Excellent article, thanks!
Excellent article, thanks!
I'm cetainly not advocating it, and am not knowledgable enough to think it through, but just for the sake of discussion, it could be an alternate (read "another') form of taxation.
for instance, in USA, all bank balances above 250K are subject to taxation, not just on the interest, but also on the principal.
either you invest it, or we will spend it.
What an important piece ! Dated Mar 28, 2013, it fills in gaps not explained in the daily 3-hour CNBC Squawk Box I record before the market opens. I have seen every report from its ace reporter sent to Cyprus and some other reports/analysis on Fox Business cable t.v. since last week. The first page of this article alone fills in some gaps for me not addressed in what I have seen on financial cable t.v. And I have only read the first page of this piece since I am not registered at the site and cannot see the 2nd page.
The first page (my summary): The FDIC and Bank of England jointly put out a report last December 2012 explaining contingency plans as originated by elements of G20 that the current execution of the Cyprus banking âbail-inâ appears to be stylized after. [Bail-in relates to the corporate capital structure, like stock and bond holders, taking the wrath for failure-- not tax payerâs money through their government in a bail-out.] And hey, what a plus ! ..... In the case of a bank failure, it happens to be a corporation that has cash on hand to expropriate from depositors. Maybe, then, wiping out all the investor/creditors and depositors will clear the bankâs financial problem. In return, a new capital bank structure occurs like the Phoenix rising out of the ashes and handing out IOUâs from the new entity in the form of stock in the new bank. The article explains traditionally our cash deposits have always become property of the bankâs with an obligation to pay it back to us depositors. The new plan emanating from G20 allows for the bank to keep our cash, and we become stock holders of the new bank. Just what I always wanted. Itâs one way to own stock without paying your brokerage a commission.
Two gaps this fills in for me that arose when I watched the CNBC reporterâs coverage on location in Cyprus since last week. This now explains more specifically why in her report the Russian oligarchs (and others with 100,000 Euros on deposit) at the Cyprus banks âhave become share holders.â She explicitly said those words just incidental to some other broader context she was reporting. She never explained it or the origin of it. Frankly I donât think she knew. I am speculating we all soon will know because of the following which is the second gap I experienced last night, Thursday: I saw an interview by Lou Dobbs of Fox Business of an English legislator addressing his country putting together an emergency fund to address what may become a spreading loss of confidence in European banks and runs of them, with depositors withdrawing their money and collapsing banks. I am supposing when Europeans become aware of information as reported in this piece (the link directs us to) and elsewhere, there will become a strong wake up call for depositors to contemplate becoming part owners of banks in return for loss of their money. Thus the Bank of England is attempting now to develop a cash buffer.
The U.S. next ? What we have been told repeatedly is that European banks are undercapitalized, especially in comparison to U.S. banks that started to recapitalize soon after the credit crunch of 2008 â 2009. Regardless, how do you think U.S. citizens are gonna take to this G20 plan when becoming largely aware of it ? Iâm guessing its not widely known that effective Jan 1, this year, U.S. citizens must hand over 30% withholding to the IRS when transferring money overseas.. Geesh ! Canât keep your cash in banks at home nor send it overseas. I wonder if they (âauthoritiesâ) can get their hands on our cash turned into gold stored in the bankâs safe deposit box ? If not, maybe gold bullion and coin will become illegal to own. Ridiculous ? I suppose it would be if you believe in a good track record of nothing having been ridiculous so far.
Now will someone please paraphrase the essence of the next page in the article ? Iâve gotta go watch this Friday morningâs recording of CNBCâs Squawk Box.
Oh, and by the way, maybe it is the G20 plan that Dutch Finance Minister who heads the Eurogroup of euro zone finance ministers who made the gaff the other day about the Cyprus banking "resolution" will become the "new template !"
I think I heard that he was forced to come out after making that remark to "restructure" (pun intended) his remark into a less provocative way. (Bank run, anyone ?)
I have been hearing ever since, this word "template" over and over. It just fills another gap for me......template = G20 concoction.
it all comes down to an opinion on wealth redistribution. I mean, that's all economics really is. Just the constant debate about whether we should redistribute like when a Monopoly game gets too one sided, or should we just let nature take it's course?
