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An interesting point raised by [url= http://www.guardian.co.uk/world/2013/mar/17/cyprus-bailout-big-implications-small-rescue ]Larry Elliott[/url] in the Guardian...
[i]But while there was never a doubt that Cyprus would need help from the so-called troika of the International Monetary Fund, the European Union and the European Central Bank, the deal announced at the weekend differed in one significant way from the ones that have gone before it: bank deposit holders in Cyprus will have to foot part of the bill themselves.
The reason for this is simple. There is a lot of Russian money in Cyprus, much of it from somewhat dubious sources. With the richer countries of the eurozone suffering from bail-out fatigue, there was resistance – particularly in Germany – to the idea that ordinary European taxpayers should be writing blank cheques to Russian oligarchs who might have been using Cyprus as a money laundering destination.[/i]
we are still talking about folk with £88K savings
Why help these?
88K is not so much - as a lump sum to fund a pension for your whole life it doesn't go very far at today's interest rates.
Cyprus, with a GDP of €17.9bn (end 2012):
- requires assistance estimated to be €17bn - point 1
- has a bank deposit base of €68bn - point 2 (Iceland, Ireland?)
- of which €20bn are held by foreigners - the bulk being Russian - point 3
- has its second largest bank (Laiki) dependent on € aid - point 4
- a potential €30bn bill to cover deposit insurance (if that still existed/exists?) -point 5
In this context, there is only one likely result, and it is not a pretty one. Faced with that and as bad as this proposal seems - the choice of paying 10% to protect the remaining 90% of your deposits starts to look worthy of some consideration? What would you do?
It looks like the domino effect will start again with this tiny tax-less nation.
Euro is ridiculous and EU is free riding ... 😆
In this context, there is only one likely result, and it is not a pretty one. Faced with that and as bad as this proposal seems - the choice of paying 10% to protect the remaining 90% of your deposits starts to look worthy of some consideration? What would you do?
Burn down the houses of some bankers and politicians.
What would you do?
Start over with a new system. The present one doesn't work. It fails. And again. And again. And again. And again.
That may keep you warm but it wont get your money back!
THMS iirc that is one of the risks of lending other peoples money and only keeping about 10% of it in your bank at any one time- the systems has a serious flaw that will occur from time to time
88K is not so much - as a lump sum to fund a pension for your whole life it doesn't go very far at today's interest rates.
First world problem and it is a lot - i rather suspect it puts you in the top 1% of the EU saving league and about 0.01 % globally.
I also doubt that anyone chooses to put their money in the tax haven of a cyprus bank as a safe way to fund their pensions/life savings.
Don't get distracted by the high earners, many ordinary Cypriots with some money in the bank are going to suffer.
Today it is Cyprus. How long before the practice spreads to other eurozone countries, or maybe one day, the UK?
Indeed. I'm sure a lot of Southern European governments are presently watching with interest,thinking "well... if they can pull this off without people rioting in the streets, then....."
First world problem and it is a lot - i rather suspect it puts you in the top 1% of the EU saving league and about 0.01 % globally.
I also doubt that anyone chooses to put their money in the tax haven of a cyprus bank as a safe way to fund their pensions/life savings.
What if you have just sold a house and the money is in your account just as they announce that they are going to do this? they then just take 10% of it........
It's ok though as the Cypriot bank holiday has apparently been extended to Thursday so they can postpone people taking any money out until they've had a rethink.
yes some ordinary folk are going to suffer but in the main it will be tax avoiders and money launderers who suffer.
Why would we help them out and in particular why would we help out the 50% who are not even EU and wont be paying any of this back?
What if you have just sold a house and the money is in your account just as they announce that they are going to do this? they then just take 10% of it........
well fist of they give you shares so you exchange the money iots not quite lost aor stolen [ better than the bank/country going bust i would assume],secondly you have been very unlucky and thirdly we cannot define policy for an entire island and think there wont be examples where it is clearly unfair on some individuals. It will be. Are you happy to bale out the 50 % who are laundeirng money and the others whatever % who are tax avoiders? Should we not have a poilcy that deals with them in the main though it will affect the odd person unfairly.
88k is a lot of money, however that's not the minimum amount they'll <ahem> tax is it? If you've toiled for years and saved €5,000 you stand to lose €500 overnight.
Too much focus on the very rich here IMO and not much thought for those that will really feel it (low earning net savers).
well first off they give you shares so you exchange the money its not quite lost or stolen
Fantastic!!! Is there much demand for shares in these organisations that are having to rob their own customers so as not to go bankrupt? Are they worth much? 😆
Junkyard - you seem to consider yourself a man of the people. If this were happening to a bank in the UK and you stood to lose %10 of your savings would you be happy about it?
