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The madness of the bailout in Cyprus

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Re: The madness of the bailout in Cyprus

#231

Post by caf »

justincormack wrote: post #193
MaysonL wrote: post #188

Earlier quoted context omitted.

This was an EU country with a bank deposit guarantee similar to the FDIC guarantee. The guarantee is being voided. How many more EU bank deposit guarantees are untrustworthy? How many depositors will choose to no longer trust them? How many banks will be run? Personally, I don't have a clue as to the answers to those questions, and I doubt that those who are imposing this tax have a clue, either.

Deposit guarantees were designed for one off failures of smallish banks, not systemic debt crises where large proportions of the total debt in a country is worthless. None are trustworthy in this sense, but some countries are worse off than others. Cyprus has a bankrupt government with no access to debt.

This is absolutely true - the deposit guarantee schemes are not a bottomless pit of money, and are nowhere near able to absorb the losses of a widespread series of cascading bank failures.

It seems extremely unwise to publicise this fact, however - which is what this measure does.

Re: The madness of the bailout in Cyprus

#232

Post by fexl »

dougk16 wrote: post #54
khuey wrote: post #47

Earlier quoted context omitted.

If you think gold is a predictable and low-volatility store of value you really should look at inflation adjusted gold prices from 1980-2000.

I didn't mean to imply that I would expect to make money from buying gold (if that's what you mean). Even if gold prices were expected to drop, I'd still be interested in buying it as an insurance policy. No matter how severe a crisis, once the dust settles, gold will always be worth something, for reasons I don't understand.

No matter how severe a crisis, once the dust settles, gold will always be worth something, for reasons I don't understand.

The reasons is simple: gold has specific physical characteristics which many people for a very long time have regarded as suitable for use as physical money: principally, it's durable, rare but not too rare, recognizable, and easily divisible. That widespread subjective assessment is unlikely to change.

Re: The madness of the bailout in Cyprus

#233

Post by justincormack »

bjornsing wrote: post #230
justincormack wrote: post #223

Earlier quoted context omitted.

There is a full resolution (ie non bankruptcy) proposal in place, due for 2015. http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=COM:20... It should be less arbitrary that the current scheme, where senior bondholders and the ECB are not being touched. If you look at the balance sheet of Cyprus Laiki half way down http://ftalphaville.ft.com/2013/03/16/1425732/a-stupid-idea-... then you see that debt is almost not…

I can well imagine that Cyprus made the controversial decision (to haircut the "insured" depositors) themselves, for political reasons. It's exactly the decision I'd make in Mr Anastasiades' place if I was being strong-armed by a German delegation. The simple reasoning (for me) would be to increase the risk of contagion above and beyond what Germany can accept, so as to maximize the likelihood of Berlin folding and o…

This (registration required) appears to be what happened http://www.ft.com/cms/s/0/f890566a-8f24-11e2-a39b-00144feabd...

Re: The madness of the bailout in Cyprus

#234

Post by wintersFright »

seanmcdirmid wrote: post #192
wintersFright wrote: post #160

Earlier quoted context omitted.

ok - won't get into US default / debt argument as we are too far apart on that. I'll just say that it is a lot more than 'no one' expecting and preparing for a failure there. It is not a mainstream view - though mainstream didn't predict the GFC either. Yes I meant the otherside of a currency failure. They are not as rare as you imply. If the economy collapses completely then a lot of people will die...likely me incl…

If I bought land, I could develop it and make it productive, I could also invest in science to grow more food, or whatever. If we want to hedge against economic collapse, I could invest in assets that are likely to survive the collapse, or better yet, are useful in helping a recovery along. So machinery, tools, a factory, a bakery? Or just upgrade my skills a bit. But gold just sits there and does nothing, you are at…

The fact that gold is so useless is what makes it so perfect as a sink for deferred wealth. Savers do not infringe on anyone else. If savers decided to hoard farm land...then farm produce would go up. Bakeries...same effect. Note I'm not arguing against investment but there is a difference between investment and saving. Saving is trying to maintain purchasing power that you have earned today and want to spend in the future. Investment is the deployment of your capital at some risk in order to possibly earn a return. Your prescriptions are all investments. I'm not a skilled businessman/investor - I'm a coder that just wants to defer my purchasing power that I earned today . What the savers currently do is hoard currency. The thirst for currency encourages and enables large amounts of debt to be written (as debt is the largest producer of currency via bank loans) which leads to cheap credit which leads to malinvestment.

