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News & ArtsMonday, March 18, 2013
Economy Europe's Top Bankers Are Stoopid
Posted by Goldy on Mon, Mar 18, 2013 at 3:14 PM
When I first heard the story about the Cypriot bank bailout on the radio this weekend, I thought the reporters must've gotten it backwards. But no, in an alleged attempt to forestall a bank run, Cyprus has agreed to tax bank deposits:
In the early hours of Saturday morning, after 10 hours of talks, finance ministers from euro area countries, the International Monetary Fund and the European Central Bank agreed on terms that include a one-time tax of 9.9 percent on Cypriot bank deposits of more than 100,000 euros, and a tax of 6.75 percent on smaller deposits, European Union officials said.
Jesus. That's just plain stupid. Forget about the blunt immorality of taxing bank depositors in order to bail out bankers, this deal sends a signal to depositors in struggling economies throughout the European Union to quickly pull their money out of the bank before they too lose a big chunk of their life savings:
Moody’s Investors Service warned that the decision to impose losses on depositors was “a significant departure from past instances of support” by European officials. It “signals euro area policymakers’ willingness to risk triggering wider financial market disruptions in pursuit of other policy goals,” Moody’s said in a note.
Analysts at DBS in Singapore wrote that financial markets were worried that the plan to force ordinary depositors to share the cost of the bailout “may send the wrong message on the safety of bank deposits in other E.U. nations, just when light appeared to be emerging at the end of the long tunnel for the peripheral nations.”
This policy is pretty much the exact opposite of what one might do if one wanted to avoid a bank run. I mean, maintaining faith in the banking system is the whole purpose of our FDIC, which insures bank deposits up to $250,000 per account. But if European officials are going to confiscate a portion of the accounts of small depositors in Cyprus, why shouldn't depositors in Greece, Italy, Spain, Portugal, Ireland and elsewhere fear the same?
I'm beginning to think that the IMF and the ECB are just fucking with people now.
1
Not the worst thing in the world to demand the Russian tax-dodgers who have a ton of their money stored in Cypriot banks pay to keep the banking system from which they're derived so much benefit afloat.
Though it sends a bad signal for sure...
Though it sends a bad signal for sure...
2
This is madness. I guess we've gotten too far from the worldwide bank runs of 1929 for the institutional memories of the bank regulators. Somebody needs to hit them in the head with a history book. Hard.
3
How do you bail out a bank where people have withdrawn all their money? Anyway, the EU has already reversed course on this. But it doesn't really restore any confidence they know what they're doing. And that's a big problem.
4
I would not be surprised if Cypriots removed 80 percent of their deposits in cold hard Euros.
Oh.
Wait.
They just did.
Talk about stupid policies to shore up the "liar's loans" the German Banks made to Greece and Cyprus based on fake numbers.
A real ECC would have forced the German - and to a lesser extent French - banks eat those loans as losses, instead of forcing Portugal, Spain, Greece, Italy, Ireland, Iceland, and Cyprus into job-destroying "austerity".
But that would be ... prudent.
Oh.
Wait.
They just did.
Talk about stupid policies to shore up the "liar's loans" the German Banks made to Greece and Cyprus based on fake numbers.
A real ECC would have forced the German - and to a lesser extent French - banks eat those loans as losses, instead of forcing Portugal, Spain, Greece, Italy, Ireland, Iceland, and Cyprus into job-destroying "austerity".
But that would be ... prudent.
5
Yeah, instead they should do it American style, where bank deposits are subject to a 2-3% tax. Of course, Goldy is too stoopid to figure it out, but I think I'll sit back and watch him sputter and froth before I tell him the answer.
6
Note they do have FDIC-equivalent insurance for the first 100,000 Euros - but despite that, they're still confiscating 6% or so of the first 100,000 (and 9% or so of the rest).
You'd think they'd at least exempt the first few tens of thousands - the sort of money a working family might have in their account.
You'd think they'd at least exempt the first few tens of thousands - the sort of money a working family might have in their account.
