Obviously, I’ll be returning to Argo Group (ARGO:LN) in greater detail another day, but news of a Cyprus bailout deal has prompted scads of emails & questions to me about Argo. A post is certainly justified…
OK, Cyprus – what a God-awful mess… At this point, years into the European debt crisis, it’s hard to believe EU politicians can attain new heights of stupidity. Whenever politicians: i) do something on the cheap, ii) kick the can down the road, or iii) (perhaps the worst) enforce some obscure point of principle, haven’t we learned it comes back to bite you far more savagely & expensively?
I have to concede the US is pulling ahead of Europe – they’re much quicker to recognize failure & to learn from mistakes. The collapse of Lehman can be ascribed pretty much to one man (Paulson) & his pig-headed intention to prove a point. Oh boy, and what an expensive point it was… Of course, everybody ignored it, lessons were learned & the Greenspan/Bernanke put was accordingly (and infinitely?!) strengthened.
And now we have EU politicians deciding that soaking bank depositors is a good idea. And the fact this plan may include small insured depositors is pure insanity! You can hear their little minds working like rats in a trap: Cyprus is only 0.2% of EU GDP…so it’s irrelevant. And clearly they want to express their disdain for the unique nature of the Cypriot banking system (and the Russians, who apparently weren’t consulted at all). But I’m afraid size is irrelevant (as Greece proved) – they’ve created a political/monetary beast, the Euro, from which there’s no exit (at least notionally) & no turning back. And they delivered it into an increasingly fragile fiat money & banking world, held together purely by faith (and spit & baling twine).
Symbolism really matters in a world like that…
All traditional savers have left (now interest rates have vanished) is faith. Faith their deposit’s safe in a bank, particularly when it’s an insured deposit. Destroy that faith, and what’s left? I’m reminded of the housing boom, when people couldn’t be dissuaded from their blind belief house prices always rise…despite plenty of historical facts & figures to the contrary. And when it comes to bank deposits, there’s also a history of failures, confiscations, defaults, governments reneging…
