Patterico's Pontifications

3/21/2013

Cyprus: Government Raids the Banks

Filed under: General — Patterico @ 7:57 am



Think your money is safe in the bank? If you’re in Cyprus, you wouldn’t think so. The government recently declared a plan to simply take money from its citizens’ bank accounts. You read that right: to just swoop in and YOINK! take people’s money. Thanks! Bye!

It’s a Third World tactic that is a real possibility in a supposedly First World country. The craziest part: Cyprus insured bank deposits! Or, they said they did. In reality, not so much.

The background is entertainingly explained in this recent Planet Money episode. Basically, Cyprus set out to be the Cayman Islands of the Mediterranean: deposit your money with us and we’ll give you a nice interest rate and ask no questions. They attracted a lot of money, especially from criminals in Russia, who loved Cyprus anyway and especially loved the banks’ lack of curiosity about the origins of their money.

In order to make money while offering high interest rates, the Cyprus banks had to make risky investments in things like . . . Greek bonds. Yeah, I know. Right?

So now they’re underwater and looking for a bailout, and the thing is, the European Union and the IMF are demanding that the government ante up. They want the government to come up with billions of Euros to earn the bailout. (The reports on the amount demanded range from 5.8 billion to 7 billion, although the lower number seems more widely reported.)

Hence the plan that emerged a few days ago. The President’s idea: we’ll levy a “tax” on bank deposits. In other words, we’ll grab money from people’s bank accounts. The Wall Street Journal has the details of the plan that was proposed:

The revised plan would have spared depositors with less than €20,000 in their bank accounts from the deposit levy. Depositors with between €20,000 and €100,000 would pay a 6.75% rate, while those with more than €100,000 would pay 9.9%. The revised plan, if it had passed Parliament, also meant that Cyprus would have fallen €300 million short of its revenue target of €5.8 billion.

Up to 10% of your money, gone overnight. Poof!

The country’s parliament has soundly rejected the bank levy, which did not garner even a single vote. However, the BBC reports:

But one senior government MP, who did not want to be named because he said discussions were not over, said the bank levy would remain in some form, the BBC’s Chris Morris reports from Nicosia. Without it, the MP said, Cyprus could not raise all the money it needed.

Banking is central to the economy in Cyprus, you see, and without the money grab, the country is probably going to fall short. From what I can tell, they will have to grab the depositors’ money or back out of the Euro. If there is a sound third option, I’m not sure what it is.

They have until Monday to come up with the money, and banks in Cyprus are closed until Tuesday. People have been withdrawing all they can from ATMs, and are otherwise screwed.

What is amazing about this is that it is essentially being required by the EU and the IMF: these organizations know that demanding the sum of money means that the government might have to raid the banks.

The interesting thing about all this is the effect it will have on other countries in the future. If you’re in Spain or Italy and it looks like the reckoning is finally coming, you’re going to look at Cyprus and think: I’d better grab everything out of the bank now, before they close it down. (Indeed, Spain may already be preparing for its own bank money grab. H/t gary gulrud.) So now, a possible crisis in the Eurozone will likely cause bank runs — which is the very thing that turns a possible crisis into a genuine crisis.

From this nothing good can come.

This could be that initial tiny domino that sets the rest tumbling. We’ll keep an eye on it.

56 Responses to “Cyprus: Government Raids the Banks”

  1. Ding.

    Patterico (9c670f)

  2. The best part is, I can easily imagine lefties defending this.

    It’s just a tax!

    Patterico (9c670f)

  3. DONG!

    Michael M. Keohane (a35b77)

  4. I don’t sleep at night.

    SarahW (b0e533)

  5. if everyone would just run to one side it would tip over and then the underwater banks would be under water and would need a bail out

    at which point we could send buckets

    the whole exercise would buy time for cooler heads to prevail i figure

    happyfeet (4bf7c2)

  6. Patterico – Those that can afford to deposit monies in the banks should pay their fair share to keep them afloat. Otherwise, this will disproportionately effect women, children, elderly, and minorities.

