
The madness of the bailout in Cyprus - mixmax
http://www.maximise.dk/the-madness-of-the-bailout-in-cyprus/
======
DannoHung
Funny that it's targeting only bank accounts and completely ignoring all other
liquid assets.

By which I mean: Holy shit, if this isn't targeted directly at middle class
and lower households and small businesses, I don't know what would be.

Also, these guys have all got to be huffing paint if they think a run on the
banks won't be a direct result EVEN AFTER THE MONEY IS GONE.

~~~
caf
The holders of those bank accounts are the ones deriving the benefit of the
bailout. Without the bailout, those banks would go under, and in that
situation the depositors would see a lot less than 90%.

It's still a silly idea from a practical viewpoint - the article is absolutely
right about the loss of confidence - but I don't think it's immoral. The root
cause here is that the depositors put their money in a bank which lent it to
someone that isn't paying it back. Frankly those depositors should be counting
their lucky stars that they're seeing anything - plenty in the same situation
in the past haven't.

~~~
mixmax
There are pan-European laws that if a bank goes under you get the funds up to
€100.000 you had in the bank reimbursed by the state.

The reason for this is that is that banks are the financial glue of society,
and for better or worse we can't live without them. Bankruns can bankrupt a
bank in a day, thus it's incredibly important that people feel secure in
knowing that the money they have in the bank is secure no matter what.

This trust has just been put to the test with this incredibly stupid move.

~~~
caf
That guarantee is clearly a dead letter in the case of Cyprus anyway, because
there's no way that their government can make good on that promise in the face
of multiple large bank collapses.

I already said that I agree it was a bad move due to the effect on confidence.

~~~
mixmax
It's a good point, so I did a quick google search and it appears that in most
countries the insurance is paid out by a seperate insurance fund that all
banks pay in to over time. Presumably the fund is reinsured with lloyds,
Berkshire Hathaway or something similar. So it's independent of the banks and
the state.

I couldn't find anything specifically for Cyprus, so I'm not sure what the
situation is there, but it's probably not much different from other countries.

Edit: Here is a good explanation: [http://europa.eu/rapid/press-
release_MEMO-10-318_en.htm?loca...](http://europa.eu/rapid/press-
release_MEMO-10-318_en.htm?locale=en)

 _"7) Will Deposit Guarantee Schemes have enough funds to pay out in case
banks fail? There have been shortcomings in some countries in the past. It is
not feasible or necessary to provide schemes with an amount of money
equivalent to all deposits. But banks will have to pay on a regular basis to
the schemes, in advance, so a pot of money can be built up, and not only after
a bank failure. Such 'ex-ante funds' will make up 75% of the overall funds in
DGS.

If it becomes necessary, banks will have to pay additional contributions,
which will contribute a further 25% of the target funds. If this is still
insufficient, Deposit Guarantee Schemes could borrow from each other ("mutual
borrowing facility") up to a certain limit (again 25% of target funds) or use
additional funding sources such as borrowing on the financial market, e.g. by
issuing bonds.

The new financing requirements will ensure that each scheme has enough funds
in place to deal with a medium-size bank failure. This level is comparable to
the existing well-financed schemes in the EU. These levels of funding will
have to be achieved in all Member States by 2020.

Banks having a riskier business model than others will pay higher
contributions to Deposit Guarantee Schemes - up to about 3 times more._"

~~~
caf
There's no reinsurance, and the rules only ensure that there will be enough
funding to cope with a single "medium-sized bank failure" ... by 2020.

~~~
justincormack
Indeed and most countries don't have medium sized banks, they tend to have big
("too big to fail") and small ones. When a bank failed in the Netherlands (SNS
Reaal) the other week the government said that it would have cost EUR 30bn to
the fund which would have crippled the 3 remaining large banks. Iceland had a
similar system where the deposit insurance fund could not cover any of the
banks failing, as they were all too big. The two big banks in Cyprus are huge.

------
ameister14
This makes me extremely uncomfortable and I don't understand how anyone could
think this was a good idea.

We have high unemployment across Europe, Catalunya is attempting to become
independent and there is open talk in the press about a military coup if that
goes through. Meanwhile, Greece elected a bunch of fascist mps, and now this?

Imagine if you woke up tomorrow and 10% of your savings were gone. What would
you do? Take your money out of the bank, sure, but also immediately attempt to
remove your government.

