Europe is risking a bank run
The Germans rejected a loan which they were certain Cyprus would invariably default on. So the sum was cut to €10bn. A depositor haircut was the only way to co-finance this. When they did the maths, they found the big deposits would not have sufficed.
So they opted for a wealth tax with hardly any progression. There is not even an exemption for people with only very small savings. If one wanted to feed the political mood of insurrection in southern Europe, this was the way to do it. The long-term political damage of this agreement is going to be huge. In the short term, the danger consists of a generalised bank run, not just in Cyprus.
As in the case of Greece, the finance ministers said: “Don’t worry, this is a unique situation”. This is true only in a very narrow legal sense. The bond haircut in Greece is indeed different to the depositor haircut in Cyprus. And when they repeat this elsewhere, it will be unique once more.
Unless there is a last-minute reprieve for small savers, most Cypriot savers would act rationally if they withdrew the rest of their money simply to protect them from further haircuts or taxes. It would be equally rational for savers elsewhere in southern Europe to join them. The experience of Cyprus tells them that the solvency of a deposit insurance scheme is only as good as that of the state. In view of Italy’s public sector debt ratio, or the combined public and private sector indebtedness of Spain and Portugal, there is no way that these governments can insure all banks’ deposits on their own.
The Cyprus rescue has shown that the creditor nations will insist from now that any bank rescue must be co-funded by depositors.
http://www.ft.com/cms/s/0/b501c302-8cea-11e2-aed2-00144feabdc0.html#ixzz2NufGvqnQ
Cash hoarding at home. Would you leave cash in a bank only to find 10% stolen and sent to banks of another country, because banks in your country made bad loans. This could be the greatest bank robbery ever.
They have extended the bank holiday to wednesday and thursday. They'll rob them on friday. You can be sure people are taking their monies out of the banks in spain, italy and greece.
It's going to affect us here one way or another, already the stock market is ultra volitile having hit it's recent highs. This could trigger a meltdown or it could be good as we see capital from abroad looking for safe havens. In the wall street casino anything is possible. These are fun time.
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