    JD (b63a52)

  7. This brings back memories from the 1980s. Banks were purchasing hot money deposits by offering above market rates on Jumbo CD’s above the FDIC insurance limits. Guess what they had to invest in to offer those kinds of rates. Insurance companies were competing by seeing who could offer the highest yields on annuities and GIC’s. Guess where Drexel stuffed a lot of its junk bonds and a lot of other crap investments wound up. When the game of musical chairs stopped, it was not pretty.

    In the past decade, a number of “money market” mutual funds played the same hot money game with unsuitable investments and broke the buck.

    The game never stops.

    daleyrocks (bf33e9)

  8. Not to worry, as soon as president i me mine solves the middle east crisis, he will fix cyprus.

    mg (31009b)

  9. What will be Cyprus future role in the banking industry? How much foreign money will they attract after this?

    Jim (ba6a58)

  10. In Spain the conservative finance ministry is floating the same idea. You see some of the regions, in more trouble than the National government, aren’t doing enough to boost revenue now that taxes have been increased, a couple of times.

    Cyprus is working on a collectivisation of its bills that may include involuntary deposit relief having failed with EU and Russian bailout plans.

    gary gulrud (dd7d4e)

  11. With regards to other countries pulling this stunt, you might want to look at what’s going on in New Zealand.

    The National Government are pushing a Cyprus-style solution to bank failure in New Zealand which will see small depositors lose some of their savings to fund big bank bailouts, the Green Party said today.

    Open Bank Resolution (OBR) is Finance Minister Bill English’s1 favoured option dealing with a major bank failure. If a bank fails under OBR, all depositors will have their savings reduced overnight to fund the bank’s bail out.

    John Smith (7f9827)

  12. 2. The best part is, I can easily imagine lefties defending this.

    It’s just a tax!

    Comment by Patterico (9c670f) — 3/21/2013 @ 8:00 am

    Of course they can defend it. Look at what the Democratic Party of Bonnie & Clyde is doing in Kali:

    California businesses fuming over retroactive $120M tax grab

    California’s top-end taxpayers — already steamed over a recent hike in the nation’s highest state income tax — are now fuming over a new $120 million retroactive tax grab on small business owners.

    …But the FTB changed its interpretation of the law after a state appeals court ruled unconstitutional a qualifying provision of the break requiring companies to maintain 80 percent of their workforce in California. Instead of asking the legislature for guidance on what to do, the FTB suspended the break in its entirety and ordered anyone who’s claimed it in the last five years to pay up.

    …The taxpayers fighting the FTB won an early victory in their fight when the tax board announced a temporary delay in issuing actual bills, technically called Notices of Proposed Assessments. It’s believed the additional time is to allow the state’s political leaders time to figure out a solution.

    “Once the revenue is identified, those folks up in Sacramento will figure out how to spend it already,” warns former state Sen. George Runner. “And that’s what makes this so difficult. Even though it has this great bipartisan support as being wrong.”

    Earlier this month, lawmakers from both parties introduced legislation that would force the FTB to scrap the retroactive tax bills. “Californians planned and based their actions on the language of the law as it existed,” Democratic Sen. Ted Lieu said in a statement. “Going backward in time and changing the rules innocent taxpayers relied upon violates the very essence of the rule of law.”

    Read more: http://www.foxnews.com/politics/2013/03/19/california-businesses-fuming-over-retroactive-120m-tax-grab/#ixzz2OBnkjWWb

    Violating the very essence of the rule of law is the first instinct of the unelected statists. Whether they work at the EU or the Kali FTB.

    This is just as boneheaded as the EU plan to bailout the Cypriot banks when you think about it. The object of the bailout was to stabilize the banks. And what do those EU geniuses come up with? A plan to screw over depositors and hammer home the message that their deposits, which are in all banking systems essentially a loan to the bank based upon the understanding that their capital will be safe (after all it’s insured) because otherwise they’d find some other investment, are not in fact safe.

    Hello! You can not stabilize a banking system by destabilizing the depositors on which all banking systems are founded upon. Essentially if you look at the ancient system of tax farming, this is the same. The Romans or the Persians would auction off the right to collect taxes to private tax collectors. They’d collect what the state insisted upon, then two or three times that for themselves.

