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Your banks are toast

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Re: Your banks are toast

Postby Tim Drayton » Thu Mar 21, 2013 4:50 pm

appel wrote:You guys don't have a clue about the seriousness of this matter.

Who cares if you can still get small bills from ATM's? That's all smoke and mirrors. Your payment system is shut down currently. If your banks go bust, your entire payment system will crash and burn. Why does the payment system matter?

The payment system is used to pay for goods and services. Companies use it to pay salaries. People use it to pay their bills. Stores use it to purchase goods. If this cycle of payment stops, the entire economy shuts down. You won't get paid, stores won't be able to refill with groceries, you won't be able to use your creditcards, you won't be able to withdraw from ATM's. You will be literally thrown back to the stone age and forced to barter.

If your banking system crashes, so goes the payment system, and so goes your economy, your livelihood, your way to buy food, gas, medicine.

Worst case scenario, you will need to join the UN World Food Program, because you won't be able to import food from overseas because there is no payment system, no money.

You have no idea what kind of hardship awaits you if worst happens.


You are right. The question is whether the European Union will stand by and watch this happen to one of its member states, presuming they do not manage to pull a plan B out of the hat.
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Re: Your banks are toast

Postby appel » Thu Mar 21, 2013 5:09 pm

Tim Drayton wrote:
appel wrote:You guys don't have a clue about the seriousness of this matter.

Who cares if you can still get small bills from ATM's? That's all smoke and mirrors. Your payment system is shut down currently. If your banks go bust, your entire payment system will crash and burn. Why does the payment system matter?

The payment system is used to pay for goods and services. Companies use it to pay salaries. People use it to pay their bills. Stores use it to purchase goods. If this cycle of payment stops, the entire economy shuts down. You won't get paid, stores won't be able to refill with groceries, you won't be able to use your creditcards, you won't be able to withdraw from ATM's. You will be literally thrown back to the stone age and forced to barter.

If your banking system crashes, so goes the payment system, and so goes your economy, your livelihood, your way to buy food, gas, medicine.

Worst case scenario, you will need to join the UN World Food Program, because you won't be able to import food from overseas because there is no payment system, no money.

You have no idea what kind of hardship awaits you if worst happens.


You are right. The question is whether the European Union will stand by and watch this happen to one of its member states, presuming they do not manage to pull a plan B out of the hat.


I am painting the worst-case picture, although unlikely, if all things are done wrong it's a real consequence. Iceland faced the same, and I'm not sure many realized this.

Who knows what will happen. You almost have no choice. If I were you I would be extremely worried about the €100K state guarantee on deposits.

Arguing about how big of a percentage to trim off deposits is almost like re-arranging the chairs on the Titanic... that ship has already struck the iceberg and is going down no matter what you're going to do.

100% taxation on all deposits, before the banks go under, is the only thing that's going to prevent a state default, because that's how you cheat the deposit guarantee scheme, if there is a 100% tax there are no deposits left to guarantee.
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Re: Your banks are toast

Postby Tim Drayton » Thu Mar 21, 2013 5:27 pm

appel wrote:
Tim Drayton wrote:
appel wrote:You guys don't have a clue about the seriousness of this matter.

Who cares if you can still get small bills from ATM's? That's all smoke and mirrors. Your payment system is shut down currently. If your banks go bust, your entire payment system will crash and burn. Why does the payment system matter?

The payment system is used to pay for goods and services. Companies use it to pay salaries. People use it to pay their bills. Stores use it to purchase goods. If this cycle of payment stops, the entire economy shuts down. You won't get paid, stores won't be able to refill with groceries, you won't be able to use your creditcards, you won't be able to withdraw from ATM's. You will be literally thrown back to the stone age and forced to barter.

If your banking system crashes, so goes the payment system, and so goes your economy, your livelihood, your way to buy food, gas, medicine.

Worst case scenario, you will need to join the UN World Food Program, because you won't be able to import food from overseas because there is no payment system, no money.

You have no idea what kind of hardship awaits you if worst happens.


You are right. The question is whether the European Union will stand by and watch this happen to one of its member states, presuming they do not manage to pull a plan B out of the hat.


I am painting the worst-case picture, although unlikely, if all things are done wrong it's a real consequence. Iceland faced the same, and I'm not sure many realized this.

Who knows what will happen. You almost have no choice. If I were you I would be extremely worried about the €100K state guarantee on deposits.

Arguing about how big of a percentage to trim off deposits is almost like re-arranging the chairs on the Titanic... that ship has already struck the iceberg and is going down no matter what you're going to do.

100% taxation on all deposits, before the banks go under, is the only thing that's going to prevent a state default, because that's how you cheat the deposit guarantee scheme, if there is a 100% tax there are no deposits left to guarantee.


You need to realise that the EU has undertaken to come up with the necessary funds (about 10 billion euro) to recapitalise the big two banks, provided Cyprus finds another 5-6 billion, which was initially supposed to come from the bank levy rejected by parliament, and may still be found in other ways. So the ship is not necessarily going to sink if the rescue still comes off. Failing a rescue, things will happen more or less as you describe, but do not forget that the currency here in Cyprus is the euro, so the money in people's pockets and small businesses' tills will retain its value whatever happens. Interesting times indeed.
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Re: Your banks are toast

Postby appel » Thu Mar 21, 2013 5:32 pm

10 billion euros will only rescue the banks from their current predicament. And about these 10 billion euros, is the Cyprus state guaranteeing such a loan? Imagine if 10 billions aren't enough and the banks fail anyway.

