Is it time to empty Euro bank accounts?

[flecc]

Hi.
You seem to have bought into the propaganda about Russians owning much of the deposits in banks. Also, many of us are asset rich during periods of our lives. At other times we may be cash rich. I really can't see how you equate either state to being "greedy".

Nothing of the sort, the thread entries all need to be read to appreciate what is being posted, not just the last post from someone. As I said earlier in the thread, I'm referring to the money that came into Cyprus from many sources, attracted by unrealistic interest rates. This had much in common with the Icelandic situation where they are still under strict banking controls years after their banking disaster.

In both cases small countries got greedy to have a share in making money by bank currency speculation, but to do so they needed lots of cash to start with. So they offered high interest rates to attract the money in. As ever, sooner or later the crash comes and the money is no longer there to cover their disproportionate liabilities, more fool them. It's a golden rule of investment that higher earnings mean higher risk. I've got money too, but I've never been daft enough to believe in something for nothing so haven't been caught.

And I've made the point that the bulk of the people who are innocent are not suffering on the whole. Sure, they can't take out more than €300 from the country, but so what, I'm old enough to remember when we couldn't take out more than £10 from Britain.

So overall as said, I've limited sympathy, Cyprus is where it is because it deserves to be, just as Iceland is. Iceland is recovering gradually now and Cyprus will too with time. Hopefully both will learn the lesson and never again go down the dangerous road of playing with large quantities of others money, wholly out of proportion to their size.

Just one of their banks, the Bank of Cyprus, has representative offices in Moscow, Saint Petersburg and Ekaterinburg in Russia, Kiev in Ukraine, Belgrade in Serbia and Johannesburg in South Africa. Clear enough evidence of trying to attract foreign money from wealthy sources as well as doing their own internal banking.
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[AlMel]

Foreign investors attracted by rates of interest considerably higher than elsewhere in the EuroZone must have been aware that greater risk naturally ensued.
I agree with Flecc that in a few years, we will probably be hearing of how the Cypriots bounced back, Iceland style.

 

[50 Hertz]

Iceland has a huge reserve of a certain commodity that is very much in demand the world over, energy. Iceland are doing very nicely at the moment and don't really give a stuff about their banking troubles. The Icelandic people are very resourceful and efficient by nature, probably why per head of population, they were the richest nation on earth until very recently. I expect that they will soon regain that position.

I don't think Cyprus have a great deal of anything which other nations want, so their recovery might not be as quick as Iceland's.

 

[AlMel]

Gas? see: Where Does the Cyprus Deal Leave Its Natural Gas? - Forbes

 

[50 Hertz]

Gas? see: Where Does the Cyprus Deal Leave Its Natural Gas? - Forbes

Maybe, but I don't think that they will realise its true worth.

 

[Old_Dave]

Gas? see: Where Does the Cyprus Deal Leave Its Natural Gas? - Forbes

Very interesting, hopefully they will now sell tickets to interested parts for the right to bid when bidding time comes.. (money now to join the waiting list... hahahah)

 

[vectra]

Hi.
Fortunately, as I move into my 60's I appear to have avoided the cynical approach. Yes, maybe these banks did have offices in Moscow or wherever but then HSBC has it's headquarters in China....so what? Should we not use HSBC accounts?

There are or were only 3 banks in Cyprus. One is to be closed leaving just two. Three banks hardly gave anyone in Cyprus too much choice in determining where to put their money. I still don't understand how you can state that greed drove the average Cypriot to put his money into one of a choice of 3 banks. Or, should he have moved his money off-shore?

We need to remind ourselves here that we in the U.K are in deep doodoo and I can picture a scenario where we wake up one day to find exchange controls reintroduced plus curbs on the amounts that can be withdrawn. The Euro Project, it seems, is to be protected whatever the cost. Strange, because we now have two Euro currencies, one that can be freely used throughout to EU and the other, the Cypriot Euro, which no-one wants and can only be used within Cyprus.

 

[jazper53]

All roads lead to Athens, as Greek bank(Laiki) exported defaults to its Cyprus subsidiary branch in 2011 shifting liability for losses from the Greek to Cypriot authorities.

 

[flecc]

There are or were only 3 banks in Cyprus. One is to be closed leaving just two. Three banks hardly gave anyone in Cyprus too much choice in determining where to put their money. I still don't understand how you can state that greed drove the average Cypriot to put his money into one of a choice of 3 banks. Or, should he have moved his money off-shore?

