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Written by Administrator
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Tuesday, 26 March 2013 22:46 |
 Jeroen Dijsselbloem, the Dutch finance minister who has been chairing the Eurogroup committee of finance ministers for two months, said that the Cyprus model (of stealing depositors' money to bail out banks) would be extended to other countries and situations to avoid the injustice of having taxpayers shell out for the risky behavior of bankers.
Firstly, aren't depositors and taxpayers largely the same group? And how are bankers suffering in this deal where depositors lose 40% of their savings and bankers keep their jobs? Wasn't the ENTIRE POINT of central banking meant to keep banks solvent without risking depositors' money?
That's how they were sold originally. Back in the late 19th and early 20th century, before the age of central banking, individual banks printed their own bank notes (i.e. currency) backed by what was on deposit (usually gold). When they printed more notes than backing (in order to collect more interest on loans -- a practice known as fractional reserve banking), and people grew suspicious of this, it would cause a run on the bank whereby individuals tried to redeem their notes for actual money (gold). But since there were more notes than gold, some people could not be made whole and lost everything. The bank also crashed, of course.
Central banks were supposed to be a central source of bank note liquidity whereby all depositors would be paid in full even if a bank wildly over-lent notes into the economy. Therefore there would be no need to rush and get your money out and so there'd be no more bank runs. This was supposed to bring stability and prosperity.
Instead all it did was allow banks to wildly print money with no responsibility for the havoc that results. And in the end, we have a massive global banking system which exponentially inflated the currency supply, and now there will be a massive, global bank run. I hope you've got your assets somewhere safe...
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Last Updated ( Tuesday, 26 March 2013 22:53 )
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