‘Why the Cyprus Bail In Is a Bigger Deal Than You Think’
March 19th, 2013Via: Yahoo Finance:
So, assuming Cyprus’s government approves the deal (still pending–with the vote now postponed until Wednesday), depositors will have some of their money seized.
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 weak 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.
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 the 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 money.
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.
I can’t believe this is happening. Yep. Starting in of all places, Cyprus. Here in the U.S. we’ve been bailing out the banks since 2008 thanks to Ben Bernanke and his no interest policy here in the U.S. I relied on interest earnings when my mother was alive to keep our capital intact and thanks to Kevin, and other unnamed advisors turned Mom’s money into cash. First, totally out of the stock market (where were earning interest but losing principal big time)and finally out of cash.
The banksters I think are at the end of their days on this planet. What happens when Anonymous attacks the Isreali system in protest of the Obama visit? On that account, I hope they create mayhem, but I think its going to be the people here in the US who have to buy their food on debit cards who are going to suffer.
I for one, hope all people everywhere on the planet take their money out of the banks and stuff it wherever they want to. Its overdue now to stop the wars so that the banks profit.
No one owes a bank anything, unless they have a loan. And no bank is too big to fail. As Jimmy Cliff sings, the harder they come, the harder they fall one and all.
Oh, and there is that movie “Its a Wonderful Life” that will give you a reall good depiction of what a run on a bank looks like. Unless you haven’t watched the movie, it tends to sympathize with a banker who is actually trying to keep his community bank alive.
My Aunt Maddie who still lives and having been through the Great Depression has told me how money disappeared from their accounts in the Great Depression. Happened then, can happen now, so take care dear ones. Three or four months of cash in hand to weather the mysterious ways to come??? I wish I had more cash, I do, I do, I do. And at least one gold and one silver coing. Yea verily. Other than that, I hope for a bright sunny day.
…
Kevin! is it to happen in your backyard?
National planning Cyprus-style solution for New Zealand
Tuesday, 19 March 2013, 11:32 am
Press Release: Green Party
19 March 2013
National planning Cyprus-style solution for 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’s 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.
http://www.scoop.co.nz/stories/PA1303/S00306/national-planning-cyprus-style-solution-for-new-zealand.htm