CYPRUS - These people are geniuses.

tailwindhome

When you're in the sh1t don't d1ck around taking £14.25 a week off people who can't afford it.

Just take it off the people who have it in one hit.

Problem solved.


Genius

rjsterry

Well I'm not sure they're out of the woods, just avoided total meltdown. Still, can't deny there's a certain pleasing irony to footage of (still) very wealthy people explaining how unfair it all is.

First.Aspect

It would cause a run on the banks. Even if it was only for savings above £x, people would still flood to banks just in case. They'd all fill up their cars and cause petrol shortages as well.

Mr_Cellophane

People would stop saving, so the banks wouldn't have any money to lend.
No one would be able to get a mortgage, house building would stop. The economy would start to grind to a halt.

UndercoverElephant

First Aspect wrote:

It would cause a run on the banks. Even if it was only for savings above £x, people would still flood to banks just in case. They'd all fill up their cars and cause petrol shortages as well.

Except that they've introduced capital restrictions so than people can't take more than a small amount out.

wgwarburton

UndercoverElephant wrote:

First Aspect wrote:

It would cause a run on the banks. Even if it was only for savings above £x, people would still flood to banks just in case. They'd all fill up their cars and cause petrol shortages as well.

Except that they've introduced capital restrictions so than people can't take more than a small amount out.

Yeah- financial firebreaks... Like pulling houses down to stop a fire spreading through a city.

This isn't a model that scales, nor one which would be adopted by those with alternatives. If anything, it highlights the need to adopt alternatives before it's too late.

Cheers,
W.

rick_chasey

It makes some sense.

Those who have put their money in for some financial reward (interest rate) bare the brunt rather than the state.

Afaik that 10% haircut is turned into equity anyway isn't it?

TheStone

TailWindHome wrote:

When you're in the sh1t don't d1ck around taking £14.25 a week off people who can't afford it.

Just take it off the people who have it in one hit.

Problem solved.


Genius

What they've done is not that wrong. By depositing money in banks, you're making interest on the risk of that money being lent out. The banks are insolvent, so as long as they've first called in any collateral on unpaid debt, wiped out the shareholders and then the bond holders, the savers have to be next.

What this means for the future of cyprus and the future of banking is unclear. Savers should expect interest rates to match inflation (which has gone up) and then the risk of their money not being returned (which has gone up), but instead the central banks keep printing money to suit their own agenda. The banking world is zombie.

Without a proper working banking system, things very quickly unwind.

rick_chasey

WGWarburton wrote:

UndercoverElephant wrote:

First Aspect wrote:

It would cause a run on the banks. Even if it was only for savings above £x, people would still flood to banks just in case. They'd all fill up their cars and cause petrol shortages as well.

Except that they've introduced capital restrictions so than people can't take more than a small amount out.

Yeah- financial firebreaks... Like pulling houses down to stop a fire spreading through a city.

This isn't a model that scales, nor one which would be adopted by those with alternatives. If anything, it highlights the need to adopt alternatives before it's too late.

Cheers,
W.

It's my understanding this is the model that was going to be implemented later anyway. This was way ahead of schedule but ultimately those with money in banks should bare the cost if the bank needs bailing out.

davmaggs

rjsterry wrote:

Well I'm not sure they're out of the woods, just avoided total meltdown. Still, can't deny there's a certain pleasing irony to footage of (still) very wealthy people explaining how unfair it all is.

How does having £100k in the bank make someone wealthy? Sounds like the worst kind of envy.

It could be a small business who has just been paid for a contract that is now stuffed, which means that their staff go without wages. It could have been a pensioner converting 40 years of saving into an annuity, or perhaps someone with their house deposit going through on the day the politicians seized it.

davmaggs

UndercoverElephant wrote:

Except that they've introduced capital restrictions so than people can't take more than a small amount out.

"Except" capital controls only work for the little people. When Britain had them the rich simply banked offshore or bought a new boat and sailed over to Monaco to sell it.

Within a month there will be ways around the regulations for those that have the means.

First.Aspect

UndercoverElephant wrote:

First Aspect wrote:

It would cause a run on the banks. Even if it was only for savings above £x, people would still flood to banks just in case. They'd all fill up their cars and cause petrol shortages as well.

Except that they've introduced capital restrictions so than people can't take more than a small amount out.

