Cyprus surprise - Cypriot depositors to take a 'haircut'

dryhat

The 600 trillion dollar (yes you read that right) derivative market would come crashing down if there was any threat to the bond market.

And then the whole theft and coruption would be exposed for what it is.

This is what those in power are afraid of.

And anything they are afraid of is, by definition, good for us.

John_Pierpoint

Graham_Devon wrote: »

.

Basically, what Peston was hinting at is that the EU rules over everything else. Therefore, things can change at the drop of a hat. He was concerned that they have targetted savers rather than thr traditional investros who accepted more risk at the start, especially those who accepted the risk knowing of the EU problems.

Peston is not the only one worried abut the changing of the rules by over-mighty governments.

Our friends on the Wall Street Journal have observed:

Investors have missed the real lesson of Cyprus: broke governments will pursue policy extremes to cover their shortfalls. Broke in this case means not being able or willing to cut expenditure and raise tax on national income sufficiently to cover deficits and interest costs. Eventually, investors may find this applies not just to Cyprus and to struggling euro-zone sovereigns, but to countries like Japan, the U.K. and even the U.S.

I would think that any US president would be forced to wear a bullet proof vest if he tried anything similar.

Who remembers back in the 1930s when the government came up with another logical solution - everyone in the country should take a mandatory 10% pay cut, to preserve the value of the pound.
Funny thing the economically illiterate regard stealing their wages or their savings as highway robbery, and get very up set.

http://en.wikipedia.org/wiki/Great_Depression_in_the_United_Kingdom

Oh those innocent 1960s:
http://en.wikipedia.org/wiki/I%27m_Backing_Britain

HAMISH_MCTAVISH

Graham_Devon wrote: »

Exactly....and rather makes the point that you can't blame the Cypriot people for the problems.

As I see, it appears to have fallen into two camps. Anyone obviously pro-EU from other conversations finding it hard to find issue with this.

Nearly everyone else taking issue.

Comparing it to the inflation we have had for instance is utter nonsense.

So you would prefer they didn't get the bailout?

Graham_Devon wrote: »

What voice is that then?
.

The one asking for billions of euros of bailout funds?

Those funds have been offered.

Would you prefer they weren't?

(Just in case you missed it on the last page.... )

ILW

Guess that is what seems so wrong, depositors are generally not investors and should be shielded from the risks. In this case the investors who should have known and accepted the risks are being protected at the expense of the depositors. Turns the whole thing upside down.

wotsthat

Graham_Devon wrote: »

As I see, it appears to have fallen into two camps. Anyone obviously pro-EU from other conversations finding it hard to find issue with this.

If you're pro-EU you've got to be 100% behind this.

If you're anti-EU you've got to be 100% against this.

I don't agree but thanks for the picture into your mind.

wotsthat

ILW wrote: »

Guess that is what seems so wrong, depositors are generally not investors and should be shielded from the risks. In this case the investors who should have known and accepted the risks are being protected at the expense of the depositors. Turns the whole thing upside down.

If I owe you £10 and don't repay but ask for another £10 you're hardly going to make it a condition that the initial £10 loan is written off first.

'I've' got some money saved but you can't have that because it's 'protected'.

Anyway about that tenner...

ruggedtoast

Is this the beginning of the end for the euro?

dryhat

ruggedtoast wrote: »

Is this the beginning of the end for the euro?

If fungibility is a required property of a currency, then yes.

Many Germans stopped accepting "greek" euros ages ago.

antrobus

grizzly1911 wrote: »

On Jeremy Vine R2 it was pointed out that the Cypriot Banks had lent out 8x the capital of their banking system....

"8x the capital"? That's nothing, in fact, that's actually quite prudent.

I think you've misunderstood. The issue is that the Cypriot bank lending amounts to 8 times Cyprus's GDP and, since Cypriot bank's no longer have any capital (it's all been swallowed up by bad Greek loans) the amount required to recapitalise the banks is very large in relation to the size of the Cypriot economy.

grizzly1911 wrote: »

...and that the EU had been privy to this information for many years but chose do nothing about it until now.....

You mean the EU should have bullied Cyprus into reducing the size of its banks?

The_White_Horse

Hamish - can't there be a bailout without the man in the street having their savings stolen from them? This sends out the complete wrong message to the masses - that your savings are not safe in the bank because the govt will nick them. The bailout should be paid by the govt by cutting spending and increasing taxes. Also, investors should be hit, not savers. Simple really. If the question is, do I want them to get a bailout if normal savers are hit, then the answer is no - let it all fall to pieces.