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Old 03-18-2013, 12:41 AM   #41
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Hawkeye is correct. This is an action by a country with no other options. Since it cannot monetize its deficits, it has to resort to unorthodox measures.

I realize I'm speculating, but the euro only has a few years left in its current form. It will survive, but without the south, most likely.
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Old 03-18-2013, 01:53 AM   #42
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Originally Posted by brewer12345 View Post
Cyprus is a pimple on the ass of Europe, so realistically this should be nothing.
Glad you feel that way, but that news had set off quite a large sell off in the Asian Markets now, and very surely will hit European markets and the US market later in the day. Hope there will not be bank runs in some European countries like Greece, Portugal, Spain and Italy.
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Old 03-18-2013, 07:52 AM   #43
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Apparently about half the $$$ in these banks is sent from Russians ...
The fact (?) that deposits are held by foreigners should not be used as an excuse for a cash-grab; at least, not by any government that wants to encourage future foreign investment.

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... a substantial amount of that is from shady/illegal activities.
If the money is suspected to be the proceeds of crime, then steps should be taken to prove that in court. But arbitrarily seizing (only) part of it without due process has nothing to do with its alleged dodgy origins.
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Old 03-18-2013, 08:08 AM   #44
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It appears that the Cyprus government is being forced by the EU and the IMF to collect the tax in return for bailout money. More of a far reaching problem in Europe IMO.

"Investors got a shock from weekend news that the European Union and International Monetary Fund have demanded that all bank customers in Cyprus pay a levy in return for a €10 billion ($12.9 billion) bank bailout. What the Cyprus levy is all about"

What will Cyprus do to Wall Street
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Old 03-18-2013, 08:38 AM   #45
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Cyprus reworks divisive bank tax, delays vote - Yahoo! Finance

Looks like the Cypriot government is backing off from the confiscation.
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Old 03-18-2013, 08:50 AM   #46
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Yeah, its not the effect in Cyprus that would be my big worry. If the EU makes it clear that your money is not safe in a bank, I see the potential for bank runs in all of the marginal countries.

There are few worse things economically than a bank run.

This is a BAD idea.

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Truly, the law of unintended consequences will kick in in Cyprus. It will be a cold day in Paradise before most folks put any more money into their accounts there. Fool me once., etc.... YMMV
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Old 03-18-2013, 12:12 PM   #47
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If I lived in one of the failing euro countries and had my money in a euro country bank last week, I would no longer have it in a euro country bank this week. Hitting up the depositors is bad precedent.

I have to agree completely with this article.
Why the Cyprus Bail In Is a Bigger Deal Than You Think | Daily Ticker - Yahoo! Finance
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Oz bank deposit
Old 03-18-2013, 12:32 PM   #48
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Oz bank deposit

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Originally Posted by Sparkie67 View Post
Meanwhile here in Oz, as of 31 May this year, any bank account that has not had a deposit or withdrawal into or from it in the previous 3 years will be taxed at 100% by the government. All banks will be required by law to deliver the money to the tax office.

Apparently you can apply to have it returned, but really.
Thanks heaps for this update. I've left some money at Westpac due to high interest, so I'll be sure to make a withdrawal. Wonder how gov't will calc interest on 'taxed' funds?
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Old 03-18-2013, 12:44 PM   #49
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Thanks heaps for this update. I've left some money at Westpac due to high interest, so I'll be sure to make a withdrawal. Wonder how gov't will calc interest on 'taxed' funds?
Wouldn't your interest earnings deposit cover the activity requirement ?
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Old 03-18-2013, 01:02 PM   #50
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Wouldn't your interest earnings deposit cover the activity requirement ?
That doesn't even work in US banks.

When I first got into internet banking I was nervous about mailing checks to California as my internet bank has no physical presence. I kept a savings account at a bricks and mortar bank to deposit checks, but as I became more confident in mailing checks I only used my local bank for depositing my annual bonus check. I was surprised to discover one day that they had closed the account for too little activity (I couldn't access it on-line and had to go in to find out why, where they gave me a check for the balance, which was over $3k).
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Old 03-18-2013, 01:06 PM   #51
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Must dependent on the bank, it worked at several I've had.
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Old 03-18-2013, 01:11 PM   #52
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Hope there will not be bank runs in some European countries like Greece, Portugal, Spain and Italy.
I expected a bigger reaction on Wall Street today and am wondering if the shoe just hasn't dropped yet. Read this in NYT:
Quote:
The general feeling was that European leaders were using Cyprus to test whether confiscating deposits would work, before possibly applying it more widely. “They are trying to make an experiment with a small country,” said Stefan Kourbelis, a manager at the Centrum Hotel in Nicosia’s main square, echoing a widely held view. “If it works, the next one could be Spain, Italy and others. If things go badly, they can just say, who cares about Cyprus?”
Also found this interesting Market Map from WSJ (new to me, maybe not to you)
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Old 03-18-2013, 01:25 PM   #53
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I expected a bigger reaction on Wall Street today and am wondering if the shoe just hasn't dropped yet. Read this in NYT:
Also found this interesting Market Map from WSJ (new to me, maybe not to you)
The reason why there is not a bigger reaction (futures were off 90 points for DJIA prior to opening) is that everyone, including the Cypriot government, the EU and the Germans are now backing away from this ill thought out and incendiary idea.
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Old 03-18-2013, 01:25 PM   #54
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Must dependent on the bank, it worked at several I've had.
I must admit that it took me by surprise.