This only worked because they had the element of surprise. How early do you think they would have to do this in, say, Italy, to prevent a run? First rumour of a one of savings tax? Second rumour? If it was Timorese in Italy, would there be immediate panic in Spain? What about here?

SteppenHerring

It's an issue though isn't it. If the bank isn't bailed out then all depositors lose everything (potentially). This would totally destroy trust in the system (whether that's a good thing or not is another question). OK, so if we start from the premise that the bank(s) need to be bailed out then who should pay?
- All depositors in all banks
- All depositors in the affected banks
- Richer depositors in the affected banks
- Owners (shareholders) of the affected banks
- The Cypriot taxpayer
- The EU taxpayer (the Germans)

Technically, it was the owners of the banks who took their eye off the ball and are responsible. But ... ah, limited liability. So who should pay?

First.Aspect

First Aspect wrote:

UndercoverElephant wrote:

First Aspect wrote:

It would cause a run on the banks. Even if it was only for savings above £x, people would still flood to banks just in case. They'd all fill up their cars and cause petrol shortages as well.

Except that they've introduced capital restrictions so than people can't take more than a small amount out.

This only worked because they had the element of surprise. How early do you think they would have to do this in, say, Italy, to prevent a run? First rumour of a one of savings tax? Second rumour? If it was Timorese in Italy, would there be immediate panic in Spain? What about here?

I just want to say that I wrote this on an iPhone. Not even I can tell what it is suppose to say.

wgwarburton

SteppenHerring wrote:

It's an issue though isn't it. If the bank isn't bailed out then all depositors lose everything (potentially). This would totally destroy trust in the system (whether that's a good thing or not is another question). OK, so if we start from the premise that the bank(s) need to be bailed out then who should pay?
- All depositors in all banks
- All depositors in the affected banks
- Richer depositors in the affected banks
- Owners (shareholders) of the affected banks
- The Cypriot taxpayer
- The EU taxpayer (the Germans)

Technically, it was the owners of the banks who took their eye off the ball and are responsible. But ... ah, limited liability. So who should pay?

Bear in mind that "allowing" a bank to fail is much less of a problem if the bank in question is a modest institution where people with spare cash have deposited it in order to keep it safe and earn a bit of interest through lending.
If the bank is a major multinational entity with cashflows larger than national institutions and which acts as a vital set of links in the operation of national and international economies then its failure (whether through bankruptcy or confidence) is a bit more of a political problem...

Is solving major political problems with the operation of the national economy an appropriate use of taxpayers money? It's not desireable, for sure, but arguably necessary, given where we are.

Cheers,
W.

rick_chasey

davmaggs wrote:

rjsterry wrote:

Well I'm not sure they're out of the woods, just avoided total meltdown. Still, can't deny there's a certain pleasing irony to footage of (still) very wealthy people explaining how unfair it all is.

How does having £100k in the bank make someone wealthy? Sounds like the worst kind of envy.

It could be a small business who has just been paid for a contract that is now stuffed, which means that their staff go without wages. It could have been a pensioner converting 40 years of saving into an annuity, or perhaps someone with their house deposit going through on the day the politicians seized it.

Well no, that would be a business account.

And it's their fault for not insuring their deposit.

rick_chasey

The arbitrary cut off where you have to pay more isn't especially fair.

Does keep the rabble at bay though.

SteppenHerring

WGWarburton wrote:

Bear in mind that "allowing" a bank to fail is much less of a problem if the bank in question is a modest institution where people with spare cash have deposited it in order to keep it safe and earn a bit of interest through lending.
If the bank is a major multinational entity with cashflows larger than national institutions and which acts as a vital set of links in the operation of national and international economies then its failure (whether through bankruptcy or confidence) is a bit more of a political problem...

Is solving major political problems with the operation of the national economy an appropriate use of taxpayers money? It's not desireable, for sure, but arguably necessary, given where we are.

Cheers,
W.

Personally, I think it's outrageous that we get into a situation of the taxpayer having to bailout a commercial operation. However there are a couple of issues: 1) the public genuinely believe that "money in the bank" is safe. Undermine that belief and who knows what will happen. 2) As you say, some of these outfits are "too big to fail". In the case of HSBC, which was found by US authorities to be laundering money for terrorists, drug cartels, Pat McQuaid and other undesirables, they were found to be "too big to prosecute".