    So the EU auctioned off, when you think about the negotiations, to the Cypriot banks, the right and the duty to collect 5 billion Euros as a guarantee in return for a 10 billion Euro payday.

    Kali is bleeding businesses so they offer tax incentives to start ups and other business to slow the hemorrhaging. Then Kali is found to have put unconstitutional conditions on the tax break and the FTB’s first instinct is to screw over the very businesses it was trying to attract. That it needs to attract, and needs to keep, to stay afloat.

    As an aside, you’d think maybe at some point Kali would learn its lesson and instead of offering special tax breaks with a lot of conditions put on them to attract certain kinds of businesses they’d just lower the tax rates across the board. After all the fact they offer tax incentives is an open admission that taxes effect business decisions. But no.

    Just like depositors in Cyprus, to business owners it doesn’t really matter if the Kali “parliament” comes up with a fix for this now. The lesson has been learned again. Kali is the worst place outside of Greece to do business. A couple of years back when Kali was broke it issued I.O.U.s to businesses it used as suppliers, vendors, or contractors. That’s what lefty statists do when they can’t meet their promises to pay; they don’t pay.

    What else do they do? They treat those I.O.U.s as if they were income and demand those businesses they just screwed over pay quarterly taxes on the fake income. But in real cash.

    Kali? Cyprus? doesn’t matter. If the lefties need the money they’ll just take it.

    By the way, it wasn’t a Cyprus government deposit insurance scheme. It was an EU wide deposit scheme. You know the EU’s motto, “toward ever closer union!”

    So when the EU demanded the Cypriots to steal 6.75% of the insured depositors savings they were going back on their own assurances to depositors EU-wide.

    How’s that going to go over in Italy and Spain, do you think?

    As an aside, apparently a large chunk of Americans in their 40s and 50s are withdrawing from their 401(k) retirement accounts. The “experts” have been saying that’s a sign of financial hardship; they’re using up retirement funds to make ends meet now. Maybe. But nationalizing retirement accounts is popular with cash-strapped governments. It’s been done in South America and Europe. And don’t think the Democrats here haven’t noticed.

    So it could be they’re just reading the writing the tax farmers have graffitied on the wall.

    Steve57 (60a887)

  13. Buy gold
    Buy a gun
    Somebody comes for your gold
    Shoot them with your gun

    Icy (c4aeff)

  14. This is one of these awesome situation where everything that could possibly have gone wrong in fact has. To wit:

    * A nation that made pretty much built its entire economy around one industry, banking. I think I heard that bank deposits in Cyprus were something like eight times larger than the nation’s GDP.
    * The ponzi-scheme-like way that Cypriot banks tried to deliver returns.
    * A small country being suckered into the EU, knowing full well that they would then be at the mercy of Germans, French, and Belgians.
    * The understandable reluctance of the German taxpayer to bail out yet another country that has behaved irresponsibly.

    There aren’t any good answers to where to go next. The government raid on the banks solves some of the problem — as long as bank depositors in Spanish and Portuguese banks don’t get scared that this same solution may be applied to them. In that case, we can look for a run on the banks next time a crisis rears its head, which would bring down the whole stinking edifice of the European Monetary Union in one grand collapse.

    JVW (4826a9)

  15. I think of all the pro-big-government, liberal-sympathizing bureaucrats (and professional pencil pushers) sitting at the EU’s headquarters in Brussels — foisting all their annoying, nanny-state edicts (some having little or nothing to do with economics) onto member nations — and I want to say: “Let them eat cake.”

    So between the EU and all its Greece-like, France-like (ie, Socialized-enthralled) member nations, which dominate Europe, I’m reminded of the worst of Republican Herbert Hoover and Democrat Franklin D Roosevelt.

    Mark (bc9a80)

  16. Greetings:

    A bit off topic perhaps, but I found the absence of any mention of our bestest Muslim ally in the whole world, Turkey, that is, a bit peculiar. Don’t/didn’t they have something to do with Cyprus??? So, how come no Islamo huffing and puffing ??? WHat’s left of my inquiring mind wants to know.

