Cyprus Deposit Tax: Could This Start A Rush To Hard Assets?

The Euro itself has failed to a certain extent because they let countries into it the probably should have never been let in. I understand the idea behind it, but personally I am not a fan of these global currencies. It allows countries like Cyrus or Greece to have a domino effect on the rest of the countries where if they had their own currency their isolated failures would mean little if anything to the rest of Europe.

To me its one of those ideas that sounds good on paper but is terrible in practice. It punishes the countries that are responsible as they just end up bailing out the ones that arent and that safety net to an extent rewards supporting things you know the country cant afford but you can enjoy anyway with the help of the rest of the EU.

That said no one in Europe would think twice about accepting a Euro as payment so it hasnt failed in that regard. There always is the option of just abandoning it and starting fresh with your own currencies and I wouldnt be shocked if at some point some of the stronger ones pull out either going their own way or forming their own thats harder to get into. I dont think Europe will become the next India though where people just hoard PMs and banks are few and far between

"The Euro itself has failed to a certain extent because they let countries into it the probably should have never been let in."

The same thing could have been said about the US two and a half centuries ago, but at least back then our leaders recognized the problem and retired the debt of the States. This did not happen in Euroland as this idea would not tend to be popular with bankers. Too bad or them. It was probably a bad idea, but it just wasn't done right and thats really the problem.

It would not appear what happened in Cyprus will become common practice in the Eurozone but what folks do not realize the tax payer will pay one way or another since the IMF needs to get the money from somewhere. How long can countries keep on loaning the IMF money?

http://www.telegraph.co.uk/finance/...failure.html

"Cyprus was a special case ... but the upcoming directive assumes that investor and depositor liability will be carried out in case of a bank restructuring or a wind-down," Mr Rehn, the European Economic and Monetary Affairs Commissioner.

"But there is a very clear hierarchy, at first the shareholders, then possibly the unprotected investments and deposits. However, the limit of €100,000 (£85,000) is sacred, deposits smaller than that are always safe."

There is interest in gold in the UK, since there is no VAT charged or Captial Gains while silver attracts a VAT charge of 20%.

Ken

"It would not appear what happened in Cyprus will become common practice in the Eurozone but what folks do not realize the tax payer will pay one way or another since the IMF needs to get the money from somewhere. How long can countries keep on loaning the IMF money?"

I would tend to agree unless someone needs a bailout prior to the reelection of Merkel.

Either way though its someone else footing the bill instead of chipping away at it over time which brings the same result of a country not being responsible for their own financial choices

But if you lose business to a competitor who is devaluing then your debt burden rises, income falls. In 1960 If I lent you 100 pennies for 20 years and said I want you to pay me back in ten silver dimes at 1/2 of the prevailing interest rates, you would have borrowed from me more pennies then I could lend you and being a skilled banker I would've lent you far more pennies than I had. But come 1980 you would be completely sunk and I would have my own island because you made a decision based on a false perception. That is of course if you could actually afford to pay me. This is what essentially happened to Europe. Once they lost their currency they lost their ability to receive investment asthere was no local currency to hedge local risk. Just a small sovereign bond market with no international liquidity. An easy target.

Ken

The only ones who own Greek and Cyrprian bonds are the Greek and Cyprian banks. The hedge funds and trading banks don't actually own the bonds but rather some sort of derivative thereof.

Its so counterproductive what they did. It created much more $ in damage outside of Cyprus, then the whole country is worth. Capital controls are bad for business and without business even a small debt burden will crush you. The debts here are anything but small. But much like here in the US no price is too high to pay for reelection when you get to spend everyone elses money.

I agree with Nigel Farage. These are the most dangerous people in Europe since 1945. Their level of care for the economy and the people in it takes a back seat to their desire for empire building. That makes them no better then the crew from the 30s and 40s.

This was not a credit event. However this is a huge problem for banks doing business in Southern Europe and business and it won't be immediately apparent. At the last G7 the Japanese realized there was a fool at that meeting and it was them. What this operation did was draw attention away from the currency war, but it will re assert itself and then gold will probably fly. Remember all these Euro countries have quite a bit of gold. Once there is nothing to be gained in exports because at some point diminishing returns set in and costs outweigh profits, the manipulation will one day go the other way and it will rise very very quickly. It may happen in a year or maybe in 3 years. When you play war with currency the end game will involve your gold stash. Make no mistake.