Krugman...Cyprus: The Sum of All FUBAR

[alcibiades_mystery]

3. Cyprus is essentially the Cayman Islands of Europe, which is what few people are saying

The giant deposits are generally offshore folks looking for a tax haven and/or out-and-out money laundering.

Think on this one carefully: "Cypriot banks cannot honor their debts, which unfortunately overwhelmingly take the form of deposits."

Um, huh? Imagine the colossal screw up that has to have occurred for a banking system that basically serves as a deposit destination for tax purposes to be unable to honor deposits! That's their only business: holding deposits. They bring tax rates to near zero (and we're talking Europe here!), precisely so they can sit on deposits while picking up a little something at the margins. Until somebody in these banks got it into their head to go all casino with the deposits.

It's truly unbelievable. But if you want to cry for the tax shelter accounts in these banks, consider how many tears you'd shed if the Cayman Islands accounts suddenly had to take a haircut. Would you be wailing for the Romney's of the world?