Saturday, March 16, 2013

Your Savings Account

O.K. probably not YOURS as I believe I have seen only one reader from Cyprus since I've been keeping track, but here's what happens when your government finds itself short of funds to pay its employees and retirees and can't get a loan from anyone without being expected to pay interest on it.

Raise Taxes! The omnibus solution to any problem a government could face. To be fair, let's make it across the board, but we'll taper it a bit so as to hit the rich a bit harder.
It is difficult to describe the weekend bailout package to Cyprus in any other way. The confiscation of 6.75 percent of small depositors' money and 9.9 percent of big depositors' funds is without precedence that I can think of in a supposedly civilised and democratic society.
Yup, the banks closed on Friday, as they usually do, and are not expected to open until Tuesday, as Monday is a Bank holiday, and Saturday morning, poof, your account is magically shrunken by the above percentages.  Nobody gets to cheat, as they usually do. BTW, most of the large depositors there seem to be Russian oligarchs, who seem to think their money would be safer outside Mother Russia.

Could have been worse. The Germans were lobbying for a 40% slice.

Many of the Russians are probably innocent businessmen. The way to bet would be that some percentage of them are the types from whom you most emphatically DO NOT want to be seen as taking their money without permission.

As an aside, there are several other European countries in similar straits. I'm thinking massive bank runs in Greece, Italy, Spain, Portugal, and possible some others come Tuesday morning.

Could get ugly.

1 comment:

Brad K. said...

There is another thought about the Russian mob taking an unexpected hit (http://theautomaticearth.com/Finance/bank-run-in-cyprus-whos-next.html)

"Besides, if you think the Russian deposit holders are fatally wounded right now, think again. They've seen this coming for at least 6 months, they've had all the time they need to move assets around, and, if anything, will simply use this decision to launder a lot of capital, and happily pay a 10% fee for the honor."