    11B40 (e3cd84)

  17. In the United States of America Cyprus, our government accomplishes this theft by printing money… Making what we have in teh bank worth less and less each day.

    Colonel Haiku (9aa305)

  18. In the United States of America Cyprus, our government accomplishes this theft by printing money… Making what we have in teh bank worth less and less each day.

    That Colonel, is an excellent point. There is at least something honest about the way Cyprus goes about stealing accumulated wealth.

    JVW (4826a9)

  19. I understand that Cypress rejected a Russian bailout plan that offered cash for oil rights, because they didn’t want to piss off the EU.

    Kevin M (bf8ad7)

  20. Yep, JVW… Cyprus can’t print euros, but Bernanke has been printing money like the chickens will never come home to roost.

    Colonel Haiku (653d21)

  21. Willie Sutton declined to take credit for the now famous words “because that’s where the money is” in his book “That’s where the money was”. However, he did recommend that one should “[g]o where the money is, and go there often.” Words that no doubt are treasured by Democrats of all stripes.

    The book’s title is the real story. Rules are important, and we may shortly see how a modern economy attempts to function without banks. Arrogant fools like MIT’s Ben Bernanke disregard pretty much of all written history at our collective risk. We’re all in a race to the bottom right now, and all those folks in wheel chairs living on pensions and SS payments will be left with whatever they’ve managed to hide under the mattress that has some value. Hint: it likely won’t be U. S. currency especially with all the revised color schemes and chemical signatures of each new issue.

    And a small addition to Patterico’s excellent summary of the Cyprus crisis: it is reported that Russian “tycoons” have deposited the equivalent of $30B in Cyprus banks, and represent a third to a half of all deposits. Perhaps Cyprus needs to “tax” all foreign investors 100%? Willie would approve.

    bobathome (c0c2b5)

  22. “It is during times of crisis that the resemblance between Government and Organized Crime becomes most apparent.”

    mojo (8096f2)

  23. mojo, you’ve hit it on the head. This is no doubt what Hte One had in mind when he spoke about transparency.

    bobathome (c0c2b5)

  24. Well, in service of providing a dissenting view, here is an interesting post from National Review Online quoting a column in Financial Times which — alas — apparently resides behind a firewall. The quote is pretty thought-provoking, so I wish I were able to read the entire FT piece, but here is what NR quoted regarding the idea that the Cypriot bank raid would be considered “theft”:

    This is nonsense. Banks are not vaults. They are thinly capitalised asset managers that make a promise – to return depositors’ money on demand and at par – that cannot always be kept without the assistance of a solvent state. Anybody who lends to banks has to understand that. It is inconceivable that banking – a risk-taking financial business – can operate without exposure to loss of at least some classes of lenders. Otherwise, bank debt is government debt. No private business can be allowed to gamble with taxpayers’ money in this way. That is evident.

    There is indeed something classically conservative about the notion that even a deposit in a government-insured bank should come with some inherent risks.

    JVW (4826a9)

  25. I wouldn’t characterize it as ‘raiding’ the bank accounts as much as the EU is offering a bailout that would cover around 92% of the deposits. Since the alternative is a bank failure in which depositors recover less than 6%, 94 cents on the dollar isn’t too shabby.

    Would you rather have government (i.e., taxpayers) have to cover 100 cents on the dollar? Why not let those who were chasing big returns suffer the consequences of having loaned their money to fools?

    steve (369bc6)

  26. Sorry, I mistyped.

    Since the alternative is a bank failure in which depositors lose more than than 6%, recovering 94 cents on the dollar isn’t too shabby.

    steve (369bc6)

  27. JVW – Bankrupcy (note the bank part, which actually refers to a moneychangers bench but which is still appropriate) has been around for a long time, and it is the conservative answer to this problem. Admittedly, the depositors may get clobbered, but first the stockholders and owners of the bank will be ruined. Our current infatuation with hiding the risk, and spreading it around, is great if you are one of those who spoke last to Hte One, or his deputy, Helicopter Ben. And without exception, these concerned citizens are also the ones most responsible for the fiasco. After all, they have the insider knowledge to see what will shortly transpire. So the government ends up protecting the well-connected fools who created the problem, and pass the consequences on to everyone else. All in the name of “fairness”, and of course for the women and children. Consider, for example, the case of MF Global and John Corzine.

