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Cyprus


Tosh

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Looks like the Troika are now suggesting that Cyprus needs to find €6.7bn (rather than €5.8bn) in order to get EU bailout funds - 12% increase in a week. That beats wonga.com as at least wonnga give you the money first!!

 

I am all for punishing Russian money laundering but this does seem a rather extreme way of going about it. WTF is going to happen if they actually DO open the banks one day?

 

And what happens that day in Spain, Italy, Portugal..?

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There's a very significant possibility of extreme political groups causing some major problems in coming years. There's no end to all of this even in sight and the rise of Greek fascism and potentially good but potentially very worrying groups like M5S in Italy, or groups aping their methods, is alarming. I'm not sure it all ends up.

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Capital controls now in place so that when they do open the banks, people can't take all their money out - essentially preventing a run on those banks. In this case a run dominated by Russians

 

The levy is still to be voted on

 

and then the Troika has to approve it before liquidity (not actual capital to make the banks solid, just cash to meet their short term obligations) can be "provided"

 

It is a clusterf*** and a very scary one at that.

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Capital controls now in place so that when they do open the banks, people can't take all their money out - essentially preventing a run on those banks. In this case a run dominated by Russians

 

The levy is still to be voted on

 

and then the Troika has to approve it before liquidity (not actual capital to make the banks solid, just cash to meet their short term obligations) can be "provided"

 

It is a clusterf*** and a very scary one at that.

 

Why is it scary ? Genuine question, how does this cyprus thing affect the rest of us over here?

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for a start it undermines the banking system...in terms of confidence

and could 'end banking'

you mean that hasn't happened already?

 

every bit of this just keeps on making the case for nationalising banks. but it'd be hard to find a government prepared to do it and actually have to do some work.

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you mean that hasn't happened already?

 

every bit of this just keeps on making the case for nationalising banks. but it'd be hard to find a government prepared to do it and actually have to do some work.

 

they should also nationalise drug dealing

 

not gonna happen though

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they should also nationalise drug dealing

 

not gonna happen though

in current circumstances one of those actions could actually be a vote winner where the other would not be. notwithstanding that they're both morally the right thing to do just now, because, well, hey.

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in current circumstances one of those actions could actually be a vote winner where the other would not be. notwithstanding that they're both morally the right thing to do just now, because, well, hey.

 

if they nationalise drug dealing, the consequential savings (health care, crime etc) means that the recession could end at once

 

not only that, but I've worked out that there would be enough for everyone to sit off and claim dole for say a month every year; say a month off to catch up on reading or something

 

I bet you that more enlightened societies, in alien worlds, have developed free-market economies with a social orientation where the above is the case. They can't help us due to their prime directive and also the risk of contamination but they watch us in real time on their tellys and have a good laugh

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The whole system relies on trust: you trust your hard earned with with the bank. It's "safer" than sticking it under your mattress. That trust extends to also being able to get that money back when you need/want it.

 

What's going on exposes two things to me which are interconnected.

 

The situation is that the banks were shut. NOT by the banks themselves but by Government. The shutting, now a week ago, means that all basic transactions other than those in cash are grinding to a halt. No debit/credit cards are being accepted for fear that the banks will not open or honour the payment to the vendor. God knows what's happening to direct debits etc. The capital controls - again imposed by Government - mean that when the banksdo open, with or without the levy, people will not be able to get "their" money from the bank (to put under a mattress) as limits on withdrawals and account closures will be in place. Point one - trust in the banking system is undermined, partly as someone can just shut your bank and take your deposits. Also, any "guarantees" on deposits made by Government are worthless as they ar taking (planned) 6.75% of all deposits UNDER the amount Guaranteed (a guarantee put in place to add trust to the system so people didn't pull their cah out to sleep on it)

 

Of course the reason for the capital controls exposes the banking system for what it is... a "Fractional Reserve" system based on trust. You put £100 in the bank and they promptly lend £92 of it out to someone (or someones else) based on the "capital requirements" suggesting that they need to keep 8% of their your deposits for withdrawal - a "liability" on their books but can lend out the rest - which of course, as it would be a secured loan is an "asset". They may of course lend that to somewhere like Greece and which means the value of that asset tanks...and thus means they have to find some other way of ensuring that they can meet the 8% capital limits (take in £100, keep £8 and lend £92 = £100. Take in £100, keep £8 and lend out £92 but that's only worth £30 and you have £38 to pay labilities of £100). The 8% "fraction" is simply a risk amount that allows the bank to cover withdrawals in normal circumstances. In Cypus case, is what has happened (they bough a load of Greek bonds like good EU citzens), so they need the money. Point two - a stable, well capitalised bank is key. Finding one is not easy...

