Carpe Diem

Putting the size of Cyprus’s economy into perspective: It’s smaller than Akron, OH and El Paso, TX

The GDP of Cyprus in 2011 was about $25 billion. Here’s how to put that amount of annual economic activity into perspective:

1. If Cyprus was a US state, it would rank No. 51 for Gross State Product, behind No. 50 Vermont at $25.9 billion and No. 49 Wyoming at $37.6 billion. (Corrected and updated with 2011 data.)

2. At only $25 billion in annual economic output, Cyprus has a smaller economy than many US cities including Akron, OH ($28 billion), Anchorage, AK ($27.5 billion), Boise, ID ($27.2 billion), Charleston, SC ($28.9 billion), Colorado Springs, CO ($26.8 billion), El Paso, TX ($28.7 billion), Syracuse, NY ($27.4 billion), Toledo, OH ($28 billion), and Wichita, KS ($27.3 billion).

39 thoughts on “Putting the size of Cyprus’s economy into perspective: It’s smaller than Akron, OH and El Paso, TX

  1. Wow! so how much money is involved? Is it proportional to what you’d see in Akron banks or is it way more because the Russian Mob parks their money there?

    • It was a tax haven. The EU hated that and asked the government to have the depositors pay for the bailout. If those depositors were smart they used the bank holiday period to withdraw their funds from the banks and the EU will have little to steal from the Russians while it makes an enemy of the local church, which just saw itself lose its deposits, and Cypriot businesses which may have to close down and take many jobs with them. And with all those Russians finding other places to take their vacations I wonder how long it will be until the citizens rise up against the EU and their own government and demand that the country leave the EU.

      • The banks are closed in Cyprus but their subsidiaries in London are still open. I imagine that when the dust settles we will find that many of the rich Russians and Germans managed to get their money out of the country and that the haircut will be taken by the smaller players who are mostly made up of Cypriot businesses, rich individuals, and institutions. Expect a political collapse and the rise of extremist parties.

  2. Actually as has been commented on, the final deal sounds like an FDIC resolution of a very bad bank where no one will buy it (such as IndyMac). In that case insured depositors where made whole, but the uninsured depositors took a haircut. There have been several of these over the years in the past. Note that Laki bank has been effectivly closed, and the Bank of Cyprus is being reconstituted with deposits over 100k becoming equity.

    • i think this new cypress template actually looks quite promising.

      when a bank fails, the first people that get slammed should be the equity holders. then the bond holders, then any other senior creditors, and then, if it comes to that, the depositors themselves.

      this seems both fair and efficient. it gives creditors incentive to take a hard look at where they put their money. it gives those that sell/provide deposit insurance real incentive to price it appropriately.

      that seems like a far better system than using gobs of taxpayer cash to fund banks that are insolvent (illiquid is different and can be handled by asset backed CB lending or swaps at interest).

      this also creates far more incentive for equity and bond holders to keep an eye on banks and demand that they not take absurd risks.

      all in all, i’m not sure what people are so outraged about here.

      who is better to bear the costs of a failed bank than those who bet on it? why should some citizen of dusseldorf who never even heard of laiki bank pay off the greek bondholders and the russian depositors who put their confidence in it?

      of course, you do run some short term liquidity risks, especially if guys keep saying things like this:

      http://www.telegraph.co.uk/finance/financialcrisis/9952979/Cyprus-bail-out-savers-will-be-raided-to-save-euro-in-future-crises-says-eurozone-chief.html

    • Both are just pieces of paper backed by nothing. Given the fact that America has issued more debt than the average EU country I do not see why the USD is any better than the Euro. Since neither is as good as gold both are headed the way of all fiat currencies.

  3. Your point only illustrates the complete fragility of the fractional reserve banking system and that it’s built on a foundation of sand. How else could the failure of such a small entity shake the stability of the entire system? It’s built on a fiction.

    It comes down to a simple choice between what bank deposits are. Are your bank deposits your money being stored in the bank for you to retrieve when you wish, or are they loans you make to the bank for the bank to use as it pleases while promising to pay you back whenever you want? The modern banking system is sold to everybody under the former, but in reality, it is the later.

    When the fiction becomes evident (as in Cyprus), then everybody (everywhere) wants their money back.

  4. how does ND get to be the 49th state with all the oil/gas drilling? Understand small population but the oil/gas sales are huge — I’m assuming Mark has his numbers right – but is sound a little strange.

