In which: the Cypriot depositor tax gets rebranded as a bank, ah, bankruptcy; and the Europeans flee to bitcoin, which is possibly not as weird as what we do now.
Link: all the drama.
The good folk at the EU, ECB and IMF had promised to cut off funding to the Cypriot banks today if things weren’t sorted. And it seems that the Cypriot government “managed” to avoid imposing the depositor tax on bank balances below €100,000.
However, part of the alternative plan was that Cyprus’ second-largest bank fold. Cyprus Popular Bank will be wound down, with its assets being taken over by Bank of Cyprus (the largest one); and the deal will wipe out uninsured depositors and bondholders (although unnamed sources would “reassure the public” that these losses will be limited to 40% of their holdings).
Point of Information: Cyprus has a deposit protection scheme which guarantees that deposits of up to €100,000 will be covered in full in the event of a bank failing.
Which implies that “uninsured depositors” are “any deposits greater than €100,000”.
So Cyprus didn’t really do away with the depositors’ tax. What it did was impose the full tax on the >€100,000 depositors of Cyprus Popular Bank.
The banks are remaining closed until further notice. And the capital controls imposed last week will remain in place.
Link: what’s happening.
In reaction to the Cypriot crisis – it seems that some of the Spanish are “fleeing” to bitcoin territory. The evidence: a sudden spike in the downloads of bitcoin apps. And this graph:
According to Nick Colas, who is chief strategist at a company I have never heard of (ConvergEx Group):
“This is an entirely predictable and rational outcome for what’s happening in Cyprus. If you want to get a good sense of the stress European savers are feeling, just watch Bitcoin prices.”
Does it not seem almost entirely absurd? A digital currency that can be “mined” by supplying the processing power of your computer to be used in the calculation of equations – and that ‘currency’ has increased in value by some 15% in the last few days.
I suppose it’s no more absurd than a fiat currency regime created by a Central Banking mint.
That’s all for now.
Have a good day.