# Bank deposits get the "haircut" treatment in Cyprus. What happens next? **URL:** \ **Category:** Great Debates\ **Created:** [March 16, 2013, 1:51pm UTC](https://boards.straightdope.com/t/bank-deposits-get-the-haircut-treatment-in-cyprus-what-happens-next/653089 "2013-03-16T13:51:10Z")\ **Posts on this page:** 20\ **Page:** 5
**Author:** ![Simplicio](https://avatars.discourse-cdn.com/v4/letter/s/c37758/32.png) [@Simplicio](https://boards.straightdope.com/u/Simplicio)\ **Post date:** [March 18, 2013, 4:34pm UTC](https://boards.straightdope.com/t/bank-deposits-get-the-haircut-treatment-in-cyprus-what-happens-next/653089/81 "2013-03-18T16:34:29Z")
> [@Sateryn76](#): > > I really don’t understand this. How can any sane person, let alone people who are Finance People in Charge, think it’s an okay idea to announce they’re going to take the money, then postpone the vote, then close the banks for a week? > > Seriously - how are people going to get food or medication? My payday is Wednesday - would I just have to hold a paper check or have my direct deposit locked in there? Even if I could get my $400 from the ATM - what if I couldn’t because I live paycheck to paycheck? > > This is so bizarre to me…nothing good will come from this, and it will fuck the Eurozone for a lot time. People can still get money out of ATMs up to the limit. And presumably you can still write checks and IOUs, though everyone will need to wait to cash them until the banks open. Not that it isn’t hurrendously stupid. Just pointing out that Cyprus probably won’t go totally Mad Max if the banks don’t open till Thursday. ---
**Author:** ![Algher](https://avatars.discourse-cdn.com/v4/letter/a/3d9bf3/32.png) [@Algher](https://boards.straightdope.com/u/Algher)\ **Post date:** [March 18, 2013, 4:50pm UTC](https://boards.straightdope.com/t/bank-deposits-get-the-haircut-treatment-in-cyprus-what-happens-next/653089/82 "2013-03-18T16:50:56Z")
Do the Euros have gold bugs like we have in the US? I know several people who do not keep cash investments, they move their money to gold coins ASAP. I would consider setting up a coin shop / gold shop if I could once the runs start. ---
**Author:** ![Baron\_Greenback](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/baron_greenback/32/48_2.png) [@Baron\_Greenback](https://boards.straightdope.com/u/Baron_Greenback)\ **Post date:** [March 18, 2013, 5:14pm UTC](https://boards.straightdope.com/t/bank-deposits-get-the-haircut-treatment-in-cyprus-what-happens-next/653089/83 "2013-03-18T17:14:02Z")
> [@smiling\_bandit](#): > > I’m curious what the pro-Euro groups in the UK are saying, if they believe that it’s still going to be a relatively short-term interruption, or if they are souring on the currency union? There’s no mainstream pro-Euro group in the UK any more, certainly not with a voice in the main parties. For all his faults, let’s give a moment of thanks to Gordon Brown. ---
**Author:** ![Baron\_Greenback](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/baron_greenback/32/48_2.png) [@Baron\_Greenback](https://boards.straightdope.com/u/Baron_Greenback)\ **Post date:** [March 18, 2013, 5:15pm UTC](https://boards.straightdope.com/t/bank-deposits-get-the-haircut-treatment-in-cyprus-what-happens-next/653089/84 "2013-03-18T17:15:22Z")
> [@Algher](#): > > Do the Euros have gold bugs like we have in the US? I know several people who do not keep cash investments, they move their money to gold coins ASAP. Yes, there are stupid people here too. ---
**Author:** ![smiling\_bandit](https://avatars.discourse-cdn.com/v4/letter/s/e9a140/32.png) [@smiling\_bandit](https://boards.straightdope.com/u/smiling_bandit)\ **Post date:** [March 18, 2013, 5:16pm UTC](https://boards.straightdope.com/t/bank-deposits-get-the-haircut-treatment-in-cyprus-what-happens-next/653089/85 "2013-03-18T17:16:21Z")
> [@Baron\_Greenback](#): > > Yes, there are stupid people here too. The way things are going, are you so sure they’re stupid? ---
**Author:** ![Algher](https://avatars.discourse-cdn.com/v4/letter/a/3d9bf3/32.png) [@Algher](https://boards.straightdope.com/u/Algher)\ **Post date:** [March 18, 2013, 5:26pm UTC](https://boards.straightdope.com/t/bank-deposits-get-the-haircut-treatment-in-cyprus-what-happens-next/653089/86 "2013-03-18T17:26:36Z")
> [@Baron\_Greenback](#): > > Yes, there are stupid people here too. Stupid? We have bank runs, risk of inflation (the easiest way to get rid of debt is to inflate our way out of it - it screws a lot of people, but it effectively eliminates a lot of older debt), etc. I am not a gold bug (my investments are primarily stocks), but I do have gold - and it has performed beautifully. I don’t get the “stupid” comment, especially in this thread. ---