I do wonder whether breaking banks up is really the answer though. The reason? Competition. Whether you have 5 banks or 1,000 if some are appearing to make money by investing in, say, "Groupsets with girl's names" derivatives then they will all feel under pressure to do the same. It's in the nature of stock market bubbles. When the bubble bursts, does it really make a practical difference if 4 out of 5 fail or if 800 out of 1000 fail?

Maybe a step forward would be to confine government-backed deposit protection schemes to organisations that "don't do risk sh1t". This means that depositors who know where their money is "safe" and where it isn't. The problem there is who defines "risky sh1t".

The other problem is that without the implicit state guarantee of a bailout (which is worth many percentage points on their borrowing), all of the major banks are, on paper, insolvent.

That was all a bit serious.

TheStone

SteppenHerring wrote:

Maybe a step forward would be to confine government-backed deposit protection schemes to organisations that "don't do risk sh1t". This means that depositors who know where their money is "safe" and where it isn't. The problem there is who defines "risky sh1t".

I'd like to see them remove all deposit protection.

The individual should decide where to deposit (invest) their money based on the risks the banks are taking versus the interest rates they're offering. If you deposit all your money in Iceland or Cyprus because they're paying higher rates, then tough when it all goes wrong.

The government have got involved with far too many things. They decide who wins and who fails not the consumer/investor. This is very dangerous for the future.

DonDaddyD

Question, why is this part of the Europe mediterranean - specifically Greece, Turkey, Cyprus - seemingly in more shite than other parts of the Europe?

danlikesbikes

SteppenHerring wrote:

As you say, some of these outfits are "too big to fail". In the case of HSBC, which was found by US authorities to be laundering money for terrorists, drug cartels, Pat McQuaid and other undesirables, they were found to be "too big to prosecute".

But they were slapped with a $1.9 Billion fine though, so its not like they were too big to prosecute & nothing more was done. Given the option of a prosecution & HSBC losing its US banking license would have kicked off another meltdown IMHO so the US government took the logical step rather than cutting its nose of to spite its own face you could say.

TheStone

DonDaddyD wrote:

Question, why is this part of the Europe mediterranean - specifically Greece, Turkey, Cyprus - seemingly in more shite than other parts of the Europe?

It's nearly everyone.

Britain probably worst. USA, Belgium, Ireland, Spain, Portugal, Italy.
Even the German banks are a mess. They rest of their economy quite strong.

SteppenHerring

Danlikesbikes wrote:

But they were slapped with a $1.9 Billion fine though, so its not like they were too big to prosecute & nothing more was done. Given the option of a prosecution & HSBC losing its US banking license would have kicked off another meltdown IMHO so the US government took the logical step rather than cutting its nose of to spite its own face you could say.

It does prove that "life isn't fair" though. I can't help but feel that if I were caught funneling money to Al Qaeada, I would face more than a fine. OTOH, I do have a car and buy fuel so technically I suppose I am.

davmaggs

TheStone wrote:

I'd like to see them remove all deposit protection.

The individual should decide where to deposit (invest) their money based on the risks the banks are taking versus the interest rates they're offering. If you deposit all your money in Iceland or Cyprus because they're paying higher rates, then tough when it all goes wrong.

The government have got involved with far too many things. They decide who wins and who fails not the consumer/investor. This is very dangerous for the future.

The flaw in that logic (loved of US libertarians) is that is has been done before and failed miserably. Not to mention the punter at home has no qualification or source of information to perform the due diligence required for this notion to work.

Deposit insurance at a reasonable level prevents riots, looting and solvent banks being destroyed by panic. It keeps the economy going.

That doesn't mean that every deposit needs to be insured or that any size bank is acceptable, but that's a whole other debate.

davmaggs

Rick Chasey wrote:

Well no, that would be a business account.

And it's their fault for not insuring their deposit.

Apart from skipping all my other examples and suggesting insurance that is fictional, you appear to be stating that businesses having their assets seized is somehow problem free. I imagine that once the odd small farmer appears on TV or perhaps the director of a charity or two sounds the alarm for their assets then more concern will set in.