Junkyard - Member
THMS iirc that is one of the risks of lending other peoples money and only keeping about 10% of it in your bank at any one time- the systems has a serious flaw that will occur from time to time
Yes and no. Banking is fundamentally about taking risk be it liquidity (what you are referring to I think), interest rate, credit, FX etc. IMO, its not really about keeping 10%, its the fact that funding tends to be short-dated (even on demand) whereas assets are longer-dated. The basic "fund short-lend long" concept at the heart of liquidity transformation (which if and when managed and priced correctly can be beneficial). The key is to manage and price risk correctly - which is were things fall down (especially when markets are distorted by Gov/Central Banks keep interest rates artificially low). Hence the recent liquidity regulations that are being introduced.
Cyprus has both equity risk - the banks need recapitalising having been "forced" (see the parallels here) to buy Greek sovereign debt on which they took a bath - and liquidity issues - Laiki etc are being kept solvent largely by European funding. On top of this, the basic numbers simply do not add up at either the macro or the micro level (see earlier).
But I am surprised at how relaxed you are about this *. This is neither a First World Problem nor a hit-the-rich one. This is affecting all Cypriot depositors, many of whom will have little understanding at how risky their banks had become. Even if they did, they will have been told that their deposits were insured up to a level but not warned about Euroland smokes-and-mirrors. But the bizarre thing is that the basic numbers should have told people that their deposits were not as safe as they thought - for that many people are to blame.
* edit: plus nobody should forget the "transparency (sic) issues" here. Over the weekend, peoples' livelihoods were used in a game of political poker. The Germans and the Finns called the Cypriot bluff and the latter blinked first. Is this really the way we want to be governed?
I got a letter from alpha bank in cyprus last week offering me an free Ipad if I opened a savings account!
Numbers with the greedy ha mers and the russian Russian mafia and the steady hand of capitalism at the helm what could possibly go wrong.
Ot.course I would not be happy and said so first post - it is not hard to see why they are annoyed by this. I bet drug dealers don't like having their assets seized but that does not make it wrong.
I'm not sure there's anything very capitalist about effectively confiscating 10% of peoples savings.
I agree it's not wrong to confiscate a drug dealers assets, but if that's the real aim here then why is it being dressed up as a tax and being imposed on the general population? If someone is found guilty of dealing drugs and has their assets confiscated does the court then go after his customers/victims and take their assets also? Or the bloke who owns the shop near the corner where he was selling his drugs?
tonyd - Member
I'm not sure there's anything very capitalist about effectively confiscating 10% of peoples savings.
A certain Russian would agree with you tonyd..
2:35 PMledbetreuters @James Ledbetter
Dmitry Medvedev on Cyprus bank levy: "This practice, unfortunately, was well known and familiar in the Soviet period."
I'm stunned at the insouence of some of the contributers. They wouldn't be so sanguine if it was their account.
I'm not sure there's anything very capitalist about effectively confiscating 10% of peoples savings.
True, a proper capitalist system would see you lose 100% when the bank goes bust.
Cannot get my head round all this.
Surely the Euro is f*ck*d or is it just down to bad running of the countries involved by their governments?
Could they ditch the single currency and go back to the way it was?
proper capitalist system would see you lose 100% when the bank goes bust.
You'd be bloody careful about where you invested the money then, wouldn't you... so when you had a choice between Icelandic Landsbanki at 6% and a building society at 3% you might think 'hmmm!'
The point is you are taking a risk sometimes the risk wont pay off and you loose.
Banking is fundamentally about taking risk be it liquidity (what you are referring to I think), interest rate, credit, FX etc. IMO, its not really about keeping 10%
well yes they do indeed take risks with their savers money and leave only 10% in the bank and lend the rest out. How else can they generate money but by lending more than they physically have of someone elses money? If they had the money that folk have given them you could not get a run on a bank now could you .
But I am surprised at how relaxed you are about this *. This is neither a First World Problem nor a hit-the-rich one
No it is a hot the tax avoiders and money launderers who has 88 K in the bank and 6 % if under that [ in shares]
You [and others]keep going on about the Normal person when the figures suggest more than half are Russian and i would assume half the others are tax avoiders. I would have no issue with it being more targetted at the mercenaries tbh than the population as a whole but the broad brush hits these more than the man in the street etc
Perhaps they could have protected it all to 100k as that is the rule then really hit those with money above this?
Not really sure how worried you want me to be about rich folk whilst you portray those with 100k of savings and everyday folk tbh. It is not as if they have just become destitute now they only have 90k of Euros.
TBH i dont understand why so many of you wish to stick your hand in your own picket and help out tax avoiders and money launderers who clearly have some wealth and way more than the EU average
JY, why do you keep banging on about tax avoiders when it is all savers?
I did it partly to counter this concern that the right wing seem to have developed for the poor everyday person in Cyprus who is being harmed etc. I dont doubt they are but they are atypical in the sense they are not the majority.
Why do you think there are so many foreign investors in Cyprus banks - 10 % corporation tax at all or is it simple coincidence?