This opposing argument once again misrepresents what I'm saying Vectra, I've said nothing of the sort. The Cypriots are largely not suffering, they represent on average a half of the invested money*, mainly made up of numerous small accounts not being punished by subtraction of funds. The other half of all the invested money is from other countries in and out of the EU and doubtless is largely of fewer accounts holding much larger sums. Those high interest chasers from overseas are taking the hit, and there's nothing wrong in that. It's the investment norm for higher earnings to have greater risk.

*Two largest remaining Cyprus banks at 52% and 48% respectively.

As for HSBC, they originated in the area where the head office is so it's hardly a case of cynical foreign investment chasing. In any case, they are a wholly owned subsidiary of the British based holding company.

I completely disagree about a risk of Britain suffering what Cyprus has suffered. I posted early in the thread that we are much better placed to recover from our present difficulties, and since then within the last few hours the OECD has forecast that Britain will return to growth in the fourth quarter and avoid a treble dip recession. Little in common with Cyprus then.
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[vectra]

Hi

Flecc, it was not myself that alluded to greed and greedy hence I have certainly not misrepresented your words. I certainly hadn't realised that you had sufficient access to all 3 banks to enable you to state that the cypriots have largely small accounts. Please state how we can verify this information?

We shall have to agree to disagree.

Re' the U.K. Economy we shall have to wait and see. One significant difference, amongst many, between our own economy and that of many other countries is that much of our debt is mid to long term payable hence the reason we have been able to maintain our current rating. Significantly, that rating is shortly to be lowered. The final arbiter will be the markets. If it looks, walks and quacks like duck then it's probably a duck.

 

[jazper53]

I always wondered who do we owe all that money too, is it just the Chinese or is there a bunch of international loan sharks out there lurking in the shadows ready to pounce, and threaten to confiscate our Queen until we pay up, or is it the banks that we bailed out with taxpayers money and lending our own money back to us, increasing our national debt. its all a great mystery to me

 

[Blew it]

Well, believe it or not, the main source of monthly "top-ups" to keep the British economy liquid........is the many cash-rich British pension funds.

 

[flecc]

Flecc, it was not myself that alluded to greed and greedy hence I have certainly not misrepresented your words. I certainly hadn't realised that you had sufficient access to all 3 banks to enable you to state that the cypriots have largely small accounts. Please state how we can verify this information?

The misrepresentation was in the repeated allusions to Cypriots losing money, when all the evidence says hardly any are. The verifications are multiple:

1) In almost any western free market economy, the great majority of the wealth is owned by a tiny minority, the least by the majority among whom that least is thinly spread. There isn't a shred of evidence to show that Cyprus is any different.

2) The resident Cypriots own only a half of the invested money in that country as I've already posted. That equates to less than €9000 per person, one eleventh of the amount protected from deduction. So even if (1) above is untrue and the money is evenly spread, they still would not be remotely near to being liable to suffer deduction of capital. Either way it's inescapable that the vast majority of Cypriots will not lose any capital.

3) As stated above, the BBC went looking for a Cypriot who actually did have over €100,000 and eventually found an architect, hardly an average person.

4) Cyprus is at the poor southern end of the EU, apart from it's ill-conceived venture into banking speculation, it's economy sustained by agriculture and tourism, both synonymous with low income employment. These do not lend themselves to the accrual of substantial wealth.

5) Britain is at the wealthy end of the EU, and abundant evidence shows that the vast majority of Britons have nothing remotely like the £85,000 protected equivalent outside of what they might hold in property and pension funds*. Indeed a huge proportion of our population are in cash negative balance due to credit card and loan debt, and these states are common in other parts of western Europe. If very few in wealthier Britain have anything like the protected level of cash investment, we can safely assume that even fewer in poorer Cyprus will.

6) Even the odd Cypriot whose wealth does exceed that protected amount will only lose 25% of the excess, not 25% of the whole. Those with marginally more cannot be said to suffer since they have been earning the above-market interest rates which will balance the deduction from a small excess. Therefore only those with substantially more than the protected level will feel any pain, and they as shown are a miniscule minority of the population. In connection with them, I have never posted that I have no sympathy, I've consistently said I'm not wasting much sympathy, implying as intended that the little I have is for those very few genuinely affected.

7) If a large proportion of the Cypriot population did have enough money to actually suffer from a deduction, that country wouldn't need to be bailed out, since their total invested would greatly exceed the country's 50% overseas investment liability. Indeed, they could loan money to Germany!

