Sovereign debt bubble thread

[Razgovory]

The deficit's increasing because of the failure of the government's economic policy.

If more deficit spending is not the answer, what it?

It would appear you are asking the wrong question.  The question should be, "If deficit reduction programs don't actually reduce deficit, what does?"

[Richard Hakluyt]

In an astounding move, the bailout for Cyprus will include losses for depositors. What's even more shocking to me, those with more than € 100k won't see all that money gone first (they will just lose a little more).

The message this sends is clear: get your money out of the danger zone.

........and the danger zone would include Italy, Spain, Greece, Portugal......

I'm amazed and appalled by this move. Interesting times.

[Phillip V]

In an astounding move, the bailout for Cyprus will include losses for depositors. What's even more shocking to me, those with more than € 100k won't see all that money gone first (they will just lose a little more).

The message this sends is clear: get your money out of the danger zone.

da fuq? They are taking a 10% tax on people's savings?

[Zanza]

In an astounding move, the bailout for Cyprus will include losses for depositors. What's even more shocking to me, those with more than € 100k won't see all that money gone first (they will just lose a little more).

The message this sends is clear: get your money out of the danger zone.

da fuq? They are taking a 10% tax on people's savings?

Not really. When bailing out the bank, they only bail out 90% of the deposits. The alternative for the customers is that their bank goes down.

[Iormlund]

Not really. When bailing out the bank, they only bail out 90% of the deposits. The alternative for the customers is that their bank goes down.

The alternative is to wipe out bondholders and people with a lot of money in deposits first. But since those have power, they get to keep much of their stuff by ripping off your average Cypriot.

[mongers]

Not really. When bailing out the bank, they only bail out 90% of the deposits. The alternative for the customers is that their bank goes down.

The alternative is to wipe out bondholders and people with a lot of money in deposits first. But since those have power, they get to keep much of their stuff by ripping off your average Cypriot.

[Phillip V]

Cypriots Rush to Get Their Money Out of Banks

"In a move that could set off new fears of contagion across the euro zone, anxious depositors drained cash from automated teller machines in Cyprus over the weekend, hours after European officials in Brussels required that part of a new €10 billion bailout be paid for directly from the bank accounts of ordinary savers.
...
Under an emergency deal reached early Saturday in Brussels, a one-time tax of 9.9 percent is to be levied on Cypriot bank deposits of more than €100,000 effective Tuesday. But even deposits of less than that amount are to be taxed at 6.75 percent, meaning that Cypriot creditors will be confiscating money directly from retirees, workers and regular depositors to pay off the bailout tab."

http://www.nytimes.com/2013/03/18/business/global/facing-bailout-tax-cypriots-rush-to-get-their-money-out-of-banks.html

[Iormlund]

One-time.

Only a complete idiot will believe that and keep his money at the bank instead of withdrawing what remains.

[Admiral Yi]

Why in the world did they announce it ahead of time? 

[Iormlund]

They didn't. Banks are shut down and ATMs won't give you over your post-"tax" balance. Not to mention by now they'll have run out of money.

[Neil]

Not really. When bailing out the bank, they only bail out 90% of the deposits. The alternative for the customers is that their bank goes down.

The alternative is to wipe out bondholders and people with a lot of money in deposits first. But since those have power, they get to keep much of their stuff by ripping off your average Cypriot.

Is there a special advantage to ripping one group off and not the other?  By rights, both groups should lose everything after all.

[Phillip V]

"Jeroen Dijsselbloem, the president of the group of euro area ministers, declined Saturday to rule out taxes on depositors in countries beyond Cyprus."

[Iormlund]

Is there a special advantage to ripping one group off and not the other?  By rights, both groups should lose everything after all.

Deposits are in theory guaranteed, where investments are not. I'm not against losses for savers, as long as it the last resort and everything is wiped out first.

From a more pragmatic standpoint it is also counter-productive. What makes them think depositors are going to keep the rest of their money there now? What happens when another country needs a bail-out (for example to access Draghi's program)?
They are simply encouraging bank runs. Moving small quantities of money to safe havens like Germany or the UK might not be worth it for your average Giorgio, but now you made hiding cash under the mattress better than keeping it at the bank as well!

[Admiral Yi]

They didn't. Banks are shut down and ATMs won't give you over your post-"tax" balance. Not to mention by now they'll have run out of money.

Ah.

[alfred russel]

What a terrible way to do things...apparently Cyprus depositors were insured up to 100k. If you are going to allocate losses to the depositors, they should first go to the uninsured, and then (if needed) to the insured.

But then isn't the point of the bailouts to keep these countries from collapsing? Allocating losses to depositors is going to contribute to bank runs (not that those runs haven't been going on for years). If there isn't the money to stand behind Spain or Italy--that might make sense. But to go through years of the bailout/austerity cycle and have this happen in a country like Cyprus? Seems penny wise and pound foolish. It almost seems like the design is to kill of banking in the eurozone periphery.