by Bill Holter, MilesFranklin.com:
I read a short piece yesterday penned by Greg Orrell, President of OCM Gold fund. He summed up in a nutshell that “ZIRP” and following the “rule of law” when winding down a bank(s) cannot exist together. The “rule of law” being that when you deposit money in a bank and exceed the insured amount the old saying “you pays your money… you takes your chances” now is the new rule. Which is apparently what has happened in Cyprus (though it looks like the Russians may have used last week to transfer their balances). If you deposit more than the insured level… your money is at risk… as it SHOULD BE.
As banks blew up in the U.S. and all over the world for that matter, they would be merged and papered over so that no one ever lost one red cent. This is not the way it used to be and not the way it should be… but it is what our banking system morphed into… because it had to. It “had to” because if a bank could fail and depositors could lose money then “bank runs” would be an issue. Bank runs were taken off of the table after Northern Rock and were not an issue… until now that is. Depositors in Spain and Italy are already putting their tennis shoes on and readying to run but that’s not what I want to talk about today.
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