*Clearly shown by the facts of our stalled property market. Those wanting to get on the housing ladder cannot raise the £20,000 to £30,000 deposit necessary. Some of them are able to turn to their parents for the necessary, but all the evidence is that the parents are raising that money by remortgaging their own property. It follows that both young and older do not have anything like the protected £85,000/€100,000 outside of their home and pension possession.

 

[trex]

Cypriots will lose in many other ways for the foreseable future. Already the property market stops functioning. Businesses face payment controls. People lose jobs because inward investment dies.
Even tourists stay away. Goverment cannot count on tax income from bnking sector for maybe a generation.
Cypriots would be better off if Cyprus just went for bankruptcy and leaves the Euro. The pain may be sharper but a lot shorter.

 

[vectra]

The misrepresentation was in the repeated allusions to Cypriots losing money, when all the evidence says hardly any are. The verifications are multiple:

1) In almost any western free market economy, the great majority of the wealth is owned by a tiny minority, the least by the majority among whom that least is thinly spread. There isn't a shred of evidence to show that Cyprus is any different.

2) The resident Cypriots own only a half of the invested money in that country as I've already posted. That equates to less than €9000 per person, one eleventh of the amount protected from deduction. So even if (1) above is untrue and the money is evenly spread, they still would not be remotely near to being liable to suffer deduction of capital. Either way it's inescapable that the vast majority of Cypriots will not lose any capital.

3) As stated above, the BBC went looking for a Cypriot who actually did have over €100,000 and eventually found an architect, hardly an average person.

4) Cyprus is at the poor southern end of the EU, apart from it's ill-conceived venture into banking speculation, it's economy sustained by agriculture and tourism, both synonymous with low income employment. These do not lend themselves to the accrual of substantial wealth.

5) Britain is at the wealthy end of the EU, and abundant evidence shows that the vast majority of Britons have nothing remotely like the £85,000 protected equivalent outside of what they might hold in property and pension funds*. Indeed a huge proportion of our population are in cash negative balance due to credit card and loan debt, and these states are common in other parts of western Europe. If very few in wealthier Britain have anything like the protected level of cash investment, we can safely assume that even fewer in poorer Cyprus will.

6) Even the odd Cypriot whose wealth does exceed that protected amount will only lose 25% of the excess, not 25% of the whole. Those with marginally more cannot be said to suffer since they have been earning the above-market interest rates which will balance the deduction from a small excess. Therefore only those with substantially more than the protected level will feel any pain, and they as shown are a miniscule minority of the population. In connection with them, I have never posted that I have no sympathy, I've consistently said I'm not wasting much sympathy, implying as intended that the little I have is for those very few genuinely affected.

7) If a large proportion of the Cypriot population did have enough money to actually suffer from a deduction, that country wouldn't need to be bailed out, since their total invested would greatly exceed the country's 50% overseas investment liability. Indeed, they could loan money to Germany!

*Clearly shown by the facts of our stalled property market. Those wanting to get on the housing ladder cannot raise the £20,000 to £30,000 deposit necessary. Some of them are able to turn to their parents for the necessary, but all the evidence is that the parents are raising that money by remortgaging their own property. It follows that both young and older do not have anything like the protected £85,000/€100,000 outside of their home and pension possession.

Hi.
From your earlier posts it you asserted that anyone who has in excess of 100k Euros in these banks is driven by greed........your words. It follows that these people should not complain as they are deserving of their haircut?

At present I have in excess of £85k in a U.K bank........greedy so and so that I am! You determine a persons level of "greed" based on no evidence of for example; their liabilities or the reason they may have such larger amounts at any particular time in their lives.

At what level does "greed" apply? Is it the arbitrary level of 100k Euros as in Cyprus or if the level had been set at 50K Euros would "greed" apply to anyone who has in excess of 50K? Or more pointedly, is it at a level set by a persons midset for it seems that many have a mindset that arbitrarily determines where greed starts.

I'm off to eat my Easter eggs.... and count my money and gold.

 

[flecc]

Hi.
From your earlier posts it you asserted that anyone who has in excess of 100k Euros in these banks is driven by greed........your words. It follows that these people should not complain as they are deserving of their haircut?

At present I have in excess of £85k in a U.K bank........greedy so and so that I am! You determine a persons level of "greed" based on no evidence of for example; their liabilities or the reason they may have such larger amounts at any particular time in their lives.

