Get ready Canada... it's "haircut" time... Cyprus style

reply to post by superman2012


I agree with you 100% is a matter of fact austerity measures are already being initiated.

1. Retirement age from 65 to 67
2. Employment insurance reforms. forcing you to find jobs that do not exist.
3. Pension reforms.
I am sure I am forgetting something.

Our government just doesn't tell you it is implementing austerity measures.

And as far as some people have mentioned about vast resources getting us through. That is absolute bologna. It never helped us much during the not so great depression.

reply to post by Unity_99


Canada has done much better, financially, than other countries. We still feel pretty confident in our economy.

But, if we are in no danger, if we are "protected", if our economy is not in danger of collapsing, then why were these provisions included in the 2013 budget?

Originally posted by OptimusSubprime


from Page 144:

“The Government also recognizes the need to manage the risks associated with systemically important banks—those banks whose distress or failure could cause a disruption to the financial system and, in turn, negative impacts on the economy. This requires strong prudential oversight and a robust set of options for resolving these institutions without the use of taxpayer funds, in the unlikely event that one becomes non-viable.”

from Page 145:

The Government proposes to implement a bail-in regime for systemically important banks. This regime will be designed to ensure that, in the unlikely event that a systemically important bank depletes its capital, the bank can be recapitalized and returned to viability through the very rapid conversion of certain bank liabilities into regulatory capital. This will reduce risks for taxpayers. The Government will consult stakeholders on how best to implement a bail-in regime in Canada. Implementation timelines will allow for a smooth transition for affected institutions, investors and other market participants…

Link to budget PDF

Link to story

Wait, so a fearmongering article claiming that citizen's money isn't safe by a company that sells silver/gold?

Yeah, I don't see any conflict of interest there at all.

Originally posted by MystikMushroom
Wait, so a fearmongering article claiming that citizen's money isn't safe by a company that sells silver/gold?

Yeah, I don't see any conflict of interest there at all.

Once again... it isn't a fear mongering article, and it never metions ONCE to but ANYTHING from the site the article is posted on. The link is DIRECTLY to the 2013 budget PDF form... it is a direct quote from the budget. If you can't see that then you are clueless.

Can somebody break this down for me?? I honestly have no idea what is in store for Canada and I can say that I don't make enough money to start saving and stock piling.

Originally posted by MystikMushroom
Wait, so a fearmongering article claiming that citizen's money isn't safe by a company that sells silver/gold?

Yeah, I don't see any conflict of interest there at all.

Same source as the Ben Bernanke rubbish the other day where he was being outright misquoted to boot. Was Silverdoctors that time, too.

In this light, going to talk about the actual budget pdf for Canada and the usage of bank liabilities (yes a bank's liabilities are customer deposit accounts) to recapitalize. This really isn't anything new under the sun, believe it or not. Basically, any time that you put in over a certain amount of money into any bank, either in the US or Canada, there is a limit to how much you'd actually get back should the bank undergo failure. In the US, we have what is called the FDIC (Federal Deposit Insurance, Co) and in Canada, it is the CDIC (Canada Deposit Insurance, Co). FDIC was created in 1933 after the stock market crash. CDIC was created in 1967. This kind of behavior by banks has been around for a long time and the most tremendous occurrence was the Great Depression.

FDIC--insures deposits up to $250,000 per customer per FDIC insured bank. In other words, if you put $250,001 in a bank, you're insured for everything but that dollar. That's why people with a ton of money actually spread it through a variety of banks to insure that their money is "safe". www.fdic.gov...

CDIC--insures deposits up to CA$100,000 so anything over CA$100,000 is fubar in the case of a bank failure and seizing of deposits. www.cdic.ca...

Hope this calms people down a bit. These entities were created to protect customer deposits and as long as your funds are in a FDIC or CDIC insured bank and the account amounts aren't over the insured amount, your money is safe.

reply to post by WhiteAlice


Yes, that makes sense, but it doesn't explain the wording of it on pages 144 and 145. They are worded that the bank can use their liabilities (customer accounts) to recapitalize, should the bank fail. So they would still be stealing from anyone that has over the allowable limit right? It also says the taxpayer won't be paying, was that language in there before when the government bailed out the banks and did not announce it until they were caught?

