities do not include much debt issuance at the holding company or parent bank level but instead comprise insured retail deposits held in the operating subsidiaries. Under such a scenario, deposit guarantee schemes may be required to contribute to the recapitalization of the firm, as they may do under the Banking Act in the use of other resolution tools. The proposed RRD also permits such an approach because it allows deposit guarantee scheme funds to be used to support the use of resolution tools, including bail-in, provided that the amount contributed does not exceed what the deposit guarantee scheme would have as a claimant in liquidation if it had made a payout to the insured depositors."

[1] http://www.bloomberg.com/news/2013-01-23/u-s-deposits-post-b...

[2] http://dealbook.nytimes.com/2011/03/22/4-wall-st-banks-still...

[3] http://www.nakedcapitalism.com/2013/03/when-you-werent-looki...

> Greek's insolvency impacted Cyprus greatly, because a large portion of the Cyprus population are of Greek descent.

Just to add a little context to this. Cyprus is a divided country, as a result of a conflict in 1973 between Turkish Cypriots (and Turkey) and Greek Cypriots (and Greece). The Greek Cypriots favoured unification with Greece (Enosis) whereas the Turkish minority felt threatened by this (due to various times in which sectarian violence had spread on the Island, and also due to fears of reprisals for anti-greek pogroms in mainland Turkey). The whole thing is really complicated and basically no-one wins.

Fast forward to 2004 and a referendum is held on whether Cyprus should unify. The Turkish north votes yes, the Greek south votes no and Cyprus enters the Euro leaving Northern Cyprus out in the cold.

The people with over 100k Euros that are being affected the most aren't the Russian depositors but older Cypriots who rode the tourist property boom. There was a vote on this and it was turned down, and then the Troika (of the Eurozone countries, ECB and IMF) decided they'd sidestep the whole thing and re-arrange the country's banking system for them.

The amount the troika were looking for was not a great deal of money to the EU or IMF, about €6 billion. This represents less than the amount spent on administration or internal policies in the last budget, and would be less than a fifth of the Common Agricultural Policy (CAP) budget. This figure was also arbitrarily decided by the troika not based on what Cyprus could actually afford (given the size of it's collapsing economy) but for political reasons because it's politically unacceptable for Germany to be seen by Germans to provide no strings bailouts to another Greece, and the IMF wanted to restructure Cyprus' banking system.

The big problem is that with this intervention it sets two extremely dangerous precedents. The first is that exiting the Euro (which would've been better for Cyprus) is not an option for bankrupt Eurozone countries. It's not even on the table. The second is that what's happened in Cyprus this week can happen in Greece, Italy, Spain, Portugal, Luxembourg (where the real Russian money is) or Ireland next week or at any point in the future, and as Shenglong said, banks are the major savings depository for most of Europe. If that doesn't scare my American friends then nothing will.

There hasn't been a lot of evidence for the idea that having no fiscal policy is better than having a bad or moderate one.

Finance can deal with inflation and deflation. Economies can't usually deal well with either, but deflation seems to be worse, and constant value is impossible and probably not better than inflation.

People are more than their bank statements. They breath their money through their life style and even survival. That is why money shouldn't stay still.