Do ebay and Amazon do this?
http://www.shelteroffshore.com/index.php/offshore/more/cyprus-attractive-offshore-tax-haven
According to a recent survey conducted by KPMG, Cyprus is one of the most attractive offshore tax havens in Europe.
for example
Tax planning is a legitimate method of minimizing your tax liability and should not be confused with tax avoidance. For any individual or company that trades or wants to make business in Europe, Russia, Middle East or Asia, Cyprus offers incredible advantages as an international business center.
http://www.hg.org/article.asp?id=21206
i cannot be bothered doing much googling as i need to make tea.
It is not alone as we also have jersey ,Isle of Mann etc
But none of that takes away that this is an indiscriminate raid on everyone. The fact that there are tax dodgers in the equation and they'll be punished too doesn't take that away.
If you want to punish tax avoiders, money launderers etc, do so.
JY, perhaps your desire to personalise the issue, sorry counter the concerns of the right wingers on here, has stopped you thinking clearly about what is happening here. Cyprus has a deposit base of around €68bn of which [b]€43 is from resident Cypriots.[/b] These people are all being hit irrespective of their background, size of deposits (below the threshold) or the type of bank that they have their money in. You comments may have held some validity if the hit was being targetted 100% above the threshold but it isn't. Instead you seem to have been misled by easy headlines and showing a rather surprising lack of sensitivity for your fellow man. Perhaps Mr Medvedev is correct in his tweet, This really is a policy of the ancient left wing. How very odd?
On the banks liquidity issue, the point is that deposits are relatively short term instruments. Most depositors want to have quick access to their money. But they want to finance things over a period of time, not an immediate short term loan. So banks provide the function of facilitating it and they make their money because the yield curve is (normally) positively sloping so the longer term assets earn more than the short term liabilities. [b]Managed well this is an important and valuable economic function.[/b] The challenge as you point out is that if everyone wants their money back at the same time, the banks cannot realise the assets quickly enough to pay them back. Hence banks typically go out of business more due to liquidity crises than capital crises. And guess what, that is exactly what could happen at Laiki. What then for the average Cypriot?
JY - if what you're saying is true then Surely you have to question the regulatory framework - or complete lack of it - of the EU? How on earth has it allowed a culture in a member state, and participant in the single currency 'project' where the banking system seems to be mainly concerned not with useful economic activity, but as a front for tax avoidance, and money laundering for Russian gangsters.
Especially as the European taxpayer is to all intents and purposes acting as the ultimate guarantor to the currency and banking system? It's absolute madness! A complete and utter shambles!!!
More than that Binners, this proposal goes directly against the principles of deposit insurance and the bailing-in of other creditors (bond holders). Ok, in Cyprus there are few bond holders, but this is a very important part of EU regulation that has been ridden-over.
Hopefully this is the first strike against these "tax exile" nations that damage all the others who at least have a semblance of fairness. Lets hope the IOM, Jersey and Monaco are next.
is an indiscriminate raid on everyone
Yes it is a blunt instrument but the reason for why it has been done is that the savers are mainly russian and tax avoiders etc hence why they did it. yes it hits many innocent [ but wealthy] folk. Its not hard to think of a fairer method
JY, perhaps your desire to personalise the issue, sorry counter the concerns of the right wingers on here
Chuckles at the lack of self awareness and the ad hom whilst protesting an ad hom [ never accidental is it] - thought that thread went well for you and put up a strong defence when challenged. Not really interested in this good luck finding another TJ - awaits goad 🙄
How on earth has it allowed a culture in a member state, and participant in the single currency 'project' where the banking system seems to be mainly concerned not with useful economic activity, but as a front
Aye if only they could be a s robust and open and honest as the City of London - the reason they cannot get more robust banking laws is because the UK vetos them but still its the fault of the Euro folk for all this and not us/CMD.
Binners the euro zone is not all brilliant but your attempt to blame everything on them is motivated by your view of it [ like farage] rather than what they do or the actuality of the causes/scenario.
I shant bother with these threads again as it is not really a debate - hard to believe i could be the neutral one on a politics thread 😯
Peace and love etc
A page and a half of interesting points and debate before a pop at Binners and me, followed by several more comments (closet racists and loons??) Sorry JY but your second para simply doesn't hold up. So good to have then behind us and to focus back on the ball not the men. There is and has been plenty of debate on here and hopefully that will continue.
So back on topic, an interesting analysis in the FT Alphaville by Willem Buiter from Citibank. Must be the only high profile economist to have backed the idea today. In his opinion, The Cyprus Bail-in (shouldn't that be partial bail in?) Is qualified good news. Quite a different take on this weekend's news.
Can't paste the link here, but worth googling or access via FT web site.
People losing faith in the euro and its banks means taking their money elsewhere.. where? The USA? So presumably the euro goes down, the dollar goes up? With a favourable exchange rate it might benefit euro manufacturing....
It's all a ploy isn't it?