Cyprus also had Deposit Insurance, the only thing that stopped the government from accepting the first round of stipulations was the mass protesting & bank runs. It still is a cautionary tail, & shows where the government lies on there economic policy.

On one hand it is good as it allows banks to fail, be it at the expense of the depositors unlike the bail outs, but on the other hand it brings us into some shaky territory. Sovereign property rights etc lead to other questions, if this can be seized what else can happen if the economy gets worse....

Bottom line is this fiat system controlled by international bankers is collapsing & they are propping institutions up whichever way they can. It is now up to the people to call a spade a spade & take control of the creation of public credit around the world & restore to sovereign central banks owned by the people. It is truly the only way out of this mess without bloodshed & complete economic collapse eventually.

These low interest rates aren't doing anything to bring us out of the recession all they are doing is avoiding a depression, but what is worse, a depression for 7-10 years or a recession for the next 20-30? Austerity doesn't work, it is the opposite of what Minsky/Keynes models need. Proper social economic policy got us out of the last depression & yet we continue to neglect that past lesson.

Purchasing Power in the hands of the citizens is what is needed.

reply to post by WhiteAlice

Originally posted by superman2012
reply to post by WhiteAlice

 

Yes, that makes sense, but it doesn't explain the wording of it on pages 144 and 145. They are worded that the bank can use their liabilities (customer accounts) to recapitalize, should the bank fail. So they would still be stealing from anyone that has over the allowable limit right? It also says the taxpayer won't be paying, was that language in there before when the government bailed out the banks and did not announce it until they were caught?

Page 144-5 on the budget link? What I'm seeing on those pages is discussion of Export Development Canada and the GPT. Not seeing what you are referring to on those pages so maybe give me the title of the section so I can look?

As far as the seizure of bank liabilities, yes, banks can seize deposits. Trying to think of a good way of explain it but it's almost like car insurance. You pay in to your car insurance every month just in case something bad happens. If it does, the insurance company swoops in. It's pretty much the same thing here but the banks pay the insurance and the insurance pays you. So basically, bank failure --> all customer liabilities go to the bank and insured amounts get paid about by the insurance company, not the bank. Does that clarify?

Originally posted by clairvoyantrose
Can somebody break this down for me?? I honestly have no idea what is in store for Canada and I can say that I don't make enough money to start saving and stock piling.

be glad to, what it means is Canada is no different than every country controlled by fractional reserve banking, of which there are only 2 or 3 remaining who are not, Iran, North Korea and Syria. what fractional reserve banking and corrupt politicians have done is hedge everyone to the moon and now they're going to take direct deposits from anyone interested in bailing them out and even from those who are not.

the bankers control the govt. and the biggest corporations on a global scale, what did anyone think would happen in this scenario, free pens?

reply to post by WhiteAlice


Sorry, not the pdf page #'s but the actual page number on the document.

reply to post by superman2012


Thanks. Read it and overall, I think it's a good thing for Canada. I'll try to explain this as best as I can and hopefully, I can really clarify the cause and effect going on in this portion of the document. Back in 2007-8, you had very major (what Canada and US would call "systemically important") banks engaging in higher and higher levels of risk taking activities, frequently in the form of derivatives. Derivatives had very little regulation and banks, who traditionally did not take these kind of risks, had very little oversight on top of it as far as this kind of activity went. So, basically, you had a double issue with an unregulated derivatives market and lack of oversight for major banks engaging that market. The end result was the global financial explosion. So the first part is basically stating that the Canadian government is taking steps to avoid that problem recurring again. I'm not sure what those specific steps are in terms of regulatory activities but they are along the same lines as Dodd-Frank and the Volker Rule here in the US. Also, requiring banks engaging in these higher risk activities to have capital to cover any losses is a very good thing for Canadians as it assures that there is a cushion, should the bank take a financial blow, that gets drawn from instead of depositor accounts. These are good things because the major banks were previously taking on far too much risk without the capital to back it and the end result would've been seizure of customer deposit of which, anything in any one bank over the CDIC limit, would've gone bye bye.

