question: for the ECB, if they continue down this 'different
path' for Cyprus, are they re-opening the pandora's box (aka the
'Lehman event') that almost took down the world financial system?
Cyprus is in this position because of the steep losses they took on
their Greek investments (somebody had to). their 2 main banks are
insolvent. Cyprus banks hold some 10 billion euros in deposits and
over 60% of that is foreign (Russian primarily). A 'run on the
bank' in Cyprus will stress the entire eurozone because that 10
billion (or part thereof) is not sitting in cash, only on paper. it
has to come from somewhere, stocks, bonds, thin air? the ECB can't
lend them the 10 billion because it would exceed threshold
guidelines (not enough collateral). The ripple effect on drawdowns
will be felt globally. what will the FOMC do this time around? are
we prepared?
seems strange that they are considering anything but kicking the
can down the road. It already looks like that is the
direction they are going. Maybe they were waiting for the
Bernanke to step up and offer to help, because I'm sure he
will.
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Cyprus - a 'defining' moment?
Posted by hazbin1 on 19th of Mar 2013 at 04:01 pm
question: for the ECB, if they continue down this 'different path' for Cyprus, are they re-opening the pandora's box (aka the 'Lehman event') that almost took down the world financial system? Cyprus is in this position because of the steep losses they took on their Greek investments (somebody had to). their 2 main banks are insolvent. Cyprus banks hold some 10 billion euros in deposits and over 60% of that is foreign (Russian primarily). A 'run on the bank' in Cyprus will stress the entire eurozone because that 10 billion (or part thereof) is not sitting in cash, only on paper. it has to come from somewhere, stocks, bonds, thin air? the ECB can't lend them the 10 billion because it would exceed threshold guidelines (not enough collateral). The ripple effect on drawdowns will be felt globally. what will the FOMC do this time around? are we prepared?
seems strange that they are
Posted by kalinm on 19th of Mar 2013 at 04:35 pm
seems strange that they are considering anything but kicking the can down the road. It already looks like that is the direction they are going. Maybe they were waiting for the Bernanke to step up and offer to help, because I'm sure he will.