Following on from your ploy idea mol, a few more days of hits in Italian banks like Unicredit will bring equity prices right back into distressed buying opportunities again. If the € does survive with Italy part of it, buying such a bank at 70% of book value might be quite a trade! Not a bad hedge?
It's all a ploy isn't it?
Hmm, not too sure - I would suspect BMW, Merc and Audi sales in Russia might dip somewhat in the near future 😆 (they shifted about 35k units each into russia last year, and sales were growing at about 30%)
(edit - ok, just looked it up and it turns out they shifted about ten times that in the USA last year , so maybe a good move after all) 😀
Junky, THM, give it a rest.
Apart from that, interesting thread. The cat is well and truly out of the bag now, and any government that is looking shaky, with shaky banks, should now be very worried about a run on the banks and potential collapse. The way the UK tried to restore confidence in the UK banking sector after Iceland was to protect deposits, not raid them.
As a result, the cleverer people (probably with the most money) will be looking very closely at IoM / Channel Is / Switzerland right now. That can't be good.
Please tell me this is sarcasm?
It's not sarcasm, but it is a bit more complex that junkyard's racist ramblings about how it's all just Russian mafia billionaires who are losing money so who cares. Feel free to choose whichever makes most sense to you.
Meanwhile what is happening in Cyprus? are the ATMs being refilled? What has happened to all of the electronic transfers or online accounts? If the bank closure continues how long before the economy and society breaks down?
http://www.guardian.co.uk/business/2013/mar/18/cyprus-closes-banks-bailout-package
People losing faith in the euro and its banks means taking their money elsewhere.. where? The USA? So presumably the euro goes down, the dollar goes up? With a favourable exchange rate it might benefit euro manufacturing....
Well that's the theory. We were told that's whats supposed to happen, isn't it? But as the Bank of England has consistently devalued the pound with round after round of QE, while our manufacturing sector has consistently contracted, and our balance of payments got worse and worse. This doesn't seem to be the case.
I don't think anyone's got a clue about whats actually going to happen. Its all just a big experiment. The people in Brussels seem to be treating it as one. Or a game. Which is fine for them, as they look on. They'll remain untouched by the fallout, whatever happens. Its just the lab-rats of the European electorate that'll have to deal with that, as economy after economy teaters on collapse
Yesterday, the FT reported that the Central Bank had instructed banks to keep cash points open to avoid panic (they will have withdrawal limits in place though). There was also reports that cash machines were running out of cash though so people were struggling to get access to whatever cash they were allowed to withdraw via the ATM.
Social breakdown rather than economics per se is the key thing ohnohesback and its hard to imagine how the current policies can be sustained. Think how we feel in the UK where austerity has hardly happened and then imagine what it feels like where it has actually happened in spades and where it has been forced on the population by external powers. Cyprus is truly in a pickle - they need assistance but that is coming with a high price tag - the EU policy or transfer gas access to Gazprom?
Some provocative yet interesting links from FT today:
http://macromarketmusings.blogspot.com.au/2013/03/missing-forest-for-tress-cyprus-edition.html
http://crookedtimber.org/2013/03/19/what-would-you-do-part-2-the-island-of-surpyc/
http://bilbo.economicoutlook.net/blog/?p=23094
was out last night with ex work colleagues one of whoms dad and aunt are both bankers back in cyprus, obviously hes not happy about the situatuon, but he seemed pretty resigned to the fact that it was going to happen;
the cypriots had tried to follow a british banking system rather than greek which they knew was dodgy but were too intermingled with the greek banks in the end so they blame greece.
as regards to the russian thing he claims his relatives dont have anything to do with russians but he did say that their influence was very noticeable over there in the last 5 years and that the cypriots were fully aware that a lot of them were very dodgy characters or domestic tax evaders at the least.
there was also a girl from portugal there and she said her dad was very worried that the same might be done there all though he moved all the family money to her UK bank account last year!
THM - if you see it in another light (and when it comes to Russia, you always should!) then the current Russian navy warm water port is in Syria...
You also need to ask why the EU insisted on this condition for Cyprus and not the larger eurozone bailouts. Was it because they could, because Cyprus is small and vunerable, or because that their patience, or more ominously their resources, are stretched?
kimbers - Member
there was also a girl from portugal there and she said her dad was very worried that the same might be done there all though he moved all the family money to her UK bank account last year!
The funny (strange not amusing) thing is to ask whether this is a good idea or not. Nothing in economics is free or a straight line, its all about balancing pros and cons. There is a good article in The Torygraph today by Jeremy Warner who points out that inflation plus devaluation of £ has meant that in the UK we have all swallowed a bigger haircut on our savings since the crisis (vis-a-vis €) than the one facing the Cypriots. Another take on the, "you should be careful what you wish for" idea.