Not exactly a move towards stability here.

~~~
wintersFright
At the end of the day you have two camps: debtors and savers. You can't force
a tractor factory to make a factory once it has closed down ie: you can't
force a debtor to pay debt they want to default on. The only way to rebalance
the system is to screw the savers. It was always going to happen, the question
is whether by stealth via inflation or overtly. It looks like they are taking
the overt path. The problem is the savers saving in the instrument of debt:
currency.

~~~
davorb
I'd like to add one thing, that those people weren't just hoarding that money.
What happens now is that Cyrpus is losing out on some badly needed investment.

------
st0p
To quote the article: "This is why The IMF and the ECB has stepped in and
bailed out the banks. Rumor has it that without the bailout Cyprus two largest
banks would be bankrupt in a matter of days. A situation no economy can
survive, especially not one with a disproportionally large banking sector."

I don't see the problem to be honest. We (I live in the Netherlands) are
paying a lot of money to help them out, which is okay. But yeah we're asking
the inhabitants of Cyprus for a sacrifice too. The 10% tax is a very crude way
to implement this, but dire times need dire actions.

~~~
omgyeah
I wish you won't ever see the consequence of dire actions against you or your
family. You have no idea how it feels like. You have no idea how unfair it is.

In case that you have not realized it, you are not paying any money. You are
loaning with loan-shark rates. Have you ever heard of a loan-shark losing
money?

Things are much more complicated than black or white.

Greece and Cyprus are not independent countries. Their very existence was
built on loan. Loan with a purpose. And this purpose fulfills as we speak.

These countries' sovereignty is more than a joke, more than a century old.

You feel cheated. Greeks (people living in Cyprus are also Greeks) feel
cheated. Every single person feels cheated.

Sadly, we live in the dystopian future where international mega-corporations
(a.k.a banks) have more power than some countries.

You can however blame the rotten democratic system that we live by. You can
blame human kind's greedy nature.

But you can't blame people of being stupid. The society can only be evaluated
by the way it treats its weakest members. You can't blame stupid. You must
protect them. This is what makes a society virtuous. Protecting its weakest
links. Everything else is pure low-level greediness instinct that has driven
us from living into caves to the modern world.

If thinking that poor nations had it coming helps you keep your conscious
clean, so be it.

But it has always been about survival of the fittest and not survival of
everybody and apparently it will keep being this way. Until human kind becomes
one. Above races, religions, borders and whatever.

Amen :)

~~~
konstruktor
As a citizen of a fiscally responsible EU country, reading shit this makes me
very angry and eradicates leftover trace amounts of solidarity.

~~~
paganel
I hope that country is not Austria (which ran to the the EU like a little girl
when shit starting hitting the fan in early 2009, asking for help for Eastern
Europe countries so that the latter won't go belly-up, that would have meant
Austria going belly-up), the Netherlands or Belgium (both countries with a
very high level of private-sector debt, approaching Cyprus, pls see this:
[https://media.economist.com/sites/default/files/imagecache/2...](https://media.economist.com/sites/default/files/imagecache/290-width/images/print-
edition/20130316_FNC251.png)), to say nothing of France.

The only European country still standing on its feet without any outside help
is Germany, but that could end very quickly end once every other country
around her begins the slide into depression. For better or worse, we're all in
this together.

------
ChuckMcM
The bank run was an entirely predictable result. And one which the courts may
soon have to untangle.

I too expect that capital will move from weaker banks into stronger ones and
that will result in a liquidity crisis.

Along one path the European Union dissolves, and along another path nation-
state sovereignty dissolves. Either way it seems pretty clear that countries
with larger economies don't seem to be particularly willing to continue to let
poorly run smaller economies drain them of resources.

~~~
lrei
Why would the EU dissolve if the Euro collapsed? Only 17/27 countries in the
EU are in the Eurozone. It would be significantly more complicated to dissolve
the whole European Union and dealing with a political and legal mess that
would ensue. Dissolving the Eurozone would be comparatively easy.

Also the concept that somehow "poorly run smaller economies" were draining the
resources of the "larger economies" has no basis in reality. It doesn't take a
lot of research to find out who benefited the most from the Euro. Hint: not
any the "poorly run smaller economies".