I never bothered opening another account at a bricks and mortar bank, and these days I have a 2nd on-line bank account, at Penfed, which I opened when I applied for a Penfed CC a few years ago. To ensure that savings account stays active I transfer cash into it each month, and then use it to pay off the CC. I could pay the CC directly but figure it is worth the extra keystrokes and mouse clicks each month to ensure that account doesn't get closed for no activity. (I have no idea if PenFed would actually close a savings account that has little activity).
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Old 03-18-2013, 03:08 PM   #55
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...everyone, including the Cypriot government, the EU and the Germans are now backing away from this ill thought out and incendiary idea.
I'm not convinced a new (albeit insane!) precedent hasn't been set here. We'll see.

OTOH, I agree with brewer12345
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"Eh, we are overdue for a correction and I have lots of cash to invest. Sell-off, ho!"
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Old 03-18-2013, 03:16 PM   #56
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So the depositors are being forced to bail out the banks who made lousy business decisions. What else is to be expected? It is simply another tactic to be used in the war on savers. Let them eat cake!!
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Old 03-18-2013, 03:28 PM   #57
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Yet another take on this from one of the biggest names in bonds-

El-Erian: Cyprus Bank Tax Lit 'Two Sticks of Dynamite' - Yahoo! Finance
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Old 03-18-2013, 04:09 PM   #58
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I was a local hire and paid in Bs. Some rough moments and sleepless nights. I remember friends and coworkers in Brazil, Argentina, Mexico and Peru who also went through tough currency and banking situations. I imagine lots of folks in Cyprus are worried right now. Those that can afford it the least will be hurt.

Nothing about the US financial situation even remotely compares, especially the fear factor.
As an Argentinian, I can relate to all of this. My parents lost a significant part of their life savings overnight, as did most middle-class folks down there. Severe currency devaluation, withdrawal limits and regulations, etc. I never saw a bank nor a government in the same light after 2001, and I was in my early 20's then. If you think your cash is safe in a bank, think again. Unfortunately, I have no magic alternatives to offer. But to this day I have a hard time believing those who keep telling me "that could NEVER happen in the US"...
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Old 03-18-2013, 04:33 PM   #59
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As an Argentinian, I can relate to all of this. My parents lost a significant part of their life savings overnight, as did most middle-class folks down there. Severe currency devaluation, withdrawal limits and regulations, etc. I never saw a bank nor a government in the same light after 2001, and I was in my early 20's then. If you think your cash is safe in a bank, think again. Unfortunately, I have no magic alternatives to offer. But to this day I have a hard time believing those who keep telling me "that could NEVER happen in the US"...

There is a difference between the currency being devalued and the currency being confiscated.. sure, both are tough on the citizens...

If the currency is devalued, then it really does not matter WHERE you keep it, it will buy less... keeping it in a bank or under your mattress is no difference... this is what some worry that the US will do, inflate their way out of a debt crisis...


Taking people's money out of their account as a 'tax' is something that I have not heard happen before... and I wonder if they are only talking about bank accounts or does it include brokerage accounts IOW, Fidelity and Vanguard has a LOT of people's money... and if they took a % of that it would hurt big time...

Taking out money from a checking account or CD would not affect me as much... heck, the other day my checking account balance was $65... (DW wrote checks she did not tell me about)...
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Old 03-18-2013, 04:58 PM   #60
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As an Argentinian, I can relate to all of this. My parents lost a significant part of their life savings overnight, as did most middle-class folks down there. Severe currency devaluation, withdrawal limits and regulations, etc. I never saw a bank nor a government in the same light after 2001, and I was in my early 20's then. If you think your cash is safe in a bank, think again. Unfortunately, I have no magic alternatives to offer. But to this day I have a hard time believing those who keep telling me "that could NEVER happen in the US"...
As I've said before the number of countries historically that have done crap like this is significantly greater than the number of countries like US,Canada, Switzerland and others that have not.

The impact of hyperinflation, devaluations and withdrawal limitation is just as bad as what Cyprus did.

If you have money in a saving account making .1% interest and the risk is the government will come and confiscate 10% of the money, you have to believe that chance the government does this is less than once every thousand years. Otherwise you are better off holding the money in cash in a safety deposit box (or home safe) and periodically depositing to a checking account as needed.

Now I don't think many people in the US are going to do this, but if even a small fraction of people in countries with weaker traditions do this it will have a significant impact on the liquidity in the world.
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