Mystery Economic Theatre 2013

[Brian-E]

Back in 1957 the BBC successfully fooled thousands and thousands of people into believing that spaghetti grows on trees!

[jasong]

I think one of the best ways to make a money comparison that deals with inflation is to mentally buy gold with the money you have in the period in question. If the total gold goes up, actual value has gone up, if it goes down, value has gone down. It's sort of a new take on crowdsourcing, a million morons doing their own thing somehow manages to form into the right answer.

I haven't looked into this, but I'm guessing when the value of gold spikes, then it's a good idea to not get into risky investments. Call it a theory :)

[Batalov]

Originally Posted by garo

Take the ZeroHedge test:
http://nihoncassandra.blogspot.com/2...edge-test.html
...

Originally Posted by jasong

I think one of the best ways to make a money comparison that deals with inflation is to mentally buy gold with the money you have in the period in question. If the total gold goes up, actual value has gone up, if it goes down, value has gone down. It's sort of a new take on crowdsourcing, a million morons doing their own thing somehow manages to form into the right answer.

I haven't looked into this, but I'm guessing ... :)

Obviously, you haven't taken the test.

[jasong]

Originally Posted by Batalov

Obviously, you haven't taken the test.

Did you know Republicans are more likely to laugh at stuff that parodies their point of view than Democrats in a similar situation?

[Fusion_power]

Doesn't anyone want to comment about the debacle in Cyprus as linked above? Bank deposits will be subject to a special "tax". No matter how you slice this, the meaning is clear. There is no "moral hazard" for EU lenders. Meaning that they won't accept a loss no matter what. The moral hazard has all been transferred to the owners of the deposits.

It is not just what is being done to Cyprus that is a problem, it is the certainty that it will be done again to the next country to request a bailout. The predictable result will be massive runs on banks at the slightest sign a nation is in trouble. Instead of having deposits in the bank to mitigate the stresses of a bad economy, the banks will be faced with rapidly declining deposits at the very time they are most needed. More important will be the insidious flow of cash out of countries having difficulties. The money has to go somewhere and putting it in a mattress will only work for a certain amount. It will flow into "safe" economies as deposits. So the EU will have to figure out how to trace down the accounts of citizens no matter what nation they are held in. Do you smell escalation?

DarJones

[cheesehead]

Originally Posted by Fusion_power

Doesn't anyone want to comment about the debacle in Cyprus as linked above? Bank deposits will be subject to a special "tax". No matter how you slice this, the meaning is clear. There is no "moral hazard" for EU lenders. Meaning that they won't accept a loss no matter what. The moral hazard has all been transferred to the owners of the deposits.

It is not just what is being done to Cyprus that is a problem, it is the certainty that it will be done again to the next country to request a bailout.

Perhaps the tax's "real" aim is to discourage future bailout requests.

The predictable result will be massive runs on banks at the slightest sign a nation is in trouble. Instead of having deposits in the bank to mitigate the stresses of a bad economy, the banks will be faced with rapidly declining deposits at the very time they are most needed. More important will be the insidious flow of cash out of countries having difficulties. The money has to go somewhere and putting it in a mattress will only work for a certain amount. It will flow into "safe" economies as deposits. So the EU will have to figure out how to trace down the accounts of citizens no matter what nation they are held in. Do you smell escalation?

... and perhaps those who designed it for that "real" aim didn't think through the ramifications well enough.

[wblipp]

"The Eurozone and the EU will survive the current crisis over Cyprus and, in doing so, take a major step towards full political union."

Will Hopper was a neighbor in 2010, the year my wife and I lived in London. I think his book, The Puritan Gift, may become a business classic on the rise and fall of American Capitalism. He has oddball takes on the European Situation that often turn out to be correct. Today's blog stakes the position of inevitable and desirable political union.

[davieddy]

Originally Posted by wblipp

Hopper was a neighbor in 2010, the year my wife and I lived in London.

Shades of Blue Velvet there William.
You don't mean Dennis in Lumberton do you?

D

[wblipp]

Originally Posted by davieddy

Shades of Blue Velvet there William.
You don't mean Dennis in Lumberton do you?

D

Will reminds of Grace more than Dennis.

[Fusion_power]

The Cyprus Solution is now in place. Depositors with more than 100,000 euros in an account will be clipped on the pretext that accounts are only insured up to the 100,000 mark. They are expecting to clip 4.2 Billion euros off of 38 Billion in uninsured deposits.

How did the banks get into this shape? It started with setting up the country as a tax advantaged banking and finance center. The banks then offered relatively high rates of return for deposits. This attracted exorbitantly high levels of deposits which are currently about 8 times the nation's GDP. The banks were able to buy debt in amounts far exceeding safe levels and invested heavily in Greek debt which received a 75% haircut about a year ago. The resulting losses left the Cypriot banks financially insolvent. I have not checked for other losses that affected the outcome, but you can bet that Greek debt was the tip of the iceberg.

The proposed solution is to combine the largest 2 banks - Bank of Cyprus and Laiki - into one good bank and one bad bank. Laiki, the bad bank, will be scuttled while deposits are transferred to Bank of Cyprus.

Now this brings up one really interesting question. What happens to the @4.2 Billion euros that will be clipped from accounts exceeding 100,000 euros in value?

DarJones

[R.D. Silverman]

Originally Posted by Fusion_power

The Cyprus Solution is now in place. Depositors with more than 100,000 euros in an account will be clipped on the pretext that accounts are only insured up to the 100,000 mark. They are expecting to clip 4.2 Billion euros off of 38 Billion in uninsured deposits.

How did the banks get into this shape? It started with setting up the country as a tax advantaged banking and finance center. The banks then offered relatively high rates of return for deposits. This attracted exorbitantly high levels of deposits which are currently about 8 times the nation's GDP. The banks were able to buy debt in amounts far exceeding safe levels and invested heavily in Greek debt which received a 75% haircut about a year ago. The resulting losses left the Cypriot banks financially insolvent. I have not checked for other losses that affected the outcome, but you can bet that Greek debt was the tip of the iceberg.

The proposed solution is to combine the largest 2 banks - Bank of Cyprus and Laiki - into one good bank and one bad bank. Laiki, the bad bank, will be scuttled while deposits are transferred to Bank of Cyprus.

Now this brings up one really interesting question. What happens to the @4.2 Billion euros that will be clipped from accounts exceeding 100,000 euros in value?

DarJones

I have no sympathy for the bond holders. But the depositors got scrod....

......
A man jumps into a taxi in Boston and says:

"Take me to where I can get scrod".

The driver responds:

"That's the first time I ever heard it in the past pluperfect".