7
@#5
What the heck kind of mind-altering pharmaceuticals are you on? Are you just complaining that bank interest is low, or what?
What the heck kind of mind-altering pharmaceuticals are you on? Are you just complaining that bank interest is low, or what?
8
@5,
Do explain, since we liberals are too stooopid to figure it out. I have never seen the government take 2-3 percent of my bank deposits every year. Am I just lucky?
Do explain, since we liberals are too stooopid to figure it out. I have never seen the government take 2-3 percent of my bank deposits every year. Am I just lucky?
9
And our bank deposit tax is 2-3% per year, which actually costs people here at least as much and maybe a lot more than what Cyprus wanted to do. But Goldy and his genius friends are too stoopid to find the American fee. Maybe it's because Goldy and his friends are too poor to have bank deposits?
10
"beginning" to think ...?
Goldy, the IMF has been fucking with --and fucking over-- people for years. Only they used to do it exclusively in the 'global south', so it wasn't really news up here in the 'north'. Now that the infection has come north,...
Goldy, the IMF has been fucking with --and fucking over-- people for years. Only they used to do it exclusively in the 'global south', so it wasn't really news up here in the 'north'. Now that the infection has come north,...
11
#7 and #8, you have me laughing. Not only is Goldy stoopid, but so are you. Come on, you really can't find the fee? No wonder the bankers here get away with what they do. Even their supposed "opponents" are too stoopid to see the obvious. Tell me, though, do you actually have any money in the bank beyond that $500 in your checking account? That must be why you can't find the American fee.
12
Sadly, @10 is correct.
What's a checking account, @11? Is that like the no-fee credit union checking account? The one with no fees?
What's a checking account, @11? Is that like the no-fee credit union checking account? The one with no fees?
15
#12, plenty of bank checking accts w/no fees. But that's not the fee I'm talking about. Find the fee, stoopid. It's the same fee that Cyprus tried to impose, just in a different form. But Goldy and his liberal American friends are too stoopid to find it. Oh, but wait, they don't object to fees. They object to fees that are easily seen even by the stoopid.
16
@1 I think this is something people miss. Cyprus is to Europe what the Cayman's are to the US. A lax banking system where rich people can shelter money and use it for less than legal things.
The problem of course, is that like the Cayman's, there are some ordinary folks who just happen to live there who get caught up in all the shit.
This was a dumbass idea for sure, but I have no problem with finding ways to get a little back from tax dodgers, money launders, and Russians.
The problem of course, is that like the Cayman's, there are some ordinary folks who just happen to live there who get caught up in all the shit.
This was a dumbass idea for sure, but I have no problem with finding ways to get a little back from tax dodgers, money launders, and Russians.
18
5, first it's a 'tax.' now it's a 'fee.'
and oh, look, how quaint. everyone who can't understand what you're talking about (which is pretty much everyone) 'stoopid.'
you're doing a bang-up job 'representing' your political ideology. arrogant, insulting, completely non-informative. not as good a job as Boehner, Cantor or Ryan, but the essence is there.
and oh, look, how quaint. everyone who can't understand what you're talking about (which is pretty much everyone) 'stoopid.'
you're doing a bang-up job 'representing' your political ideology. arrogant, insulting, completely non-informative. not as good a job as Boehner, Cantor or Ryan, but the essence is there.
19
Moscow is the city with the most billionaires - beating out London. Let's not pretend the English banking system has rules or cares how depositors got their money. It will fiercely protect the money once it's there though, which means the crisis in Cyprus will only drive deposits to London.
20
#17, keep looking. It just blows me away how stoopid Americans are about the banking system here. Anyone who thinks that American depositors aren't being made to pay a bailout fee very similar to what Cypress wanted to do is, well, stoopid. It's happening right now, and this isn't the first time.
21
#18, I'm not a Republican. I'm much, much, much worse than that. I'm a split-ticket independent, which means I'm capable of being hated by everyone.