On another idea - it would be interesting to see how the Turkish Cypriots and the Turks as a whole are viewing this?
edit: ohnohesback - a combination of all your points plus the usual - ELECTION TIME. Its interesting that it was the left-wing parties in German that were the most vocal in adopting a hardline stance on Cyprus.
edit2: anyway, look like the backtracking has already begun with proposal to exempt first €20,000. Nevertheless the key principles of EU banking reform and regulation (deposit insurance, bail-ins) have been put to the test - and the truth laid bare!
On another idea - it would be interesting to see how the Turkish Cypriots and the Turks as a whole are viewing this?
i joked to my cypriot mate that maybe turkey invading would be a good thing right now, it was not well received
You also need to ask why the EU insisted on this condition for Cyprus and not the larger eurozone bailouts. Was it because they could, because Cyprus is small and vunerable, or because that their patience, or more ominously their resources, are stretched?
Because the large German/EU banks are not exposed to Cypriot debt. The existing EU bailouts have been nothing except a re-capitalisation of EU banks. Without actually saying so.
If Greece or Portugal didn't owe a shedload of money to German banks, would they have got a bail-out? Of course not. Do the Greek taxpayers look like they saw any bail-out money? The money was simply payed directly from the EU budget to the German banks. And any future bail-outs (and there will be many more future bailouts JY!) will follow the same pattern.
Owe money to a German or EU bank? Yes. We'll write down some of your debt, but here are the new rules to run your/our country.
Owe no money to a German or EU bank? Then no bail-out for you. You're ****ed!!!!
There's a lot of "€-gossip" coming out that Cyprus was actually on the brink of default over the weekend. Comments are coming out, that the ECB was told on Sat afternoon to prepare for the collapse of 2 Cypriot banks. If true, the rest is history. The ECB leapt into action and pushed the deal through - whether this was irrespective of the consequences can be debated!
Junky, THM, give it a rest.
ok but can i just be clear that when i said the loons and closet racists [ which is a CMD line about UKIP the full quote is
Leaves thread to the closets racists and loons [ CMD quote - i know neither of you are this at all]
Not sure how i could make it clearer but i will stop the sarcasm as it is not being well recieved. Hopefully you will also alter posting style and we can all play happy campers?
junkyard's racist ramblings
Have you considered reporting my posts then as racism is not tolerated here and nor should it be - pretty low blow for an ad hom and straw man tbh even for here.
You also need to ask why the EU insisted on this condition for Cyprus and not the larger eurozone bailouts.
I think they think there would have been more of a kick off [ or it was the right thing to do to protect their electorate /citizens]if they are seen to be bailing out folk who are neither part of the EU nor honest.
Kind of damned if they do damned if they dont.
Its interesting that it was the left-wing parties in German that were the most vocal in adopting a hardline stance on Cyprus.
Source and relevance?
Binners I am not sure i as simple as you suggest
It seems the Germans [population not politicians] are getting annoyed with funding those who are rubbish with their finances [ greeks and tax collection for example]
This may be the straw that breaks the camels back rather than unrest in the streets predictted by some.
I dont disagree there will be more and to beat my Drum - really what do you expect with capitalism but this and everyone bailing them out? It is inevitable now and again at some other point in our lifetime and then in our kids etc.
The idea is spreading like a rash...
http://rt.com/business/new-zealand-cyprus-style-banking-failure-solution-477/
It seems the Germans [population not politicians] are getting annoyed with funding those who are rubbish with their finances [ greeks and tax collection for example]
Or another way of looking at it is the Germans not dealing very well with a fundamentally flawed economic system that was designed by themselves, and created to benefit their economy almost exclusively. To all intents and purposes, the Southern European countries that are now ****ed have been essentially subsidising German exports for years.
So its a bit bloody rich, having milked it for more than a decade, to start getting uppity about the downsides of a system you created, once the fairly inevitable consequences of it come home to roost!
The EU set strict conditions for entry into the Euro, then chose to completely ignore those self-set criteria because it suited them at the time. That political expediency is now biting them on the arse big time! But they've only themselves to blame
At the end of the day, no-one in Brussels will suffer. They'll plough on with their disasterous 'project', no matter what the consequences for their respective electorates.
Its interesting that it was the left-wing parties in German that were the most vocal in adopting a hardline stance on Cyprus.Source and relevance?
Source FT 18/3/13 : "This time round, however, it is the opposition Social Democratic party that has been making the running in setting tough conditions for the rescue programme, and not hardline members of Angela Merkel’s ruling centre-right coalition."
Relevance:
1. This is not a capitalism/right wing issue - in fact, far from it, but that is a separate debate (done to death elsewhere)
2. This is being driven by Germany (and the Finns) and this time the (centre-) left are playing hard ball
3. As mentioned above, domestic politics in Germany needs to be taken into account
Cyprus is running very close to a sovereign default and its banks are in deep trouble - both liquidity and equity. It has two important sources of funding that it is trying to protect and manage - the EU and Russia. The conflict of interest is obvious and serious.
So from what I can make out, Cyprus has to now decide who's bitch it wants to be, and who's it going to be beholden too for ever? Germany? Or Russia?
