Just looking for answers to some questions about this new wonder called "Bail-in". Now on the surface, it sounds like a "proper" thing to do when an institution collapses. You entrust a yahoo to hold on to your money. The yahoo wastes it all on a gambling spree trying to get rich. You lose your money. Sucks to be you, and us, but that's how it goes.
Now that being said, when the Yahoo actually has all the money of an entire country, and a few others, things get serious. So, my questions are:
1) how is "Bail-In" any different than the government just saying "Tough cookies" to a failed bank? I assume here that bank account insurance is still functioning.
2) Bailed-in money for the large depositors goes...? If equity and bond holders are wiped out, who is left to confiscate and give the money to? Or is this were the funds will come from to cover the "insured" accounts. Hmm, I wonder how much my mom likes to know that she is now the RBC's underwriter?
3) What is "off" the table when a bank collapses. I have some investment accounts, empty till the next drop so no biggie there, but will these be included in Bail-In'able assets? I understand the risk of investing, but adding in the risk of an over-leveraged banking system? Perhaps a moot point as all ships will sink in a Tsunami, but still.
4) What are the implications of this as far as large deposits go? They say, there are no bank runs in Cyprus, laughable to me, but what is happening in the rest of the EU and PIIGS? Any reports out there of people spreading their money around or diversifying out of the EU?
5) As we now have this in Canada's March federal budget, this has been in the works and discussed in summits long before Cyprus. Who in their right mind thought it would be a good idea to shake the confidence of a fractional reserved fiat world order? Or is this just a scare tactic to get banks to straighten up their acts? (again, laughable)
6) Does this mean a new Renascence in precious metals? If we are all to start suddenly shouting that our Fiat emperors are naked does this mean people will start understanding the logic behind "10% of your portfolio should be precious metals"? Such a move would lead to an astronomical, and frightening to the average Joe, price increases.
Anyways, would love to hear some feed back. And please merge if this is discussed elsewhere, but I didn't find a specific bail-in topic.
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