The second part should be read as a reminder of what can possibly happen in these "systemically important banks". In the Great Depression, banks shut their doors and when they failed, all their customers' deposits were consumed. This is why the FDIC and the CDIC were formed but each has their limits. The "bail-in" is basically a re-affirmation of what can happen and they are unspecific as to what bank liabilities would be consumed.

Implementation timelines will allow for a smooth transition for affected institutions, investors and other market participants.

This little quote may provide a clue as to who would get hit should the "unlikely" happen after the installment of better risk management oversight and rules and the greater capital requirement not be sufficient. It's probably not going to be Joe Blow working at a construction site. Because they aren't totally specific, it's a warning and a reminder--and a very good one at that. I particularly liked this quote:

This risk management framework will limit the unfair advantage that could be gained by Canada’s systemically important banks through the mistaken belief by investors and other market participants that these institutions are "too big to fail".

Basically, everything above is meant to equalize the playing field behind the vast variety of banks within Canada. You have the super big banks that are going to be forced to have a lot more capital to cover for their risk-taking activities as they very well should and they are also being told quite clearly that they will be allowed to fail next time. It's a warning to both bank, customer and investor. Really, the best way to assure that a bank isn't "too big to fail" is to diversify. If investing or depositing into a "systemically important bank" is more risky, then perhaps depositing into a CDIC insured smaller bank is in order. Get it?

reply to post by WhiteAlice


Cool, thanks for getting back to me and explaining it for a simple minded lad.

I have another question for you regarding your first paragraph explanation...

Isn't that what Cyprus had in place as well and then it was found that not only did the banks not have the back up capital, but the regulators weren't doing their job as well to ensure that the capital was there?

Great Catch OP, I started a thread the day after the Cyprus thing went big time news.
It was about how difficult it was to remove our cash from one of the biggest banks in Canada.
There are new rules in town just to warn you all, you cannot just waltz into a major Canadian bank and ask for your money.
That use to be the way, not now.

I took some abuse for sure in that thread, funny thing is now I am vindicated because of your thread.

Yes sir they are really prepping with this one......is this a "Trial Balloon"?
I don't think so personally, I believe this is the real deal and it stinks to high heaven.

S&F
Regards, Iwinder

Originally posted by superman2012
reply to post by WhiteAlice

 

Cool, thanks for getting back to me and explaining it for a simple minded lad.

I have another question for you regarding your first paragraph explanation...

Isn't that what Cyprus had in place as well and then it was found that not only did the banks not have the back up capital, but the regulators weren't doing their job as well to ensure that the capital was there?

Yes, Cyprus also had depositor insurance and that insurance limit was €100.000. If you look at what happened to deposit accounts, those that got sucked into the void per se were those amounts over €100.000. Cyprus doesn't have the best reputation for bank regulation and oversight. That's what made it a tax haven really if you think about it because foreign depositors knew that the banks wouldn't be handing over their information to their countries.

Cyprus deposit insurance:

The maximum level of compensation, per depositor and per bank, under the DPS is €100.000. This limit applies to the aggregate of a depositor’s deposits with the same bank.

cyprusbank.org.ua...

So, the DPS aka the "Deposit Protection Scheme" in Cyprus insures up to €100.000 in total value per customer. Having 8 accounts with €100.000 in each for a total of €800.000 means a potential loss of €700.000 and a guarantee that you'll get €100.000 back.

What has happened to depositor accounts in Cyprus as of today:

As revised, the bailout terms would dip into deposit accounts at levels only above the €100,000 threshold that is guaranteed against losses.

www.nytimes.com...

So basically, what happened in Cyprus was those accounts that were guaranteed by the DPS (€100.000 or less) are unaffected. Those that were over the limit were affected. Cyprus is basically protecting the DPS by doing this so that the DPS doesn't get hit by a bank taking on too much risk. That's the same thing that is supposed to happen at any bank in Canada (CA$100,000) or the US ($250,000) for accounts over each's specific guarantee limits. It's good to know if you do happen to have more than the insured limit in any bank. Knowing those limits is pivotal. Let's say that you have $1 million in cash in the US. You don't want that in one bank. You want in 4 banks so that every penny is insured. Does it all make sense now?