    bobathome (c0c2b5)

  28. “Consider, for example, the case of MF Global and John Corzine.” Hmmm .. it turns out that depositors in his investment company will get 93% of their accounts returned via the bankrupcy. The only disappointing thing is that Corzine appears to have emerged relatively unscathed. And $1.6B is said to have “disappeared”. So the “conservative” solution worked, and this doesn’t illustrate my point. Sorry about that. Perhaps Countrywide and BofA would work, but that would involve Bush and not Hte One, which is ok by me.

    bobathome reconsiders (c0c2b5)

  29. bobathome, there is not a whole lot of disagreement in our positions. I too believe that the best option is bankruptcy in order to let the markets work as they should, but we both know that there is no way the EU can allow this, not after Greece and with Spain looming on the horizon. I was interested in the FT writer’s point because he was essentially arguing that this should be treated as “you take your chances, you pay the consequences” which is at core a conservative argument. I would assume that you and I both agree that the least moral outcome is the one in which a certain group of investors is protected while another group of investors takes the haircut. Regardless of whether it is the rich investors or the poor investors benefiting from the protection, it is inherently wrong to treat each group separately.

    JVW (4826a9)

  30. All EU banks are required to insure depositors up to 100,000 euro (about 129k dollars) in a manner similar to our FDIC.

    Except they don’t have an agency available with money sitting around in some sort of account, even as lamely inadequate as our own deposit insurance. We have the benefit of having more banks so it would theoretically be possible for one of them to fail and get bailed out without affecting the others but that’s not really true of us either in our current circumstances.

    Cyprus only has two banks. The ‘deposit insurance’ comes from the government of Cyprus apparently which is already in hock and would just have to borrow the money for it. So this whole thing is about how to borrow the money for it.

    It has to come from the EU which means it has to come from Germany and Germany only has so much good money to throw after bad – the only reason they’re considered solvent too at this point is because they’re Germans and we trust them to work for a living.

    The EU said ‘we can slush up this much if you’ll put something down’ and they decided they couldn’t put anything down.

    The hard-assed thing to do would be to crash the bank and recompense every depositor up to the legal limit of 100,000 euro. That’s what the law says.

    It pisses off a lot of ex-pat Brit and a heck of a lot of Russian criminals.

    But who cares what the law says? It’s not like any of this is asset-backed. Send your army in here and repossess my crappy European car. See if you can sell it anywhere.

    luagha (5cbe06)

  31. JVW, I would distinquish between depositors and owners, and I would not consider them both “investors”. Depositors should have a fairly straightforward deal. They put money in the bank in return for fixed returns over specified periods (CDs for example) or no returns but the convenience of checking accounts and the safety of all those vaults and alarms. They have no control over bank policies. The owners of the bank are in the business to make a profit, and they are the ones who are capable of vetting the bank’s investments. The owners should be more at risk than the depositors since they have the authority to select the bank’s investments. Obviously both should stand some risk, but the owners should lose all their equity before anything is taken from the depositors. Even if the owners were just doing what Congress ordered, lending to unqualified home buyers for example, they should still take the fall. And they should be completely removed from the new bank’s management as it emerges from bankrupcy.

    It strikes me that we are in a situation somewhat akin to the pathological liar. After 20 or 30 years of lying, it becomes more and more necessary to keep lying in order to prevent the whole fantasy from collapsing. Here we have Helicopter Ben zeroing out interest rates to facilitate his experiment with demand pumping via uncontrolled government handouts. But this has unforeseen consequences, like lowering interest payments everywhere, which facilitates even more extraordinary spending by places like Greece. Now pensions are underwater, no one knows what money is really worth, and everything is going sideways. Russian “tycoons” are looking to protect their loot and stumble upone Cyprus. This whole thing is spinning our of control.

    bobathome (c0c2b5)

  32. The only good thing about what happened in Cyprus is it gives us a glimpse of where we could end up. Either we stop it politically or take steps to protect ourselves from it.

