Greetings Regular Joes,
As more information regarding Cyprus comes out, I’ll post these excerpts for readers to attempt to keep up. It’s hard to find articles that are really beneficial, since so many of them appear to be hyping the story or spinning it just so. But some seem very responsible.
This one in particular brings together many thoughts from many sources, yet quite responsibly. The situation appears much worse than originally reported, and very sad indeed. Imagine having your entire cash savings wiped out because of the irresponsibility of bureaucrats. It’s beyond infuriating, and there’s absolutely nothing the victims can do about it.
However, there’s another thought too, that is in response to those who call Cypriots and Greeks idiots and blame them for this debacle. I”ll comment on that in my next entry. But this will help fill in some pieces first.
Later we’ll likely hear more that will either confirm or deny what’s being dug up right now. My guess is that it’ll be slightly better than what we’re seeing for three reasons.
- This is so insidious that it seems implausible. The destruction of wealth like this is absolutely devastating to many families who used the bank assuming it was safe. That’s not their fault. What does “Good as money in the bank” supposed to mean, anyway?
- It’s illegal. In fact, this has been brought up many times in the past few weeks. The fact that it’s illegal seems to be moot, according to these reports. We’ll see…
- There’s the tendency I mentioned before, where governments announce something so outrageous that the masses are relieved when they find out it’s only half as bad. If you were told that you were going to lose your entire 500,000 euro savings on Friday, you’d be reeling from the implications. That would be one long weekend. But if you woke up Monday and found out that you were actually going to get 200,000 euros back, you’d be relieved, even though you were still being robbed of 60% of your “safe” deposits.
All we can do is wait and see how this pans out. For now, this article is incredibly insightful and informative.
Kind regards,
Another Joe
Destruction of Cyprus Economy Proceeding Ahead of Schedule
When I first heard about the Cyprus ritual execution bailout, I had thought that the widespread predictions that the island nation’s economy would contract by 20% to 30% over the next two years were off base.
I thought it would happen much faster, on the order of two to three months. An estimated 45% mind you, 45%! of the economy is banking, and almost all of that international banking. So if you generously assume 200% of the 900% of GDP was bona fide domestic assets remember you have a lot of retirees, the other 7/9 goes poof. And that’s before you get to the fact that a lot of the services provided to foreign customers the higher-end accounting and legal services will have no future in a purely domestic banking business. So assume 90% of that 45% disappears in short order.
via Destruction of Cyprus Economy Proceeding Ahead of Schedule « naked capitalism.
