Let’s Kick Start The Bank Run
CBS provides more proof that the Euro is doomed:
In a 10 billion euro bailout deal clinched in the early hours of Monday morning, Cyprus agreed to dissolve the country’s second-largest bank, inflicting significant losses – possibly up to 40 percent – on all deposits larger than $130,000.
That step, agreed with the other 16 European Union countries that use the euro and the International Monetary Fund, marks the first time in Europe’s 3-year-old debt crisis that large deposit holders – wealthy savers, businesspeople or institutions – will be forced to take losses as part of a eurozone rescue.
The move was hailed later that day by Jeroen Dijsselbloem, the head of the Eurogroup of euro finance ministers, who said that forcing losses on banks’ shareholders, bondholders and even large depositors could become the template for future rescues.
However by Tuesday, Benoit Coeure, a member of the executive board of the European Central Bank, bluntly dismissed Dijsselbloem’s idea.
Coeure is dreaming, the finance ministers are still trying to convince people that austerity is working as unemployment rises, so they will use the same model for any bank in trouble, which the big depositors have probably already figured out. The run, the really punishing part of the run, won’t involve queues of people outside of banks, it will take place electronically.
Dijsselbloem had better hope that there are no Dutch banks in trouble, because I don’t think the bankers in Amsterdam are going to be happy with his comments.
2 comments
“Coeure is dreaming”
Indeed. The average person on the street is seeing this as a “come one, come all” event. With fewer receipts for all governments, all that lovely money in bank accounts is about all that’s left for them to eyeball. Now that the bank accounts in Cyprus have been seen as a “natural resource”, what’s to stop this from happening again? Well…nothing that I can see.
Seems to me that once you steal for the first time, it just gets easier. Of course, with your background, you would know more about that than I.
My question to the central money guys/gals is this: Once you’ve raided everyone’s bank accounts, what DO you do when that doesn’t work and there’s nothing left to raid? Because Cyprus is falling apart. So, this is your template???
This is the basic problem with the Euro as it is currently set up. The banking questions are being handled by politicians, as the finance ministers are members of the parliaments of the nations in the European Unions, not people actually brought in to handle the issue, like the Secretary of the Treasury. There is no federal government structure to deal with problems, every issue has to be decided by more than a dozen governments.
The European Central Bank doesn’t actually do what a central bank like the Federal Reserve does. It is also heavy on politicians and light on power. They don’t have the necessary banking regulations and every case is treated like a separate event.
The politicians don’t want to use the tax dollars from their countries to fix problems, so they are going after depositors. There is no European budget to deal with these issues, and no real European regulation of the banks. The whole thing is coming apart, and the individual countries don’t really understand what this means.
Cyprus has the worse of both systems – a national currency imposed on them that they don’t control, depositors fleeing their banks, no money or credit available for normal business – a total meltdown. This is what the ‘brain trust’ in Brussels has crammed down their throats and called a ‘bail out’.