Raid on bank accounts in Cyprus

[MrsJREwing]

Nearly 10% of savings will be taxed from private individuals savings, to save the banks.

As I predicted. The Cyprus Govt voted down the proposal and ECB has just announced it will provide cash liquidity within existing rules to pay out depositors.

Let the bank run commence and lets see how much money the ECB will agree to print 'within existing rules'.

I think this is what socialists call Capital accumulation by dispossession. I agree with much of what MoreBeta has said. It is wrong than ordinary people have to bail out the banks but to argue that wealthy savers shouldn't whilst at the same time arguing for default and the loses that bond holders and hedge funds would take seems like a contradiction though.

I agree with Morebeta that they should default and nationalise although the longer they string this out without acting then I fear Cote is right......by the end of the week they won't have any banks.

Claig:I think Kirsty's article shows what the Guardian possibly thinks.

"This may be the future that the socialists have planned. It seems that the authors of that Guardian article are fully behind the European elite, the IMF and the OECD, and are not on the side of the people"

Claig this is the time for you to take note, THE GUARDIAN IS NOT a LEFT WING PAPER it is a liberal paper. Liberal ideology is centred on personal freedoms and identity politics, just as neo-liberalism is based on the ideology of capital accumulation to the elites and the strengthening of their class power, divide and conquer through the rhetoric of individual obligation, responsibility and freedom.

"Cypriot Communists slam EU robber barons"

"Interview with Athina Kariati, New Internationalist Left (CWI in Cyprus)
After months of ?calm? the capitalist debt crisis has resurfaced over the banking meltdown in Cyprus, sending financial markets into a spin. EU ministers and the newly elected right-wing Greek Cypriot president have demanded that small savers, ie Cypriot workers, pay ?billions for a banking bailout.
But angry workers in Cyprus are refusing to accept these capitalist dictats, with Cypriot CWI members helping to organise mass protests outside parliament. Already, the government is making concessions"

www.socialistalternative.org/news/article11.php?id=2076

so rather than being in the business of seizing peoples money, the left are doing a great deal to protect the ordinary savers of Cyprus. Compare that to the liberal elite mouthpiece "the guardian" that says hand over the money.

Mini, you are right. The Guardian is not a left wing paper that represents working people. I think it is an establishment paper.

You are right that the entire people (left and right) in Cyprus are united against the elite.

Even their politicians are with the people and have defied the elite. It remains to be seen what vengeance is wreaked upon them by the elite in their ivory towers in Brussels.

No, MinitheMinx, the Guardian IS a left-wing paper. You're trying the same tired old trick that socialists always try, which is to pretend that anything bad done in the name of socialism (such as murdering 100 million people) wasn't REAL socialism.

The Guardian is as much a part of the left as your preferred reading material. It is establishment, yes, but it is left-wing metropolitan establishment, diametrically opposed ideologically to the old Tory landed gentry establishment of the 19th century.

landed gentry establishment of the 19th century

Anything opposed to the landed gentry of the C18/19th is capitalist. What came out of feudalism? ahhhh that would be capitalism!! The Guardian is a liberal paper and it is owned by and works in the interests of the capitalist class. They take up a space deemed to be on the left, a left that is not socialist. Clever really.

It seems that not one MP in Cyprus voted for the bank raid, what now?

ISTM that your definition of 'Left' consists of just you and Ttosca.

What now? The EU will make them vote again until they vote the right way.

I doubt it. I think it will be help from Russia

What now?

The deal is being renegotiated. The Cypriot Finance Minister is in Moscow today.

My personal view is that the banking system of Cyprus needs to be taken into conservatorship under ECB/IMF control and split into two. The 'Good Bank' part should be left with the branches and secured loans and credit card receipts that are being fully serviced and thsi should be funded by customer deposits with all the senior bond holders forced to convert to equity.

The Bad Bank part should contain all the bad debt and be funded by Junior Debt holders who will be repaid a very small percentage of their original investment by liquidating those bad assets.

Cyprus should default on all its Governement debt and not bail out its banks. Much tighter regulation of deposits from non residents needs to be implemented.

There are so many reasons why your plan can't be implemented that I don't know where to start.

First of all, there are people called shareholders who own parts of specific banks. You can't tell some that they are now shareholders of "bad bank" and others that they have shares in the "good bank".

Debt holders also hold debts of specific banks. These names are written on the bonds themselves. You can't tell them that they are now holding bonds of a fictitious new shitty bank, so won't get a thing.

Not to mention the fact that you still don't get that these banks have no money. What do you think happens when most of their liquid assets get written off?

What kind of money do you think they will raise when they "liquidate bad assets"? Most of their investments were in Greek bonds (morons). Those bonds have been converted into various long-term instruments of pathetic returns which nobody will now touch with a barge pole.

"Good bank" & "bad bank" Seriously. Do you really think it's that simple?

Er, Cote, it is a widely used strategy now.

An intelligent read on in

www.oliverwyman.com/bad-bank-strategy.htm#.UUn0GWtYCSM

Govt can do what it likes when it nationalises a failed bank.

