This Deal Could Screw Up A Lot More Than Cyprus

Posted in the Columbus Forum

“Larchmont's Leading Citizen”

Since: Dec 12

Hilliard, OH

#1 Mar 17, 2013
You can be forgiven for thinking that you don't need to give a hoot about what's going on in Cyprus this weekend.

After all, it's just a little island somewhere in the Mediterranean.

But what's going on in Cyprus could actually matter — not just to the rest of Europe, but to the rest of the world.

Here's the short version of what's happening:

Cyprus's banks, like many banks in Europe, are bankrupt.

Cyprus went to the Eurozone to get a bailout, the same way Ireland, Greece, and other European countries have.

The Eurozone powers-that-be gave Cyprus a bailout — but with a startling condition that has never before been imposed on any major banking system since the start of the global financial crisis in 2008.

The Eurozone powers-that-be (mainly, Germany) insisted that the depositors in Cyprus's banks pay part of the tab.

Not the bondholders.

The depositors. The folks who had their money in the banks for safe-keeping.

When Cyprus's banks reopen on Tuesday morning, every depositor will have some of his or her money seized. Accounts under 100,000 euros will have 6.75% of the funds seized. Accounts over 100,000 euros will have 9.9% seized. And then the Eurozone's emergency lending facility and the International Monetary Fund will inject 10 billion euros into the banks to allow them to keep operating.

cyprus

en.wikipedia.org
Cyprus's government tried to explain this deal by observing that it was better than the alternative: Immediate bankruptcy and closure of the major banks. In that scenario, depositors would lose a lot more of their money. Businesses would go bankrupt. And tens of thousands of people would be instantly thrown out of work.

But, still, not surprisingly, news that deposits in Cyprus's banks would be seized triggered an immediate run on the banks.

Depositors rushed to ATMs and tried to withdraw their money before it could be seized.

But the ATMs weren't working. And the government has now made it impossible to transfer money out of the country.

So, assuming Cyprus's government approves the deal (still pending), depositors will have some of their money seized on Tuesday morning.

Now, half of these depositors are said to be Russian oligarchs and other non-residents. And unless you happen to have the misfortune of having an account in a Cyprus bank, you may not care much whether these depositors have their money seized.

After all, that was the risk they took for storing their money in bankrupt banks, right?

Well, yes, that was the risk they took.

But ever since the Great Depression wiped out a big percentage of the world's banks, vaporizing the bank depositors' savings in the process, banking system regulators have tried to do everything they can to protect bank depositors.

And they are smart to do so.

Because the moment depositors think that there is risk to their savings, they rush to banks to yank their money out.

That's called a run on the bank.

And since no bank anywhere has enough cash on hand to pay off all its depositors at once, runs on the bank cause banks to go bust.

That's what happened to hundreds of banks in the Great Depression.

“Larchmont's Leading Citizen”

Since: Dec 12

Hilliard, OH

#2 Mar 17, 2013
And it's what happened to Bear Stearns, Lehman Brothers, and other huge banks during the financial crisis (though, with Bear and Lehman, the folks who yanked their money out weren't mom and pop depositors but other big financial institutions). It's what threatened to bring the entire U.S. financial system to its knees. And it's why the U.S. and European governments have been frantically bailing out banks ever since.

But now, thanks to Eurozone's bizarre decision in Cyprus, the illusion that depositors don't need to yank their money out of threatened banks because they'll be protected has been shattered.

Depositors in Cyprus banks will lose some of their deposits.

They will be furious about this.

And they will, rightly, feel that it is grossly unfair — because depositors in the bailed-out banks in Ireland, Greece, etc. didn't lose their money.

And they will feel like fools for not having taken their money out.

And ... here's the important part ...

Other depositors at weak banks all over Europe, in places like Spain, Italy, and Greece, will rightly wonder whether this is the beginning of a new era of bank bailouts, an era in which bank depositors are going lose some of their money.

What do you think those other depositors in Spain, Italy, Greece, etc., are going to feel like doing when they realize that, if their banks ever need a bailout, they might have their deposits seized?

That's right.

They're going to feel like yanking their money out of their banks.

And if some of them yank their money out of their banks, well — then the financial condition of those banks will go from weak to insolvent.

And the banks will go rushing to their governments and the Eurozone for help.

And if, god forbid, the Eurozone decides to seize the deposits of more bank depositors ...

Well, then, a good portion of Europe is going to suddenly experience a good old-fashioned bank run.

That, to put it mildly, could be a disaster.

It could bring the European financial crisis, which has lurched from one flare-up to another for most of the past five years, to a rather sudden head.

How much would it cost for the powers-that-be to bail out all of Europe's weak banks at once?

A lot.

More than the Eurozone has in its emergency lending facilities, certainly. And more than the International Monetary Fund has on hand.

So the U.S. would probably have to get involved.

And, regardless of whether the U.S. needed to get involved, the European economy would likely suffer the equivalent of a heart attack.

That wouldn't be good for the U.S. economy.

Or the Chinese economy.

Or any other economy that sells things to Europe.

