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MOODY'S: Even with The New Deal Cyprus Could Still Default and Leave The Euro

MOODY'S: Even with The New Deal Cyprus Could Still Default and Leave The Euro

Matthew Boesler | Mar. 24, 2013 | 11:05 PM

Cyprus finally reached a deal with the EU on how to bail out its troubled banking system tonight.

Nonetheless, the events of the past week have likely shattered confidence in Cypriot banks.

In a new piece, Moody's analyst Sarah Carlson argues that the financial crisis in Cyprus "will have profound long-term negative consequences for the sovereign," and that "even in the best-case scenario, where the Cypriot parliament passes and implements measures that the euro area governments of the European Union, European Central Bank and International Monetary Fund (collectively known as the Troika) find acceptable, the sovereign will remain at risk of default and exit from the euro area for a prolonged period."

Read more: http://www.businessinsider.com/moodys-cyprus-could-still-def...



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Fractional reserve banking

Fractional reserve banking failure up close for all to see.

This is what can happen when banks over extend. Pay attention to what the elites did here, because it's likely a test case for what is to come.

They wiped out shareholders and bond holders. That's good, they deserved it. They "protected" small depositors - those under the 100K insured amount - but only after significant push back from their initial proposal to haircut the little guys 6.5%. They stood by the small depositors not out of any sense of right and wrong, they did so because they feared for their lives, because there would have been riots and it would have been very ugly for any elite caught by the crowds.

As for larger depositors, word out of Cyprus this morning is that they're looking at something between a 30 and 70 percent loss.

Imagine you're retired and you listened to all the experts who told you to be conservative and you just kept your money - your precious life savings that was going to fund your retirement - in the bank. Oh well, you're now fucked.

This is the downside of fractional reserve banking. The fact of the matter is that when you deposit money in a bank, any bank, you have to think of it as an investment in that bank. You are turning over YOUR money to the bank. At the moment you make the deposit, the money ceases to belong to you. It belongs to the bank. If the bank is well run and the economic shit doesn't hit the fan, then you'll likely be safe and you might even make some money. But if things go wrong you can lose it all. Those are the facts. See Cyprus.

The money you deposit in a bank belongs to the bank, not to you.

I must be willing to give up what I am in order to become what I will be. Albert Einstein

If making a deposit makes one

If making a deposit makes one an investor, where is the dividend?