"Theft, pure and simple"

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Insomniac
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Re: "Theft, pure and simple"

Post by Insomniac »

Shakespeare wrote:
FWF establishment
Well, I would like to see all deposit insurance capped at 98% or something similar, but it isn't practical to do that in Canada while other countries have 100% coverage up to a minimum. Above that minimum, depositors should be held to whatever haircut is required.
It would be fun in CDIC was capped as you suggest, but the provinces did not follow suit and credit union insurance remained at 100%.
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ghariton
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Re: "Theft, pure and simple"

Post by ghariton »

parvus wrote:
More than 2 years ago, FxPro took the decision to only use global banks of investment grade standing for segregated client accounts (currently Barclays UK and Credit Suisse Monaco) and to keep these banks under constant review. The strength and track-record of FxPro in the forex industry enabled this step to be taken.

Furthermore, in 2012, FxPro expanded its scope of permissions with the FSA in the UK, to allow the holding of client funds within its separate UK entity. Where possible, this has given clients the choice where to open their trading account and also in which bank they wish to deposit their funds.
Exactly.

Private institutions who have a financial interest in doing due diligence, as well as the means to do it, will do a much better job of disciplining banks and other financial institutions than government regulators can. The two are complementary of course, but by insuring 100% of all bank obligations, we have effectively removed much of the incentive for the private sector monitoring.

Again, small depositors -- the typical household -- cannot be expected to do any due diligence on banks, and so deposit insurance is appropriate for them. Even so, a co-payment, as Shakespeare suggests, may be productive.
If cash in one country is taxed at a higher rate than in others, then we might just as well go back to a gold standard.
[/quote][/quote]
I dunno. Interest rates certainly vary from country to country, and "hot" money does flow -- as we have seen. Some deplore this as being destabilizing. But while markets certainly overshoot, there is danger in paralysis through regulatory straitjackets.

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Re: "Theft, pure and simple"

Post by dusty2 »

The Cyprus incident makes a good case for keeping a lot of one's savings in gold. It reminds me of all these Canadian nit-wits, piling all their savings into RSP's and TFSA accounts and registering them with the tax man, thinking they're so clever. When it comes time to cash out, they'll wish they only had to take a 6.75% haircut instead of the 30% they'll get.
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adrian2
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Re: "Theft, pure and simple"

Post by adrian2 »

dusty2 wrote:The Cyprus incident makes a good case for keeping a lot of one's savings in gold. It reminds me of all these Canadian nit-wits, piling all their savings into RSP's and TFSA accounts and registering them with the tax man, thinking they're so clever. When it comes time to cash out, they'll wish they only had to take a 6.75% haircut instead of the 30% they'll get.
You've overdone yourself with this piece of "advice". I know you don't reply to comments showing how wrong your statements are, so I won't bother debunking the obvious. :evil:
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Re: "Theft, pure and simple"

Post by mudLark »

ghariton wrote:It is this paradigm -- that gains are pocketed by the banks' managers and equity-holders and creditors (the latter in the form of higher interest rates as in Cyprus) while the losses are borne by the taxpayers -- that must be replaced. Taxpayers must stop being called on to bail out creditors, who should have done their due diligence before lending but who were evidently tempted by other considerations to overlook credit risk.
Quite right. However would changing horses in mid-stream be a good idea? Don't you think it's a little late too start doing what you and Wolfe suggest now ... after trillions of taxpayer dollars/euros have already been used to bail out most of the world's banks? And don't you think it more than a little risky to impose these types of strictures right now, in the midst of hyper-sensitive markets, the worst economic uncertainty in a couple of generations, and european austerity the likes of which has not been seen since the depression and/or WW2?

People (those in Europe with little or no future or those everywhere with their eyes wide open) are worried enough about future economic uncertainty. Adding to this uncertaintly at this time by cementing in people's minds the idea that in future your government may arbitrarily choose to reach into your bank account and take out some of your money was just plain dumb. Somebody should leak the indentity of the idiot technocrat who floated this idea in this particular instance.
ghariton wrote:Anyway, I note that both Martin Wolfe and I (as I stated in another post) believe that the deposit insurance guarantee should be honoured and that the one-time tax should only apply to deposits above 100,000 Euros.
Very glad (and relieved) to hear it.
ghariton wrote:Still the FWF establishment apologist
It's a tough job but I guess somebody has to keep the free radicals in line.

