1/ With European banks teetering because the crash of stock & bond markets, it's important to remember how western financial authorities since 2012 have been planning for bank *bail-ins*, i.e. depositor haircuts or controlled bankruptcies.
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2/ Basically a bail-in means you'll hear from your banker one day "And... it's gone!". I've been following these policy changes for over a decade now. E.g. in 2013 I talked about it in my San Jose presentation:
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3/ The big switch from bail-outs to bail-ins is mostly a Western phenomenon. Now that the strength of EUR, GBP, JPY is no longer taken for granted, nations are switching to strategies that are commonplace in, say, Latin America (google "2001 Corralito").
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4/ The Financial Stability Board, a new entity akin to the BIS and the IMF, has been the organization overseeing the implementation of legislation that allows for depositor haircuts / asset freezes.
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Financial system bail-in plans on track: 15 countries onboard, up from 2 in 2012. #bankrun #corralito #assetfreeze
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5/ Keep in mind, if a state wants to bailout its banks, it needs access to cash, usually available by issuing government bonds (debt). But if those bonds are crashing, it's extremely hard to get cash. So a partial bankruptcy becomes the only other option.
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Replying to @aronvanammers
@aronvanammers Yeah, bail-in means no bailout, and the banks survives by freeze of assets and deposit haircuts.
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6/ Take the example of the UK. Last year, it published this paper: "Executing bail-in: an operational guide from the Bank of England".
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7/ This year, the interest payments demanded by investors on UK government debt has spiked tremendously, meaning that the market has lost trust in them and that raising money for the UK government is becoming very expensive very quickly.
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8/ In response, the BOE announced today it's going to buy government debt. Which helps the government's cash flow in the short term, but will of course lead to more inflation. (British banks have more financial liabilities than just pounds...)
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9/ And so the UK economy is stuck. Like I've said before, continual bank bailouts eventually lead to hyperinflation (rock), but the alternative, bail-ins, cause bank runs/devaluations (hard place).
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10/ These are the types of situations that make bitcoin an attractive alternative: non-inflationary and censorship resistant.
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Bank of England on the Brink of Third Bailout for Banks
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11/ In sum: Bank bail-ins (=depositor haircuts) have been tested before, the legislation is ready to roll them out globally as needed, and the current bond market crash is making the enactment of such measures exceedingly likely.
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@btclondon There was evidence of a lot of BTC buying in Cyprus & Spain during the Cyprus bail-in crisis.
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