------
papercruncher
I was born and raised in Cyprus and my entire family still lives there. I
spoke to a few of them this morning and whether the measures pass or not
(parliament still needs to approve) they all plan on making a run to the bank
asap.

~~~
camperman
Money's already been taken out of the 9,9% accounts dude. And electronic
transfers are frozen.

~~~
papercruncher
Yes, but as the article pointed out, trust is broken and everyone thinks this
will happen again

~~~
camperman
Ah, OK. Yes I agree. In fact, I think this action will be viewed very
seriously across the whole of Europe and not just Cyprus. I expect to start
seeing bank runs starting next week in the PIIGS countries.

------
seivan
Expect this to happen all over Europe. In particular England. It has happened
before and will happen again, until the fuckers in charge understand and
learn.

But no one would vote on the guy calling for budget cuts. Everyone likes the
guy with the hand outs.

~~~
dageshi
"England" isn't in the euro, it has a central bank that can and will print
money if required. If anything chances are the UK will be on the receiving end
of any money transferred out of Greece, Portugal, Spain e.t.c. because it's
within the EU (and therefore other EU citizens can easily open bank accounts)
but not inside the eurozone (the UK has not funded any of the EU bailouts
except via contributions to the IMF)

~~~
_pferreir_
i.e. "has one's cake and eats it"

------
italophil
The article is a lot of fear mongering. It ignores the fact that before the
EURO the Southern European countries had high inflation rates and hence didn't
need bail outs. These high inflation rates devalued savings in the local
currencies and often created similar runs on banks. Since the smaller
economies have a low impact on the EURO inflation this is an alternative
adjustment.

------
TillE
It's absolutely insane. I can't understand how they think this will cause
anything other than a catastrophic bank run on Tuesday.

At least they get to skim off a percentage before the banks collapse, I guess?
Someone's benefiting, somehow.

~~~
samstave
They knew it would cause this Tuesday which is why it is done now so that the
peasants have to wait several days to be able to do anything. In the mean time
the elite have days and resources to do what they need to do.

These are acts of war on citizens by corporations and should be treated as
such.

~~~
arbuge
Acts of war by governments you mean.

~~~
omgyeah
Acts of war by governments ordered by corporations would be more accurate.

Sad but true.

------
znowi
I say let them default. Can't manage your assets - go out of business. Employ
shady schemes - go to jail. Now this would be fair.

~~~
moe
Wait a second. So I lend you a thousand dollars, for a nice interest rate.

Then you go bankrupt or just disappear.

And in this dire situation I should _not_ be allowed to collect $1 from a
thousand random citizens to compensate my loss?

What an absurd concept.

</sarcasm>

~~~
omgyeah
Unlike people, countries don't disappear. They have many (natural) resources
standing still on the earth. Which can be used to pay back loan.

But greed is good. I can have both the other country's natural resources and
$1,000 from my citizens. Win-win for me. Lose-lose for everybody else.

~~~
tatsuke95
> _"They have many (natural) resources standing still on the earth. Which can
> be used to pay back loan."_

Like the German war reparations after WWI? That worked out well for everyone.

~~~
moe
If you feel a need to invoke Godwin you should at least try to be
intellectually honest.

The citizens in the tumbling EU-nations _are_ paying what they perceive as
unfair reparations already (Justification: "You lived beyond your means" -
most citizens most certainly didn't). The radicalization _is_ already
happening (cf. elections in Greece and Italy).

You make it sound like taking 6.75% out of the small guy's savings account
would somehow be better than stretching out the pain or (god forbid!) claiming
the wealth back from those who extracted it in the first place.

~~~
tatsuke95
Do you just wait around for people to mention Germany so you can talk about
this stuff? Godwin's Law is about Hitler. So, in essence, _you_ have invoked
Godwin's Law.

Can I not talk about Germany in the historical context of WWI?

The parent comment said that these countries have resources in the ground, we
can take those resources, hence these countries will always be able to pay
their bills. I said that didn't work very well when we tried to force Germans
to "pay the bill" after WWI; they simply inflated the currency away.

But thanks for your arrogance and lesson on intellectual honesty.

~~~
moe
Well, Godwin's Law is about "someone inevitably makes a comparison to Hitler
or the Nazis" (see Wikipedia). If mentioning WWI/WWII does not qualify for you
then we must have quite a different interpretation.

