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Europe Announces Bailout For Cyprus — Bank Depositors Get Instant 10% Tax

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Re: Europe Announces Bailout For Cyprus — Bank Depositors Get Instant 10% Tax

#41

Post by samstave »

mdasen wrote: post #32

In some ways, this isn't a great plan. It punishes those who saved their money while rewarding those who consumed their income. It also means that people will have to start assuming that wealth taxes on bank account balances may happen in more jurisdictions and that they should move their money into what they deem to be safe jurisdictions. This could do harm to other countries whose banking systems have been having t…

In any circumstance where a bank employee of any bank receiving a bailout receives any bonus at all - this is criminal.

The first measure should be a cut of all executive pay and bonus monies in any bank that so poorly managed themselves that they needed a bailout.

Re: Europe Announces Bailout For Cyprus — Bank Depositors Get Instant 10% Tax

#42

Post by arbuge »

It's a perfectly horrible idea:

- penalizes savers who lived within their means and didn't overextend themselves, saving up for a rainy day. Debtors who took out excessive mortgages etc. aren't affected.

- penalizes foreign investors like the Russians, who will be paying about 40% of the money to be raised from this measure if you do the math. Never a good idea to scare foreign investment away.

- might create a bank run in other weak economies in the EU, like Italy, Spain, and Portugal. That could create a problem on a huge scale.

Re: Europe Announces Bailout For Cyprus — Bank Depositors Get Instant 10% Tax

#43

Post by Pro_bity »

mdasen wrote: post #32

In some ways, this isn't a great plan. It punishes those who saved their money while rewarding those who consumed their income. It also means that people will have to start assuming that wealth taxes on bank account balances may happen in more jurisdictions and that they should move their money into what they deem to be safe jurisdictions. This could do harm to other countries whose banking systems have been having t…

Your conclusion that this action would be lawful in the US is an overstatement. Without contorting the Euro Zone economic rules into the US monetary system, if something like this happend in the US, it would not be a tax, but a seizure of private property without Due Process. Kinda a no-no, legally speaking.

Re: Europe Announces Bailout For Cyprus — Bank Depositors Get Instant 10% Tax

#44

Post by mistercow »

ameister14 wrote: post #35
mdasen wrote: post #32

In some ways, this isn't a great plan. It punishes those who saved their money while rewarding those who consumed their income. It also means that people will have to start assuming that wealth taxes on bank account balances may happen in more jurisdictions and that they should move their money into what they deem to be safe jurisdictions. This could do harm to other countries whose banking systems have been having t…

In no way was this a good plan. It doesn't net a significant amount of money in terms of EU GDP, and it enrages and frightens a lot of people. The difference between a government switching what it taxes and this is that the former goes through intense oversight and debate by the elected officials of the country involved. People can influence the decision and it is an internal matter. In this case, it was an external…

>In no way was this a good plan.

mdasen gave some very reasonable arguments that in fact, yes, in some ways it was a good plan. Fr the reasons you gave, you can certainly argue not a good plan on balance. And I would tend to agree with you, although I would confess significant ignorance to the particulars of the situation

But it is misapplication of the affect heuristic to say that because the plan stinks over all, there is nothing good about it.

Re: Europe Announces Bailout For Cyprus — Bank Depositors Get Instant 10% Tax

#45

Post by vellum »

mdasen wrote: post #32

In some ways, this isn't a great plan. It punishes those who saved their money while rewarding those who consumed their income. It also means that people will have to start assuming that wealth taxes on bank account balances may happen in more jurisdictions and that they should move their money into what they deem to be safe jurisdictions. This could do harm to other countries whose banking systems have been having t…

>This could do harm to other countries whose banking systems have been having trouble.

This. Cyprus isn't the most troubled southern EU country. That honor goes to Italy or Spain. It was a bad idea for Germany to have tipped its hand this early in the game. They should have reserved this for Italy or something. You're going to see a bunch of people moving their cash out the southern EU countries ASAP.

Re: Europe Announces Bailout For Cyprus — Bank Depositors Get Instant 10% Tax

#46

Post by Pro_bity »

hmottestad wrote: post #38
mdasen wrote: post #32

In some ways, this isn't a great plan. It punishes those who saved their money while rewarding those who consumed their income. It also means that people will have to start assuming that wealth taxes on bank account balances may happen in more jurisdictions and that they should move their money into what they deem to be safe jurisdictions. This could do harm to other countries whose banking systems have been having t…

Seeing as I'm a student with a big loan and limited savings that will go towards my first proper flat deposit. If I lived in Cyprus, would the government now take some 6% of my savings and leave my loans untouched? Anyone?

Seems to be the case. There is no information about personal loan forgiveness being part of the EU's plan.

Re: Europe Announces Bailout For Cyprus — Bank Depositors Get Instant 10% Tax

#48

Post by Nightrider »

mdasen wrote: post #32

In some ways, this isn't a great plan. It punishes those who saved their money while rewarding those who consumed their income. It also means that people will have to start assuming that wealth taxes on bank account balances may happen in more jurisdictions and that they should move their money into what they deem to be safe jurisdictions. This could do harm to other countries whose banking systems have been having t…

Extracting money from people's bank accounts without even an acknowledgment is akin to foraging through their purses and wallets without consent.

Can't you see the larger issue here? This shortsighted measure will backfire.

Imagine you saved just enough money to cover rent, or see a dentist. You counted on that money being there. Wouldn't this be upsetting and a betrayal of your trust? Would you be so quick to leave money in a bank account ever again?

Edit: Actually, re-reading your comment, you went both ways and waffled like a politician. You didn't actually say anything.

Re: Europe Announces Bailout For Cyprus — Bank Depositors Get Instant 10% Tax

#49

Post by ww520 »

This is highway robbery. It reneges on the contractual agreement between the depositors and the banks to get the full deposit back. If they impose a 10% levy on the new deposits, then fine. They are levying on existing deposits retroactively. That's simply robbery.

Just because the money is from foreigners doesn't make it right. EU banking will have not credibility after this.

This will discourage people to put money in the banks and encourage them to keep them at home.

Re: Europe Announces Bailout For Cyprus — Bank Depositors Get Instant 10% Tax

#50

Post by revelation »

samstave wrote: post #41
mdasen wrote: post #32

In some ways, this isn't a great plan. It punishes those who saved their money while rewarding those who consumed their income. It also means that people will have to start assuming that wealth taxes on bank account balances may happen in more jurisdictions and that they should move their money into what they deem to be safe jurisdictions. This could do harm to other countries whose banking systems have been having t…

In any circumstance where a bank employee of any bank receiving a bailout receives any bonus at all - this is criminal. The first measure should be a cut of all executive pay and bonus monies in any bank that so poorly managed themselves that they needed a bailout.

In this circumstance, the first measure should be to cut losses now and dissolve the most toxic banks. Cyprus' banking system is ridiculously oversized for its economy. We need to get back to the idea of banks facilitating business, not being it.
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