In my comment history you will see a rather long entry I reposted from ZeroHedge. It's worth a read if you want to understand this argument some more.

Re: The madness of the bailout in Cyprus

#235

Post by wintersFright »

scotty79 wrote: post #189
wintersFright wrote: post #144

Earlier quoted context omitted.

when credit collapses (which is what this is) then the price of things bought on credit will collapse. Real estate will not be a good store of value in the short term. Long term it is an excellent asset but don't think it will hold value though this. Bitcoin....you have seen the volatility on it lately? And the other week the miners were all asked to rollback a recent build because the crypto broke? Bitcoin is for sp…

> when credit collapses (which is what this is) then the price of things bought on credit will collapse. Real estate will not be a good store of value in the short term. I agree. > Long term it is an excellent asset but don't think it will hold value though this. Do you expect people will stop needing roofs over their heads? I agree that real estate seems silly. But I don't mean swapping houses. I mean buying few pro…

Given the young age of bitcoin then I would still suggest that buying and holding is still speculation. Good luck to you. Keep in mind though that the scale of your savings compared to others. What if Bill Gates wanted to sink some of his savings into Bitcoin? It would be a market moving event. What happens when he wants to exit?

Buying a few properties over your life at this point in time - presumably via credit is a risky proposition. People need roofs over their heads but they need food more. For an interesting perspective on property during a currency event - read Gonzalo Lira's description on Chile

http://gonzalolira.blogspot.com.au/2010/08/hyperinflation-pa...

Re: The madness of the bailout in Cyprus

#238

Post by caf »

wintersFright wrote: post #119
DJN wrote: post #107

Earlier quoted context omitted.

That sounds really interesting. Can you provide a link to an example or source of additional info. Thanks

offset accounts are common in Australia http://www.news.com.au/money/banking/offset-accounts-help-lo...

Likely anywhere that variable-rate/variable-term mortgages are common (ie. partially funded by short-term securities).

Re: The madness of the bailout in Cyprus

#239

Post by seanmcdirmid »

omgyeah wrote: post #221
seanmcdirmid wrote: post #197

Earlier quoted context omitted.

So what was the right solution? Kick Cyprus out of the EU and let them scavenge for themselves? Letting the banks fail might attract an invasion from Russia, and then it becomes a NATO problem....such a mess.

There ain't no right solution. That's the biggest problem of them all. Earlier, in biblical period, god would flush the toilet and things would start from scratch. Now, we can't afford to flush.

I'm not really sure how useful this kind of thinking is, but I understand what you mean.

Re: The madness of the bailout in Cyprus

#240

Post by Alberto_ben »

Why is anyone talking about bitcoins? You can put your money into bitcoins but you can't actually take any reasonable amount of money "out".

It is a simple Ponzi scheme created by anonymous hackers to take people's money.

Look at the largest "exchange". How much do they let you convert into actual money? The main one limits you to $1K per day or $10K per month.

But you know what? They don't have to convert anything for you if they don't want to. There are no laws, nothing. One day, your bitcoins will be completely and totally worthless. There is no government to back it up as a store of value.

There are a bunch of anonymous hackers who manipulate the price to get more people to give them actual money while they give them worthless virtual numbers.

And everyone thinks they are making money as the price goes up and up. But try and take any of that money out. Guess what, it won't be there.

The exchanges will close and poof, you have nothing.

Some of you are really, really gullible.

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