    DRJ (a83b8b)

  33. In the United States of America Cyprus, our government accomplishes this theft by printing money… Making what we have in teh bank worth less and less each day.

    Comment by Colonel Haiku (9aa305) — 3/21/2013

    Thread winner. Our politicians are simply more crafty than Cypriot politicians.

    Dustin (73fead)

  34. If you don’t think this can happen here, you don’t have the requisite number of brain-cells to pick your nose.
    It’s already happened in Argentina and other South American nations, plus various member-nations of the old Warsaw Pact in Eastern Europe.
    Show a politician a pot-of-gold, and he’ll try to confiscate it to put it to a “better use”.

    askeptic (b8ab92)

  35. The scam of subsuming IRAs and such into government pension plans has been done in better places than Argentina.

    Kevin M (bf8ad7)

  36. The revised plan would have spared depositors with less than €20,000 in their bank accounts from the deposit levy

    In the original version, they taxed the first dollar of deposits.

    People were withdrawing money from ATMs. The british government was trying to ensure that their soldieres based in Cyprus would collect their full paycheck. (they said they would be reimbursed for any money lost)

    The very original idea had been, I think, not to tax those below 100,000 Euros, or to tax them less, but the President of Cyprus insisted that the top rate be kept below 10% (not in double digits) He wanted to aintain Cyprus as an international banking center. A lot of the depoists are from Russia. Russian oligarchs also like to use Cyprus courts – they are at least real courts.

    Meanwhile Russia (or Gazprom, or rather a Gazprom subsidiary that operates as bank or something – but it is controlled by Putin) has offered (and denied offering) a bailout. They would get exclusive rights to lots of offshore oil.

    Germany’s Chancellor Angela Merkel said to Cyprus they shouldn’t accept that.

    Sammy Finkelman (d22d64)

  37. Up to 10% of your money, gone overnight. Poof!

    Cyprus bank accounts were paying 5% annual interest, so if someone had deposited money there for 5 to 7 years, they’d still be better off – someone saaid than the United states but there you have to take account exchange rates.

    Sammy Finkelman (d22d64)

  38. Comment by Steve57 (60a887) — 3/21/2013 @ 9:05 am

    So when the EU demanded the Cypriots to steal 6.75% of the insured depositors savings they were going back on their own assurances to depositors EU-wide.

    How’s that going to go over in Italy and Spain, do you think?

    Pretty well. People are distinguishing their case from that of Cyprus.

    Some commentators are not so sanguine.

    Sammy Finkelman (d22d64)

  39. It’s starting to look a little like a case of corruption in Cyprus.

    The original plan would have honored deposit insurance. it was feasible. But some people with pull apparently didn’t like it. (and the first thing they settled on would have taken away even from the first dollar of deposits)

    http://blogs.wsj.com/brussels/2013/03/18/senior-bonds-last-ones-standing/?mod=brussels

    The tax was seen as less risky and painful than the alternative—an IMF plan to radically shrink the two banks at the center of Cyprus’s financial problems in a full-on restructuring.

    That proposal, which was backed by Germany, Finland and the Netherlands among others, would have meant steep losses for depositors with more than €100,000 on accounts at Laiki Bank and Bank of Cyprus.

    According to people involved in the discussions Friday night and Saturday morning, depositors above the legally insured level would have faced haircuts of between 30% and 40%. The ones with accounts of less than €100,000, as well as depositors in other Cypriot banks, however, wouldn’t have been hit. Crucially, that plan would also have seen senior bondholders in Laiki and Bank of Cyprus take losses.

    The euro zone has to far carefully avoided burning senior bondholders during a bank restructuring. Doing so was seen as too destabilizing for the bloc’s credit-starved financial system. On top of that, in many countries senior bondholders have the same status as bank depositors when it comes to getting repaid.