Is this the new colonialism?
That's a pretty unpalatable decision for anyone to make. But given the way they've been treated by the EU, and where most of the money flowing into their economy is now coming from....
THM.... what would happen if Cyprus defaulted, Left the Euro? Then cossyed up to Russia for Gas rights etc? Could that happen?
Thm the EU was never a left or right issue as you and binners amply.demonstrate.
I think we shall agree to disagree re whether this is capitalism or not.
Binners no offence but I am not even replying you as I can only be sarcastic to that rant/ polemic.
Oh go on 😉
Even if all the deposit holders are Russian tax dodgers, Cypriot banks (with the backing of their government) were originally more than happy to entice them to deposit their money there. To just shift the goalposts means this is a one-off for Cyprus. Assuming they get a lump sum, they'd better spend it well, because no bugger will trust them ever again.
In terms of the regular Joe in the street, consider this. You have two colleagues on identical salaries. One has denied their family luxuries and saved in order to have peace of mind and a buffer if things go wrong. The other has pissed their money away by going out to eat 2 or 3 times a week and renewing their car every two years (and acted a bit flash as well). Now the government is going to take a big bite out of family A's nest egg whilst family B don't lose anything.
Well done, we're now encouraging a scorched earth approach to family finance.
Might as well take all your money out of the bank and bury it in the garden.
What the hell happened to rationality?
In terms of the regular Joe in the street, consider this. You have two colleagues on identical salaries. One has denied their family luxuries and saved in order to have peace of mind and a buffer if things go wrong. The other has pissed their money away by going out to eat 2 or 3 times a week and renewing their car every two years (and acted a bit flash as well). Now the government is going to take a big bite out of family A's nest egg whilst family B don't lose anything.
Good point.
Add 10% to all debts!!
(Is that genius, or stupid?)
Can't add 10% to nothing. Family B never considered HOW they might pay the debt off. That's what turned billions of so-called 'assets' held by banks into liabilities overnight. When it (obviously) turned out that the clue was in the title. Sub-prime. Says it all really.
Neither a lender nor a borrower be.
your right we should just stick at the 100 k aassurance and let the bank fold - then we wont have moved the goalposts and everyone is happy.To just shift the goalposts means this is a one-off for Cyprus
Re your example - how typical do you think that will be? I think we all agree it is a broad brush that harms savers rather than spenders but the saver still has more than the spender just 10% less if they saved over 100k rather than say only having 100 k of 250k if the bank is not bailed out.*
* IME those with 100 k in savings have been very well paid rather than scrimped and saved[ ie they have the broadest shoulders] - even 2 k net saved for each year you work does not get to 100k. I am not sure atypical examples of savers v spender help the discussion tbh and doubt anyone thinks that all savers deserve this equally and that it is not unfair to some.
IME those with 100 k in savings have been very well paid rather than scrimped and saved[ ie they have the broadest shoulders] - even 2 k net saved for each year you work does not get to 100k. I am not sure atypical examples of savers v spender help the discussion tbh and doubt anyone thinks that all savers deserve this equally and that it is not unfair to some.
Well you obviously have pretty limited experience, I know an ex teacher, hardly a highly paid profession especially when he was doing it, he is in his eighties who has liquid savings of £500k. He is tight though.
* IME those with 100 k in savings have been very well paid rather than scrimped and saved[ ie they have the broadest shoulders] - even 2 k net saved for each year you work does not get to 100k
IME other peoples shoulders always look broader. I suppose to say "they" can afford it is fine as long as "they" doesn't become "we" or "me"
* IME those with 100 k in savings have been very well paid rather than scrimped and saved[ ie they have the broadest shoulders] - even 2 k net saved for each year you work does not get to 100k
Quite easy to have achieved with very modest earnings over the last few decades with relatively high inflation, a booming stock market and a booming house market.
Well you obviously have pretty limited experience, I know an ex teacher, hardly a highly paid profession especially when he was doing it, he is in his eighties who has liquid savings of £500k. He is tight though.
yes that will be very typical of a teacher - they all have 500K saving dont they
IME other peoples shoulders always look broader. I suppose to say "they" can afford it is fine as long as "they" doesn't become "we" or "me"
TBH those with less money than me look like they have narrower shoulders so I disagree.
I dont think i would consider myself amongst the least well off in society if that was what my bank statement said. I doubt I would leap for joy about being asked to pay it either if I became the "we" and had the broad shoulders.
It is not hard to see why if you have 100k saved you dont want to pay but it is not that easy to argue they are not that well off or that they dont have broad shoulders.
I am not sure it is quite easy tbh [probably not impossible but also no where near typical] and what exactly are you defining as "quite modest" earnings? they bought a second home and invested in the stock exchange with modest earnings. I thought they would have just paid the bills and hoped the car did not break down.
It's more to do with the 'message'.
Don't bother saving. We'll only take it off of you and the crap rate means it's actually shrinking in real terms.
