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News Link • Economy - Economics USA

If Americans Realized How Bad Income Inequality Was Here, We Could Have Our Own Cyprus Situation

• Business Insider

On its face and in the abstract, this proposal is a horrible way to bail out a bank and an ailing economy, as it violates rule #1 of financial bailouts, namely “avoid bank runs.”

Not only does the proposal guarantee every Cypriot bank will suffer a run by all its depositors as soon as they open on Thursday, but every bank in Southern/peripheral/wobbly Europe – Spain, Portugal, Greece – has to wonder whether their depositors will do the same in anticipation of future similar bailout terms imposed by the European Union, and Germany in particular.

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