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.