Turns 'better safe than sorry' on it's head at the level of the individual.
Someone else will pick up the tab after all.
It is not a wise assumption to make that this is a one-off. That is the crucial point. The initial proposal goes against the agreed regulation of EU financial services which is what the fuss is all about. Once/if they proceed with the ability to impose a full bail-in for depositors, regulation and insurance has fundamentally changed and the goal posts have been moved. People must understand that and should therefore take responsibility to ensure that they place their deposits in safe banks in safe countries. Otherwise the principle has been established that their deposits may not be as safe as they think. Banks will also have to respond and weaker banks will be forced to pay higher deposit rates to compensate savers for the added risk. Some may argue that this is not a bad thing (and actually what was happening in Cyprus at the aggregate level).
yes that will be very typical of a teacher - they all have 500K saving dont they
I wasn't suggesting it was typical of teachers, I was suggesting that you had limited experience if you thought you could only generate £100 K of savings if you were well paid. There are plenty of frugal people in the world, you just don't seem to have made their acquaintance, and in many ways a levy on bank deposits hits the least financially astute as the well advised will use a broader range of investment vehicles than bank deposits. In my view such people should be protected.
Once/if they proceed with the ability to impose a full bail-in for depositors, regulation and insurance has fundamentally changed and the goal posts have been moved. People must understand that and should therefore take responsibility to ensure that they place their deposits in safe banks in safe countries. Otherwise the principle has been established that their deposits may not be as safe as they think.
I get your point and it is a good one
However what it fails to realise is the rules require only 100k to be covered so that means many folk [ no idea how many]will be better off with this deal than without this deal- swings and roundabouts and the more wealthy you are the betterof fyou are v the bank failing
It may cause panic and I think it is highly unlikely it has no effect. No idea how large an effect and only time will tell
Interestingly the UK tax havens only offer 50k [ guernsey, jersey and Isle of Mann] but i suspect nothing much will change there
I was suggesting that you had limited experience if you thought you could only generate £100 K of savings if you were well paid
Shall I expect folk on benefits to achieve this or many on the NMW?
Its pointless to point out savers are different and some folk are frugal and some are not - i think we all know this but [ frugal or meagre or whatever] once you have 100k you are not modesst in terms of wealth and I dount anyone really get there these days without some serious disposable income [ if they ever did]
Having surveyed 2000 people across Britain in August of this year, the Birmingham Midshires Building Society reported that the average person (they mean just adults, though) had £7500 in savings. In September National Savings & Investments (NSI) reported that the average person had £17,300 in all types of savings, including investments, bonds, and other non property-assets. NSI also also reckon that monthly savings are, on average, 6.8% of income or about £88/month.These figures belie some other facts, though. About 4 million households in the UK (so that's up to 9 million adults, or 18% of the adult population) have barely any cash or analogous assets. They are the "financially excluded". So when you see an estimate of £7500 per adult, that's really less than 0 for about 8 million people, and (on average) £9000 for the rest. Of course, we know some people are stinking rich, so maybe more like just £2000 or so (on average) for an ordinary person assuming they have any savings at all.
http://www.blurtit.com/q977258.html
compared with £6,074 across the whole of the UK.
http://www.timesandstar.co.uk/the-savings-map-of-uk-1.846223?referrerPath=2.6350
I have not met them because there is next to none to meet and basing the discussion on anything other than the average is rather pointless
Yes there will be exmplars and atypical folk - there always are.
Of course it is harsh if you saved but you are not exactly about to starve to death or be in serious finacial hardship afterwards
i think the main issue [ which is wait and see] is what it does to bank assets as folk withdraw money. I suspect it will lead to more problems as THM and Binners note. I am sure it is not worse than what could happen if we just applied the rules and did not bale them out [ certainly is not for the wealthiest who had over 100k in a bank.
Perhaps I should be annoyed, as usual, they have helped the really rich?
So JY - what you seem to be saying is that anyone with any money deserves to have a percentage of it taken off them, as they've probably not earned it by selfless public spirited toil.
It's a quite imaginative basis to run an economy and banking system, I must admit. What could possibly go wrong? Ironically given the russian connections, i think Stalin beat you to the fundamentals of it quite a while back. Once you've taken their money off them should there be 're-education' required so it doesn't happen again? 😆
edit: re-posted below - don't want to get caught in/associated with the crossfire
I though we had agreed to stop sarcasm as it was not always taken as intended- that is twice now, Flounces 😉
what you seem to be saying is that anyone with any money deserves to have a percentage of it taken off them, as they've probably not earned it by selfless public spirited toil.
Have you heard of taxation?
It's a quite imaginative basis to run an economy and banking system, I must admit. What could possibly go wrong? Ironically given the russian connections, i think Stalin beat you to the fundamentals of it quite a while back. Once you've taken their money off them should there be 're-education' required so it doesn't happen again?
