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Anorak | Cyprus insanity: You can trust the Eurocrats to do the wrong thing

Cyprus insanity: You can trust the Eurocrats to do the wrong thing

by | 22nd, March 2013

Cyprus Financial Crisis

OVER this Cyprus thing. They’ve decided that everyone who has their bank deposits guaranteed by the government of Cyprus must lose some of their bank deposits guaranteed by the government of Cyprus. Which is insane.

Here’s the real basic problem: banking is inherently unstable. No, I don’t mean casino banking, excessive trading and all that stuff. Because banks don’t keep your money in the vaults, they lend it out to other people. So if we all turn up one day demanding our cash the banks go bust simply because our cash is invested in Mrs. Miggins’ mortgage.

The solution to this is that the government offers deposit guarantees. Not to everyone of course: the rich are presumed to be big boys and know what they’re doing. But to small depositors, you and me, they guarantee that if the bank goes tits up then they’ll make good our small deposits.

So, all the Cypriot banks are tits up. The money that was put into the accounts was then lent

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Posted: 22nd, March 2013 | In: Money Comments (3) | Follow the Comments on our RSS feed: RSS 2.0 | TrackBack | Permalink