Cyprus and banks

[Dave2002]

And if the alternative is that your bank goes bust and you lose everything? What then?

Alternative?

And if the alternative is that your currency becomes worthless, what then?

Wheelbarrows?

[Simon]

Leaving aside the politically naive comments that blame everyone but the true culprit, it is indeed very sad for the people there. I can only imagine what it must be like.

The point above about kicking the can down the road is a sensible one. But there is even a limit to that, and the fools who are kicking will run out of tarmac at some point.

Then, the whole sorry mess that is the politically-motivated, insane, one-size-fits-all, never-in-a-million-years-workable Euro project, that so many of us foretold would end in disaster and poverty for millions of ordinary people, will collapse.

It will be a troubling time. But it has to happen. And out of the ashes, with luck and some decent leadership, may arise a sensible trade system between the european nations.

[amateur51]

Leaving aside the politically naive comments that blame everyone but the true culprit, it is indeed very sad for the people there. I can only imagine what it must be like.

The point above about kicking the can down the road is a sensible one. But there is even a limit to that, and the fools who are kicking will run out of tarmac at some point.

Then, the whole sorry mess that is the politically-motivated, insane, one-size-fits-all, never-in-a-million-years-workable Euro project, that so many of us foretold would end in disaster and poverty for millions of ordinary people, will collapse.

It will be a troubling time. But it has to happen. And out of the ashes, with luck and some decent leadership, may arise a sensible trade system between the european nations.

Living in North London I am only too aware through conversations with people in cafés and, greengrocers & bakeries that the impact of this crisis will affect people in this country sooner than we may like to think. Britain has long had links with Cyprus and with their gas reserves largely unexploited I'm surprised that we have not heard about the British government cozying up to Cyprus to see how we can help. Maybe it's happening on the quiet

[An_Inspector_Calls]

It's a question of what we want from our banks. If you just want somewhere to help with day-to-day administration of your funds (cash available anywhere in the world, direct-debits, electronic transfers available at the the touch of a button, etc) then we can't really expect much in the way of interest. If you want a place to invest your money then we have to accept that there can never be such a thing as a safe ride. That's the whole basis of investment: you share the gains and the losses of your ventures. This seems to have been forgotten but perhaps now we're returning to that awareness?

Here they steal from public sector pension funds, and then lie about it. It's just a variation on the theme, except that the situation in Cyprus, Greece, Portugal and Spain is much worse. Cameron will probably blame their situation on the last Labour government too. And Angela Thatcher Merkel isn't exactly the kind of person I would like to meet...

Anyone else you want to accuse of lying/hate? When's your next strike?

[rauschwerk]

The government of Cyprus allowed the banking sector to grow to eight times Cyprus's GDP by allowing it to operate a tax haven, offering high interest rates and inevitably attracting vast quantities of hot money. They were stupid enough to believe that, being in the Eurozone, they would be rescued unconditionally if the banks got into trouble. In my view they were jolly lucky to get a conditional bailout. I pity the people of Cyprus who were taken for a ride by a bunch of idiots called a government.

If capital flows across borders were once again to be restricted (as they were for 25 years after WW2 under the Bretton Woods agreement) this kind of thing could not have happened. It's that simple (if only it really were!)

[ahinton]

one key requirement is to decouple the casino banks from the day-to-day banking needed for a modern society (the law forces people to have bank accounts) - Thatcher destroyed the Trustee savings bank, the Giro and the building societies - we need them to be re-invented and decoupled from the 'investment' banks.
Given that according to Dutch minister that Cyprus now forms a template for weak banks why would anyone leave any money in say Santender (Spanish) etc -

That decoupling is all very well, assuming that it could be made to work effectively (and the regulatory policing that this would require will itself be immensely costly), but the "high street" banks - i.e. the retail banks - still have to get their money from somewhere in order to continue to operate and, if they cannot do that, the result will inevitably be broadly similar to that which we see when "casino" banks go under. In other words, without speculative investment, where's the money coming from? In so saying, I'm not seeking to distinguish between public and private sector operation either because, like the rest of us, governments need money in order to provide services and, whilst governments uniquely have a license to print ever more money, the more that they print, the less it will be worth, so the ultimate effect will be broadly similar to that of a government sequestering funds from people's bank accounts such as is being threatened in Cyprus today.

That said, the comparative recovery of Iceland has, rightly or wrongly, been put down in part to its independence from Eurozone membership that has left it free to devalue its currency, a facility not open to Cyprus unless it leaves the Eurozone (and it would be too late to make any difference now anyway). The fears that are now growing among depositors not only in Cyprus but in others among more financially vulnerable Eurozone states such as Ireland, Spain, Portugal, Greece and Italy may well result in people in those countries withdrawing as much as they're allowed to from their bank accounts and, if they've any sense at all, depositing the withdrawn funds in banks in the Isle of Man, which has a stable economy and is outside not only the Eurozone (like UK) but also EU (unlike UK); the appeal of Peel may well be waxing...

