Anthony Peters, SwissInvest Strategist
Reports this morning from Cyprus had me smiling as journalists and cameramen lined up outside the banks to catch the first shot of stampeding depositors. The banks won’t open until 11.00 am so what they were doing there at eight in the morning is slightly beyond me.
Alas, the BBC chappy found a sole Cypriot sitting outside his branch. Asked why he come so early, he admitted that he’d got the opening time wrong. The reporter then went on to ask him – the chap in question had clearly repatriated himself from Australia and was therefore fluent in Australian – whether things had been difficult over the past ten days and was left high and dry when the interviewee replied with a simple, laconic and monosyllabic “No…”
The reporter tried desperately to retrieve the situation with a follow-up when the man simply pointed at the sky and added: “…the guy up there takes care.” Cool citizen 1 - Panic-Seeking Journo 0.
This is just another case of the mass-market broadcast media trying to find a “scoop” and I must say, I have been very impressed with the way in which both the professional networks and the investor community have “kept calm and carried on”.
The chap outside the bank reminded me of the fall of the Northern Rock here in the UK. At quiet dinner parties, the opinion is often expressed that the man who become a household name here in the UK on the back of his having broken the news of the troubles which the Rock was suffering in refunding itself in the Libor market, Robert Peston, probably killed the bank single handedly. Peston – apparently known as “the pest” during his time at the FT, announced proudly on the TV that the Rock was going under. A run ensued on the bank.
Now, the Rock only had a few dozen branches and did most of its work on the net. Not surprisingly, the on-line systems couldn’t cope with the rush of depositors trying to get out and the website crashed. In response, people decided to find a branch and to collect their money in person. Queues formed which were duly shown on TV and the rest – along with the Northern Rock – was history. I have a well-known pundit friend who later told me that one of the news networks had phoned him and asked where he thought the best queues might be found for filming.
Peston’s voice with its uniquely eeeeelongated vowels is a common sound on the BBC but one which the City has little fondness for. He will be forgiven for the Rock as little as Michael Fish, the weather man, will be forgiven for having on air denied the risk of exceptional storms just a few hours before the hurricane of 1987 completely devastated the South of England.
So, huge quantities of cash have been shipped into Cyprus to meet depositors demands for folding notes – luckily Michael Caine didn’t know about it in advance – and extra security guards have been posted to keep things under control. However, if Cyprus is set to return to the cash nexus, such luxuries as VAT and income tax will go by the by along the way. I wonder whether Cyprus will take over from Spain as the favoured home of the €500 bill? In the past 10 years or so, the cash society has been associated with drug runners and money launderers. Holding cash and paying in cash has become a bit like smoking – those who do it are quietly frowned upon.
We have become conditioned to believing that anyone with a “wad” must be a criminal or at least have criminal tendencies. On the other hand, the authorities which are paid by all of us to oversee and maintain the stability of the banking sector have let us down. The system is now geared towards forcing us all to use it – anyone without a bank account is a priori highly suspicious – and those holding and using cash find themselves forced to do so behind closed doors. The cash economy is deemed to be “black”.
It will be interesting to see how Cyprus deals with an economy which has always had a strong cash element but which will now no doubt have an even stronger one. Governments hate what they can’t control and the one thing they seem to be able to deal with less than any other is the cash economy. Don’t you just love it?
—————————————————————————-
Alas, it is that time of the week again – or technically at least – and all that remains is for me to wish you and yours a happy and peaceful Easter festival. May this weekend signal the beginning of the season of rebirth for all but the Greeks and the Cypriots (and all the other Orthodox Christians too) who have to wait another whole month for their celebration of the resurrection. If they can’t even agree on that, how do we expect them to agree on the terms of a bail-out?