Or otherwise said, their sole purpose is to lure the naive voter into thinking his deposit is covered. ANd I mean the poor ones. Free at last! Free at last! Thank God Almighty, we are free at last! (Martin Luther King)
What the governments also did (as in Ireland) was to cover creditors' exposure while talking about protecting depositors (who were already protected). That was disingenuous. The brainless should not be in banking. — Willem Buitler
Deposit insurance (which was invented as a result of the 1930's wave of bank failures) is not "bogus" if its presence ensures it doesn't need to be used. And the current crisis has demonstrated it does work. The brainless should not be in banking. — Willem Buitler
The world stood, not from confidence, but from cynicism. Free at last! Free at last! Thank God Almighty, we are free at last! (Martin Luther King)
So, I rest my case. Deposit insurance prevents runs on banks' retail deposits.
What we have had is a series of "bank runs' on the capital markets side of banking institutions. Which is why Glass-Steagall was such a great idea and why it took about 10 years since it was repealed for a new Great Crash complete with its own Bank Panic and Long, Deep Recession. The brainless should not be in banking. — Willem Buitler
The government can print as much money as it wants to cover the deposits. Sure, that will create inflation, but the government only promised to guarantee the deposits, not the value of the currency. Peak oil is not an energy crisis. It is a liquid fuel crisis.
We have a name for this in France, which I won't repeat here. I'm going to leave that honour to Jerome :) Free at last! Free at last! Thank God Almighty, we are free at last! (Martin Luther King)
How many people do you know with over 70 k€ in their standard account? Earth provides enough to satisfy every man's need, but not every man's greed. Gandhi
If you have a moderately sized demand deposit account, then yes. Because it means that you can get your money back if the bank goes belly-up.
If you hold bonds in the bank, then no, because it means that the government can save the depositors' shirts without having to bail you out too. Which means that if the government takes its responsibility to the citizens seriously, you won't see a single taxpayer-financed eurocent.
- Jake If you only spend 20 minutes of the rest of your life on economics, go spend them here.
There is no "reserve" to reimburse your 10 € notes either. That does not make them phony money.
Of course, if you have a sovereign default, then that's a different story...
And it is still the most likely outcome for the US / the $ in the medium term. In the long run, we're all dead. John Maynard Keynes
Regardless, however, the point was not whether a sovereign default was likely or not.
It was that a sovereign default is hard to say anything general about, because it can take so many forms: Default on guarantees (as Ireland will be forced to), default on foreign debt (as Russia and Argentina did some years ago), default on the state's obligations towards its employees (as the French state attempted with its pension reform theft plan), default on the state's obligations towards its citizens (as the Bush regime attempted with its pension reform theft plan).
Only in the rarest of cases (Zimbabwe comes to mind) does a sovereign default encompass all these. So predicting that a sovereign default will happen is usually easier than predicting precisely where it will happen.