[amateur51]

It's a question of what we want from our banks. If you just want somewhere to help with day-to-day administration of your funds (cash available anywhere in the world, direct-debits, electronic transfers available at the the touch of a button, etc) then we can't really expect much in the way of interest. If you want a place to invest your money then we have to accept that there can never be such a thing as a safe ride. That's the whole basis of investment: you share the gains and the losses of your ventures. This seems to have been forgotten but perhaps now we're returning to that awareness?



Anyone else you want to accuse of lying/hate? When's your next strike?

Of course, the sub-prime debacle was my fault, Libor rate fixing was my fault, etc etc.

These scandals have nothing to do with simply making a profit for shareholders. There is a sickness at the heart of modern banking. Ordinary citizens need to be protected from it.

We need the return of mutuality including credit unions, and a mass flight from banks which is what's needed to fighten them back into some sense of decency and reciprocation.

[Resurrection Man]

Shall we bring a few facts into this thread?

It is true to say that the Cyprus banks had assets of more than 7x it's economic output. But the banks did weather the global financial crisis and subsequent Euro-crisis reasonably well. But last weeks decision by Euro leaders for holders of Greek bonds to take a massive haircut had an exaggerated affect on Cypriot banks, two of which are among the largest holders of Greek bonds.

One could argue that perhaps the banks should not have had so much invested there.

But it is not just the banks. The Communist led Government is locked in battle with trade unions and rival parties over an austerity programme to get its (the Govt) deficit under control.

Then the largest power plant blew up after a cache of Iranian explosives confiscated by the authorities blew up (it does beg the question that if you are going to store explosives that you don't store them next door or inside your largest power plant)

I could continue but better to read it for yourself here http://www.ft.com/cms/s/0/856fb806-b...#axzz2OdZ0hOKF

Less hysteria..more facts.

[amateur51]

Less hysteria..more facts.

I'll just say that this is Boris Johnson's favourite 'get out of jail' card and leave it at that

[ahinton]

Of course, the sub-prime debacle was my fault, Libor rate fixing was my fault, etc etc.

These scandals have nothing to do with simply making a profit for shareholders. There is a sickness at the heart of modern banking. Ordinary citizens need to be protected from it.

We need the return of mutuality including credit unions, and a mass flight from banks which is what's needed to fighten them back into some sense of decency and reciprocation.

By "fighten", I assume you to mean "frighten", although I imagine that what you seek won't happen without a fight as well. That said, it may well not happen at all, for it's no use having mutuals, credit unions and the rest unless they have access to and control over the funds that they need in order to exist, let alone survive. The suggestion that there's hardly a nation on earth that could repay all of its debts on demand if required to do so is surely evidence enough that the sickness of which you write extends far beyond just the banks; it's just that the banks are perhaps one of the more in-your-face manifestations of it.

[ahinton]

I'll just say that this is Boris Johnson's favourite 'get out of jail' card and leave it at that

I didn't realise that he'd been jailed!

[An_Inspector_Calls]

Of course, the sub-prime debacle was my fault, Libor rate fixing was my fault, etc etc.

These scandals have nothing to do with simply making a profit for shareholders. There is a sickness at the heart of modern banking. Ordinary citizens need to be protected from it.

We need the return of mutuality including credit unions, and a mass flight from banks which is what's needed to fighten them back into some sense of decency and reciprocation.

In a sense, Libor and sub-prime were all stoked by public greed and expectation of easy money for no risk. As for mutuality, yes, bring it back, but I do recall the general public braying for the abondment of those institutions - couldn't happen fast enough.

[amateur51]

By "fighten", I assume you to mean "frighten", although I imagine that what you seek won't happen without a fight as well. That said, it may well not happen at all, for it's no use having mutuals, credit unions and the rest unless they have access to and control over the funds that they need in order to exist, let alone survive. The suggestion that there's hardly a nation on earth that could repay all of its debts on demand if required to do so is surely evidence enough that the sickness of which you write extends far beyond just the banks; it's just that the banks are perhaps one of the more in-your-face manifestations of it.

From my experience in the world of charitable giving, I'm pretty certain that there are enough experienced and dedicated charitable doners/lenders to kick-start this sort of initiative if there was a demonstrable appetite for it. The thriving of peer-to-peer lending and microfinance initiatives would seem to give credence to this too

[amateur51]

In a sense, Libor and sub-prime were all stoked by public greed and expectation of easy money for no risk. As for mutuality, yes, bring it back, but I do recall the general public braying for the abondment of those institutions - couldn't happen fast enough.

The general public is no different from most other aggregations of humans in that we all like a bargain/freebie and in the slightly hysterical atmosphere created by the Tories' selling off the nation's family silver (the utilities) the public was offered a considerable 'bung' to ditch mutuals.

A lot of experience has flowed under the bridge since than and I think a return to mutuality would be popular and successful.

[ahinton]

From my experience in the world of charitable giving, I'm pretty certain that there are enough experienced and dedicated charitable doners/lenders to kick-start this sort of initiative if there was a demonstrable appetite for it. The thriving of peer-to-peer lending and microfinance initiatives would seem to give credence to this too

As I've already stated, that may be all very well, but if the big boys will insist on screwing it up for the rest of us, there'll be little or no money with which such institutions will be able to operate; no such organisation will have or be able to acquire the power to protect a currency, for example.