    Sammy Finkelman (d22d64)

  40. 25 Comment by steve (369bc6) — 3/21/2013 @ 11:27 am

    I wouldn’t characterize it as ‘raiding’ the bank accounts as much as the EU is offering a bailout that would cover around 92% of the deposits. Since the alternative is a bank failure in which depositors recover less than 6%, 94 cents on the dollar isn’t too shabby.

    According to that article, uninsured deposits would have still retained 60% to 70% of their value.

    But that was too low for some Russians, apparently.

    So they persuaded the government of Cyprus to steal some money from the small depositers.

    Sammy Finkelman (d22d64)

  41. ”The American Republic will endure until the day Congress discovers that it can bribe the public with the public’s money”. Alexis de Tocqueville

    Are there any limits left to a government that can simply steal some people’s money to buy the loyalty of the majority?

    These kinds of disturbing developments make it clear that we are rapidly running low on options to preserve liberty without gunfire.

    About the only thing the people really paying the bills have left is to at least temporarily stop working to show that they will no be enslaved by a mooching majority.

    It may soon come to pass that laws will be in place to stop such Taxpayer Strikes, but for now they need to take place.

    Strike early and strike often I always say – beginning the day that is most symbolic for the effort – the big pain In the posterior for taxpayers: April 15!!!!

    Alexis de Tocqueville (733b39)

  42. Congressmen at CPAC said that the DHS is flat refusing to talk about their arms purchases.

    With drones observing from 1500 feet, and inside their bullet-proof armored vehicles, eveh the DHS-ATF goons will be formidable.

    Will probably be needed against the National Guard.

    gary gulrud (dd7d4e)

  43. I think the best thing to to do what krugman recommends – keep borrowing money to fuel the dems spending.

    Joe (debac0)

  44. 16. Greetings:

    A bit off topic perhaps, but I found the absence of any mention of our bestest Muslim ally in the whole world, Turkey, that is, a bit peculiar. Don’t/didn’t they have something to do with Cyprus??? So, how come no Islamo huffing and puffing ??? WHat’s left of my inquiring mind wants to know.

    Comment by 11B40 (e3cd84) — 3/21/2013 @ 9:29 am

    The part of Cyprus the Turks are involved in is Northern Cyprus. It declared its independence in 1983. Nobody except Turkey recognizes it. But it’s not the part of Cyprus that had its banks invest heavily in Greek government bonds or turned its banks into a money laundering operation for the Russian mob.

    So there’s no Islamo-huffing and puffing because they’re not involved.

    Steve57 (60a887)

  45. 24. There is indeed something classically conservative about the notion that even a deposit in a government-insured bank should come with some inherent risks.

    Comment by JVW (4826a9) — 3/21/2013 @ 11:12 am

    It’s even more classically conservative to put your money in a jar and bury in the back yard.

    25. I wouldn’t characterize it as ‘raiding’ the bank accounts as much as the EU is offering a bailout that would cover around 92% of the deposits. Since the alternative is a bank failure in which depositors recover less than 6%, 94 cents on the dollar isn’t too shabby.

    Would you rather have government (i.e., taxpayers) have to cover 100 cents on the dollar? Why not let those who were chasing big returns suffer the consequences of having loaned their money to fools?

    Comment by steve (369bc6) — 3/21/2013 @ 11:27 am

    The thing is Cyprus doesn’t have a tax base that could cover it. It doesn’t bring in enough in taxes to cover current spending. It can’t borrow because the only entities that will buy Cypriot debt are Cypriot banks. Cypriot government debt are junk bonds. Although the Russians are offering a deal where they’d participate in a bailout if GAZPROM gets exclusive drilling rights, it’s not clear A) the oil and gas deposits are exploitable and B) the Cypriot claims are valid. They’re disputed by both Turkey and Egypt.

    Cyprus also doesn’t have enough state assets to sell, and when Greece tried that it took longer to make the sales then anticipated and they didn’t bring in as much as anticipated anyway.

    What the Cypriots (and I’m talking the average individual Cypriot) is an EU wide Deposit Guarantee Scheme. The Cypriots, like most people in the EU, have been led to believe that the EU wide DGS was just that. It isn’t.

