Cyprus levy --- merged threads

[Georgia O'Keeffe]

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Edited March 18, 2013 by Tamara De Lempicka

[Giordano Bruno]

Gnar!

There is EXACTLY the same amount saved as borrowed. By defintion.

We don't need "more saving, less borrowing" that's a physical impossibility. It's like asking for more water but less H₂0

The problem is that "savers" have lent money to "borrowers" that cant be repaid. The argument is over who eats the loses.

...

I see no logic in your assertions at all. I take it you understand how fiat currency and fractional reserve banking work. So can you support your assertion with an argument? Not by definition. That is not an argument. Reality does not bow down to someone's definition and whose definition do you mean?

H₂0 and water are the same thing. That is not the same as stating that the amount of borrowing is the same as the amount saved.

[gadget]

What about leverage. Surely that is exactly the point of fractional reserve banking.

No, that's about capital reserves (ie the extra amount in equity they have to absorb loses).

If everyone turns up at once and wants their money back then they can not pay them.

That's not to do with capital ratios, fractional reserve doo dahs or anything.

That's to do with banks borrowing short term deposits and lending long term. Ideally they would match. But in the real world that's impossible. People need 25 years to pay off a mortgage, companies need decades to pay for equipment (planes, trains, factories) Few people are up for 25 year savings bonds.

[EnuffZNuff]

Interesting. Spoke to one of my work colleagues who's parents live in cyprus (for work), living on the Turkish side, apparently his mum asked him about transferring money to a Cyprus bank, apparently you can get 18% interest there. Lots live off the interest! Not sure if this impacts just the Greek side or the turkish side, or even if there still is that split there these days???

[gadget]

H₂0 and water are the same thing. That is not the same as stating that the amount of borrowing is the same as the amount saved.

Yes it is. Water and H₂0 are two different words for the same thing.

"Borrowing" and "Lending" are two sides of the same transaction. Two different words for the same thing. How can someone borrow without someone else lending?

Saving is just lending to a bank.

[SaintJay]

vote scheduled for tomorrow has been cancelled.

SpiegelPeter Peter Spiegel

Word from Nicosia that they've canceled the bailout vote for tomorrow. #Cyprus

About 19 minutes agovia web Favorite Retweet Reply

[dances with sheeple]

vote scheduled for tomorrow has been cancelled.

They are going to fall out of the common currency.

Edited March 18, 2013 by dances with sheeple

[interestrateripoff]

If this goes ahead it's going to destroy "trust" in the banking system.

Who is wanting to engineer a bank run?

[Traktion]

No wonder Bitcoin has been doing so well recently. No one can help themselves to money in your Bitcoin wallet.

TBH, the more sh*t like this they try, the more people will seek alternatives to fiat currency.

[Trampa501]

They are going to fall out of the common currency.

What currency will they use? Pounds?

[Ash4781]

Are the banks now shut for the week over there?

[gadget]

No wonder Bitcoin has been doing so well recently. No one can help themselves to money in your Bitcoin wallet.

http://www.bbc.co.uk/news/technology-19486695

One of the biggest Bitcoin currency exchanges has been taken offline after 24,000 units ($250,000; £157,800) of the virtual currency were stolen from its computer servers.

[Giordano Bruno]

Yes it is. Water and H₂0 are two different words for the same thing.

"Borrowing" and "Lending" are two sides of the same transaction. Two different words for the same thing. How can someone borrow without someone else lending?

Saving is just lending to a bank.

I don't think you do understand fractional reserve banking (FRB henceforth). In fact, I doubted that you did. Your argument seems simple but I believe there is false logic in it.

If I borrow £100 off a loan company and I don't pay any back for about 3 months, I could very well be told that I now owe £1,000. That is the effect of interest. I don't think anyone will claim to have saved £1,000.

And if I borrow from a bank that uses FRB, the bank simply credits me on its database as having that amount in my account. It doesn't need to have a saver providing the money. Perhaps it did once upon a time but now with FRB that is not required.

By your logic the total credit in a system would be zero, since all savings = all debt. But when money is created, by the banks, or some might think by government, there is an increase in the total amount of money or credit, so the total credit must be a lot greater than zero.

[Executive Sadman]

so if they wanted 40% originally, but now look like settling for 10-15%, what will they steal next to make up for the 'unexpected' shortfall? Pensions? Natural Resources?

Bankster shill on Radio 2 earlier was saying the 7-8% likely to be collected was 'enough to ensure a sustainable debt situation'

Which begs the question why they started by demanding 40%.

[SaintJay]

Bankster shill on Radio 2 earlier was saying the 7-8% likely to be collected was 'enough to ensure a sustainable debt situation'

Which begs the question why they started by demanding 40%.

aim high - seems to be the same as EAs and fantasy Foxtons pricing.....

[Fishman]

This is turning into farce now.