**Author:** ![Leaper](https://avatars.discourse-cdn.com/v4/letter/l/4bbf92/32.png) [@Leaper](https://boards.straightdope.com/u/Leaper)\ **Post date:** [March 18, 2013, 5:30pm UTC](https://boards.straightdope.com/t/bank-deposits-get-the-haircut-treatment-in-cyprus-what-happens-next/653089/87 "2013-03-18T17:30:27Z")
“Especially in this thread”? Does anyone interpret the events discussed in this thread as “proof” that the gold standard is better? Anyway, here are some claims I saw made in another forum (no idea as to their validity): > [@Xenos](#): > > The reporting on this issue has been pretty irresponsible and often inaccurate. Consider a few things: > > 1-EU directives require member states like Cyprus to maintain depositors insurance. The EU does not supply that insurance or guarantee it. > > 2- The banks in question were insolvent. The depositors had a lot less than 90 centimes/euro in real value in their accounts. This deal has saved them from catastrophe. > > 3- This was not a haircut but a buy-in. The depositors lost value out of their accounts because they were forced to purchase shares in their newly recapitalized banks. They shares are likely to not be worth what people paid when open trading on these, but are worth something. > > 4- I can’t find a single reporter who has bothered to ascertain the simplest details about the Cypriot deposit insurance system. This system may be underwritten by the recapitalized banks themselves, or by the Cypriot government. Depositors may eventually be made whole under the terms of the Cypriot depositors insurance system. But that is not the subject of this deal, which was set up to avoid all depositors losing nearly all of their deposits, not just 10%. > > I am pretty cynical about the banking system in Europe (I am getting an LLM in EU finance right now, but have been off at a scouting event all weekend, and so am just catching up on this topic), but this looks less like an evil European Central Bank clusterfuck and more like a fairly typical IMF screw-job. Like I said, I don’t know how accurate these assertions are, but I question whether #2 is a strong enough reason to basically trade one form of catastrophe for another. ---
**Author:** ![Magiver](https://avatars.discourse-cdn.com/v4/letter/m/4491bb/32.png) [@Magiver](https://boards.straightdope.com/u/Magiver)\ **Post date:** [March 18, 2013, 5:34pm UTC](https://boards.straightdope.com/t/bank-deposits-get-the-haircut-treatment-in-cyprus-what-happens-next/653089/88 "2013-03-18T17:34:23Z")
> [@Der\_Trihs](#): > > Money extorted by foreigners is tribute. Or just plain “loot”. Not a tax. And calling it a “tax” when it is so different than normal taxes is disingenuous, and not going to convince anyone who doesn’t already want to be convinced. Foreign money was used against excessive debt. The government has to access money from it’s citizens to pay the money owed. Call the government assessment whatever you want. ---
**Author:** ![Baron\_Greenback](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/baron_greenback/32/48_2.png) [@Baron\_Greenback](https://boards.straightdope.com/u/Baron_Greenback)\ **Post date:** [March 18, 2013, 5:38pm UTC](https://boards.straightdope.com/t/bank-deposits-get-the-haircut-treatment-in-cyprus-what-happens-next/653089/89 "2013-03-18T17:38:53Z")
> [@Algher](#): > > I am not a gold bug (my investments are primarily stocks), but I do have gold - and it has performed beautifully. I don’t get the “stupid” comment, especially in this thread. Gold does not pay a dividend income. Gold does not have the state-backed guarantees of Treasury bonds or gilts. It’s a commodity, albeit with a shiny sheen. No doubt plenty people have made money out of trading in gold recently, witness the many “we buy your dead mother’s jewellery for CASH” businesses that have sprung up. If you are going to buy metal, may I suggest copper? 😉 ---