 

Especially as - irony of irony - the 2007/8 crisis has meant that the banking regulators worldwide have said, er actually, to lend money out you need to keep 13% as capital, not 8%. With the amount of deposits declining as incomes drop, and the value of assets (such as Greek bonds or property in Spain) declining, they have to lend less and keep more deposits to meet the new capital requirements. This is partly why our banks (and those elsewhere) won't lend. Undermine this further by letting a bank fail and the banks won't HAVE new deposits to lend out

 

 

Of course, the banks are "private" and could - arguably in a capitalist system should - be allowed to fail, to deault on their obligations and move on. Of course, that would wipe out ALL the depositors, mean that NO transactions would take place at the "retail" level (you and me) and you'd likely get contagion: people queuing outside banks from Milan to Madrid to Manchester. On the wholesale level, the banks are currently buying government debt. Debt the Government is issuing to allow it to print more cash. Which is being pumped to the banks to help them meet their new capital requirements while the Government pays it's bills (effectively Government debt becomes an asset on the books of the bank...). If the Government suddenly has no buyers for the debt it issues, it can't meet it's OWN obligations (as few Goverments in Europe seem to be running a surplus). And a Government default is not a good thing. In the Cyrpus case it would be the end of them in the Eurozone and very likely the end of the Euro. Oh, and NO politician who wants to keep a job will oversee/allow a default of the banks or their country. Political suicide. So you could argue they'd rather rob and impoverish everyone ("socialise the private sector debts) to keep the private banks afloat in order to keep their jobs.

 

 

So, it's pretty major s***.

Edited by Tosh
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There's a very significant possibility of extreme political groups causing some major problems in coming years. There's no end to all of this even in sight and the rise of Greek fascism and potentially good but potentially very worrying groups like M5S in Italy, or groups aping their methods, is alarming. I'm not sure it all ends up.

 

If it carries on, It's the end of management politics, that we are 0.2% different to the other lot thing

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The whole system relies on trust: you trust your hard earned with with the bank. It's "safer" than sticking it under your mattress. That trust extends to also being able to get that money back when you need/want it.

 

What's going on exposes two things to me which are interconnected.

 

The situation is that the banks were shut. NOT by the banks themselves but by Government. The shutting, now a week ago, means that all basic transactions other than those in cash are grinding to a halt. No debit/credit cards are being accepted for fear that the banks will not open or honour the payment to the vendor. God knows what's happening to direct debits etc. The capital controls - again imposed by Government - mean that when the banksdo open, with or without the levy, people will not be able to get "their" money from the bank (to put under a mattress) as limits on withdrawals and account closures will be in place. Point one - trust in the banking system is undermined, partly as someone can just shut your bank and take your deposits. Also, any "guarantees" on deposits made by Government are worthless as they ar taking (planned) 6.75% of all deposits UNDER the amount Guaranteed (a guarantee put in place to add trust to the system so people didn't pull their cah out to sleep on it)

 

Of course the reason for the capital controls exposes the banking system for what it is... a "Fractional Reserve" system based on trust. You put £100 in the bank and they promptly lend £92 of it out to someone (or someones else) based on the "capital requirements" suggesting that they need to keep 8% of their your deposits for withdrawal - a "liability" on their books but can lend out the rest - which of course, as it would be a secured loan is an "asset". They may of course lend that to somewhere like Greece and which means the value of that asset tanks...and thus means they have to find some other way of ensuring that they can meet the 8% capital limits (take in £100, keep £8 and lend £92 = £100. Take in £100, keep £8 and lend out £92 but that's only worth £30 and you have £38 to pay labilities of £100). The 8% "fraction" is simply a risk amount that allows the bank to cover withdrawals in normal circumstances. In Cypus case, is what has happened (they bough a load of Greek bonds like good EU citzens), so they need the money. Point two - a stable, well capitalised bank is key. Finding one is not easy...

 

Especially as - irony of irony - the 2007/8 crisis has meant that the banking regulators worldwide have said, er actually, to lend money out you need to keep 13% as capital, not 8%. With the amount of deposits declining as incomes drop, and the value of assets (such as Greek bonds or property in Spain) declining, they have to lend less and keep more deposits to meet the new capital requirements. This is partly why our banks (and those elsewhere) won't lend. Undermine this further by letting a bank fail and the banks won't HAVE new deposits to lend out

 

 

Of course, the banks are "private" and could - arguably in a capitalist system should - be allowed to fail, to deault on their obligations and move on. Of course, that would wipe out ALL the depositors, mean that NO transactions would take place at the "retail" level (you and me) and you'd likely get contagion: people queuing outside banks from Milan to Madrid to Manchester. On the wholesale level, the banks are currently buying government debt. Debt the Government is issuing to allow it to print more cash. Which is being pumped to the banks to help them meet their new capital requirements while the Government pays it's bills (effectively Government debt becomes an asset on the books of the bank...). If the Government suddenly has no buyers for the debt it issues, it can't meet it's OWN obligations (as few Goverments in Europe seem to be running a surplus). And a Government default is not a good thing. In the Cyrpus case it would be the end of them in the Eurozone and very likely the end of the Euro. Oh, and NO politician who wants to keep a job will oversee/allow a default of the banks or their country. Political suicide. So you could argue they'd rather rob and impoverish everyone ("socialise the private sector debts) to keep the private banks afloat in order to keep their jobs.