BTW: IMO if they had any sense Cyprus would encourage their banks to default, would exit the Euro, and would do a quick study on how to become the European Singapore.
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Re: "Theft, pure and simple"

Post by scomac »

mudLark wrote:
BTW: IMO if they had any sense Cyprus would encourage their banks to default, would exit the Euro, and would do a quick study on how to become the European Singapore.
They can't! In fact, none of them can because they aren't the masters of their own destiny by virtue of using a common currency. Not only would the banks have to default, but so would the countries as there is no way they could service Euro denominated debt with their own devalued and virtually worthless currency. They would become a third world country overnight ravaged by Wiemar Republic style inflation. I suspect that the first offer for a bailout will ultimately prove to have been their best course of action despite the bitter taste of a levy placed on savings.
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Re: "Theft, pure and simple"

Post by kcowan »

I think this is a classic political case of exercising the options in full view while accepting the inevitable outcome. The camel might have another hump but it will be a camel...
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Re: "Theft, pure and simple"

Post by mudLark »

scomac wrote:They can't!
They can, though they may be brow-beaten into believing they can't. Cyprus could revert to the Cypriot Pound or perhaps adopt the Ruble :shock:[quote="In "The Hitchhiker's Guide to the Galaxy" Douglas Adams"]This planet has - or rather had - a problem, which was this: most of the people living on it were unhappy for pretty much of the time. Many solutions were suggested for this problem, but most of these were largely concerned with the movement of small green pieces of paper, which was odd because on the whole it wasn't the small green pieces of paper that were unhappy. [/quote]
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Re: "Theft, pure and simple"

Post by ig17 »

Reuters:
A senior source in the "troika" said dealing with Cyprus was even more frustrating than protracted wrangling with Greece.

"The Greeks wanted to cheat on you all the time, but they knew what they wanted," the source told Reuters.

"The Cypriots are leaving us really confused."
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Re: "Theft, pure and simple"

Post by parvus »

mudLark wrote:
scomac wrote:They can't!
They can, though they may be brow-beaten into believing they can't. Cyprus could revert to the Cypriot Pound or perhaps adopt the Ruble :shock:
Or Cypriot natural gas futures redeemable at the local branch of Gazprombank?
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schmuck
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Re: "Theft, pure and simple"

Post by schmuck »

parvus wrote: Or Cypriot natural gas futures redeemable at the local branch of Gazprombank?
IMHO, it would be naive not to consider "conspiracy theories" wherever Putin has some skin in the game.
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Re: "Theft, pure and simple"

Post by poedin »

schmuck wrote:
parvus wrote: Or Cypriot natural gas futures redeemable at the local branch of Gazprombank?
IMHO, it would be naive not to consider "conspiracy theories" wherever Putin has some skin in the game.
And with the Cypriot ministers of finance and energy apparently still in Russia http://www.guardian.co.uk/world/2013/ma ... ussia-deal
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Re: "Theft, pure and simple"

Post by Shine »

It is time for the IMF to step in and investigate mismanagement, money laundering, and corruption in Cyprus.Not just with the government crooks but the Russian gangs as well.
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Re: "Theft, pure and simple"

Post by Koogie »

This is just a simple little chart "borrowed" from BMO but nicely reinforces the message that lots of things are going wrong in Cyprus...
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adrian2
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Re: "Theft, pure and simple"

Post by adrian2 »

Shine wrote:It is time for the IMF to step in and investigate mismanagement, money laundering, and corruption in Cyprus.Not just with the government crooks but the Russian gangs as well.
A brilliant idea! OTOH, ever heard of the concept of national laws and sovereignty? If the Cypriot government is mismanaging their money (it is theirs, once they have banknotes or IOU's in their coffers), how can the IMF "step in and investigate"?

Should the IMF step in and investigate alleged mismanagement by Ontario's Mc.Guinty's government wrt power plant cancellations et al?
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Re: "Theft, pure and simple"

Post by Descartes »

“The talks have ended as far as the Russian side is concerned,” Russian Finance Minister Anton Siluanov told reporters after two days of crisis talks with his Cypriot counterpart, Michael Sarris.
Russia rebuffs Cyprus, EU awaits bailout ‘Plan B’
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Re: "Theft, pure and simple"

Post by Bylo Selhi »

adrian2 wrote:Should the IMF step in and investigate alleged mismanagement by Ontario's Mc.Guinty's government wrt power plant cancellations et al?
Only if they devote as much time to investigate alleged mismanagement by Canada's Harper government wrt military procurement et al! ;)
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Re: "Theft, pure and simple"

Post by ghariton »

Bylo Selhi wrote:
adrian2 wrote:Should the IMF step in and investigate alleged mismanagement by Ontario's Mc.Guinty's government wrt power plant cancellations et al?
Only if they devote as much time to investigate alleged mismanagement by Canada's Harper government wrt military procurement et al! ;)
Please take it to watercooler.

