tag:blogger.com,1999:blog-8764541874043694159.post2499639854782312902..comments2024-03-28T07:33:46.151+00:00Comments on Coppola Comment: The broken EuroFrances Coppolahttp://www.blogger.com/profile/09399390283774592713noreply@blogger.comBlogger54125tag:blogger.com,1999:blog-8764541874043694159.post-68715295519742519382014-06-09T08:39:21.656+01:002014-06-09T08:39:21.656+01:00Reminds me of the recent story about the NY Cop wh...Reminds me of the recent story about the NY Cop who bought a barefoot homeless man a pair of good boots. The homeless man decided to “hide“ them, as he said, and preferred to walk on his bare feet.<br /><br />That's how I see the capital controls: preventing that the rescue money and the rest of the deposits is used for something other than paying the bills.agen judi onlinehttp://goo.gl/StzUWonoreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-25244230552676943852013-05-30T12:00:08.726+01:002013-05-30T12:00:08.726+01:00Being a new blogger, I would like to tell you that...Being a new blogger, I would like to tell you that you have given me much knowledge about it. Thanks for everything.Vibration Switchhttp://www.acdmachines.com/electronic_vibration_switeches.htmnoreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-78646657789729994182013-03-27T08:02:58.146+00:002013-03-27T08:02:58.146+00:00There are good capital controls, like limiting spe...There are good capital controls, like limiting speculaton and movement of hot money and bad capital controls. Cyprus has been saddled with bad capital controls. Gary Andersonhttp://seekingalpha.com/article/1288731-the-confiscatory-cyprus-bank-tax-idea-destroyed-european-bank-confidencenoreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-56987087179519456322013-03-26T14:52:35.179+00:002013-03-26T14:52:35.179+00:00Thanks, Jake, expecially for the second point.
So...Thanks, Jake, expecially for the second point. <br />Sounds logic for me.<br />If no foreigner wants Iceland money and cant use it abroad, there is no risk for money drainage. That's a huge difference to cyprus.<br /><br />It needed time for me but I start thinking too, that the Euro is contraproductive toward the ideal of european unity. So it will be interesting how it couldt get dissolved carefully.<br /><br />Roger again :--)Rogernoreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-58072258945100753192013-03-26T01:28:35.334+00:002013-03-26T01:28:35.334+00:00Thanks Frances for a very good post, thoughtful an...Thanks Frances for a very good post, thoughtful and to the point.<br /><br />As you mention capital controls open a Pandor'a box. Once the Cypriot Euro is compromised by another currency in circulation (pounds, dollars dinars...) then we indeed have the problem of how to collect taxes to fund the bail out (or in depending on your orientation as debtor or depositor...) If a significant grey economy in cash (even multiple cashes) takes off then the Euro project become less a project and more of an "experiment."<br /><br />I note that Modern Monetary Theory posits that the money gains its legitimacy with the power to tax. If the power to tax is in Euros and the economy is in pounds then what happens? I can only think of Jesus flailing the money changers in the temple as a somewhat fit image.<br />David Petraitishttp://www.petraitis.usnoreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-82284123899547372692013-03-25T23:09:59.237+00:002013-03-25T23:09:59.237+00:00Corporate accounts are included. There will be a b...Corporate accounts are included. There will be a big hit to Cypriot SMEs.Frances Coppolahttps://www.blogger.com/profile/09399390283774592713noreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-65395016073850097272013-03-25T22:36:34.914+00:002013-03-25T22:36:34.914+00:00Very helpful summary. Can I ask a question. Is the...Very helpful summary. Can I ask a question. Is the confiscation limited to individuals accounts or are corporate accounts included?Graham Barneshttps://www.blogger.com/profile/05560365225407263116noreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-90226423653627430012013-03-25T21:57:56.934+00:002013-03-25T21:57:56.934+00:00The leading letter in the note serial number is a ...The leading letter in the note serial number is a country-of-issue identifier (see, e.g.: http://en.wikipedia.org/wiki/Euro_banknotes#Serial_number ).<br /><br />But nobody cares about the cash economy - the cash economy is a sideshow in Cyprus, not the main event. (Russia and Spain are a different stories, as is Greece becoming these days).