    • re: ” how does ND get to be the 49th state with all the oil/gas drilling? Understand small population but the oil/gas sales are huge — I’m assuming Mark has his numbers right – but is sound a little strange.”

      yeah… I caught that also…

      they must have started from way, way back… eh?

  5. this issue here is not the size of cyprus gdp but, rather, the size of their banking sector which had over $160bn in deposits (more than 6X gdp) and far more than that in assets/exposure.

    cyprus was a banking haven and it’s banks were run poorly.

    when you have a banking sector that big and anyhting goes wrong, your economy simply cannot produce enough to pay for a bailout.

    • moe-

      i’m not quite sure that’s the right way to frame it.

      the issue is more one of:

      if a bank does not have enough capital to meet its obligations, who should bear the brunt?

      to my mind, the equity holders lose first, then the bondholders. if that still does not make the bank solvent, then who is better to cover losses than depositors?

      they made a choice and picked the bank. it was their doing. sure, it sucks, but it seems reasonable and fair, far more so than asking some uninvolved taxpayer to cover them.

      the notion of a bail in as opposed to a bail out seems like a better system in terms of incentivise depositors and creditors to exercise due care, the correct pricing of assets and deposits (and insurance), and the reduction of moral hazard.

      • Howdy Morg: Here’s my take;
        Banks were not always allowed to gamble with depositors money. This is symptomatic of what banks have become – heads I win, tails you lose. It has to stop somewhere. Albert Einstein observed that “we cannot solve our problems with the same thinking we used when we created them”.

        • Also, placing money in the stock market is a “bet”, I never considered putting my money in a bank savings account a “bet”.

          • moe-

            then the problem would seem to be with you, no?

            of course putting your money in a bank is a bet on the solvency of the bank. how could it not be?

            this was once one of THE key factors anyone took into account when picking a bank.

            this has largely gone away (at least in the us) due to 2 things: deposit insurance and bailouts.

            i see deposit insurance as a fine thing so long as the agency that issues it cannot be bailed out. you pay some fee to the fdic (or whomever) and it provides insurance. this is a nice feature to have both for depositors and banks, as it can be a big help in stopping bank runs and is somehting that can easily self fund and evolve organically.

            bail outs are a real problem though.

            a central banks acting as a lender of last resort for illiquid banks and requiring asset backing and punitive interest for such loans is fine, but when you start flat out bailing banks out, the system gets damaged.

            you create enormous moral hazard. the thing that OUGHT to keep banks from taking bad risks with money is the customers demanding it and refusing to give them money if they do.

            but, if you, the depositor, know the bank will get bailed out, then what do you care? you’re safe and you will gravitate to the banks that offer the best interest which will tend to be the ones taking the most risk.

            this is how moral hazard works. because you, as a depositor do not face the costs of taking risk, of course you like risks. who doesn’t? it’s heads the depositor wins, tails the taxpayer makes good their losses.

            if you want to impose disciple upon banks, it needs to come from the funding side, not the regulatory one.

          • I don’t agree. The majority of saving depositors would never consider their bank deposits “bets”. Depositors looked for the best toaster offer – not the most stable bank – how could investors, before the days of the internet, know if a bank was solvent or not anyway?

          • morganovich

            It would seem that both deposit insurance and lender-of-last-resort are intended to calm the jittery nerves of depositors rather than actually insure against losses. After all, deposit insurance insures against a pre-existing condition. We already know the bank only has 10% of our money “on hand” so to speak, and the only way the lender-of-last-resort could cover major levels of withdrawals would be to print tons of additional dollars. Instant hyperinflation.

            The S&L Crisis of the 1980s seems an instructive example.

          • Moe: “I don’t agree. The majority of saving depositors would never consider their bank deposits “bets”.

            In that case, the magic act is working! You know that your bank only has 10% of depositors’ money available for withdrawal, so every time you write a check you are betting that the bank has enough cash on hand to cover it, and that no more than 10% of total deposits are being withdrawn today.

            Depositors looked for the best toaster offer – not the most stable bank…

            And that’s exactly the problem. We are soothed by assurances of deposit insurance, a central bank as lender of last resort, and finally by the idea of taxpayer bailouts into believing that banks can’t fail.

            – how could investors, before the days of the internet, know if a bank was solvent or not anyway?

            Umm. I’m not sure how to answer that. You realize that the world – including banks – existed before the internet, right? People invested in companies and deposited their money in banks and somehow were able to determine how secure those firms were without the internet.

          • In that case, the magic act is working! You know that your bank only has 10% of depositors’ money available for withdrawal, so every time you write a check you are betting that the bank has enough cash on hand to cover it, and that no more than 10% of total deposits are being withdrawn today.

