Cyprus "Deposit Tax"

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chicago81
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Post by chicago81 »

http://www.bloomberg.com/news/2013-03-1 ... osses.html
Scary stuff from an ERE perspective, when a country wants to go directly after assets instead of taxing income or taxing sales.


secretwealth
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Post by secretwealth »

Welcome to wonderland where savers are punished above all else.


Seneca
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Post by Seneca »

Well, except for earners.


secretwealth
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Post by secretwealth »

A fanatic is someone who can't change his mind and won't change the subject.


Seneca
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Post by Seneca »

Should I come up with something cute about the wisdom of using superlatives, or do we let it go?


bigchrisb
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Post by bigchrisb »

I've got mixed feelings from this one. Typically, when countries hit unsustainable debt levels, they either try to inflate their way out of it, or devalue the currency. The Euro common currency has taken the option of devaluation out of the picture. So this would seem like a way to achieve the same result. Let’s be honest, inflation, currency devaluation or taxing deposits all have the same effect, they take from the savers. It’s one of the big risks of holding cash (as opposed to stocks / real estate).
What worries me is that while the effect is the same, the psychology of it is likely to lead to a fair old run on the banks, which are already in a poor state. Sounds like a pretty sure fire way to bring on an additional banking crisis. See how it goes, but there might be some opportunities to deploy some excess liquidity into stocks soon!
<edited for multiple typos>


chenda
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Post by chenda »

Apparently Berlin is demanding this as Cyprus is a notorious tax haven for the Russian mafia and the like. Which is no doubt true, but it seems a very reckless gamble to hit ordinary savers and risk a bank run. Apparently Osborne is going to compensate some of the many Britons who live there, but will be of no comfort to the cypriates. http://m.bbc.co.uk/news/uk-21820237


bigchrisb
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Post by bigchrisb »

Given that Cypriot banks have been offering rates on deposits (in Euros) of up to 7%, my sympathy is somewhat limited. Something about if things look too good to be true...


JohnnyH
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Post by JohnnyH »

Gold futures up 15, over 1600. Related perhaps?


Chad
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Post by Chad »

It would be interesting to determine how much money in Cyprus banks is illicit. They have been a notorious money laundering country for quite awhile.
@Seneca

Actually, Secretwealth should be telling you to just drop it. His first comment in no way brings up this argument, but you insist on bringing it up anyway. Then you purport to be the "bigger man" by pretending Secretwealth started it, when he is just responding to you. What is this grade school?


chicago81
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Post by chicago81 »

I'm already reading blog articles online on how likely bank runs might be in the EU nations with weaker economies (Greece, Italy, etc) in light of the discussions about the Cyprus deposit tax.


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jennypenny
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Post by jennypenny »

>>Gold futures up 15, over 1600. Related perhaps?

Could be. I've wondered if some small, isolated event would set off the market. I think a lot of people have been waiting for a reason to panic. Tomorrow might be interesting.
@chicago81--I can't really blame people for trying to grab their money.


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Ego
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Post by Ego »

One lesson: If you have lots of cash in any one financial institution it would make sense to spread it out over many different banks. Up to €100,000 taxed at 6.75% and anything over €100,000 taxed at 9.9%.


secretwealth
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Post by secretwealth »

I take another lesson from this: keep my money in a country with reliable deposit insurance and a government that tends to keep its promises to its citizens.


Seneca
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Post by Seneca »

Western European and North American governments have various levels of debt distress and demographic challenges but all have Them. This problem is not going away soon and it will impact ERE living.
They are dealing with it in different ways as bigchrisb points out. The US is doing it in the manner I originally, if inelegantly, posted for now. Income, not savers. That could definitely change.
There is little way to predict these things other than to pay attention and be ready to adapt quickly. Diversification is certainly a proven strategy.


George the original one
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Post by George the original one »

Wealth tax ("savers" tax).

Property tax.

Income tax.

Consumption tax (sales tax, VAT).

Use tax (toll roads).
None of it matters.
If I were a Russian oligarch laundering money through Cyprus, I'd be annoyed and adapt, but I'd still be playing the game because accumulation of wealth is still better than having no wealth.
In the USA, accumulating enough wealth to opt out of the working class and become one of the investor class will decrease your taxes. You can do it quicker by decreasing expenses.


JohnnyH
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Post by JohnnyH »

This would cost me about $375 (unless they raided cash in retirement accts)...
I'd probably start banking with my mattress (hope it was worth it, Cyprus!) but I'd take this over some of the things the "safe" US has done any day:

https://en.wikipedia.org/wiki/Executive_Order_6102
Not only did you have to go turn in formerly legal tender, which was subsequently devalued by 75%, but you were threatened with $800k (adjusted) fine and 5-10 years for noncompliance.


secretwealth
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Post by secretwealth »

A lot of time has passed since 1933.


George the original one
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Post by George the original one »

@JohnnyH - yes, so it always surprises me why people put so much faith in the permanent portfolio.


Tyler9000
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Post by Tyler9000 »

Gold can be confiscated. Cash can be confisc... ahem, "taxed". Bonds can be defaulted upon. Stocks can go bankrupt. Real estate can be seized via eminent domain.
No need to pick on the PP. Once the government decides they want your money, there's no such thing as a risk-free investment.
But FWIW, situations like this are why the PP advocates holding some gold coins outside of your home country.


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