The argument in this thread was that there must be alternatives to the current
move, such as making some of the creditors _wait_ or _default_ , rather than
taking it out of the small guy's pocket. Discarding such alternatives for the
fear of consequences that are _already happening_ just makes no sense.

Cyprus is effectively inflating the Euro for their citizens right now, that's
the whole purpose of this stunt.

------
stefantalpalaru
It's not just the banks. Cyprus has a huge public debt[1].

The measure is also not the first of its kind in the EU - Italy did it in 1992
to cover a financial emergency. They took "only" 0.6% from all bank accounts
back then.

[1] [http://www.cyprus-mail.com/cyprus/highest-annual-increase-
go...](http://www.cyprus-mail.com/cyprus/highest-annual-increase-government-
debt/20130124)

~~~
grannyg00se
According to wikipedia, Cyprus' public debt is less than Greece's, Italy's,
USA's, Canada's, Germany's, and many others.

~~~
omgyeah
Yeah, but Cyprus, Greece, Italy, Portugal and Spain don't have any nukes ;)

------
JumpCrisscross
When a sovereign fails, its banks fail, and private sector losses are
virtually assured. The question is who bears the burden. Roughly half the
deposits in Cypriot banks, with assets five times its GDP, are of Russian,
Greek, or British origin [1]. They were attracted by high deposit rates
(roughly double EMU average) and a system tolerant of likely tax evaders.

>" _This whole thing is entirely unfair for the people living in Cyprus. The
average citizen had nothing to do with the banking sector stocking up on Greek
debt, but now they have to pay for it._ "

Foreign deposits are flighty. The loan-for-austerity solution is too slow. The
Cypriot financial minister has already noted "substantial outflows" from banks
over the past few weeks [2]. Announcing a future tax would leave the burden
exclusively on ordinary Cypriot depositors. This measure was intended to help
the Cypriots, not burn them.

Further, the mark-downs on Greek debt is a proximal, but not the root, cause
of the problem. The IMF warned Cyprus in 2011 to raise capital levels,
potentially by slashing deposit rates - it did not. Ratings agencies chimed
in, in 2012, that private sector losses would result if Cyprus did not
increase contributions to bank capital. Complicating the situation is that
15-20 percent of Russian bank capital and nearly 10 percent of Russian
corporate deposits sit in Cyprus - there was probably external pressure to
keep the banks leveraged.

Pre-crisis, Cyprus stood out for its high growth (almost 4%) and low
unemployment (low of 3.6% in 2008), despite a falling savings rate, rising
labour costs, and a red hot real estate market following its accession into
the eurozone in 2004 [3]. Today, we have a zero growth economy with a banking
crisis that would have tipped its debt/GDP from 87% to 145%.

Cyprus needs a capital injection equal to half of GDP. This was never going to
be painless.

>" _So what do investors, businesses, and savvy savers do? They pull their
money from banks in the troubled euro countries. No need to take the risk,
even if it’s small._ "

This is unlikely - the EU banking environment is already highly re-
patrimonialised. Non-financial corporate and high net worth deposits have
already fled to the degree that they can. Domestic depositors are, for better
or worse, less flighty (and savvy) than senior bank debt investors - hence the
logic for preserving their latter at the expense of the former. Also Cypriot
banks have very little senior bank debt (0.3% of assets for Laiki [4]). This
is cruel, yes, and I sound with _The Economist's_ criticism of the tax levied
on minor accounts (those holding less than €100 000). But forced de-leveraging
will be cruel.

Given the political constraints from Deutschland limiting the ability of the
European Central Bank to launch into Fed-style monetary base expansion and its
Landesbanks preventing euro-wide deposit insurance, the bank regulatory
constraints imposed by a country relying on flighty deposits for financial
stability, and the economic constraints of a highly-indebted nation in the
middle of a geopolitical brouhaha between Greece, Turkey, and Russia slated
for near zero growth in the near future, this is not a terrible deal. Note
that Iceland, which was in a similar position in 2007, saw its economy crater
by nearly 1/3 from 2007 to 2011, or about 9% annually. Peak (2007) to trough
(2009), 3/5.