So, you can see, this little decision to seize a little money from bank depositors in the little island of Cyprus could be a much bigger deal than you think.

It could conceivably precipitate a run on weak European banks.

And a run on weak European banks could hammer the European economy and then the economy of Europe's trading partners. And it could cause global markets to crash.

So keep an eye on what's going on over there in Cyprus.

It's potentially much more important than it seems.

Read more: http://www.businessinsider.com/cyprus-bailout...

“Tenured Marxist Radical”

Since: Jan 13

Ivy League-ISIS

#3 Mar 17, 2013
Can the Turks buy them out?

They stole the Muslim half in the 70s.

The Emir of Qatar owns a Greek island.

“Larchmont's Leading Citizen”

Since: Dec 12

Hilliard, OH

#4 Mar 17, 2013
Full Steam Ahead On Obama’s Theft Of IRA’s And 401k’s
http://www.westernjournalism.com/full-steam-a...

“Larchmont's Leading Citizen”

Since: Dec 12

Hilliard, OH

#5 Mar 17, 2013
-The-Artist- wrote:
Can the Turks buy them out?
Greece would go to war first.

“Tenured Marxist Radical”

Since: Jan 13

Ivy League-ISIS

#6 Mar 17, 2013
Hugh Victor Thompson III wrote:
<quoted text>Greece would go to war first.
Broke

The EU will send Angela Merkel and Daniel Hannan over to broker the transfer of ownership.

http://www.telegraph.co.uk/comment/columnists...

I found this. That guy is much nastier than I thought when I first heard of him in 2008.

“Larchmont's Leading Citizen”

Since: Dec 12

Hilliard, OH

#7 Mar 17, 2013
-The-Artist- wrote:
<quoted text>
Broke.
Doesn't matter. NATO Article Five is a "fight a war for free" card (except for the US.) It would be amusing to see how applied when the "enemy" was also a NATO member.

“Tenured Marxist Radical”

Since: Jan 13

Ivy League-ISIS

#8 Mar 17, 2013
Hugh Victor Thompson III wrote:
<quoted text>Doesn't matter. NATO Article Five is a "fight a war for free" card (except for the US.) It would be amusing to see how applied when the "enemy" was also a NATO member.
Most of Nato would drop out, saying that the Greek Military was all "Golden Dawn supporters" or something like that.

“Larchmont's Leading Citizen”

Since: Dec 12

Hilliard, OH

#9 Mar 17, 2013
-The-Artist- wrote:
<quoted text>
Most of Nato would drop out, saying that the Greek Military was all "Golden Dawn supporters" or something like that.
NATO has been a joke since the first bomb was dropped on Serbia in 1995.

“Tenured Marxist Radical”

Since: Jan 13

Ivy League-ISIS

#10 Mar 17, 2013
Hugh Victor Thompson III wrote:
<quoted text>NATO has been a joke since the first bomb was dropped on Serbia in 1995.
I was raised on "Behind Enemy Lines" into the pro-Muslim viewpoint

“Larchmont's Leading Citizen”

Since: Dec 12

Hilliard, OH

#12 Mar 17, 2013
-The-Artist- wrote:
<quoted text>
I was raised on "Behind Enemy Lines" into the pro-Muslim viewpoint
The US propaganda machine was worthy of Goebbels concerning the Balkans in the '90s.

“Larchmont's Leading Citizen”

Since: Dec 12

Hilliard, OH

#13 Mar 18, 2013
Let the riots begin:

Cyprus banks to remain shut Tuesday and Wednesday: government source

NICOSIA | Mon Mar 18, 2013 11:04am EDT

(Reuters)- Banks in Cyprus will be shut on Tuesday and Wednesday pending a decision by parliament to approve a levy on bank depositors, a government source told Reuters.

"Tuesday and Wednesday are bank holidays," the source said. A decree will be released shortly from the Finance Ministry to this effect, he said.
http://www.reuters.com/article/2013/03/18/us-...

“Tenured Marxist Radical”

Since: Jan 13

Ivy League-ISIS

#14 Mar 18, 2013
Hugh Victor Thompson III wrote:
Let the riots begin:
Cyprus banks to remain shut Tuesday and Wednesday: government source
NICOSIA | Mon Mar 18, 2013 11:04am EDT
(Reuters)- Banks in Cyprus will be shut on Tuesday and Wednesday pending a decision by parliament to approve a levy on bank depositors, a government source told Reuters.
"Tuesday and Wednesday are bank holidays," the source said. A decree will be released shortly from the Finance Ministry to this effect, he said.
http://www.reuters.com/article/2013/03/18/us-...

“Tenured Marxist Radical”

Since: Jan 13

Ivy League-ISIS

#17 Mar 18, 2013
You cannot kill a Spook wrote:
<quoted text>
The outright theft of people's savings / checking / and or.safety deposit boxes should cause.the citizens to riot against the.gov ernment.goons that approve such theft. Bonds and.stocks.are.risk investments savings accounts may get zero or.near.zero interest but should be secure.from theft.

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