**Author:** ![Honesty](https://avatars.discourse-cdn.com/v4/letter/h/f04885/32.png) [@Honesty](https://boards.straightdope.com/u/Honesty)\ **Post date:** [March 18, 2013, 6:56pm UTC](https://boards.straightdope.com/t/bank-deposits-get-the-haircut-treatment-in-cyprus-what-happens-next/653089/90 "2013-03-18T18:56:41Z")
What a stupid idea. If they tried that nonsense in the U.S, I’d pull my money and never, ever open a bank account again. Is there any chance this could ever happen to the U.S banking system? This shit has me spooked. ---
**Author:** ![Leaper](https://avatars.discourse-cdn.com/v4/letter/l/4bbf92/32.png) [@Leaper](https://boards.straightdope.com/u/Leaper)\ **Post date:** [March 18, 2013, 7:14pm UTC](https://boards.straightdope.com/t/bank-deposits-get-the-haircut-treatment-in-cyprus-what-happens-next/653089/91 "2013-03-18T19:14:01Z")
Technically, _anything_ could happen, really. It’s a great big universe. Likely to happen? That’s another question entirely. But if the post I quoted in my last post is true, if things get that desperate that the proposal sounds like even anything close to a remotely good idea, then we’re fucked anyway. ---
**Author:** ![Shodan](https://avatars.discourse-cdn.com/v4/letter/s/9f8e36/32.png) [@Shodan](https://boards.straightdope.com/u/Shodan)\ **Post date:** [March 18, 2013, 7:17pm UTC](https://boards.straightdope.com/t/bank-deposits-get-the-haircut-treatment-in-cyprus-what-happens-next/653089/92 "2013-03-18T19:17:37Z")
> [@Honesty](#): > > This shit has me spooked. You have a lot of company in Europe. But I don’t think there is much chance of this in the USA. I believe this is happening in Cyprus so as to get a bailout from the EU, because they have so much foreign debt. Since most of the US national debt is held by US citizens, I don’t see any external agency pressuring us to do something like this. ETA - [QUOTE=Leaper] if things get that desperate that the proposal sounds like even anything close to a remotely good idea, then we’re fucked anyway. [/QUOTE] Entirely correct. Regards, Shodan ---
**Author:** ![pancakes3](https://avatars.discourse-cdn.com/v4/letter/p/ba9def/32.png) [@pancakes3](https://boards.straightdope.com/u/pancakes3)\ **Post date:** [March 18, 2013, 7:23pm UTC](https://boards.straightdope.com/t/bank-deposits-get-the-haircut-treatment-in-cyprus-what-happens-next/653089/93 "2013-03-18T19:23:30Z")
> [@Baron\_Greenback](#): > > Gold does not pay a dividend income. Gold does not have the **state-backed guarantees** of Treasury bonds or gilts. It’s a commodity, albeit with a shiny sheen. No doubt plenty people have made money out of trading in gold recently, witness the many “we buy your dead mother’s jewellery for CASH” businesses that have sprung up. If you are going to buy metal, may I suggest copper? 😉 Ironic in the context of this thread. ---
**Author:** ![even\_sven](https://avatars.discourse-cdn.com/v4/letter/e/dfb087/32.png) [@even\_sven](https://boards.straightdope.com/u/even_sven)\ **Post date:** [March 18, 2013, 7:25pm UTC](https://boards.straightdope.com/t/bank-deposits-get-the-haircut-treatment-in-cyprus-what-happens-next/653089/94 "2013-03-18T19:25:11Z")
> [@Honesty](#): > > What a stupid idea. If they tried that nonsense in the U.S, I’d pull my money and never, ever open a bank account again. Is there any chance this could ever happen to the U.S banking system? This shit has me spooked. Anything can happen, sure. But countries that control their own currency have other ways to manage these problems, and the chances of this happening in the US are as low as they get. That said, pulling money out of bank accounts is not the only way to reduce buying power. Messing with the money supply, exchange rate and interest rate can cause a much larger impact than this. This is an unusual move, but not some kind of unique horror. No banking system is 100% safe, and indeed much of the world deals with unstable banking systems and the fallout from that. But anyway, if the US banking system is failing on that level, you are going to have much bigger problems in your life than losing a bit of your savings. ---
**Author:** ![newcomer](https://avatars.discourse-cdn.com/v4/letter/n/e5b9ba/32.png) [@newcomer](https://boards.straightdope.com/u/newcomer)\ **Post date:** [March 18, 2013, 7:29pm UTC](https://boards.straightdope.com/t/bank-deposits-get-the-haircut-treatment-in-cyprus-what-happens-next/653089/95 "2013-03-18T19:29:40Z")
> [@Algher](#): > > I am not a gold bug (my investments are primarily stocks), but I do have gold - and it has performed beautifully. I don’t get the “stupid” comment, especially in this thread. Well, there’s a slight difference between trading gold as commodity vs. gold standard; apples and apples orchard kind of difference. ---