[1] [http://blogs.ft.com/beyond-brics/2013/03/13/russias-
cyprus-p...](http://blogs.ft.com/beyond-brics/2013/03/13/russias-cyprus-
problem/#axzz2Nkqaa1N5)

[2]
[http://www.ft.com/intl/cms/s/3/83fb0dd2-8802-11e2-b011-00144...](http://www.ft.com/intl/cms/s/3/83fb0dd2-8802-11e2-b011-00144feabdc0.html#axzz2NeRbHw8o)

[3]
[https://www.imf.org/external/pubs/cat/longres.aspx?sk=25382....](https://www.imf.org/external/pubs/cat/longres.aspx?sk=25382.0)
_2011 Cypriot IMF Article IV Consultation_

[4] [http://ftalphaville.ft.com/2013/03/16/1425732/a-stupid-
idea-...](http://ftalphaville.ft.com/2013/03/16/1425732/a-stupid-idea-whose-
time-had-come/)

~~~
jpdoctor
> _this is not a terrible deal._

Nonsense. The EU just made the _depositors_ junior to the _bondholders_ of the
bank! On what planet does that not have permanent implications for trust in
the banking system?

Every EU depositor (esp in Greece, Spain and Italy) should start thinking
about where to store their money besides the "insured" banks. Hell, with 0%
interest in US banks, the FDIC should at least make some high-profile
statement saying this would never happen in the US.

Edit: As near as I can tell, Nemo gets the real rationale correct -
<https://self-evident.org/?p=962>

~~~
justincormack
There are almost no bondholders. The junior bondholders have probably been
wiped out, it is unclear. The senior bondholders there are (very few) are
secured (covered bonds) which are senior to depositors.

~~~
jpdoctor
> _which are senior to depositors._

Not for any definition of "depositor insurance" that I'm familiar with. The
whole point was that the investors of the bank would lose their money first,
then a gov't agency would make good on the deposits.

Anything less is a return to the days of unstable swings banking and
deflationary depressions. Or perhaps the wizards at the EU thought/didn't care
that Cyprus would join Greece in their deflationary depression: But the signal
to Spain and Italy is abundantly clear: Anyone who leaves their money in a
bank in those countries is not paying attention.

~~~
justincormack
Depositor insurance is not about legal seniority in debt, it is about an
insurance scheme that is made available (usually funded by a levy on banks).
Covered bonds own a specific pool of assets. But the issue now is that there
is legal restructuring, or taxes like this, without any bankruptcy, so it is a
bit random what happens...

~~~
jpdoctor
> _Depositor insurance is not about legal seniority in debt_

It absolutely is. When a bank fails, the regulating institution steps in and
performs the capital restructuring. The statement of depositor insurance is
that they are to be made whole, even if the regulatory institution must dip
into the depositor insurance fund.

The EU restructured the Cyprus banks, but they did not haircut the bondholders
for the difference, as has been done in every other bank failure since the
Great Depression.

~~~
bjornsing
I wholeheartedly agree. And this in my mind is what the whole story comes down
to. I've written about it here: <http://bit.ly/1103Gkq>.

But to summarize, when both the banking system and the government is insolvent
it's relatively obvious to me that loses should be imposed in this order:

1\. First bank shareholders should be wiped out(!),

2\. then junior bondholders,

3\. then senior bondholders and uninsured depositors,

4\. then government bond holders,

5\. and finally, only if the above doesn't cover it, insured deposit holders
will have to take a haircut.

What we're seeing now is more or less a jump straight to 5.

~~~
justincormack
There is a full resolution (ie non bankruptcy) proposal in place, due for
2015. [http://eur-
lex.europa.eu/LexUriServ/LexUriServ.do?uri=COM:20...](http://eur-
lex.europa.eu/LexUriServ/LexUriServ.do?uri=COM:2012:0280:FIN:EN:HTML)

It should be less arbitrary that the current scheme, where senior bondholders
and the ECB are not being touched.

If you look at the balance sheet of Cyprus Laiki half way down
[http://ftalphaville.ft.com/2013/03/16/1425732/a-stupid-
idea-...](http://ftalphaville.ft.com/2013/03/16/1425732/a-stupid-idea-whose-
time-had-come/) then you see that debt is almost nothing. There is a lot of
central bank (ECB indirectly) money which has not been haircut. The decision
to haircut the "insured" depositors was a political one, allegedly made by
Cyprus itself.