<br /><br />I don't think this will lead to any rapprochement between the two halves of the island. Neither the Turkish nor the North Cypriot government is trusted/expected to negotiate in good faith when they have Cyprus over a barrel like this (whether this expectation is fair or not I can't say, but it's beside the point anyway - the expectation itself precludes such talks). It is more probable that assorted nationalist bigots will come out of the woodwork to capitalize on the chaos. That has, after all, been the experience in Hungary, Spain, the Baltics and Italy, to name but a few.<br /><br />- JakeJakeShttp://www.eurotrib.comnoreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-27028001770408831932013-03-25T21:47:53.727+00:002013-03-25T21:47:53.727+00:00The GB£ likely depreciated against the €-Mark beca...The GB£ likely depreciated against the €-Mark because British economic policy is even dumber and more austeritarian than German economic policy, difficult as that may be to believe.<br /><br />But caveat lector here: Usually you need way longer than 1 year time scales to see any effect of fundamentals in the currency markets - on a one-year time scale, the exchange rate is basically a martingale, and on a quarterly or shorter scale it's driven almost entirely by hot money chasing interest rate differentials.<br /><br />Capital controls are different in Cyprus than in Iceland, because Cyprus cannot print its own currency for its own local needs (well, it could print greenbacks and dare the ECBuBa to do anything about it). This inability means that Cyprus is dependent on having enough currency on hand to maintain the purely internal cash flows that keep a modern economy operating. Which means that it cannot simply put up a barrier against cross-border money flows and be done with it, the way Iceland could.<br /><br />- JakeJakeShttp://www.eurotrib.comnoreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-75151797217517364092013-03-25T19:24:25.924+00:002013-03-25T19:24:25.924+00:00Just some questions:
- If the trust in the Euro t...Just some questions: <br />- If the trust in the Euro that so much devastated, why did the british pound (and other currencies) devaluate against the Euro over the last years? I don't get the logic.<br />- To avoid bank run, capital control are a usual possibility. Why it should be awful to do in Cypria what they did in Iceland? Of course, in normal times capital controls are a no-go. But cyprus is not at all in normal times but was very close to the Iceland-situation, on the intensive care unit due to its broken banks. So is it it fair or at least intelligent to expect normal situations behaviour? <br /><br />Roger, without accountAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-9280703180899201022013-03-25T17:12:24.110+00:002013-03-25T17:12:24.110+00:00With this deal, what's the possibility of bank...With this deal, what's the possibility of bank runs on local banks in other small Eurozone members? Like Slovenia, for example. Would anyone keep more than 100000 Euros in any bank?crfhttps://www.blogger.com/profile/10726414637021391906noreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-17433763744423818752013-03-25T16:22:59.042+00:002013-03-25T16:22:59.042+00:00Looking at the Central Bank of Cyprus statistics, ...Looking at the Central Bank of Cyprus statistics, it looks like almost a third of deposits in the country are in foreign currencies (mostly dollars). Does this mean a chunk of BoC's debt will be written off using dollars? Prendergastnoreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-53490467969602193022013-03-25T16:18:57.764+00:002013-03-25T16:18:57.764+00:00Again, [citation needed] for the "ELA liabili...Again, [citation needed] for the "ELA liabilities are Greek and Cypriot government bonds". From there:<br /><br />http://www.ritholtz.com/blog/2013/03/cyprus-popular-laiki-bank-balance-sheet/<br /><br />It seems Laiki has only about 3 billions worth of things that could be government bonds at most ("held to maturity financial assets", including some of the other non-loans small items wouldn't change the argument materially). Even then, we don't know if that is what was pledged for the ELA, and at what price (or do we?).<br /><br />Even if it is the case that the ELA assets are not a sufficient match for ELA balance, I'll expect them to put enough of the other best assets to match. It's a bit of guesswork, but why would they otherwise leave any assets in Bad Laiki?cighttp://commentisglee.wordpress.com/noreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-5584657550893804392013-03-25T15:23:48.434+00:002013-03-25T15:23:48.434+00:00cig
