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Cyprus surprise - Cypriot depositors to take a 'haircut'
Comments
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What's irrational about it?
If cyprus shows us anything it shows that government can change the law.(Not will, but can) .
It's irrational because no bank has the money to repay depositors if they start queuing to withdraw it. The money is only there by guarantee. Once the irrational start queuing the only rational thing to do is join them. Bank deposit guarantees are great but, when push come to shove, most people would prefer to have their own cash under the mattress and let others test them.
We don't need Cyprus to teach us that governments can change laws and taxes. We already knew that - still plenty of money of sloshing around in deposit accounts.0 -
It's irrational because no bank has the money to repay depositors if they start queuing to withdraw it. The money is only there by guarantee. Once the irrational start queuing the only rational thing to do is join them. Bank deposit guarantees are great but, when push come to shove, most people would prefer to have their own cash under the mattress and let others test them.
We don't need Cyprus to teach us that governments can change laws and taxes. We already knew that - still plenty of money of sloshing around in deposit accounts.
I think you have a very different view of rationality than me, then.
It would seem to me to be entirely rational in normal times to deposit money in a bank where it is safe from normal everyday risks such as theft, fire, and bookworm.
It also seems rational to take money out of a bank if you think it may go insolvent, or if it looks like the government is going to confiscate it. There is a first mover advantage. The people at the front of the line are most likely to get their money back. If I lived in cyprus I would have taken my money out of the bank months ago.“The ideas of debtor and creditor as to what constitutes a good time never coincide.”
― P.G. Wodehouse, Love Among the Chickens0 -
Graham_Devon wrote: »I think people will be queuing up to remove their cash regardless of whether they took the default route or not. The confidence is damaged.
The government in the UK were lucky when they found themselves in similar situations with NR & RBS. They very quickly guaranteed to protect all depositors and provide funds to keep the banks operating. Most importantly - people believed the guarantees.
Maybe the Cypriots will be getting another long weekend to consider whether a 6.75% tax is such a big deal after all.0 -
The government in the UK were lucky when they found themselves in similar situations with NR & RBS. They very quickly guaranteed to protect all depositors and provide funds to keep the banks operating. Most importantly - people believed the guarantees.
Maybe the Cypriots will be getting another long weekend to consider whether a 6.75% tax is such a big deal after all.
Or maybe Europe will get another weekend to realise that this ridiculous plan if it goes ahead will cause a run on other Southern European banks
The Cypriots will not starve and they are not sitting there waiting for benefit payments like our lot do in the UK0 -
Or maybe Europe will get another weekend to realise that this ridiculous plan if it goes ahead will cause a run on other Southern European banks
The Cypriots will not starve and they are not sitting there waiting for benefit payments like our lot do in the UK
Europe seems to have made a big gamble for what is a relatively small amount of money (in the scheme of bailouts). It will certainly be interesting seeing it play out, from the sidelines.
I wonder how much the technocrats weren't paying attention, junior ranks in charge, took their eye off the a ball, such a small part of Euro GDP etc, contributed to the shambles."If you act like an illiterate man, your learning will never stop... Being uneducated, you have no fear of the future.".....
"big business is parasitic, like a mosquito, whereas I prefer the lighter touch, like that of a butterfly. "A butterfly can suck honey from the flower without damaging it," "Arunachalam Muruganantham0 -
I think you have a very different view of rationality than me, then.
It would seem to me to be entirely rational in normal times to deposit money in a bank where it is safe from normal everyday risks such as theft, fire, and bookworm.
It also seems rational to take money out of a bank if you think it may go insolvent, or if it looks like the government is going to confiscate it. There is a first mover advantage. The people at the front of the line are most likely to get their money back. If I lived in cyprus I would have taken my money out of the bank months ago.
Insolvency shouldn't really be a consideration. Everyone knows that banks don't have the cash to repay depositors so it's irrational to queue to withdraw what was never there.
I'd be queuing only if I thought the government wouldn't, or couldn't, honour the terms of their deposit guarantee scheme. If I thought additional costs were likely to be imposed then I'd consider whether that made alternative investments more attractive.
I wouldn't have considered putting money on deposit in Cyprus under any circumstances anyway other than if I worked there in which case I'd have kept the bare minimum in a current account.0 -
The government in the UK were lucky when they found themselves in similar situations with NR & RBS. They very quickly guaranteed to protect all depositors and provide funds to keep the banks operating. Most importantly - people believed the guarantees.
Maybe the Cypriots will be getting another long weekend to consider whether a 6.75% tax is such a big deal after all.
One of the difficulties in Cypus now though is that the Cypriots were told they had a Guarantee too. This was then reitterated to them around a month back.
Then all of a sudden out of the blue, this promise was removed. Apparently all of a sudden the country would fall over and everyone would lose their jobs without doing this.
Now....they are told differently again. They are now supposed to believe, (after all this, and their banks shutting for 4 days, cash machines run out) that they have a guarentee again.
Your description of rationalality is not one I can comprehend.0 -
Graham_Devon wrote: »One of the difficulties in Cypus now though is that the Cypriots were told they had a Guarantee too. This was then reitterated to them around a month back.
Then all of a sudden out of the blue, this promise was removed. Apparently all of a sudden the country would fall over and everyone would lose their jobs without doing this.
Now....they are told differently again. They are now supposed to believe, (after all this, and their banks shutting for 4 days, cash machines run out) that they have a guarentee again.
Your description of rationalality is not one I can comprehend.
How many times Graham....
Deposit guarantees do not protect against taxation.
The Cypriots have now made things far worse for themselves, and they'll now lose far more money than the 6.75% most would have lost to this tax.
This will not end well...“The great enemy of the truth is very often not the lie – deliberate, contrived, and dishonest – but the myth, persistent, persuasive, and unrealistic.
Belief in myths allows the comfort of opinion without the discomfort of thought.”
-- President John F. Kennedy”0 -
John_Pierpoint wrote: »You have to realise that we are taking about the wars of the roses here....
Yes, Cyprus has a population of about 840,000. That's more than Iceland, but a bit less than say, Birmingham.Graham_Devon wrote: »One of the difficulties in Cypus now though is that the Cypriots were told they had a Guarantee too. This was then reitterated to them around a month back.
Then all of a sudden out of the blue, this promise was removed.
No, the deposit guarantee is still in place. Which is part of the problem. Were the two main Cypriot banks to become insolvent, then the Cypriot government would apparently have to find 30 billion euros to meet that obligation. Which is (a) more money than it has, or could be ever expected to have, and (b) a lot more than the 5.8 billion euros it has to find to recapitalise the banks to avoid that happening in the first place.
Of course, now the cat is out of the bag and howling the place down, it might be too late to do anything to save the situation.
Plan B needs to be a corker.0 -
I think the haircut might after all have been the most pragmatic plan though it should have tried to fairer by giving equity and multi property owners a haircut also.
Nothing in life is certain. Cypriots would still be left with nice weather, most of their cash and forward going bank guarantee on their savings, plus the security of the Euro and the EU membership.
Doth the Cypriots and all those wealthy Russians there protest too much?0
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