Cyprus govt to seize 6.75% of all bank accounts as of Sat morning

[ratto]

Based on the report I read, about 1/3 bank deposit in Cyprus belongs to foreign holders. There is also accusation that Cyprus banking system has allowed tax invasion and black money for too long. So asking whoever has over 100k euros in deposit for one-time 9.99% tax is not too far-stretched from some other EU members. It would be unfair to ask Germans to foot bills every time. There have already been bank runs in Cyprus now, even including a man threatened to get his deposit out of his bank by using a bulldozer. Not sure if online banking will make any difference in this case. I guess it probably would be even easier for government to put restriction on asset transfer initiated online if deemed necessary. We can potentially inflate our debt obligation away, but the price must be paid, sooner or later, by someone.

[jebmke]

Quote:

Originally Posted by MichaelB I've lived through worse than that. Twice, in fact (Venezuela). Nothing to do with the US, not even sure it has any impact on us.

On the business side I was pretty heavily into the situation in Argentina when they un-pegged. In some ways this was the equivalent of seizing about 75% of the bank deposits in local currencies. Those were interesting times. The locals who didn't have USD accounts offshore were not happy campers.

Our dealings in Venezuela were almost exclusively with PDVSA so we dealt strictly in USD and all transactions occurred through a bank outside of VEN.

[bondi688]

While the article said a lot of accounts in Cypress were set up by money from Russia, by history, proximity and linkage, there must be a lot of money from Greece as well.

[Koolau]

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

[jon-nyc]

Excellent piece on the subject by Felix Salmon

The Cyprus precedent | Felix Salmon

[mickeyd]

One can not help to wonder if it is at all possible for Cypriot politicians that were in the know on Friday (you know that there were some. Had to be) took advantage of the situation and made arrangements to transfer all/most of their loot.

[redduck]

Quote:

Originally Posted by soupcxan To me this sounds like hypothetical fear mongering on AM talk radio, but in fact is happening today in Cyprus (account limits are EUR not USD). Am I the only one scared by the precedent this sets? http://www.nytimes.com/2013/03/17/bu...banks.html?hpw

Well, to answer your question, you seem to be the only one scared so far.

[LOL!]

Thanks for link to the Salmon piece.

Is there anything actionable in all this for US investors? Will US Treasuries get a small pop? Will int'l funds drop by 1% since the Euro is off by 1%? Anything else?

[MichaelB]

Quote:

Originally Posted by jebmke On the business side I was pretty heavily into the situation in Argentina when they un-pegged. In some ways this was the equivalent of seizing about 75% of the bank deposits in local currencies. Those were interesting times. The locals who didn't have USD accounts offshore were not happy campers. Our dealings in Venezuela were almost exclusively with PDVSA so we dealt strictly in USD and all transactions occurred through a bank outside of VEN.

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.

[theOAP]

This from the BBC:

"Depositors will be compensated with the equivalent amount in shares in their banks."

I'm not sure shares in a failing bank is any consulation.

BBC News - Cyprus bailout: Parliament postpones debate

[mickeyd]

Quote:

Originally Posted by theOAP This from the BBC: "Depositors will be compensated with the equivalent amount in shares in their banks." I'm not sure shares in a failing bank is any consulation. BBC News - Cyprus bailout: Parliament postpones debate

Wow can't believe that the Cyprus government has that much power. Forcing banks to issue sahres of their stock and getting zero in return.

[ejman]

Monday might be an interesting day in some European countries... Good thing there is no chance of a reenactment of the impact of certain events in Sarajevo almost exactly a century ago.

[ERhoosier]

Quote:

Originally Posted by MichaelB I've lived through worse than that. Twice, in fact (Venezuela). Nothing to do with the US, not even sure it has any impact on us.

I would like to agree, but things like this have a way of spiraling beyond expectations. If this situation in Cyrpus is viewed by enough Eurozone citizens as a precedent it could start a major run on bank deposits across the Eurozone, and possible precipitate another financial crisis before the world economy has fully recovered from the last one.

Why today’s Cyprus bailout could be the start of the next financial crisis

[brewer12345]

Eh, we are overdue for a correction and I have lots of cash to invest. Sell-off, ho!

[haha]

Quote:

Originally Posted by brewer12345 Eh, we are overdue for a correction and I have lots of cash to invest. Sell-off, ho!

Yes, and to make it better I just bought some SPY puts. Here's hoping for some filthy lucre, my second favorite thing.

Ha

[Bikerdude]

Quote:

Originally Posted by brewer12345 Eh, we are overdue for a correction and I have lots of cash to invest. Sell-off, ho!

You may get your wish as market futures are heading down.

[FIREd]

It could be argued, I think, that in the US we are also paying a tax on our deposits when real interest rates are kept negative.

[brewer12345]

Cyprus is a pimple on the ass of Europe, so realistically this should be nothing.

[Texas Proud]

Quote:

Originally Posted by Koolau 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

This is what I was thinking...

Also, if some of that money is Russian mob.... I bet they will not take less than what they put in.... or else...

[imoldernu]

If the results of the Monday decision cause EU instability or the beginnings of worry in the US markets, you may want to revisit this link (previously posted on this thread). "Collateral Damage - Back to Mesopotamia"
http://www.bcg.com/documents/file87307.pdf

Not only does it cover the kind of resolution proposed by Cyprus government, but it shows the inter dependability of world wide banks, and offers some unpleasant solutions, as well looking forward in the event solutions are not begun.
Interesting, if only as a framework to view events as they unfold, and possibly to help in developing a personal plan of action, in the event that things do go downhill... ie, where to keep assets safe.
On of the parts of a proposed solution was to tax corporations on non producing liquid assets, to encourage R & D.
The charts that cover the relative financial strength of the US and EU countries is quite revealing, covering Household Debt, Corporate Debt and National Debt... as well as the relative differences in personal wealth between the countries.
The article is from September 2011, but as far as I can see, very true to today's circumstances, albeit the debt was substantially less then.