Capital controls are not a new idea, nor unexpected by anyone familiar with the standard preamble to a typical currency deprecation.
What is new perhaps is that any euros Cypriots have in cash will retain value in the rest of Europe even if Cyprus drops the Euro in favor of a new national currency.
This creates an incentive to keep your cash under the mattress instead of in banks. Banks might fail or be used to expropriate some of the value via a 'tax' or an unfavorable exchange into a new national currency.
But a euro will still be spendable outside of Cyprus if kept in cash form at a more favorable value.
Capital controls are not a new idea, nor unexpected by anyone familiar with the standard preamble to a typical currency deprecation.
ReplyDeleteWhat is new perhaps is that any euros Cypriots have in cash will retain value in the rest of Europe even if Cyprus drops the Euro in favor of a new national currency.
This creates an incentive to keep your cash under the mattress instead of in banks. Banks might fail or be used to expropriate some of the value via a 'tax' or an unfavorable exchange into a new national currency.
But a euro will still be spendable outside of Cyprus if kept in cash form at a more favorable value.