We have already SHOWN we will close our bank doors and fleece the people....sooo whats the point. If you have everything in a bank you didn't learn anything from the thirtys. Oh thats right the FED RES has got our back....so hows that working out for us?
Just saying

Originally posted by GrantedBail

“The Government also recognizes the need to manage the risks associated with systemically important banks—those banks whose distress or failure could cause a disruption to the financial system and, in turn, negative impacts on the economy. This requires strong prudential oversight and a robust set of options for resolving these institutions without the use of taxpayer funds, in the unlikely event that one becomes non-viable.” Translated, Without the use of taxpayer funds means via depositor funds. And the meat of the provision,

Oh, I see and the savers are not tax payers? Is that right.

I can see all banks worldwide following suit so that there is no safe place to bank. Another though I had was that the Canadian government must know something that is not publicly available, like they have some insolvent banks already.

Technically, they already are, but as long as they can shuffle money between each other fast enough (ie. liquidity) nobody will notice. The minute everyone pulls their money out of the bank at the same time, then it becomes obvious. It's no different from the way people share internet pipe capacity. An Internet provider leases out a 1 Terabit/second channel, and shares it between 1 million customers, giving each 512K/second. Nobody notices until they all start trying to download movies at the same time.

The thing about Cyprus, was that there banking system was one of the most conservative ones in existance until they joined the EU. Then EU regulations meant that they could no longer limit the debt loads of their banks, and the high interest rates they offered attracted the Russians.

The accounting textbooks explain this as follows: "If a business owner decides to open an account with a bank, he can open an account, deposit a sum of money, and use his business as security against the loan, which the bank uses to borrow money from central banks. The bank can then consider the deposit, the business and the interest on the loan as assets, which can then be used to borrow more money from central banks to lend out". But once this repetitive process is blocked, the banks can only lend out as much hard cash as they have, which means they now have to resort to cash-grabbing.

Originally posted by stormcell
The accounting textbooks explain this as follows: "If a business owner decides to open an account with a bank, he can open an account, deposit a sum of money, and use his business as security against the loan, which the bank uses to borrow money from central banks. The bank can then consider the deposit, the business and the interest on the loan as assets, which can then be used to borrow more money from central banks to lend out". But once this repetitive process is blocked, the banks can only lend out as much hard cash as they have, which means they now have to resort to cash-grabbing.

Not quite and as an accountant, I've never seen it quite in a textbook like that. Overall, this is how banking is supposed to work. Customers will deposit money into banks and the banks can utilize this money to make loans for businesses and individuals. The money, however, is not listed as an asset within the banks themselves. Basically, when you deposit money into a bank, you are lending them your money. That's why, from a bank's perspective, deposit accounts are considered liabilities (think accounts payable). Their assets would be the loans that they dispensed to their lending customers (accounts receivables really). What the capital requirement means is that banks need to have X amount of cash of their own on hand in order to cushion loss. Banks make money off of loans and investments so they have to basically build a nest egg off of the profits of those activities if they are going to be engaging in greater risk taking activities such as messing with derivatives, whose market is possibly as high as $800 trillion now (hard to say but it's BAD). Not all derivatives are created equal but a lot of them are like super high stakes gambling; ergo, they can be very risky.

reply to post by WhiteAlice


You explained it marvelously, that being said, I still don't trust dem bankers! (nor the governmet). Thank you for your patience!

Originally posted by clairvoyantrose
Can somebody break this down for me?? I honestly have no idea what is in store for Canada and I can say that I don't make enough money to start saving and stock piling.

Rose,

Do not worry about this. The OP is saying DO NOT save your $ because the Canadian Gov will take some at some imaginary point in an imaginary situation.

Now here is the truth ok.

Canada will be the last bastion on the globe where your money will become unsafe to bank.

$ from future oil sands development will support the whole of Canada in the event of failures in other systems.

Please come back here and let me know the SECOND the gov takes ANY of your bank account funds (besides the theft that is already happening lol)