Coming to a bank near you?

[Wino]

Cyprus to take 10% of savings

Is this just a harbinger of things to come for all countries? Roll it out small, work out the bugs, then bring it to the world at large?

Just something to think about.

[lorraineb]

How to ensure a quick run on all banks

[Wino]

Update on the crisis in Cyprus

Now, imagine you have money in the bank in Greece, Italy, Spain, or Ireland. All of these countries have been targeted by the IMF for not paying the way they are accusing Cyprus. Now, you have $100K Euros in the bank.

What do you do? Wait until the "bank holiday" is declared in your country and you cannot get to your money before it becomes $90.1K Euros overnight? Or do you go to the bank tomorrow and pull out everything and put it somewhere safe, like in a mattress or safety deposit box?

Like I said originally, is this coming to a bank near you soon?

And don't think the US and UK are immune from this. All it takes is one stroke of the "executive order" pen, and your money is gone, too. I think this will have international repercussions not foreseen by the perpetrators.

As they say in the nautical world, "Stand by for heavy seas!"

[GrimJack]

You are comparing the largest economy in the world with Greece (34th - with a GDP less than .5% of ours), Spain (13th - 1/70th), Italy (8th - 1/35th), and Ireland (44th - less even than Greece).

Have you read about Chicken Little? You might want to refresh your memory. Many of the individual states in the US have larger economies than these countries. There is no rational way to even bring those economies up in the same breath as the US economy. But go ahead and withdraw all your money and hide it somewhere.

[Wino]

That's great, GrimJack. Of course, you didn't see this follow-up to the follow-up?

European Bank Shares tumble in Cyprus fallout

If I'm Chicken Little, then you're the proverbial ostrich. Go ahead and bury your head in the sand. If you can't see it, it is not happening.

There's no way that bank failures and runs on banks in Europe can have any effect on the US or UK, right?

Of course, this Financial Times' columnist has a different take. On Saturday morning, the finance ministers of the eurozone may well have started a bank run

Equity markets were underscoring the more immediate worries, however, that the Cyprus deal could see savers and firms in other highly indebted countries like Italy and Spain rush to pull money out of their own banks.

And from Reuters:

The euro fell sharply on Monday, hurt by news of a bailout plan for Cyprus that will tax bank deposits and which has raised fears of bank runs elsewhere in the euro zone.

Yep. Nothing to see here. Move along.

[kork13]

Realistically, it won't have a significant impact on the US. As GrimJack stated, the Cyprus GDP (~$25Billion per year) is pennies next to the US. The US literally spends the entirety of Cyprus' GDP every 3 days.

The 24-hour news media loves to sensationalize headlines, but when you get down to it, life goes on. When Iceland went belly-up, the US barely even flinched. Zimbabwe's currency flop meant zilch to the US economy. Even the huge issues with the Greek gov't has barely even skinned the knee of the US economy. Bottom line: scale matters. For example, when the US economy had a "fission event" 5 years ago, the world recoiled. Why? Because the US economy (GDP: about $15Trillion) is over 20% of the GLOBAL economy (~$70Trillion), not to mention its status as the world's largest governmental lender.

You point to the stock market as an indicator of the impending doom triggered by Cyprus' fiscal problems. Allow me to demonstrate the fallacy of that argument:

WSJ Headline: "Cyprus Fears Trigger Losses for Futures"
U.S. stock futures fell Monday as an unprecedented Cyprus bank-deposit levy triggered global stock losses. About 90 minutes ahead of the open, Dow Jones Industrial Average futures were down 80 points, or 0.6%, to 14353. ... Standard & Poor's 500-stock index futures dropped 13 points, or 0.8%, to 1541 and Nasdaq-100 futures shed 25 points, or 0.9%, to 2766.

The "Cyprus problem" has not rocked the global financial system in any way. Those variations in the stock market are standard -- the exact same variance that you would expect to see in any random day of trading. By comparison, on the first day following the bankruptcy of Lehman Brothers (generally considered the tipping point of the most recent recession), the S&P 500 saw a one-day drop of 4.4%. In the days following 9/11, shares fell as much as 7.0% in a single day.

So yes.... Nothing to see here, move right along. The events unfolding in Cyprus, while unfortunate for the Cypriots, is not something that anyone here in the US needs to be terribly concerned about (unless they hold significant equity in a Cypriot olive oil operation -- in that case: PANIC!!!!)

[kork13]

P.S.:

WSJ Headline: "Markets Unfazed By Cyprus Bailout"
For an unprecedented development, the reaction was decidedly run-of-the mill. The €5.8 billion ($7.6 billion) levy on depositors in Cypriot banks unsurprisingly caused investors to shy away from risky assets as trading started on Monday; the euro, stocks and southern European government bonds all fell. But crucially, they didn't fall by much. Investors' main concern is Cyprus's ability to implement the tax, not the tax itself. Europe's safety net is still working.

[Wino]

Shareholders in Spanish banks see 90% losses

Have you heard all of the advice from folks telling people who want loans on good terms that they should go to Credit Unions?

If you belong to a credit union, you are a shareholder. Cyprus has frozen withdrawals at about 100 Euros. Spain is wiping out shareholders (mostly small investors who may or may not have thought of the shares as deposits, not shares).

Who's next?

But remember, as others have said above, the Euro collapsing won't have any effect on the US, because our economy is too large. Too big to be affected, too large to fail. Twenty-six percent unemployment in Spain is very small compared to the population of the US.

Things are decidedly NOT looking good for European banking in general.

[wingman007]

Domino Effect

Through experience, we have all seen the domino effect from other failing economies worldwide. Therefore, to think what goes on abroad has no effect locally is really dangerous thinking. I'm not an economist nor psychic, but it is all relative.