~~~
bjornsing
I can well imagine that Cyprus made the controversial decision (to haircut the
"insured" depositors) themselves, for political reasons. It's exactly the
decision I'd make in Mr Anastasiades' place if I was being strong-armed by a
German delegation. The simple reasoning (for me) would be to increase the risk
of contagion above and beyond what Germany can accept, so as to maximize the
likelihood of Berlin folding and offering better terms.

~~~
justincormack
This (registration required) appears to be what happened
[http://www.ft.com/cms/s/0/f890566a-8f24-11e2-a39b-00144feabd...](http://www.ft.com/cms/s/0/f890566a-8f24-11e2-a39b-00144feabdc0.html)

------
acd
The rich are getting richer for each year that goes, Middleclass are therefore
relatively getting poorer compared to the rich. Yet we bail out the banks that
supports the debt money of the super-rich. Thus we save the rich and put
austerity packages on the poor.

There is not money for the principal in the current economic system.

Almost all money is debt. Less than 5% of banks assets are cash, the rest is
debt.

The current economic system is a gigantic Ponzi scheme, were wealth is
transferred from the working class to rich. Since there is not money for the
principal the system will crash by itself since its inherently instable, but
no we keep saving the debts the rich has created.

If central banks did not create at least 2% inflation new money in its goals,
since there is not money to pay the interest principal in the system, all
banks would eventually go bankrupt.

We should create a new economic system with debt free money.

~~~
gasull
Agreed. Except that new economic system already exists. It's called Bitcoin.

Also, debt money isn't necessarily bad if it isn't controlled by politicians
and bank oligarchs. Ripple is a good example of this.

------
ryguytilidie
I don't understand how someone decided the Eurozone was a good idea. It really
is probably the biggest economic disaster in modern history.

~~~
kansface
Wedding essentially third world countries with Germany's isn't healthy, but at
least it stops wars.

~~~
_pferreir_
I'm curious as to which of the countries currently in financial trouble can be
considered "third world".

------
jasonlingx
A good reason to keep your cash in bitcoin ;)

~~~
lrei
sure because bitcoin value never went down overnight. Not even 10% like the
cypriot savings. Oh wait, never mind. It went down 30% in a single day:
[http://www.dailytech.com/Digital+Black+Friday+First+Bitcoin+...](http://www.dailytech.com/Digital+Black+Friday+First+Bitcoin+Depression+Hits/article21877.htm)

~~~
icebraining
The Cypriot savings didn't lose value, they lost a part. It's not the same
thing at all. The proof is that Bitcoin returned to its previous value (and
then some) rather quickly, while the savings will never return.

~~~
lrei
Losing value and losing a part is the same thing.

Say you have 100 dollars. And with 100 dollars you can buy 100 beans: * The
dollar loses 10% value. Now you can only buy 90 beans. * You lose 10% of your
100 dollars. Now you only have 90 dollars. You can only buy 90 beans.

Compare that with: * Cyprus banks go bankrupt, the euro loses 10% value -
never mind that people actually lose 100% of their money. * Cyprus savings
take a 10% cut, Euro keeps 100% of its value.

Sure it's a simplification but I think it's a valid point.

~~~
icebraining
The Euro losing 10% of value in relation to what? USD? Yen?

And even if the dollar loses 10% of the value vs every other currency, it's
not true that you can only buy 90 beans, because you're not the only one with
dollars: there are farmers who sell in dollars, and buy their stuff in
dollars, and so will probably keep their prices.

When everyone you trade with uses the same currency as you, there's no value
to be lost or gained relative to them, and since Cyprus trades in Euros, a
loss of 10% versus say, the dollar, wouldn't automatically make everything 10%
more expensive.

~~~
gasull
This is not true. Currency depreciation leads to price inflation. That's why
your dollars (or euros) buy less things year over year.

~~~
icebraining
Currency depreciation by increasing the supply is not the same as losing value
relative to other currencies, which was what happened to BItcoins (since the
supply is constant).

And while both depreciations lead to price inflation, an loss of X% in the
latter doesn't lead to an increase of the same amount in price inflation,
because not all products completely depend on imports from other economic
zones.

------
scotty79
That's basically end of banking on Cyprus. Who will keep money at the place
that arbitrarily decides to steal 6.75% of it (or 9.9% if you are rich)?