Anyway, it looks like the Cypriot Finance Minister is still in Moscow negotiating over the Russian loan and Cyprus banks will be closed until Friday with ECB meanwhile lending Euro notes fill the cash machines to stop a full blown panic developing across Europe.

There is though the implicit threat now being discussed that the ECB would let the Cyprus banks collapse if a deal is not worked out.

Will they really do that?

EU politicans know if Cyprus banks fail along with a Cyprus Govt default and leaving the Euro area then that could start an unstoppable bank run across the continent, capital flight and the collapse of the Euro within days.

Or, of course, not, if other governments don't turn down the best available offer, which leads to private depositors in an insolvent bank being bailed out and getting over 93% of their money back.

Relying on a good fairy flying in to take away the problem might not be a good move

I think they are going to nationalise pension funds. In a sense that may be worse. Your pension fund is often the biggest asset you have. If the state takes it over you may well find they raid what is in it now and promise instead to pay pensions when they are due for payment out of then current tax revenues. People cannot then move or withdraw from pensions as they are less moveable than their savings are.

Xenia - very good point on pensions. If they cant take depositors cash they will take pension funds.

Spain is also considering nationalising its pension funds as is the USA to effectively pay for the bank rescue. Did you notice George Osborne also talking about the nationalisation of the Post Office pension fund yesterday in the Budget?

I have thought for the last few years that all of the cost of the Financial Crisis will end up one way or another being paid for by public and private pension funds. They wil seize the assets and give you some sort of bond you cant sell in return and then let inflation soar to eat away the real value of the bond and your ultimate pension.

Its the only way out of this mess and that is whay I never saved for a pension.

A pension promise either public or private is not worth the paper it is written on. There is an article in the FT today tallking about the Japanese plan to allow inflation to increase, under so called 'Abenomics' and that is really just a plan to stealthily tax and inflate away the pension entitlements of the older Japanese generation. Problem is the younger generations are suffering unemployment and falling living standards in Japan and refusing to contribute to their own pensions.

The net result is retirement promises will ultimatley have to be broken. Govt cannot just announce pensions will be seized or cut but they can keep interest rates close to zero for decades and let inflation rise to undermine pension values. It only takes 10 years of zero interest rates and zero capital gains in a pension fund combined with 5% inflation to cut pension fund values in half.

In the UK we have near zero interest rates already and the FTSE 100 is still not back to its July 2007 peak and inflation in basic living costs is already way above what official inflation measures so we are already 5 years down that road hereand nearly 20 years in to that process in Japan.

the previous proposal for Cyprus would have given them a pretty good bail-out, kept them in the Euro, and left most private depositors with 93% of theior savings. It would also have forced the non-Cypriot depositors in Cypriot banks to contribute to propping up their insolvent banks, especially those with very large deposits. Some of them might or might not be gangsters, money launderers and tax evaders.

Compared to that proposal, raiding Cypriot pension funds sounds like a very poor alternative.

MoreB, may well work out that way. I too have not contributed to mine for years and I think I will just take the tax free lump sum at 55 (which you used to be able to take at 50 until they changed the rules as ever) and annuity for life and forget about it as I have always wanted to and probably work until death anyway. We have had too many changes to UK pension funds (£1.2m life time cap is the latest down from £1.5m, change in ACT years ago by Gordon Brown, private companies taking too many pensions holidays when times were good, state retirement age going up - originally 60 for most of us and now almost up to 70, limits on tax free contributions into it etc etc

Xenia - that is exactly my thinking too. I have a small SIPP and will liquidate that entirely at the very first opportunity before Govt takes it off me.

Yes, you can do complex things with pensions and I could with my SIPP which I manage and delay drawing it (which usually means long term you get more out of it) etc but my lack of trust in the system means I will take 25% as a lump sum (although they may well have forbidden that by then too) and then just buy an inflation linked annuity for life.

I mentioned up thread that I received a doom-laden e-mail from a money site a few weeks ago, before this Cyprus issue had broken. It foresaw that the only way governments could get money was by swooping on those who had some: the ordinary working people. Pensions are the obvious target and, as MoreBeta says in a more financially-savvy way than I could, there is more than one way to skin a cat as far as raids are concerned.

It all sends me into a state of financial paralysis! Is hiding our money under the mattress the only option?

I read that too although it does end things by saying subscribe to Money Week and you'll be okay or something like that.

Not putting money in banks does not protect you if the value of your currency drops though, if go back to the inflation we had in the 1970s which was 18%, 22% and 20% three years in a row! So your £1000 in effect became worth £40k over 3 years and it became better to buy goods like a TV now because in a year your savings would not buy you one.

Yes, the "answer to all our problems" would be revealed if I took out a subscription! I wonder what it was...

the way to solve all your money problems is to set up a "tips" website and get people to pay you for it.

CYBC is reporting (following the failure to sell it to the Russians) that the Cyprus Popular bank is to be shut down, split into good-bank-bad-bank, and that deposits under EUR100,000 will be protected.

Rioters seen scuffling with police.

Its kicking off but at least a 'good bank bad bank' resolution looks like a decent start. It is a model for the rest of the Cyprus banks.

ECB has said Cyprus has until Monday to sort this out or they will cut off flows of Euros and ATM machines will be empty.