22
#5-9-11-15 is talking about inflation, everybody. But he's full of shit if he thinks there's no inflation in the EU.
24
@21 in other words you're a tax-subsidized weasel pretending you're not supporting tax subsidies for your rich elite friends who buy you a drink every once in a while.
25
p.s.: #18, whether it's a tax or a fee is purely semantic. What counts is that American bank depositors are paying it, same as the 6.75% that Cypress wanted to charge smaller depositors there. I think maybe the reason the Stranger's writers and commenters can't see it is because they really don't have any money in the bank, to speak of. Which does raise the question of why they'd care about a bailout fee in Cyprus while ignoring the one here.
26
#22, you're getting there, but that's only part of the story. I'm not one of those whack-job gold bugs ranting about how paper currency is a theft.
#23, put down the crack pipe and practice reading comprehension. I didn't raise my politics until #18 accused me of being a Republican wingnut, which I am not.
#23, put down the crack pipe and practice reading comprehension. I didn't raise my politics until #18 accused me of being a Republican wingnut, which I am not.
27
And everybody might be thinking "oh yeah, take that money from the Russian Mafia, that's fine, but what's going here is that they're A) stealing money from wealthy, connected Russians, and B) stealing potential tax revenue from the Russian government. That's just not a good idea.
29
@giffy, I'm going to let the meat marinate overnight and see how it smells around here tomorrow. Trust me, though (or don't trust me, I don't care, it was only a figure of speech), there's a fee on deposits here and it's pretty close to what Cypress just tried to charge. Calculating it exactly is more work than I feel like doing for this bunch of stoopid slugs, though.
The Stranger needs a finance writer who actually understands the shit. But then they'd have to pay that writer, which isn't something they'll want to do. So they get stoopid people like Goldy to write stoopid things for mostly stoopid readers. Kinda fun to watch, anyway.
The Stranger needs a finance writer who actually understands the shit. But then they'd have to pay that writer, which isn't something they'll want to do. So they get stoopid people like Goldy to write stoopid things for mostly stoopid readers. Kinda fun to watch, anyway.
31
Alternative "Unbrainwashed":
American bank depositors pay a stealth tax of 2-3% every year. I have discovered a truly marvelous proof of this, which this comment box is too narrow to contain.
34
I have seen zero evidence that the deposit insurance breech was demanded by the EZB or IMF.
The much more likely scenario is that those funding the bailout simply said: hey, we're not going to pay enough to make all your creditors whole; they are going to have to take some losses. (This is a regularly featured demand from the left, no? "Stop bailing out the bankers!") Then Cyprus, in a misguided but understandable attempt at salvaging its status as an offshore banking center, said: "okay, but to reduce the haircut that our big bucks Russian clients have to take, we will take some money from the little depositors too. (What, you mean I said something about deposit insurance? Well, that was then, this is now.)"
The much more likely scenario is that those funding the bailout simply said: hey, we're not going to pay enough to make all your creditors whole; they are going to have to take some losses. (This is a regularly featured demand from the left, no? "Stop bailing out the bankers!") Then Cyprus, in a misguided but understandable attempt at salvaging its status as an offshore banking center, said: "okay, but to reduce the haircut that our big bucks Russian clients have to take, we will take some money from the little depositors too. (What, you mean I said something about deposit insurance? Well, that was then, this is now.)"
35
@34 That is a very plausible theory. I'd bet as well that this gets highly modified given all the backlash.
36
@29, etc...
I'm not sure you understand finance as much as you think you do. First off, what you are suggesting in the way of "fees"/"taxes"/"depreciation" has nothing to do with "the banks." For example, if you put your money under your mattress, it ends up pretty much the same as if you left it in the bank these days, over the same period of time. Therefore, it's not the banks. Now, as for monetary policy...
Stable monetary policy needs something like 2-3% annual inflation to provide growth and incentivize investment. It normally coexists with fuller employment than we have now, too. Stagnation, on the other hand, leads to deflation, and deflation is self-perpetuating, leading to massive unemployment, homelessness and a death spiral into the next Depression.