I wonder how many of us work for organisations that would not be able to pay us if HMG seized their bank balances?

rick_chasey

DonDaddyD wrote:

Question, why is this part of the Europe mediterranean - specifically Greece, Turkey, Cyprus - seemingly in more shite than other parts of the Europe?

Combination of things, but broadly being the weaker economy in the Euro means their currency does not suit their economic needs. They can't devalue their currency so they must take an output haircut.

That and a heavier reliance on borrowing, but that is partly related to the Euro anyway.


This bail in is not a perfect solution but it works better than a state bail out.

Uninsured depositers who took the risk for interest bare the brunt. That money doesn't disappear anyway. They get equity in the bank.

rick_chasey

davmaggs wrote:

Rick Chasey wrote:

Well no, that would be a business account.

And it's their fault for not insuring their deposit.

Apart from skipping all my other examples and suggesting insurance that is fictional, you appear to be stating that businesses having their assets seized is somehow problem free. I imagine that once the odd small farmer appears on TV or perhaps the director of a charity or two sounds the alarm for their assets then more concern will set in.

I wonder how many of us work for organisations that would not be able to pay us if HMG seized their bank balances?

Afaik business and charity accounts have not been forced to take equity in the bank.

Ultimately there is a risk attributed to putting a deposit in a bank. That risk is why you get interest on it. To compensate for the risk you bare.

In this instance that risk has been realised.

Also that insurance is not fictional. If I had over 100k euros in a eurozone periphery bank I'd be sure as sh!t to either insure it or move it out.

danlikesbikes

SteppenHerring wrote:

Danlikesbikes wrote:

But they were slapped with a $1.9 Billion fine though, so its not like they were too big to prosecute & nothing more was done. Given the option of a prosecution & HSBC losing its US banking license would have kicked off another meltdown IMHO so the US government took the logical step rather than cutting its nose of to spite its own face you could say.

It does prove that "life isn't fair" though. I can't help but feel that if I were caught funneling money to Al Qaeada, I would face more than a fine. OTOH, I do have a car and buy fuel so technically I suppose I am.

Yes you probably would get more than a fine as the punishment should fit the crime.

My point was simple that if the US did take HSBC to court (& based on the limited evidence to hand in the public domain) would have probably won. In winning making HSBC lose its US banking license would have in basic terms caused another US financial meltdown & we all know what happened the last time.

rick_chasey

Re deposit insurance being 'fictional'.

https://www.google.co.uk/search?redir_e ... 0insurance

rjsterry

davmaggs wrote:

rjsterry wrote:

Well I'm not sure they're out of the woods, just avoided total meltdown. Still, can't deny there's a certain pleasing irony to footage of (still) very wealthy people explaining how unfair it all is.

How does having £100k in the bank make someone wealthy? Sounds like the worst kind of envy.

It could be a small business who has just been paid for a contract that is now stuffed, which means that their staff go without wages. It could have been a pensioner converting 40 years of saving into an annuity, or perhaps someone with their house deposit going through on the day the politicians seized it.

EDIT: Weird: my post has vanished :? Anyway, it's not envy. I just think it's a bit rich to invest in an obviously more risky country, and then argue that someone else should pay for it, when your investment doesn't provide the return you hoped for.

sketchley

IIRC deposit of less than 100k euro are insured by the eu. If the bank collapases they get there money back. Any deposit in excess of this you potentially can lose everything unless the bank is rescued and you are paid off. People 'loosing' 10% should in fact look at this as getting a 90% payout on their uninsured investment. Which is a good deal.

To put this in a little perspective, if you owed the bank £100k and went for an Insolvancy Volentary Agreement becuase you lost your job and couldn't pay it back, the bank would most lucky to get 10% to 15% of that back.

Or to put it another way, if you had a £100k outstanding invoice as small company and owed to you by a ltd company that went into liquidation, you would be lucky again to get more than few points back.

Of course both of the above depend a lot on circumstance.

I have not issue with the big foriegn investers in cyrus getting hit, after all they invested in foriegn bank why? To reduce tax or get better return etc? I suspect thay initally made or saved this 10%, they haven't lost out. I am concerned about reprocussions of this as these investments are bound to pulled out sooner or later by one means or another.....

Where I do have sympathy is for the hard working familiy man that's saved and now lost some of thier money, where as someone earning the same who blew the lot on fast cars and women has not lost a thing!