At what level does "greed" apply? Is it the arbitrary level of 100k Euros as in Cyprus or if the level had been set at 50K Euros would "greed" apply to anyone who has in excess of 50K? Or more pointedly, is it at a level set by a persons midset for it seems that many have a mindset that arbitrarily determines where greed starts.

I'm off to eat my Easter eggs.... and count my money and gold.

And still you grossly misrepresent what I've posted!!!!

Nowhere in any of my posts in this thread have I said that "anyone" investing there is driven by greed, those are not "my words" as you've wrongly said.

In the 8 posts that I've made with any relevance to this, I have only mentioned "greed" three times, once applying it to the Cyprus banks and twice applying it to the small countries seeking large overseas funds to enter into the bank speculation free-for-all. Not once have I applied it to any individuals, and certainly not to any Cypriots.

I have repeatedly made it clear that any similar criticisms in that vein are for those from other countries who chase over the market interest rates. How many times must I repeat that they are the ones suffering the consequence, and how many times must I repeat that high interest means high risk. Those who choose risky investments do not deserve sympathy when they go wrong, so I proffer none.

None of this applies to you and your money. In what way have my comments on the Cyprus situation said or implied that anyone in the UK having over £85,000 to invest is greedy? I have done nothing of the sort, I've merely observed that they are a very small minority of the UK population, without any comment whatsoever on their status. Legal possession of over £85,000 or any sum is not of itself in any way wrong.

Please Vectra, read and answer what I post, not what you imagine I've posted.
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[flecc]

Cypriots will lose in many other ways for the foreseable future.

But not long after you posted this, most of the restrictions were lifted, so the Cypriots didn't suffer from them for very long. Once again it shows how the hysteria expressed in so many opinions is provoked by the media exaggeration of an issue. Cyprus is merely sharing in some common issues affecting much of the western world. They, like us and others, will climb beyond those problems with time. I've seen all these events happening a number of times in my lifetime, including here in Britain where we once suffered far harsher restrictions over a number of years, not just for a few days.

 

[AlMel]

Media hysteria, especially when politically oriented, is terribly destructive of balanced opinion. If one’s means of information is always saying the same thing, always twisting whatever news there is towards one goal, it’s hard not to be swept along.

Perhaps all responsible citizens should systematically consult contradictory opinion at least to know what the ‘opposition’ to their regular source of information says.

It’s interesting that whilst the BBC is valued throughout the world for its objectivity and independence, at home it’s so often criticised for being biased when merely trying to present several opinions.

 

[trex]

I am afraid this time it's not the same hysterical as Northern Rock. The banking crisisis in Cyprus is the logical destination of the fractional reserve banking system, practiced all over the world.
jazper53 wants to know who do we owe the money to, the answer is virtually everyone. We are both lenders and borrowers, if not just because we are citizen of of state or another that owes money to everyone. The capitalist system we live in nowadays is substantially different from the 50's when Keynesian economics was still workable. There is no way out, no matter how much money we print.
Cyprus banking industry cannot recover from this crisis, the Eurocrats won't allow it. Without transformtive industry and inflated property prices, Cypriots will head to much harsher living standards.
Even the German model is not safe. I am not saying that the British banks are about to fall, I am saying they cannot make normal profit therefore cannot raise capital from shareholders and get back to where it once was, not even to Keynes time.
Our government will keep QE for the foreseable future because it does not have any alternative, regardless which party or coalition is in power.
Until someone invents a new system, countries with abundant natural resource will do well to the detriment of the rest of the world. Getting back to Cyprus, although restrictions do not affect the apparent wealth of ordinary citizens, their life is already changed for the worse. Let's say that they manage to find the money and borrow the rest from the EU/IMF, how are their goverment and their banks ever going to pay it back?
Greece can't. So a few years from now (I say two), another round of bail in/bailout is needed and more money needs to be printed. Look at food prices, you see how fast the pound loses its value and we are luckier than most, we can let the pound drift. However, devaluating the pound can only worsen the trade balance because we don't have the ability to work hard like our parents did.
So, we are getting robbed by our government but I don't think we are going to vote for any politician with the will to force people who don't want to work to work or let people with ill health die.

 

[jazper53]

I think that QE is not working, and then there will be only one option left, and that will be trade protectionism. USA are pretty close to giving up on QE and will bring in some form of legislation that will look very much like protecting it own markets, which will be a very slippery slope for the global economy, and free trade in general.