Also if I lived in Portugal or Spain I'd be on my way to the bank right now.
Well actually I'd just transfer almost all of my money to mtgox (or some
european market) and buy bitcoins.

~~~
gasull
I think for people living in Europe it makes more sense to use Bitcoin
Central, since they accept SEPA transfers in euros without needing to convert
them to dollars before buying bitcoins:

<https://bitcoin-central.net/>

<https://en.bitcoin.it/wiki/Bitcoin-Central#EUR>

------
ikassinopoulos
The problem is worse as far as it concerns loans here in Cyprus. Let's say I
have a loan for 100k to buy a new house. Now I have 90k, I still owe 100k to
the bank and I cannot afford to buy the house without a new loan. The same
goes for startup fudings, student loands and who knows what else. there is no
control over special cases and most of the wealthy ones have already moved
their money to foreign banks a few weeks ago. Jobs and salaries are still safe
and people will not be on the street. Even I as a student not currently in
Cyprus had my account frozen and lost some 100s of euros. I hope the country
is now in a way saved but this is still a disaster for some of us. However I
don't feel the same for the eurozone and don't see how it is possible to keep
Italian banks from drying out during the next few weeks.

------
kubindurion
This is THEFT. I leave my country if that happens to me.

(I am from Poland, EU)

~~~
caf
What about if the alternative is no bailout, the bank goes under, and you get
almost nothing back at all?

Like it or not, when you deposit 100 euros in a bank, you don't have 100 euros
anymore - you instead now have an unsecured bank debt with a face value of 100
euros.

~~~
krcz
All banks (at least in Poland) are backed up by kind of guarantees fund, which
allows to return some money to clients in case of bankruptcy. (WRONG INFO:
It's 100% for amounts < 1000 EUR, 90% for amounts between 22'500 EUR and 0%
(no guarantees) above that.) EDIT: actually it's 100% up to 100k EUR and 0%
above.

But it's kind of risk you should be aware of when keeping money in bank.
Simple taking money from accounts under risk of bankruptcy isn't.

~~~
khuey
And what good did that 100% up to 100k EUR do people with bank accounts in
Cyprus? That's the whole point. They broke the deposit guarantee. Now you
really do have an unsecured bank debt.

~~~
krcz
What do you mean? Won't things described here:
[http://www.centralbank.gov.cy/nqcontent.cfm?a_id=8158&la...](http://www.centralbank.gov.cy/nqcontent.cfm?a_id=8158&lang=en)
work in case of bankruptcies of these two banks?

~~~
khuey
But the banks aren't going bankrupt.

If you have 100k EUR in a bank account in Cyprus today, you're going to get
93.250k EUR on Tuesday. If instead the bank went bankrupt you'd have 100k EUR
in your bank account on Tuesday too thanks to the deposit insurance. You'd be
better off if the bank actually went bankrupt!

The typical pro-bailout argument at this point is that if Cyprus lets the
banks go bankrupt the deposit insurance scheme (in other words, the
government) won't be able to make everyone whole. That argument is a tacit
admission that bank accounts really are unsecured.

~~~
kansface
Not really if you consider that no one can or would pay in the case of
bankruptcy.

------
siculars
This is 100% contagion for depositors in all shaky countries. If they can do
it in Cyprus they can do it anywhere. I would expect huge inflows into Germany
to continue matching outflows from everywhere else in southern Europe.
Insanity.

------
3dptz
Off by 80% error

 _"You could wake up one day and see that your €1 million has shrunk to
€100.000 overnight."_

Should be "1 million has shrunk to 900.000" or "1 million has shrunk by
100.000 overnight"

------
tnuc
Even after the tax is taken out there will be a huge run on all banks in
Cyprus.

If I was in Cyprus, I would be buying gold and burying it somewhere safe :)

~~~
gasull
Bitcoins are better for that matter since you don't have to worry so much
about storage. You can easily cross a border with them. Or you can create a
brainwallet (basically a passphrase that recreates a wallet), delete any data
of the bitcoin wallet from your electronics, cross the border, then recreate
the wallet from the passphrase.

