ramanan50

Banks May Seize Your Small Savings

In Europe, Finance on March 26, 2013 at 11:33

Most of us are aware of the Financial Crisis, when the Government seized amounts from the Bank account of small investors to manage its financial crisis, which triggered of a run on Banks . by people rushing to ATMs to withdraw their cash.

To defuse the situation the EU ,along with the creditors mainly Germany, made out a Bail plan and since it was suggested as being unworkable, a new package was devised.

Under this dispensation,Deposits under 100,000 euros will be protected.

The reasoning behind this is that these amount are (small amounts) are protected by Insurance!

I fail to understand that the Government will be losing the money appropriated ((or Misappropriated) by way of  the payment by the Insurers.

Even if the Insurance firms belong to private Sector, it will drive inflation further.

I do not know which Economic Genius thought out this plan!

More than this  is an interesting perspective from the ‘Business Insider

Now banks in EU may tap and seize your savings!

How long will it take to reach India?

I have been voicing about the inefficacy of the Keynesian Economics in my columns for quite some time.

First came Argentina,then Greece, Ireland,now Cyprus.

Western countries rm down an economic system which is not savings oriented, but spending oriented  on unsuspecting Nations by way of lending and squeeze when the Note is due, like Germany has done now to Cyprus.

Story:

Cyprus Crisis

Cyprus Crisis

As expected, Cyprus and the EU reached a new late-night bailout deal last night that will reduce the chance that Cyprus’s financial system and economy will completely implode.

The new deal is better than the last deal in one key respect:

  • Deposits under 100,000 euros will be protected

That’s very important. Those deposits were ostensibly “insured.” To seize them, the way the last bailout deal would have, would have been grossly unfair and would have set a truly alarming precedent.

Now, small depositors in European banks can breathe more easily. At least in this case of gross malpractice on the part of reckless bank managers, their life savings have been preserved.

Alas, the good news ends there.

Although deposits under 100,000 euros will be spared, deposits over 100,000 euros will be seized and subjected to an as-yet undetermined haircut–with the confiscated money going to bail out the gambling losses of the aforementioned reckless idiots who run some of Cyprus’s banks.

This seizure, needless to say, will dampen the enthusiasm of rich depositors for keeping money in banks that get themselves into financial trouble.

And because many, many banks in Europe have gotten themselves into financial trouble, this will create a general state of unease among rich depositors throughout the Eurozone.

And it should wig out some bank lenders, as well.

After all, never before in the history of this global financial crisis has a major banking system allowed depositors to lose money, no matter how reckless and stupid and greedy their bank managers have been. And only rarely have bank lenders–those who hold bank bonds–been asked to pony up.

In this case, however, the depositors will lose money. Perhaps a lot of money. And if there had been big bank debtholders in Cyprus, they probably would have been socked with losses, too.

It’s possible that everyone will just laugh off Cyprus, viewing it as an exceptional one-off. After all, the Cyprus banking system was notorious for being the offshore money-laundering arm of many Russian oligarchs, so many folks will likely view this asset seizure as a case of “just desserts.”

But this optimistic view of the Cyprus horrorshow overlooks one key fact:

The main reason that Cyprus depositors will lose their cash is because it has become politically difficult (impossible?) for leaders in Germany and other rich European countries to bail out their brethren in the “periphery” without taking many pounds of flesh.

And it is that precedent, in addition to the fate of big depositors in Cyprus, that should spook Europe’s big bank depositors and lenders.

If Germany is done bailing out countries and banks without having those countries and banks cover some of the cost, it’s not clear why Germany will relent next time Spain, Italy, Greece, and other countries in near-desperately bad financial shape come rushing to the EU with their hands out.

Unlike Cyprus, the banking systems in these countries do have bondholders that can get haircut before the depositors get haircut, but the effect will be the same.

For the first time since the collapse of Lehman Brothers, those who lend their money to banks or keep their money in banks are at risk.

Because the neighborhood loan shark (Germany) is now extracting much more onerous terms.

http://www.reddit.com/tb/1az48w

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