The Cyprus deal will seize an as yet undetermined amount of cash from big uninsured depositors. � Apparently the amount will be substantial. Deposits under €100,000 will be protected. On the face of it, this is immensely bullish in the short run for the Last Ponzi Game Standing, the US Treasury market. It?s what comes after the short run that we must be thinking about. Here?s what Henry Blodget wrote about it, based on Aaron Task?s interview of Lee Buccheit.
The main reason that Cyprus depositors will lose their cash is because it has become politically difficult (impossible?) for leaders in Germany and other rich European countries to bail out their brethren in the ?periphery? without taking many pounds of flesh.
And it is that precedent, in addition to the fate of big depositors in Cyprus, that should spook Europe?s big bank depositors and lenders.
If Germany is done bailing out countries and banks without having those countries and banks cover some of the cost, it?s not clear why Germany will relent next time Spain, Italy, Greece, and other countries in near-desperately bad financial shape come rushing to the EU with their hands out. ?The one lesson that you can take from the Cypriot experience is: the race goes to the swift,? says Buchheit. ?And if you get out of Dodge early, you are completely protected. If you stay, and in effect trust the politicians, they not only come after [your money] they lock it up.? by Henry Blodget via .