    The EU DGS are really just a set of directives. The governments of the member states are responsible for meeting the requirements of the EU DGS. But Cyprus, like many other EU members, simply can’t do it as I’ve outlined above.

    Essentially the EU has through its DGS directives imposed an unfunded mandate on its members states. Which has misled depositors. It’s a pretty heinous thing to do.

    So the EU contrary to its own directives is requiring Cyprus to violate the EU DGS.

    What do you think will happen to the banking sector when Cypriot depositors take out their cash so that 94% they have left can’t be turned into 88%?

    You can argue that it’s really a pretty good deal for depositors, but they were misled about the safety of those deposits. An even better deal for depositors is not to quit being suckers and stop being depositors.

    Steve57 (60a887)

  46. All they have to do is say they have a green energy plan and Obama will give them the money. It doesn’t matter if they will never pay it back. Obama doesn’t care if the American taxpayers get their money back.

    George (cddde7)

  47. Thanks to Zerohedge for unearthing this quotation from Jean-Claude Trichet, then-president of the European Central Bank, on January 18, 2008:

    ”For a small, open economy like Cyprus, euro adoption provides protection from international financial turmoil.”

    SPQR (768505)

  48. SPQR, the EU is a massive criminal conspiracy and the people who designed it and grew it should be thrown in prison.

    That was my point about the EU Deposit Guarantee Scheme. It’s an entire fraud perpetrated on depositors. It only exists in countries that don’t need it. Really, it only exists in countries that don’t need to EU to tell them to have it (Norway threatened to opt out because they insure deposits up to 250k Euros, and they found the EU directives limiting them to only 100k Euros to restrictive).

    Depositors in the countries that actually need an EU DGS are finding that far from guaranteeing anything it’s the EU that’s most likely to raid into those supposedly “insured” accounts.

    Steve57 (60a887)

  49. Ah STATISM!! Isn’t it lovely?

    Gus (694db4)

  50. 47. Everyone has backed away while the victim convulses in its death throes.

    Europe may just beat the ME to WWIII launch.

    gary gulrud (dd7d4e)

  51. Go watch the old He-Man cartoon shows. The part where he holds up the sword and proclaims “I have the Power”. Bet you didn’t know that socialist politicians are all cartoon characters?

    cedarhill (146fff)

  52. Hasn’t ObamaCare basically done the same thing here in the U.S.? In the end, virtually everyone has their pockets picked with this program that had zero support from more than half the country.

    Rovin (47f04d)

  53. Just wait until you buy a fishing pole and find out it has been classified as a “medical device” and is now subject to a surtax

    Colonel Haiku (591848)

  54. Which brings up the old doctor joke:
    Doctor asks a patient if he plays golf.
    If the patient says yes, he advises him to quit to reduce his blood pressure;
    If he says no, he advises him to take it up as good exercise.
    Golf-clubs too, are medical devices.

    askeptic (b8ab92)

  55. 43. Comment by Joe (debac0) — 3/21/2013 @ 3:28 pm

    I think the best thing to to do what krugman recommends – keep borrowing money to fuel the dems spending.

    This is Krugman about Cyprus:

    http://www.nytimes.com/2013/03/22/opinion/krugman-treasure-island-trauma.html?ref=paulkrugman&_r=1&

    he tries to get in some points about tax havens, but it has some information, as does a New York times news article and a Wall Street Journal article and editorial.

    Krugman says 37% of Cyprus deposits are foreoign owned but that includes a lot of Cypriot residents who aren’t (this is not only Russians, it is also Chinese) and people who left Cyprus. He compares it to Iceland, without being too informative.

    The WSJ editorial says the bank should simply be alloeed to go broke, with bondholders and shareholders wiped out and the uninsured depositors should be come the new stockholders.

    Sammy Finkelman (d22d64)

  56. Damn, I hate it when that happens:

    http://www.zerohedge.com/news/2013-03-25/have-russians-already-quietly-withdrawn-all-their-cash-cyprus

    Cyprus, which had only joined EMU in like 2008 commits sepuku on demand. Never let it be said the Germans are any smarter than the non-Aryans.

    gary gulrud (dd7d4e)


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