Kaz wrote:Cypriot banks have now locked people's accounts so they can't take their money away. Does anyone want to defend that????Holding people's money to ransom, basically
Reality bites.
Banks don't have all our money to give back because they take it and lend it to others at advantageous interest rates. Most people don't understand the 5% rule that the world governments are trying to increase. Simply it goes like this.
You and everyone else pay money into the bank. The bank lends 95% of it. They keep only 5% in assets.
If the banks did NOT do this, then they would collapse as they would not be able to pay back their investors without borrowing the 95% they have loaned out. If they did borrow, under these circumstances, then they would have to pay more interest than they receive on the loans.
Why is it so difficuilt to understand that if 1,000 people borrow £500,000 on a 25 year mortgage, then the bank is lying out that [edit]£500m for the better part of 12 years before they get the majority of it back. That £500m is Your Money working for You and the Bank. You can't have it back unless you foreclose on those 1,000 mortgages. THAT is where the Cypriot's money is and that is why they can't have it back all at once....
It is far more irresponsible to allow people to panic withdraw as much as they can from their banks and to allow them to have a run on the banks, like the 1930's and the banks collasping, than to do the unpopular thing and restrict access to the money in people's accounts.
This is not difficult to understand, but like a Fiat Currency (which all are today), it all comes down to confidence. If there is no confidence, people very rapidly come to realise that the currency and banking system is a house of cards.
So you say "Justify this". What I say is "It is pure irresponsibility to do anything else".