 

 

So, it's pretty major s***.

I'm ecomically thick, so this helps.

 

Cheers, Tosh!

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The whole system relies on trust: you trust your hard earned with with the bank. It's "safer" than sticking it under your mattress. That trust extends to also being able to get that money back when you need/want it.

 

What's going on exposes two things to me which are interconnected.

 

The situation is that the banks were shut. NOT by the banks themselves but by Government. The shutting, now a week ago, means that all basic transactions other than those in cash are grinding to a halt. No debit/credit cards are being accepted for fear that the banks will not open or honour the payment to the vendor. God knows what's happening to direct debits etc. The capital controls - again imposed by Government - mean that when the banksdo open, with or without the levy, people will not be able to get "their" money from the bank (to put under a mattress) as limits on withdrawals and account closures will be in place. Point one - trust in the banking system is undermined, partly as someone can just shut your bank and take your deposits. Also, any "guarantees" on deposits made by Government are worthless as they ar taking (planned) 6.75% of all deposits UNDER the amount Guaranteed (a guarantee put in place to add trust to the system so people didn't pull their cah out to sleep on it)

 

Of course the reason for the capital controls exposes the banking system for what it is... a "Fractional Reserve" system based on trust. You put £100 in the bank and they promptly lend £92 of it out to someone (or someones else) based on the "capital requirements" suggesting that they need to keep 8% of their yourself deposits for withdrawal - a "liability" on their books but can lend out the rest - which of course, as it would be a secured loan is an "asset". They may of course lend that to somewhere like Greece and which means the value of that asset tanks...and thus means they have to find some other way of ensuring that they can meet the 8% capital limits (take in £100, keep £8 and lend £92 = £100. Take in £100, keep £8 and lend out £92 but that's only worth £30 and you have £38 to pay labilities of £100). The 8% "fraction" is simply a risk amount that allows the bank to cover withdrawals in normal circumstances. In Cypus case, is what has happened (they bough a load of Greek bonds like good EU citzens), so they need the money. Point two - a stable, well capitalised bank is key. Finding one is not easy...

 

Especially as - irony of irony - the 2007/8 crisis has meant that the banking regulators worldwide have said, er actually, to lend money out you need to keep 13% as capital, not 8%. With the amount of deposits declining as incomes drop, and the value of assets (such as Greek bonds or property in Spain) declining, they have to lend less and keep more deposits to meet the new capital requirements. This is partly why our banks (and those elsewhere) won't lend. Undermine this further by letting a bank fail and the banks won't HAVE new deposits to lend out

 

 

Of course, the banks are "private" and could - arguably in a capitalist system should - be allowed to fail, to deault on their obligations and move on. Of course, that would wipe out ALL the depositors, mean that NO transactions would take place at the "retail" level (you and me) and you'd likely get contagion: people queuing outside banks from Milan to Madrid to Manchester. On the wholesale level, the banks are currently buying government debt. Debt the Government is issuing to allow it to print more cash. Which is being pumped to the banks to help them meet their new capital requirements while the Government pays it's bills (effectively Government debt becomes an asset on the books of the bank...). If the Government suddenly has no buyers for the debt it issues, it can't meet it's OWN obligations (as few Goverments in Europe seem to be running a surplus). And a Government default is not a good thing. In the Cyrpus case it would be the end of them in the Eurozone and very likely the end of the Euro. Oh, and NO politician who wants to keep a job will oversee/allow a default of the banks or their country. Political suicide. So you could argue they'd rather rob and impoverish everyone ("socialise the private sector debts) to keep the private banks afloat in order to keep their jobs.

 

 

So, it's pretty major s***.

So basically careerist politicians/banking gamblers take everyone's hard earned money and recklessly f*** about with it then expect us to cough up when it all goes t*** up.

 

That's how capitalism works.

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Think they have to find 5bn, and it's going to come from the two failing banks depositors, so not sure there's an actual answer on percentages yet, but up to 40% in some cases with not sure if additional or taken for granted bond holders and shareholders wiped out.

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How much are they hitting the bigger depositors for then?

A lot

 

Reuters is reporting that the international (London) branches of the two biggest basket case banks in Cyprus AND their subsidiaries in places like Russia were open for business last week and doing a healthy volume of cash transfers...

 

Meaning that the haircuts for those who still have deposits over the "insured" limit just got a lot bigger...

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