<https://en.bitcoin.it/wiki/Brainwallet>

~~~
paulhauggis
This is bad advice. Bitcoin isn't stable enough yet to put my life savings
into it.

------
Alberto_ben
Why is anyone talking about bitcoins? You can put your money into bitcoins but
you can't actually take any reasonable amount of money "out".

It is a simple Ponzi scheme created by anonymous hackers to take people's
money.

Look at the largest "exchange". How much do they let you convert into actual
money? The main one limits you to $1K per day or $10K per month.

But you know what? They don't have to convert anything for you if they don't
want to. There are no laws, nothing. One day, your bitcoins will be completely
and totally worthless. There is no government to back it up as a store of
value.

There are a bunch of anonymous hackers who manipulate the price to get more
people to give them actual money while they give them worthless virtual
numbers.

And everyone thinks they are making money as the price goes up and up. But try
and take any of that money out. Guess what, it won't be there.

The exchanges will close and poof, you have nothing.

Some of you are really, really gullible.

~~~
Geofflee
That is incorrect. It does not require an exchange for me to move money in and
out of Bitcoins. All I have to do is find another human who is willing to
trade Bitcoins for another currency, and vice-versa. For example, I could do
this on eBay or a forum.

The large "exchanges" merely make this process more expedient. At the core of
this concept is that people are willing to trade one good for another good,
and in this case, it's Bitcoins for another currency.

------
romarin
What is worse for the EU and Cyprus: default on its sovereign debt or default
on bank deposits insurance?

I would think the latter because potential EU wide bank runs and reduction of
foreign investments.

------
chailatte
If I were in Greece, Italy, Spain, or Ireland, I think I would pull out all my
bank deposits but the bare minimum cash needed to cover obligations.

~~~
dougk16
I've been thinking about this lately, and, at the risk of sounding like a
doomsday kook, this seems to make sense to me (perhaps in a milder sense) no
matter where one lives. My plan is, if I ever get over $X in my account, where
X is some reasonable buffer to pay bills, etc., that I'll just buy gold with
the overage[1]. Back in the day you'd at least get reasonable interest by
keeping money in a bank, but nowadays it's really only the convenience of
direct deposit and online bill pay that draws me. Even then, all these charges
and penalties and sales pitches every time I enter a bank are really turning
me off.

[1] I acknowledge some logistical challenges with my plan if I become a
millionaire.

~~~
khuey
If you think gold is a predictable and low-volatility store of value you
really should look at inflation adjusted gold prices from 1980-2000.

~~~
dougk16
I didn't mean to imply that I would expect to make money from buying gold (if
that's what you mean). Even if gold prices were expected to drop, I'd still be
interested in buying it as an insurance policy. No matter how severe a crisis,
once the dust settles, gold will always be worth something, for reasons I
don't understand.

~~~
bitcartel
A few things to consider:

Central banks are buying gold.
[http://www.bloomberg.com/news/2013-02-10/putin-turns-
black-g...](http://www.bloomberg.com/news/2013-02-10/putin-turns-black-gold-
into-bullion-as-russia-out-buys-world.html)

Central banks are repatriating gold reserves held overseas.
[http://www.forbes.com/sites/afontevecchia/2013/01/16/germany...](http://www.forbes.com/sites/afontevecchia/2013/01/16/germany-
repatriating-gold-from-ny-paris-in-case-of-a-currency-crisis/)

The LIBOR rigging scandal has turned the spotlight to the gold market, where
it has long been claimed that the price of gold has been manipulated.
[http://www.guardian.co.uk/business/2013/mar/13/london-
financ...](http://www.guardian.co.uk/business/2013/mar/13/london-financial-
sector-gold-market)

It has also been claimed there is a ponzi scheme in paper gold, i.e.
instruments may not actually be physically backed, so when things go pear-
shaped and you ask for physical delivery, you will have to fight other
investors over legal ownership.
[http://www.businessweek.com/news/2011-12-12/hsbc-sues-mf-
glo...](http://www.businessweek.com/news/2011-12-12/hsbc-sues-mf-global-
brokerage-over-850-000-worth-of-gold.html)

Given recent banking scandals, anything is possible. Caveat emptor!

~~~
tatsuke95
Central banks are known buyers at the highs and sellers at the lows. Part of
their mandate is "financial stability", and up to and including backstopping
out-of-favour assets (like, say, mortgages). I see central banks buying gold
as a way to stop a precipitous decline in gold as money rotates sectors.

Then again, this theory happened before this Cyrprus thing, so who knows for
sure. Guess we'll see what kind of carnage happens next week.