Yes, except the bank deposits have already been invested in government bonds and they've already spent it.
The depositor haircut is just an admission that the money is already long gone.
can you clarify? i have more than that in the bank,but never saw any taxes or any other tax forms,besides 1099 INT
looks like it's time to spread the money all over the place.
deucy28-same question about 30% withoholdint tax. where can i find more info about it? are you sure that you not cunfusing it with 'exit tax?'
I meant, a wealth tax on money over the FDIC coverage could be taxed (confiscated).
keep in mind, in years past, the government was making money on deposits because they were paying interest, and like you say, interest is taxed. But now it is just sitting there, you aren't making any money and they aren't making in money by taxing practically nothing
spread the money? Isn't that the big question? You can't give it to somebody else without first taking it from me
but then again, I always said, "If the whole world spent like I do we would be in a great depression."
take it from me, give it to the spenders, I'll get it back again
some people like spending money
some people like making money
in my whole life it is very rare to find somebody, the old Silas Stingey, who just likes having money, so they are not really worth considering, but like the Bible says, invest it, or even that which you have will be taken away
Yes, the money is long gone.
Fortunately for now at least, there doesn't seem to be a lot of inflation ramifications so printing seems to be working, here in the US at least.
I can't see that working forever, as if it sounds too good to be true, it usually is.
Maybe while we still maintain the word's reserve currency status we can keep printing and exporting our inflation however and thereby be immune from things like this.
One thing is for certain..... the politicians WILL not reduce spending, until there is no alternative. The "people" want their government cheese, even though they claim they want spending reduced and taxes to not go up.
it's all fine until it is not fine.
what is your plan of action?
Use multiple banks. There's no reason to have more than FDIC maximum sitting in any single bank as loss of funds has a greater probability than diversification. It's what I advcoate in my trading accounts too. MFG/PFG taught us that lesson for sure.
how about the oldtime disaster fund?
doubt it would make any money, but it is very easy to talk the book
that's what i'm planning to do ASAP. as for FDIC-there is a multiple owners on this particular account,so -for each of them 250K coverage should apply. i mean-if you have a joint account-the total coverage would be 500K. i'm wrong?
Oh I don't disagree. I happen to think the odds are better that it ends badly than not.
I am fairly well hedged and do hold a wide range of asset classes, with plenty of inflation protection in mind.
I don't hold a lot of cash in my personal bank accounts, but our business does hold a lot of cash at any given time out of necessity.
I 10%+ haircut like they had in Cyprus would be a huge problem for the business that we operate.
keep your money in brokerage account not in the bank (which is not bank anymore but rather a bond house and insurance company)
This is why private credit unions are good choices.
I'm surprised this is the first mention of credit unions, they're generally a good way to go.
Sounds like a good Idea.
I was thinking about that one. A credit union wouldn't be subject to the mess if emergency gov't measures were put in place?
Were there credit unions in Cyprus who never even closed its doors during that week?
I don't know about Cypress in particular, but in terms of the US credit unions are usually insured by a different entity (NCUA), and generally offer more conservative loans to their members. Not to mention they're smaller, and usually regional.
And they have no derivative exposure, as they are privately held by members of the Credit Union (depositors).
I wonder if deposits in a institution like the former ING would be at risk?
Did I say "tax" or did you ?
I did a search not that many weeks ago on ET for what I am talking about and was stunned not to find any posts addressing this. Of all web sites, too !
I suspect many do know with what I speak, and I am going to find them and join that conspiracy of quiet. We don't want to start a bank run of ET posters, do we ? ..... and we certainly don't want to open the flood gates bigger of expatriates
....until I close me real estate transaction on my home in S. America.
I intend to be far away....
....and high as possible
....shhhhh..... You are left to your own devices until then.
it would be plain dumb luck if they did not get the same haircut as other financial institution if there is reason to think otherwise someone please post.
1. The executive branch and half the Senate will not reduce spending, you are right. It wants to do the opposite. And FAST ! ..... Get your decoder ring: more 'revenues" (how deep are your pockets ?) and more "investments" into the 26th best education in the world and into picking winners in the private sector. All done efficently, mind you. "Shovel ready jobs" was already used, and it knows it can't go with that one again.