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Re: "Theft, pure and simple"

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ghariton wrote:Please take it to watercooler.
Absolutely! I didn't start it.
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Re: "Theft, pure and simple"

Post by ig17 »

Paul Krugman:

Treasure Island Trauma
But step back for a minute and consider the incredible fact that tax havens like Cyprus, the Cayman Islands, and many more are still operating pretty much the same way that they did before the global financial crisis. Everyone has seen the damage that runaway bankers can inflict, yet much of the world’s financial business is still routed through jurisdictions that let bankers sidestep even the mild regulations we’ve put in place. Everyone is crying about budget deficits, yet corporations and the wealthy are still freely using tax havens to avoid paying taxes like the little people.

So don’t cry for Cyprus; cry for all of us, living in a world whose leaders seem determined not to learn from disaster.
Here you go... :cry: :cry: :cry:
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Re: "Theft, pure and simple"

Post by parvus »

I dunno. I think Krugman overstates things. Still, he's right on Iceland repudiating debts its banks owed to foreign depositors. Unlike Ireland.

Certainly brings "risk" back into the risk/reward equation.

Oh dear, I'm turning Austrian. :shock:
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ghariton
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Re: "Theft, pure and simple"

Post by ghariton »

The more I think about this, the stranger it gets.

If a government taxes the savings people have placed in their bank accounts, this is widely regarded as theft.

On the other hand, when a country gets into fiscal trouble, a standard recommendation is to devalue the currency. This is not an option for Cyprus, of course, but many observers have spoken regretfully of it, holding it as a major failing of the Euro that individual countries can no longer devalue.

But surely a devaluation of the currency is very like a tax on accumulated savings. Devaluation means that the purchasing power of one's savings has just dropped. To the extent a person buys imported goods, directly or indirectly, they are more expensive, and less of them csn be affdorded. How is this different from a tax on savings?

Well, a devaluation is worse than a one-time tax on savings. It is an effective tax not only on what you have saved, but also on what you will earn in future. The ordinary citizen gets royally screwed.

So: condemning one-time tax on accumulated savings, suggesting a devaluation instead. I just don't understand the logic. (Or maybe I understand very well -- the tax on savings is very visible, the devaluation's effects are invisible. People are stupid and politicians take advantage.)

George
Last edited by ghariton on 23 Mar 2013 19:07, edited 1 time in total.
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Re: "Theft, pure and simple"

Post by eezee »

YUP

especially "the tax on savings is very visible, the devaluation's effects are invisible. People are stupid and politicians take advantage."
I am going to live forever .... so far so good.
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Re: "Theft, pure and simple"

Post by like_to_retire »

ghariton wrote:The more I think about this, the stranger it gets.

If a government taxes the savings people have placed in their bank accounts, this is widely regarded as theft.

On the other hand, when a country gets into fiscal trouble, a standard recommendation is to devalue the currency. This is not an option for Cyprus, of course, but many observers have spoken regretfully of it, holding it as a major failing of the Euro that individual countries can no longer devalue.

But surely a devaluation of the currency is very like a tax on accumulated savings. Deflation means that the purchasing power of one's savings has just dropped. To the extent a person buys imported goods, directly or indirectly, they are more expensive, and less of them csn be affdorded. How is this different from a tax on savings?

Well, a devaluation is worse than a one-time tax on savings. It is an effective tax not only on what you have saved, but also on what you will earn in future. The ordinary citizen gets royally screwed.

So: condemning one-time tax on accumulated savings, suggesting a devaluation instead. I just don't understand the logic. (Or maybe I understand very well -- the tax on savings is very visible, the devaluation's effects are invisible. People are stupid and politicians take advantage.)

George
Devaluation would have a similar effect on savings as when a government controls interest rates and inflation, but I suppose the fairness difference would be that the tax on accumulated savings is targeting cash held in a bank. I understand that they were not going to place that tax on bonds, stocks, gold, land, etc.?

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Re: "Theft, pure and simple"

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like_to_retire wrote: I suppose the fairness difference would be that the tax on accumulated savings is targeting cash held in a bank. I understand that they were not going to place that tax on bonds, stocks, gold, land, etc.?
The banks are insolvent. The proposed tax on bank deposits was simply a proxy for the haircut depositors would have taken if the banks had been allowed to fail. Iceland took the path of letting the banks fail. Cyprus being part of the EU and ECU, that outcome was apparently not feasible so a solution that leaves the banks standing needs to be devised.

A tax on non-bank assets would be a bailout of depositors, many of whom are offshore, from the general economy - which is exactly what happened in Ireland and truly unfair IMHO. As I understand it Cyprus bank deposits were insured up to € 100,000 so a just outcome would be for every depositor to get that much back and those with more to get a share of whatever remains. From what I've been reading in the news the PTB seem to be moving in this direction.
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