While the economic problems in Cyprus are relatively small - in as much as Cyprus is small - it is interesting to see how it is interpreted politically and in the markets. Euroskeptics, like Farage, point to the situation as further evidence of the inevitable collapse of the EURO. That remains to be seen. Farage is correct to point out that the plan proffered by the EU to save the Cypriot banks was politically anathema to the rights of individual bank depositors and reveal the inherently undemocratic nature of the EU bureaucracy.
The details of the plan seem to be distorted by some critics. The plan did not steal 10% per cent of the depositors assets. Actually, it forced the depositors to convert 10% of their holdings to stock in the bank. While deposits, under a certain limit, are guaranteed stock is not. So this plan amounted to coercing the depositors to shore up the capital of the bank and enter into a risky investment. Even after the EU adjusted the plan to only affect deposits over @ 100,000 €, the Cypriot parliament voted the plan down.
The Euro is continuing to weaken. A weaker Euro will be good for exports...it may even make the strains within the disparate Euro economies slightly less severe. But it will not bely the fact that the European banking system, scrambling to shore-up its foundations, is making many of the mistakes made in the banking sector during the Great Depression.
Banks are contracting. EU Government is expanding. The opposite is what is called for!
Banks are contracting. EU Government is expanding. The opposite is what is called for!
1 comment:
all good point well taken.
i would characterize fiorcing people to invest in a bad bank tantamunt to TAKING.
as when the usa government forces people to invest in Soc Sec - under the GUISE that it goes into a fund that buys T-bills.
it's bs.
it takes away the power to use own's hard earned money the way one wants. and that's tantamount to stealing.
Soc Sec should be changed into into a personal account that must buy t-bills. (not crappy bank stock) but then our savings have to be sacrosanct.
in cyprus, the eu "govt" was essentially telling people the money you earn/save is never really yours.
what happens is that people lose FAITH in the money. they won;t want euros.
and the euro will collapse.
after all, a euro is just a piece of paper that is an EU iou.
farage is right: with this act people won't want it anymore.
it's worthless.
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