Cypriot banks now closed until Thursday (at earliest) is simply increasing the pressure and as soon as they open, the banks

will be overwhelmed - physically and electronically so they won't be able to function. Branches will be chaotic and servers will probably

go down as everyone tries to access their accounts simultaneously.

And the longer the waiting goes on, the worse the chaos will be.

It wouldn't surprise me if this bail-out deal does NOT go ahead in the agreed format. If this WAS an experiment by Eurozone Politicos to gauge reaction to confiscation of private money (and let's not forget businesses as well) then they have their answer.

If it goes ahead then we'll certainly see the locals put the word RIOT in Cypriot.

Edited March 18, 2013 by Fishman

[stormymonday_2011]

No, that's about capital reserves (ie the extra amount in equity they have to absorb loses).

That's not to do with capital ratios, fractional reserve doo dahs or anything.

That's to do with banks borrowing short term deposits and lending long term. Ideally they would match. But in the real world that's impossible. People need 25 years to pay off a mortgage, companies need decades to pay for equipment (planes, trains, factories) Few people are up for 25 year savings bonds.

Not how the wiki article describes it

http://en.wikipedia.org/wiki/Fractional_reserve_banking

[bomberbrown]

A whole worth of work that I have done is remunerated by my employer and this pays my rent, utilities bills, sundries, food, etc and what's left over gets saved for big purchases. ie fridge, washing machine, car, holidays etc.

To even intimate that deducting a percentage of what remains in my store of wealth of hard graft is something other than theft is contemptible to say the least.

This whole Cyprus incident has really opened my eyes.

[gadget]

I don't think you do understand fractional reserve banking (FRB henceforth). In fact, I doubted that you did. Your argument seems simple but I believe there is false logic in it.

If I borrow £100 off a loan company and I don't pay any back for about 3 months, I could very well be told that I now owe £1,000. That is the effect of interest. I don't think anyone will claim to have saved £1,000.

And if I borrow from a bank that uses FRB, the bank simply credits me on its database as having that amount in my account. It doesn't need to have a saver providing the money. Perhaps it did once upon a time but now with FRB that is not required.

By your logic the total credit in a system would be zero, since all savings = all debt. But when money is created, by the banks, or some might think by government, there is an increase in the total amount of money or credit, so the total credit must be a lot greater than zero.

I really don't want to get into this argument. And this is the last i'll say on the matter (we should let it get back to Cyprus). But:

At the end of every day a bank* has to ensure that the amount that it lent out is covered by the amount it has has borrowed.

The reason banks "create money" when they lend is not because they don't have to actually get the money from somewhere to lend out. It's because once they've lent the money out it becomes a deposit in someone elses account somewhere in the banking system. That doesn't change the fact that a bank needs to get someone (retail depositors, bondholders or other banks with excess deposits) to lend them cash for them in turn to lend it out to borrowers.

* The exception to this rule is the Bank of England. But we're not talking about that...

[mfp123]

They are going to fall out of the common currency.

that common currency being the Deutschmark.

the euro is european currencies pegged to the DM. the ECB is based on the exact model of the bundesbank.

the ECB HQ based in frankfurt.

its not really a common currency its Germanys currency. unfortunately the rest of the euro countries failed to grasp this fact.

[stormymonday_2011]

According to the Telegraph Anastasiades can not get a majority in the Cypriot Parliament to back the deal

19.28 Greek-based Antenna TV is now reporting that Mr Anastasiades will tell the Eurogroup that he doesn't have enough backing in parliament to pass the bill.

http://www.telegraph.co.uk/finance/debt-crisis-live/9936737/Cyprus-bailout-live.html

[Ash4781]

Thats it then they'll leave the euro. Banks are shut so could devalue and issue new currency next week.

[RufflesTheGuineaPig]

The problem with these type of arbitrary levies, taxes and haircuts on deposits is that it presents people with a dilemma.

If you are a Cypriot or other Euro based saver do you leave your money in the bank and accept the promises that such a levy will never occur again or do you take it out of the local banks where it is vulnerable to expropriation and move it elsewhere

There is no dilemma. When the banks reopen it will be for half a day. A massive bank run will start, banks will close.

Then they will have to bring in capital controls, or drop out of the euro.

Even if they "abandon" the new tax, the run will still happen. Either now, or in a few months, Cyprus is now destined to leave the euro. The only question is, will the Spanish panic and beat them out.

[SaintJay]

Thats it then they'll leave the euro. Banks are shut so could devalue and issue new currency next week.

time to buy de la rue shares?

http://shares.telegraph.co.uk/quote/?epic=DLAR

[interestrateripoff]

According to the Telegraph Anastasiades can not get a majority in the Cypriot Parliament to back the deal

http://www.telegraph.co.uk/finance/debt-crisis-live/9936737/Cyprus-bailout-live.html

I'm guessing that many local MP's are in fear of being lynched, it certainly will focus the mind about whether to give the bankers taxpayers money in return for you being strung up on a lamppost.

Game on.