Cyprus savers lose 10% of money after shock bailout
irishexaminer.com
irishexaminer.com
I'm not familiar with Cyprus' particular situation but I'm guessing that if they need a bailout, excessive spending and debt are factors contributing to that problem to begin with...
Which is not the only kind of economy known to man.
I'm not taking about communism either. Lots of systems have been both proposed and used effectively. Until 15th century (or even 2-3 centuries later) there wasn't even capitalism proper.
If you're conservative in your investment you'll get them back. If you're lucky, you will get more than you put in. If you are unlucky, you might lose it all.
No matter what they do with your money, they are expected to keep it as it was, at least nominally (maybe with a little interest).
Bank runs and bank defaults can be possible but are far far far far rarer than yourself investing and losing your money.
So your argument is like:
"You think chainsaw-tied-on-your-head-skiing is dangerous and you'd rather stay at home? Do you know how many people die at their homes?".
The savers are rewarded a little (always positive) percentage of their money that barely covers inflation.
Or it used to. With this braindeath concept people will be more likely to burry their stuff in the back yard.
People with less than €100,000 in their Cypriot bank
accounts will have to pay a one-time tax of 6.75%,
those with more will lose 9.9%.
The measure is expected to net €5.8bn in additional
revenues, Mr Dijsselbloem said, greatly reducing the
country's financing need.
Even though the tax shelter is legal, it doesn't change the fact that if the regional governments are going to step in and provide bailout money for the country that was the tax shelter in the first place, then the financial residents (so to speak) of that country should be made to chip in..
If Cyprus didn't have such an imbalanced tax and banking system (that led it to be a shelter in the first place), they wouldn't have needed the bailout..
(project of mine - sort of crude proto-HN for finance)
Tough choice... banks are busted, so do you make depositors whole and bail out Russian mobsters with German taxpayers' money? (Cyprus is a big offshore money laundering center, much of the deposits are from offshore)... or create a precedent where money in EU banks is not safe, raising the specter of bank runs?
Bank runs it is... distinct possibility Cyprus could be the Reserve Primary Fund of the EU crisis.
(When Lehman failed and that big money market mutual fund broke the buck, everybody started withdrawing money from money markets, and the US had to guarantee all MMMF and bank deposits.)
(going to further speculate...Germany and the EZ said we will only pony up X, depositors have to take some of the hit... no one in these banks or the Cyprus government was eager to be the point person advocating the mobsters taking a bigger hit by exempting locals or small depositors...so the small local depositors got sucked in.)
( also hackers who might want to work on this sort of thing )
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By having money(wealth) stored in banks, you can control the economy. You'll have more control over inflation, taxes, leverage... By having money stored in people mattresses, you'll lose this control.
It'll be even hard to estimate the amount of money in the system, and if it's even moving. The EU is handling this crisis all wrong to protect their interest.
2. this is a terribly non-progressive levy
Edit.
From: http://www.economist.com/blogs/schumpeter/2013/03/cyprus-bai...
> That idea had been in the air for a while, not least because a lot of those uninsured deposits came from outside Cyprus, and from Russia in particular. The politics of saving wealthy Russians with money loaned by thrifty Germans were always going to be tricky.
> What had not been anticipated was a 6.75% loss for savers with deposits in Cypriot banks below the insurance ceiling. Cypriots woke up this morning to find bank branches closed to them. By the time they will be able to get at their money, it will be too late. The offer of equity in banks to replace the value of their savings is meant to be a balm but it’s not a choice they would have made. Why this decision was taken is not yet clear. The most plausible explanation is that the Cypriot government itself preferred to spread the pain rather than wipe out non-resident depositors and jeopardise its long-term prospects as an offshore financial centre for Russian and other money.
Interesting.
At the point of a gun, a sad way to go for decent people but only fair.
Sweden has started to screw with pensions which are basically savings.
It's fucked up. I can't stand it. High tax countries not being able to handle it and tax even more from savings/pensions.
It's unsustainable. And recently there were many articles praising "the nordic model"... fuck it's a joke.
As far as I've seen the only countries managing their economy is Singapore. They got a sustainable model.
Don't spend peoples money. Low taxes means that whatever they spend it's not coming from the people.
Sounds like a nice anecdote, it would be good if it corresponded with reality at all.
EDIT: Why the downvote? Please explain what percentage of the debt is being defaulted, that is, what is the percentage of Cyprus debt that isn't going to be paid at all?
Especially if that only repays a tiny amount.
Same thing with Greece. The dept is always the same as it was, and the default is only avoided by getting a quick additional loan every X months. Which is essentially a default in "life support".
A new loan that can never be repaid, and its only purpose is to prevent an immediate default, it just as good as a default in my books.
Maybe not from the point of view of the creditors (they will get some of their money back), but still having very similar consequences to the debtors: difficulty in loaning new money, financial destruction, a take-over-of-control by the creditors' intermediaries and the liquifying any valuable state assets.
It already started with indiscriminately stealing 6% from the bank account holders and can only go downhill.
>That is, what percentage isn't going to be paid at all?
Lots of it. Following the same process as with Greece et al, there is definitely going to be a "haircut".
That's quite a stretch of the term "default". A default is when a debtor declares that he can't pay and therefore he won't pay. Getting into a new loan doesn't qualify as default.
> Maybe not from the point of view of the creditors (they will get some of their money back), but still having very similar consequences to the debtors: difficulty in loaning new money, financial destruction, a take-over-of-control by the creditors' intermediaries and the liquifying any valuable state assets.
With a real default, there would be less financial destruction. At least the bleed of paying the loans would stop.
> It already started with indiscriminately stealing 6% from the bank account holders and can only go downhill.
Agreed.
> > That is, what percentage isn't going to be paid at all?
> Lots of it. Following the same process as with Greece et al, there is definitely going to be a "haircut".
Then it will be a (partial) default on the new loans, but it isn't yet.
http://www.reddit.com/r/europe/comments/1aeht8/eurozone_and_...
Of course people would expect more tax.
As for assurances, they don't mean anything. Just five days ago they were assured by the Finance Minister that "no bank tax would happen". And then boom.
So, a bank run DID happen after the news emerged. But the people found the banks were closed and ATMs had restrictions. The banks will be closed for several more days.
Lets crash all the banks than then build something good from the ashes.
If someone has an investing account that has money invested in stocks or ETFs, are those assets liquidated partially to pay up to the the 10% of the levy?
Does only not invested money count?
This does not increase my confidence in keeping my money in the bank. The usual argument is theft + lack of interest but the banks barely pay any interest anymore and the lack of theft....