2. At least half the people do "want their government cheese" which is why point #1 is the way it is."
3. To "claim they [including suckers of government tits included in point 2] want spending reduced and taxes to not go up" need clarification.
A. Half are ok for continued spending and for taxes to go up on themselves within reason, because the country has moved that far left due to promises from demogogues, liers, and hippy generation professors that have them sold on the nanny state. (Now tell me again why Europe's banks are undercapitalized and it has PIIGS countries.)
B. Of the next half, half of them want spending to be reduced as long as they themselves are not affected; and as long as taxes go up on the "rich" [capitalists, job creators, etc.] that already pay most of taxes and not for themselves to have to pay.
C. This #3 point is cause for point #1 also.
I am concerned about--and the use of a label--"confiscation schemes." But it is manifestly evident in the last 4 years with respect to our money, (1) there is acceleration of government invasion of privacy, e.g., overseas banks forced to report U.S. citizens' deposits, (2) erosion of our personal independence and wealth with what it takes from and returns to us, (3) its insane "printing" of money that is/will drags the strength of the dollar, (4) and implementation of currency controls with respect to erecting impedence of how much and where we can take our money. It's an accelerating slippery slope, not unlike bites to the ankle always nipping at quality of life the last 15 years and into the near and intermediate future. At some point this frog slowing its swim in the continually heating water won't be able to jump from the pot just before it heats to a boil should we remain on this presently projected path.
Then there is the demographics not enough attention is directed to that all by itself is potentially implosive- causing, but that is a different subject. I'm going surfing (link in second post...labeled "surfer boy with trader").
My understanding is that Credit unions were also in some jeopardy in connection with the financial crash, because the large majority of them had all invested in some derivative instrument marketed by one of the banks in order to get higher interest income, which swung around in value.
That is a propaganda term devised by the republican party
they thought it sounded less offensive than "the rich"
Warren Buffet and Bill Gates are the two richest Americans
How many people do they employ?
The United Way and Red Cross probably employs more than both of them combined
yeah, that Warren, he's one hell of a job creator
How many employees would he fire if you raised his taxes?
Like most good businessmen, nobody has one more employee than they actually need, regardless of the rate
if you ask me, this whole focus on jobs, especially the FED mandate is totally misguided
Jobs and employment are an elitist concept created by Ivory Tower snobs
They need people to have jobs so they can control them
entrepeneurs make them very nervous, especially the poor ones out where I live who have never worked a day for anybody else. They just got a good deal on a back hoe and know how to use it if you have money and they are in the mood.
I'm guessing you're referring to Cypress, but as far as I know most, if not all, credit unions in the US don't have derivative holdings.
Well I must have missed that at my stock brokerage.....that like-FDIC coverage for my account, with the exception of a few things.
But I am glad to have that SIPC as I caught my young stock broker/brokerage owner at work (not working) and his high maintenance wife with a few yacht buying guides and various brochures on his desk of Caribbean ports-of-call. When I asked him if they had plans, he didn't reply; he just blushed.
In just the last week, I read in Money Magazine, that generally credit unions have a disproportionately larger number of defaulted loans. I will try to remember to look for that citation and reference the page number and issue date.
But to your broader point, I don't know anything more than what I posted earlier about the G20 and anything in its plan to include all depositories like credit unions.
Just google: dutch fiancial minister for Euro Zone to find more on the headwaters of where this new "template" for bank failurs is coming from. It includes many links including this one........
FDIC is a gimmick so people think they are covered and it only works if one bank in 100 years goes under. Other than that you are on your own. FDIC has almost no money to cover potential liabilities stemming from multiple concurrent bank failures.
In brokerage account if you hold assets not cash than they are generally safer other than usual market risk.