**Author:** ![Algher](https://avatars.discourse-cdn.com/v4/letter/a/3d9bf3/32.png) [@Algher](https://boards.straightdope.com/u/Algher)\ **Post date:** [March 18, 2013, 7:44pm UTC](https://boards.straightdope.com/t/bank-deposits-get-the-haircut-treatment-in-cyprus-what-happens-next/653089/96 "2013-03-18T19:44:55Z")
> [@newcomer](#): > > Well, there’s a slight difference between trading gold as commodity vs. gold standard; apples and apples orchard kind of difference. Agreed - I used gold bug more for those who would rather have coins in a safe than cash in a deposit account. That was a mistake on my part, since I was not referring to gold bugs like Steve Forbes et al. That was why I mentioned the coin shops - places where you can take your cash you just pulled out of the bank and convert it to gold coins that you can sell again somewhere else. With interest rates so low - you are insane to keep large amounts of cash in a bank account in my opinion. ---
**Author:** ![Baron\_Greenback](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/baron_greenback/32/48_2.png) [@Baron\_Greenback](https://boards.straightdope.com/u/Baron_Greenback)\ **Post date:** [March 18, 2013, 8:22pm UTC](https://boards.straightdope.com/t/bank-deposits-get-the-haircut-treatment-in-cyprus-what-happens-next/653089/97 "2013-03-18T20:22:04Z")
> [@pancakes3](#): > > Ironic in the context of this thread. True enough 😃 ---
**Author:** ![Der\_Trihs](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/der_trihs/32/233_2.png) [@Der\_Trihs](https://boards.straightdope.com/u/Der_Trihs)\ **Post date:** [March 18, 2013, 9:13pm UTC](https://boards.straightdope.com/t/bank-deposits-get-the-haircut-treatment-in-cyprus-what-happens-next/653089/98 "2013-03-18T21:13:06Z")
> [@Simplicio](#): > > People can still get money out of ATMs up to the limit. And presumably you can still write checks and IOUs, though everyone will need to wait to cash them until the banks open. > > Not that it isn’t hurrendously stupid. Just pointing out that Cyprus probably won’t go totally Mad Max if the banks don’t open till Thursday. Thing is, the ATMS have already been drained of cash. And what if the person you need to pay isn’t _accepting_ checks or IOUs? ---
**Author:** ![asterion](https://avatars.discourse-cdn.com/v4/letter/a/4da419/32.png) [@asterion](https://boards.straightdope.com/u/asterion)\ **Post date:** [March 18, 2013, 10:20pm UTC](https://boards.straightdope.com/t/bank-deposits-get-the-haircut-treatment-in-cyprus-what-happens-next/653089/99 "2013-03-18T22:20:49Z")
> [@Shodan](#): > > You have a lot of company in Europe. > > But I don’t think there is much chance of this in the USA. I believe this is happening in Cyprus so as to get a bailout from the EU, because they have so much foreign debt. Since most of the US national debt is held by US citizens, I don’t see any external agency pressuring us to do something like this. > > ETA -Entirely correct. I agree, there’s essentially zero chance of this ever happening in the US. (Would it be fair to call the devaluation of the dollar under FDR similar?) Anyway, what worries me is that this will be the one “one-time” crisis too far for the Eurozone and most of the EU tanks. I don’t know if non-Eurozone countries are strong enough to take a Eurozone recession and I’m not sure if the US could really take a Eurozone collapse. How much exposure do we really have to this? ---
**Author:** ![lisiate](https://avatars.discourse-cdn.com/v4/letter/l/f05b48/32.png) [@lisiate](https://boards.straightdope.com/u/lisiate)\ **Post date:** [March 18, 2013, 10:23pm UTC](https://boards.straightdope.com/t/bank-deposits-get-the-haircut-treatment-in-cyprus-what-happens-next/653089/100 "2013-03-18T22:23:50Z")
It’s crazy moves like this that will lead to the total collapse of the Euro IMHO. Here’s the Guardian’s liveblog of the [first day’s reactions](http://www.guardian.co.uk/business/2013/mar/18/eurozone-crisis-cyprus-bailout-savers-markets) [Previous page](https://boards.straightdope.com/t/bank-deposits-get-the-haircut-treatment-in-cyprus-what-happens-next/653089.md?page=4) [Next page](https://boards.straightdope.com/t/bank-deposits-get-the-haircut-treatment-in-cyprus-what-happens-next/653089.md?page=6)