Cyprus-Forum.com

[GeorgePen]

2 years ago MP's rejected the proposed bank levy and went for the haircut instead.

Which do you think was better for Cyprus as a whole?

1. Levy
2. Haircut

[Get Real!]

You should’ve asked such a question two years ago but anyway…

Realistically there was no choice because accounts <100k were guaranteed so a levy was out of the question. No doubt the government looked into the legalities of the matter and opted for the doable.

[GeorgePen]

Get Real!,

I made my views very clear 2 years ago.

A levy is just a tax and the Government can change taxes whenever they like so there is no illegality involved.
There are no guarantees for bank deposits. EU insists each member state have insurance cover for balances below €100K but they do not enforce the insurance cover.
At the time of the bailout the insurance policy in Cyprus covered around 3% of the balances below €100K i.e. virtually no guarantee at all.

For me the decision taken by the MP's will cost Cyprus billions as no business will invest in Cyprus for the next few decades following the haircut.
The modest levy of 6% for balances below €100K was only the interest earned in the previous 18 months and would have had a much smaller impact on the economy than the haircut.
Terrible decision to vote against the levy in my opinion.

[Lordo]

it was a grave mistake. instead of taking from everybody a small amount, they went for a hair cut. cyprus will be disadvantaged for decades because of it.

[Robin Hood]

GeorgePen:

A levy is just a tax and the Government can change taxes whenever they like so there is no illegality involved.

That is not true! Taxes are imposed by Governments and, had it been a tax that was then handed over to the banks to dig them out of their self created shit, then that would have been a tax-payer/government funded BAIL OUT! Just what the Troika was opposing.

A levy is imposed by the banks with government approval. Had that been applied then, because it was as a result of a bank’s failure, the so called ’guarantee’ applied to accounts of < 100k would kick in. As you correctly point out, the banks ( the guarantors) don’t have anything like enough to cover that sort of pay out without creating billions more debt out of thin air. Result ….. bank collapse and hyper-inflation. The only currency the banks have in their trading account is YOURS AND MINE ………. and we are unsecured creditors of the bank. That number in your bank account is an IOU from the bank not currency.

The so called ‘bail-in’ was the banks writing off 47.5% of THEIR debt to you and me (if we happened to have over a 100k in the bank). When you put your money into the bank you are lending it to the bank for them to do with as they more or less please. The banks created billions in debt which they call loan's, although they actually loaned nothing ……… they have NOTHING to loan, they simply opened up a line of credit. Our money is held mostly as the banks reserves to be repaid when we ask for it, the banks ‘liabilties’; what they called ‘assets’ were in fact debts that they created out of nothing.Our currency is still sitting in the bank’s reserve account.

The ‘debt’ (or more correctly …. a line of credit) in turn creates an identical sum of currency in another account in the same or another bank. That account holder spends this ‘currency’ into circulation. When the borrower repays the debt, the ’loaned’ sum is written of the line of credit or ‘loan account’. The bank makes no profit (OR LOSS) from the ‘loaned’ sum, they only benefit from the interst. The repayment of debt destroys the currency created by the banks creation of a line of credit. Net sum is zero!

There are no guarantees for bank deposits. EU insists each member state have insurance cover for balances below €100K but they do not enforce the insurance cover. At the time of the bailout the insurance policy in Cyprus covered around 3% of the balances below €100K i.e. virtually no guarantee at all.

Exactly ……… they do not have the money to cover this guarantee! More banking smoke-and-mirrors.

The modest levy of 6% for balances below €100K was only the interest earned in the previous 18 months and would have had a much smaller impact on the economy than the haircut

.

I agree.

An interesting subject.

But It wasn't just a bad decision ...... it was a criminal act!!!!!

[kurupetos]

Correct. It's idiotic to put huge amounts of money sitting in bank accounts.

Nowadays the interest is so low, which allows very little advantage to depositors.

It's better to invest... that's what the banks are doing anyway!