It's not a tax. It's a balancing act. It's the cost of living in an economy.
If you're worried about your idle funds losing value over time, you probably have too much money. Invest it, spend it, or fund something worthwhile with it.
Even better, if you take out a honking big mortgage at today's low interest rates, the banks will be "paying" you to use their money in the future.
I'm not sure you understand finance as much as you think you do. First off, what you are suggesting in the way of "fees"/"taxes"/"depreciation" has nothing to do with "the banks." For example, if you put your money under your mattress, it ends up pretty much the same as if you left it in the bank these days, over the same period of time. Therefore, it's not the banks. Now, as for monetary policy...
Stable monetary policy needs something like 2-3% annual inflation to provide growth and incentivize investment. It normally coexists with fuller employment than we have now, too. Stagnation, on the other hand, leads to deflation, and deflation is self-perpetuating, leading to massive unemployment, homelessness and a death spiral into the next Depression.
It's not a tax. It's a balancing act. It's the cost of living in an economy.
If you're worried about your idle funds losing value over time, you probably have too much money. Invest it, spend it, or fund something worthwhile with it.
Even better, if you take out a honking big mortgage at today's low interest rates, the banks will be "paying" you to use their money in the future.
37
So much for the Free Market.
For every example you can name of a socialist country that failed, I can think of a hundred capitalist countries that failed. Well, now that Cyprus has to rob banks to stay afloat, let's make that one hundred and one.
For every example you can name of a socialist country that failed, I can think of a hundred capitalist countries that failed. Well, now that Cyprus has to rob banks to stay afloat, let's make that one hundred and one.
38
@36 Thanks. Muddybrain is tiresome to deal with.
Financial institutions charge fees, lots of them, most of them hidden, it isn't the government that is doing it. Those fees are levied by the banks and investment houses.
FDIC is not a tax it is insurance. But yes, the horror, it is government run insurance. Guess why go on see if you can guess.
Inflation if our Unwashed friend is adding inflation into his alleged numbers. Well god forbid we ever try and explain to him that Debt is Money.
As for Cyprus being stupid, I'm not so sure, need to give it more thought. But the argument could be made if your government allows your private banks to become too big to fail, and the rest of the economy is too small to catch it when it falls, and you have a third party, the EU in this case demanding payment/austerity now, ......... maybe it is not so crazy if your small enough
Financial institutions charge fees, lots of them, most of them hidden, it isn't the government that is doing it. Those fees are levied by the banks and investment houses.
FDIC is not a tax it is insurance. But yes, the horror, it is government run insurance. Guess why go on see if you can guess.
Inflation if our Unwashed friend is adding inflation into his alleged numbers. Well god forbid we ever try and explain to him that Debt is Money.
As for Cyprus being stupid, I'm not so sure, need to give it more thought. But the argument could be made if your government allows your private banks to become too big to fail, and the rest of the economy is too small to catch it when it falls, and you have a third party, the EU in this case demanding payment/austerity now, ......... maybe it is not so crazy if your small enough
40
@4, Will in Seattle makes some excellent and most noteworthy points (read Prof. Mark Blyth's old article on this subject), as does @38, Machiavelli ...
As far as the IMF, ECB and World Bank, obviously Goldy isn't familiar (as in IGNORANT) of their historical perfidy in such matters.
As far as the IMF, ECB and World Bank, obviously Goldy isn't familiar (as in IGNORANT) of their historical perfidy in such matters.
41
What's really stoopid, is the American citizenry not stringing up members of the US Treasury Department and their Wall Street bankster advisors, for allowing the continuing use of naked swaps (uncovered credit default swaps), the chief tool of financial fraud and manipulation by the criminal bankster scum.
42
I can tell from the comments that no one here has any money in the bank, to speak of. Therefore, there's no point in explaining it to you. But I do have to wonder why anyone would give a shit about Cypress, including Goldy.
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