The assets backing the ELA liabilities are Gr...cig<br /><br />The assets backing the ELA liabilities are Greek and Cypriot government bonds, neither of which are worth anything like the amount they say they are - or anything like the value of the ELA. They are, to put it bluntly, junk. Consequently the ELA liabilities far exceed the value of the backing assets. The ELA liabilities are being loaded onto the Bank of Cyprus balance sheet and large deposits will be raided to cover the difference between the value of the collateral (not much) and the value of the ELA debt outstanding. Frances Coppolahttps://www.blogger.com/profile/09399390283774592713noreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-64506230742027096312013-03-25T13:17:29.634+00:002013-03-25T13:17:29.634+00:00BoC's assets are also presumably inflated with...BoC's assets are also presumably inflated with the 9.2B worth of matching ELA assets, which should be the best assets from Laiki. It would be odd to leave the best assets of Laiki in Bad-Laiki!<br /><br />The BoC large-depositor haircut is (I would guess) against BoC's own bad assets, not as part of their role as the contractor operating Good-Laiki. All of this would be clearer if Good-Laiki was a distinct institution, but one can see why a merger is operationally more convenient.<br /><br />In any case, for the Cypriot banking sector Target2 balance with the eurosystem to change, there must be a cash flow which this reshuffle (as such) does not involve regardless of where Laiki assets end up. Or maybe I've completely misunderstood what Target2 is.<br />cighttp://commentisglee.wordpress.com/noreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-35820694824982235102013-03-25T11:58:12.972+00:002013-03-25T11:58:12.972+00:00That's because you're parsing the newspeak...That's because you're parsing the newspeak wrong. "Restore trust" means "reassure Bild Zeitung's readers," "the Eurozone order" means "German hegemony," and "discipline" means "Germany's dead-end economic policies."<br /><br />- JakeJakeShttp://www.eurotrib.comnoreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-85230556831277145762013-03-25T09:49:24.289+00:002013-03-25T09:49:24.289+00:00On the plus side (if there is one) this may be an ...On the plus side (if there is one) this may be an opportunity for the two sides of the island to improve cooperation. I can see a trade of Euros and commodities crossing the border and entering/exiting via Turkey which is not subject to any controls. In fact I find it hard to see how capital controls of cash can actually work. Euro notes are not national in their design (coins are) so unless people are tracking the note number, there is no way of knowing the origins of a Euro from Cyprus spent in a shop elsewhere in EZ.<br /><br />On the minus side, having to hold everything in cash can only lead to an increase in crime, along with the inevitable crash in the economy. This doesn't sound good for tourism which will be the main economy at least until something else turns up.<br /><br />Of course these two are linked - it is an opportunity for gangsters from all sides to make a profit. The Mafia does not respect capital controls.<br /><br />Sad. What a mess.<br /><br />There will be blood on the hands of Cypriot banks, politicians, Greece and of course Germany which really has stood in the way for a long time. <br /><br />As JakeS said, it is really pour encourager les autres.<br /><br />Poor people.<br /><br />John@TheMoneyPrinciplehttp://www.themoneyprinciple.co.uknoreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-51343236204548128802013-03-25T05:50:44.551+00:002013-03-25T05:50:44.551+00:00Warren Mosler's proposal:
"ECB guarantee...Warren Mosler's proposal:<br /><br />"ECB guarantees deposits for .25% annual fee<br />ECB takes over regulation, supervision, enforcement of banking regs etc.<br /><br />This becomes the model for regulating all EU banks<br /><br />I finally got a quick minute to add some color to the above proposals from earlier today.<br /><br />With about 70 billion in assets, the banking system has negative capital of about only 2 billion, or about 3% of assets. And that no doubt includes markdowns on EU member nation debt that ‘goes away’ with the ECB ‘doing what it takes’ to sustain solvency."<br /><br />More here:<br />http://moslereconomics.com/2013/03/22/cyprus-proposal-detail/CarpeDinkumnoreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-28229417663489200022013-03-25T03:58:45.102+00:002013-03-25T03:58:45.102+00:00Bertram "A chopped off head of the Cyprus chi...Bertram "A chopped off head of the Cyprus chicken would restore trust in the eurozone order and help to enforce discipline"<br /><br />I see it as the exact opposite. A lack of trust in the eurozone due to the ham handed enforcing of disciplineFatboyhttps://www.blogger.com/profile/13777120295384956611noreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-18459198989798449022013-03-25T01:36:10.928+00:002013-03-25T01:36:10.928+00:00That's not my understanding of the reason for ...That's not my understanding of the reason for the capital controls. The reason is to prevent bank runs - which have been happening ever since the attempt last week to haircut small depositors. The flow has been stemmed for the moment by the bank holiday, temporary restrictions on electronic transfers and limits on ATM withdrals. Once banks reopen, though, there is a real risk of major outflows. The capital controls bill has been put in place as an emergency measure to prevent those outflows.Frances Coppolahttps://www.blogger.com/profile/09399390283774592713noreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-73948824433502141682013-03-25T01:31:45.789+00:002013-03-25T01:31:45.789+00:00No. The ELA balance is being transferred to the Ba...No. The ELA balance is being transferred to the Bank of Cyprus so that it can be included in the haircut on Bank of Cyprus depositors. In effect, BoC's debts are being inflated by E9.2bn then written off against its large deposits. That settles the Target2 balance without involving the central bank of Cyprus. Frances Coppolahttps://www.blogger.com/profile/09399390283774592713noreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-7738732811413850512013-03-25T01:27:05.994+00:002013-03-25T01:27:05.994+00:00Reminds me of the recent story about the NY Cop wh...Reminds me of the recent story about the NY Cop who bought a barefoot homeless man a pair of good boots. The homeless man decided to “hide“ them, as he said, and preferred to walk on his bare feet.<br /><br />That's how I see the capital controls: preventing that the rescue money and the rest of the deposits is used for something other than paying the bills.<br /><br />Maybe that's not nice. Maybe everone should have the right to gamble with his live (or with the pension funds of the people). <br />zatnoreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-7979826533712489302013-03-25T01:09:00.245+00:002013-03-25T01:09:00.245+00:00I think you're at serious risk of being deligh...I think you're at serious risk of being delighted then. It worked for the 100K thing. Soon the problem we'll have will be merely democratic accountability: that you make eurozone policy without being properly elected! :-)<br /><br />I would think that the core infrastructure you need to bank overseas is there, it just means Cypriots behaving (financially) like eurozone tourists. Local "banks" become effectively cash machine operators/cash deposit processors on behalf of overseas banks. The one thing that would be slow in that scenario is to have overseas or otherwise new institutions filling the void on the local loans market.<br /><br />Re Target2, I don't understand how transferring the ELA balance from one private sector bank to another changes the net balance with the ECB at all. Are you perhaps confusing the Bank of Cyprus, a notionally private sector bank, with the central bank of Cyprus?cighttp://commentisglee.wordpress.com/noreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-20525896018000379192013-03-25T00:48:46.495+00:002013-03-25T00:48:46.495+00:00There are conflicting reports on the original nego...There are conflicting reports on the original negotiations. The most definitive account is in the Wall Street Journal, which is behind a paywall. The WSJ says the small depositor haircut was suggested by Asmussen of the ECB. Frances Coppolahttps://www.blogger.com/profile/09399390283774592713noreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-87448550348164019502013-03-25T00:40:32.073+00:002013-03-25T00:40:32.073+00:00"Losses on small depositors was suggested by ..."Losses on small depositors was suggested by the ECB"<br /><br />[citation needed]<br /><br />I'm genuinely curious where you got that from, as it contradicts some other reports.cighttp://commentisglee.wordpress.com/noreply@blogger.com