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Silvano IHC
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Well, he is basically saying "blame the government if I didn't see comin'in, I was just the Central Banker...".
Since many interverventions and regulations are driven by the same by market partecipants, I find too strong subdivisions between market and government rather ideological. Much more interesting to see how istitutions develop by themselves. Ex.: "licensing" was present even in the middle age when there were no such things like modern state nations. Many times, the necessity to reduce asymmetric informations jointed with the desire to reduce competition, gave life to regulations which act as a barriers for newcomers and were even self-enforced even in the absence of a goverment (in the modern sense of the word). Better said: there is a degree of political action which is endogenous to the market process.
Consider three things: I) we're talking about a small coutry who joined a currency area, the EZ which is basically different from a small bank run which could happen in US, II) bondholders were insignificant compared to depositors and just unsecured bond issued under UK law didn't suffered Troika's blitzkrieg (at least for the moment since they have CAC - however I advice you to not bet your money on them..), III) The Troika gave 10 billions to Cyprus Government to payback his bonds which were pledged as collateral by local banks to the ECB: that is not charity, that is a way to avoid losses into ECB balance sheet (why? was ECB uninformed about Cyprus' banks? was Draghi an "innocent bystender"?). "But what I would like to blame, since you're asking, is the idea that these banks should be reorganized at all." In theory, I may agree with you. But in practice leaving a country with zero banks, capital controls and a "corralito" doesn't look great. So the opportunity cost to be assesed by Cypriots is if it's worth to stay in EZ or not.
Maybe. But if you allow some banks to be backstopped by the government (let's call them ABN Amro, Commerzbank, Dexia, Fortis and so on) while you let the others fail you simply have a process of financial and economic colonization based on a scheme which isn't so different from the "loans for shares" model who benefited russian oligarchs and some foreign banks after 1995 in Russia. Much better to internalize the effects of good and wrong decisions with a national currency.
What I find interesting is that you blame governments both when they bail out banks and when they make shareholders and creditors pay.
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Mar 31, 2013