Investors protest carrying Chinese flags

Net contributors would be locked into a relationship with the markets a convincing creditor.

Remarkably, Japanese savers soak up some 95 of their government s debt.

But investors do not know and cannot tell that Oz has no talent.

Because banks service their depositors on a first come first served basis, those who wait risk being left empty handed, because the bank may be forced to liquidate its long term assets at a loss and run out of resources.

They occur when a bank's clients fear that most of their fellow depositors will withdraw their funds.

The EFSF will also provide funds to ensure that Irish banks depositors can get their money back today.

Indeed, the proposal amounted to a rupture with the near universal agreement that small depositors should be considered sacrosanct.

If the fund blows up, investors cannot tell whether it was due to bad management or just bad luck.

Depositors with the British bank Northern Rock blame American developments for the credit turbulence that made it impossible for the bank to continue to fund its lending.

Some investors don t have a sufficient level of financial understanding and, when purchasing bearer savings certificates, may assume that their investments are insured.

Savers could see gains as well through higher yields at the, though experts differ on how quickly that will take hold.

In fact, large depositors are not unlike senior bondholders, and the proposed haircut was a small but welcome step forward.

Instead, the government closed down the banking system, so that depositors could no longer convert their pesos into dollars!

Given this situation, the logical choice for the country should have been clear if the government wanted to survive, foreign depositors must bear part of the losses.

Depositors deserve strong, effective protection for their funds and the banking system requires it in order to maintain confidence.

As in Ireland, the most vulnerable were being asked to take the hit, while large depositors were let off lightly and other lenders were to be spared.

Many small savers place their savings in so called money market funds that pay a premium over ordinary federally insured deposits.

If savers in Portuguese banks start moving their money to Germany, the ECB will recycle these euros back to Portugal through interbank deposits.

Second, we thought that the depositors prone to panic would always be small depositors households and small firms rather than corporations or professional investors.

Long term interest rates will rise as savers perceive that discipline is lost, wage increases will be encouraged by pro labor governments and that means inflation.

Second, we thought that the depositors prone to panic would always be small depositors households and small firms  rather than corporations or professional investors.

Italian savers, for example, still hold a significant volume of foreign assets (including German bonds), and foreign investors still hold a sizeable share of Italian government bonds. But interest rates on longer term Italian government bonds (and Italian private sector borrowing costs) are about 250 basis points higher than those on the German equivalents (this is the risk premium).

Although the value of the bank s assets doesn t exceed its liabilities, depositors won t flee as long as the government backs the bank by guaranteeing its deposits.

The common shareholders in financial firms do not have an incentive to induce executives to take into account the losses that risks can impose on preferred shareholders, bondholders, depositors, and taxpayers.

Meltdown fears, even if remote, directly raise the premium that savers are willing to pay for bonds that they perceive as the most reliable, much as the premium for gold rises.

But holding cash can be risky, as Greek savers, worried about the safety of their bank deposits, learned after stuffing it into their mattresses and walls the number of armed home robberies rose sharply, and some cash was devoured by rodents.

In fact, Japanese savers have been benefiting from this phenomenon for more than a decade, reaping higher real returns than their counterparts in the US, even though Japan s near zero nominal interest rates are much lower than America s.

But financial markets reacted calmly to the news that, for the first time, even depositors in a bank in the European Union will lose part of their money (and this was noted with glee in Berlin and elsewhere in northern Europe).

Ensure that homeowners and small investors do not absorb too much loss, for their only crime was to accept bad risks, which they would not have done in a world of properly diversified portfolios.

But financial markets reacted calmly to the news that, for the first time, even depositors in a bank in the European Union will lose part of their money (and this was noted with glee in Berlin and elsewhere in northern Europe).

So when the event eventually does occur, investors who leave their money in the fund lose everything, whereas Oz nets more than 3 million in each year before the fund crashes.

Reversal of that process will likely not occur until the three key elements of banking union common supervision, common deposit insurance, and a common resolution fund are within tangible reach. Indeed, if Spanish savers become truly afraid of redenomination risk in the interim, the OMT will not matter they will just take their cash and deposit it as quickly as possible in, say, a German bank.

Indeed, if Spanish savers become truly afraid of redenomination risk in the interim, the OMT will not matter they will just take their cash and deposit it as quickly as possible in, say, a German bank.