If 10-20% of the deposits decide to flee, your banks are toast again. Foreigners hold a lot of deposits in Cyprus, and they have already decided to flee (don't kid yourself about that). Domestic depositors cannot flee as much, but foreigners can and will.
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Re: Your banks are toast

Postby Oceanside50 » Thu Mar 21, 2013 5:33 pm

the extra funds are found(5.8billion), in exchange the Eu takes over stewardship of Cyprus' banks ....another likely scenario
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Re: Your banks are toast

Postby Tim Drayton » Thu Mar 21, 2013 5:51 pm

appel wrote:10 billion euros will only rescue the banks from their current predicament. And about these 10 billion euros, is the Cyprus state guaranteeing such a loan? Imagine if 10 billions aren't enough and the banks fail anyway.

If 10-20% of the deposits decide to flee, your banks are toast again. Foreigners hold a lot of deposits in Cyprus, and they have already decided to flee (don't kid yourself about that). Domestic depositors cannot flee as much, but foreigners can and will.


Not having personally seen the books, I can't really add much more. The figure of 17 billion euro has been touted as the amount needed to recapitalise these banks. If, as you say, this will just be money down the drain, then there is no hope.
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Re: Your banks are toast

Postby cyprusgrump » Thu Mar 21, 2013 6:07 pm

Tim Drayton wrote:
appel wrote:10 billion euros will only rescue the banks from their current predicament. And about these 10 billion euros, is the Cyprus state guaranteeing such a loan? Imagine if 10 billions aren't enough and the banks fail anyway.

If 10-20% of the deposits decide to flee, your banks are toast again. Foreigners hold a lot of deposits in Cyprus, and they have already decided to flee (don't kid yourself about that). Domestic depositors cannot flee as much, but foreigners can and will.


Not having personally seen the books, I can't really add much more. The figure of 17 billion euro has been touted as the amount needed to recapitalise these banks. If, as you say, this will just be money down the drain, then there is no hope.


if you think about it logically...

Cyprus finds €7B from somewhere and borrows €10B.

Even if the banks don't crash we can never pay the €10B back - not a chance until the gas comes ashore...

...so we may as well sell the gas rights to whoever wants them, take the cash and boost the economy that way...

Otherwise the bailout will just be followed by another like Greece...

And if as we expect there is a run on the banks the bailout won't be enough anyway....
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Re: Your banks are toast

Postby Jerry » Thu Mar 21, 2013 6:17 pm

appel wrote:10 billion euros will only rescue the banks from their current predicament. And about these 10 billion euros, is the Cyprus state guaranteeing such a loan? Imagine if 10 billions aren't enough and the banks fail anyway.

If 10-20% of the deposits decide to flee, your banks are toast again. Foreigners hold a lot of deposits in Cyprus, and they have already decided to flee (don't kid yourself about that). Domestic depositors cannot flee as much, but foreigners can and will.


Withdrawals from high interest deposit accounts or bonds require notice, at least they do in the UK so even if they want to flee they may not be able to.
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Re: Your banks are toast

Postby appel » Thu Mar 21, 2013 6:20 pm

I've read that total deposits in Cyprus are at €80-90 billion.

€17 billion is a lot of money, but does it stop the banks from succumbing to bank runs? I don't believe so.

And remember, €17 billion is needed to recapitalize the banks, PRE-PANIC, in the state they were weeks/months before the current situation. This amount does not take into account run on the banks.

You might need closer to €40 billion to re-open the banks today.


For such a tiny nation of 1 million, this is a huge gamble, especially if the state is guaranteeing this €17 billion "loan".
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Re: Your banks are toast

Postby B0B » Thu Mar 21, 2013 6:24 pm

appel wrote:You guys don't have a clue about the seriousness of this matter.

Who cares if you can still get small bills from ATM's? That's all smoke and mirrors. Your payment system is shut down currently. If your banks go bust, your entire payment system will crash and burn. Why does the payment system matter?

The payment system is used to pay for goods and services. Companies use it to pay salaries. People use it to pay their bills. Stores use it to purchase goods. If this cycle of payment stops, the entire economy shuts down. You won't get paid, stores won't be able to refill with groceries, you won't be able to use your creditcards, you won't be able to withdraw from ATM's. You will be literally thrown back to the stone age and forced to barter.

If your banking system crashes, so goes the payment system, and so goes your economy, your livelihood, your way to buy food, gas, medicine.

Worst case scenario, you will need to join the UN World Food Program, because you won't be able to import food from overseas because there is no payment system, no money.

You have no idea what kind of hardship awaits you if worst happens.

yep - absolutely true
this collpase is not the first in my life and i keep telling everyone what is about to happen
and they all laugh and say this is cyprus - its different
no its not
if you check my posts you will see what i expected to happen and half of it happened
i expected more anger on the streets but clearly the locals have no idea whats comming
and when they go to protest it will be too late

my advise to everyone isw drain your cards, load up with lasting supplies, of everything needed
to survive for months ahead, including pertol
and stay safe home and watch the news and follow twitter
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