Just keep in mind that cash is paper too and changes its value as any other asset so there is risk holding cash. Not to mention pressures stemming from hyperinflation that we are experiencing today with 3 times growth of monetary base in just few years(it just did not blow out so nobody is aware of it yet and once people notice it will be too late as always).
hehe.......I will let your opinion stand on whatever merit it has that the wealthier class is more to be looked at as offensive rather than capitalists and job creators. It appears to me over the years, republicans tend to have less use for "politically correct" than their nemesis party, and I've observed use more defining labels on things. Dems appear to code things ..... "revenue" for taxes...."investment' for never-ending hemorrhaging of money (always better to be a sugar daddy for re-election purposes. Can't blame, them....It works !) And recently, I have seen republicans using the same words, so it must be a politician thing. IMHO "the rich" is a dirty label others like to use with disdain; I really heard it in Europe like Satan incarnate. Those were in my younger days when I didn't know if wealthier were actually evil folks there, or were just severely envied upon.
(For the record, I am not a party animal, and I don't think too spectrum left or right. I am an economics animal. I do know what drives jobs creation, and one would have to be blind today to see what has become a wet blanket on it.)
having a link is nice..thank you..however having an answer is much better and more productive. next time you ask-how to make a money of stock market-i will point you to few books..each of them 600+ pages long..no guarantee that you will make any money after reading them
take care my friend..
Why would they get a haircut when they wouldn't need to be bailed out? Are you trying to say the government will take all savings in all banks regardless of whether or not that bank needs saving?
While anything is possible, I think that's simply not going to happen.
Add Canada to the list.
Recent economic blueprint of Conservative Party wants to use (in unlikely scenario of course) certain bank liabilities (i.e. accounts) to fund banks bailouts.
If that is true are they talking about transferring money from savers to shareholders to keep government bond printing intact?
Not bad! Communist revolution is spreading around the world comrades!
you sound like you are old enough to remember Jimmy Carter. It was much worse back then. Everybody coming on the scene were ex hippies. Nowadays, we also have the yuppies still hanging on, and they liked being rich.
otherwise, propaganda is much more entertaining than policy
"a balanced approach" means in reality "Raise taxes now, and we will cut spending when we run out of money."
Indeed ! I enjoyed the laugh at the balanced approach explanation. The personalities under the capital dome are so broken of full, fiduciary faith to the good of the country, the wonderful system in place with its warts, blemishes, and some serious flaws have been corrupted into severe dysfunction at a time more so than ever when it needs to be running on Slick 50. (Whoops. I should not have used the word slick.)
Yup, I was 20- something during Carter, and I can relate. Strangely, I embrace the differences between generations. Makes for a lot of interesting dynamics, and life is not boring. For the republicans in the news its now the young Turks gonna move the old guard aside and sweep the floor of stuck-in-the-mud, non-effective leaders, so the current drift appears to be. For the dem's I can believe there is horrific frustration by the junior set elected with passion in their hearts to make a difference but are faced with "We'll read the bill after it becomes law," leadership mentality and Mt Rushmore size ideology trumping common sense that would otherwise allow constructive dialogue and compromise. Not that dem's have the corner in the market on those characteristics, as I am struck with it from all directions.
If the good fairy were to come along and unwind the dysfunction tomorrow and purge the unwarranted gridlock, our economy, banking, and government could become effective again. Banking is only as good as the economy, and government is only as good as the astuteness of citizens that elect those who run it. Education as poor as ours won't be making any inroads soon in graduates with a functional grasp of history, economics, and motivation to stay informed by important current events that in the end would allow for a better voter and elected quality of leadership driven to affect our future by performing for the nation, not for self aggrandizement and posturing for the next election.
well at anyrate, all economics comes down to two camps. I started another thread on the "Economics" forum just to discuss this.
and it all comes down to "wealth redistribution" or just letting the best man win..
It's kind of scary, because when it's all said and done, there is no intellectual answer.
It all comes down to old fashined physical warfare. The team that's got the biggest baddest warriors who can beat your ass with superior weapons (and I mean the kind that can kill you physically dead) or the team that has the most devoted soldiers who are willing to give up their physical life (I mean giving up your life for your belief) will win.
It aint much different from the old Hollywood Westerns where a bad guy takes over a town, and a hero comes along and shoots him.
With that description, no argument: It's kind of scary.
600 pages to read to much for u to handle?