You are first for the programme as you know better 😉
PS no pies and no fags for you either for disrespect
There is no, "no-bail" out option. Cyprus will default without financial assistance. The do-nothing option does not exist as discussed pages earlier. Faced with that stark reality, paying 10% to protect 90% is a no-brainer. Hence my earlier question - what would you do?
But again, this is not the crucial issue that has unsettled everyone. The wider issue is that we have another example of how the EU will unilaterally ride rough-shod over pre-agreed/understood principles. Once this is realised, the world changes forever.
JY- there is nothing "fails to realise" about any of this. Remember, someone (by all account a combination of centre-left Germans, Finns and Cypriot politicians) chose to apply the bail-in to everyone despite the €100k threshold (the murky stuff is to understand each party's motives). The only bit "not to realise" is that when push-comes-to-shove the Euro-elite will and do change the goal posts to suit their immediate needs. The last 24 hours have shown them that this is/was an error - hence the backtracking on all sides.
Arse-biscuits!!!! 🙁
It'll be interesting to see, once this goes through, what happens to the banks of Southern Europe. If trust in the safety of your savings and deposits is completely undermined like this, then it could surely spell the end of the economic system as we know it. I mean... What's the point of using the banking system at all?
How many people, especially business owners, are just going to opt to conduct all transactions in cash, and keep it in a safe? With the implications that has for taxable revenue. Not to mention armed robbery (as opposed to the present unarmed type)
But having let the genie out of the bottle it can't be forced back in. The fact that the EU have reached this level of desperation is an indication as to how grave things really are for the entire eurozone despite the "we're over the worst" BS.
I am not sure atypical examples of savers v spender help the discussion tbh
Well, you wouldn't, would you?
I find it strange that you react so badly to jibes about Stalin given your previous espousals on politics!
Anyway, we'll pop the "it'll be different next time, just bail us out this once" record on in a bit. That'll calm things down.
Strangely, that's the same line that the banks trotted out in their moment of trying to blame everyone else.
More often than you think - you find the same arguments of convenience being made by supposed enemies when they've ballsed up and lived beyond their means.
There is no, "no-bail" out option.
There is but of course we cannot let banks fail so we all need to have a whip round for them AGAIN
Cyprus will default without financial assistance. The do-nothing option does not exist as discussed pages earlier. Faced with that stark reality, paying 10% to protect 90% is a no-brainer. Hence my earlier question - what would you do?
I think i would have protected up to 100k so as not to not break the rules then "taxed" above that.
But again, this is not the crucial issue that has unsettled everyone. The wider issue is that we have another example of how the EU will unilaterally ride rough-shod over pre-agreed/understood principles. Once this is realised, the world changes forever.
Pretty sure the IMF were involved and the Cypriot govt as well and part of the team that brokered this but you and Binners have yet to mention this thus far for some reason and focus on the EU - of course they were the noisest partner but the IMF and the cypriots could say NO [ the later may well do this].
The only bit "not to realise" is that when push-comes-to-shove the Euro-elite will and do change the goal posts to suit their immediate needs. The last 24 hours have shown them that this is/was an error - hence the backtracking on all sides.
You alwasy say Euro -elite or some such term to disparage them here from the BBC
On Saturday, the government, the European Union and International Monetary Fund agreed an outline deal for a levy on bank deposits in return for a bailout worth 10bn euros ($13bn; £8.6bn).
I am not engaing with your or Binners re the EU as the evil bogeyman you may as well argue with me that capitalism is nice and fair though I probably use less emmotive language to criticise it.
The International Monetary Fund described the country's economic performance before 2008 as a "long period of high growth, low unemployment, and sound public finances".
By 2011, the IMF reported that their assets - which include all the loans they have made - were equivalent to 835% of annual national income, or GDP. A chunk of that is down to foreign-owned banks, but those that are Cypriot had made loans to Greek borrowers worth 160% of Cypriot GDP.
Thanks god we have them to look after the worlds finances eh
Have you heard of taxation?
But I would have thought you were keen on fair taxation, what is fair about taxing deposits in banks whilst leaving all other forms of wealth tax free? It is the little man would saves with the bank, not the hedge fund manager or russian oligarch.
Well, you wouldn't, would you?
for the reasons stated yes - have you some sort of rational rebuttal or just this?
I find it strange that you react so badly to jibes about Stalin given your previous espousals on politics!
Not really sure why you have said that as Binners was joking and so was my reply.
Have you ever heard someone referred to as like Stalin [ or hitler] as a compliment then ?
you will need to argue that your comment was flattery and praise so good luck 😉
I'd also be interested to see how many tens of billions of Euros are presently being withdrawn from Spanish, Portuguese, and Italian banks, now they know how the EU will be thinking when their inevitable, rapidly approaching bail-outs are required.
The powers that be in Brussels may have, through this one decision - ill thought through as always - started a whole new self-fulfilling banking crisis! All for the sake of 10% of savings of a country that represents 0.2% of Euro GDP
You really couldn't make it up!