            Is this true? I doubt that the banking system has 10% of deposits on hand. Some of the reports were indicating that the banks were using leverage that varied from 20-1 to 65-1. Unless they are using some weird definition of leverage your 10% claim seems too optimistic.

          • moe-

            “I don’t agree. The majority of saving depositors would never consider their bank deposits “bets”. Depositors looked for the best toaster offer – not the most stable bank – how could investors, before the days of the internet, know if a bank was solvent or not anyway?”

            you are actually making my point for me.

            that fact that they do not consider them bets is the problem. the simple fact is that they are, always have been, and always will be. absolutely nothing can change that.

            even if you bank simply takes your cash and puts it in a vault so it is there anytime you want it, that’s still a bet on security (and on inflation).

            use fractional reserve banking, and the bet gets considerably riskier (though you will also get paid interest to mitigate this).

            what people think IS the problem and is why banks are such a mess. people think they will always be bailed out, that they are insured perfectly by the fdic and backstopped by the government.

            bailouts are still a bet, just a bet that the government will come to your rescue. take that away, and people will start to look at banks.

            pre internet, it was not much harder to assess a bank. hell, it was probably easier if you factor in how complex derivatives are now. you asked for a copy of their financials. they would sned it to you via mail. this is how we used to get all our 10k’s, q’s, and annual reports before the internet. i myself used to do this. you called the company on the phone, spoke to IR, and asked them to send you a copy of the financials.

            the fact that you would even consider choosing a bank without examining it’s financials or, at the very least, getting the opinion of someone you trust on such matters, is a sign that the system is badly broken.

            banks are not magic. they have risk like anyhting else. we just ignore it because we have faith the government will bail us out. because of this, no one asks the banks for much. if people did not believe in bailouts, then banks would need to compete to reassure them that they are safe and would become more transparent and likely less risky.

            the current system of bailouts is WHY they feel they can take so much risk. this moral hazard is simple, econ 101 stuff.

            if you reduce the price of somehting, people choose more of it. reducing the price of your bank blowing up through a bailout makes people more willing to give risky banks money and banks more willing to engage in risky opportunity.

            if i offer you a bet to risk $1 for a 50% chance of winning 40 cents, you’d tell me to get lost.

            but if i then said that if you lose,there is a 95% chance that the government will cover your loss, well, you’d be all over that bet, yes?

            that’s how backstops drive increased risk taking.

            at the end of the day, you have to make a choice:

            either accept that you need to examine your bank carefully as a fiduciary partner and make a call about the risk or give up complaining about banks taking too much risk.

            you cannot have it both ways.

            you are demanding that they manage risk, but refusing to do so yourself.

          • V: “Is this true? I doubt that the banking system has 10% of deposits on hand. Some of the reports were indicating that the banks were using leverage that varied from 20-1 to 65-1. Unless they are using some weird definition of leverage your 10% claim seems too optimistic.

            You are correct, but I believe the current reserve requirement for demand deposits at large commercial banks is 10%, so I used it for simplicity.

  6. Is the Fed’s money printing really all that different from what’s happening in Cyprus? Both are robbing savers, just via different methods.

          • So you advocate a central authority sweeping in and just confiscating wealth because some may, or may not, have done something illegal.

            You’re a perfect Democrat, Larry.

            “where is your sense of justice?”

            What a warped world you live in.

          • ” So you advocate a central authority sweeping in and just confiscating wealth because some may, or may not, have done something illegal.”

            isn’t that proper justice for the original property owners who were stolen from?

            isn’t that the purpose of govt – to protect property owners?

          • “isn’t that proper justice for the original property owners who were stolen from?”

            Where’s your evidence they were all criminals? Can you even name a single person who stole anything? Even if they were 100% bad guys, that doesn’t justify a bloated welfare state seizing assets in order to feed itself for a little longer.

            “isn’t that the purpose of govt – to protect property owners?”

            How ironic, and typically clueless of you. What do you call the bank deposits, if not property?

          • re: ” How ironic, and typically clueless of you. What do you call the bank deposits, if not property?”

            bank deposits of Russian mobsters?

            is that really THEIR property?

            shouldn’t we take it away and try to find the original owners?

            ;-)

            isn’t that what we do when the US freezes the assets of dictators and despots and known drug dealers?

          • “bank deposits of Russian mobsters?”

            So everyone who deposits in a Cyprus bank is a Russian mobster?

            “is that really THEIR property?”

            Is it the EU’s?

    • Is the Fed’s money printing really all that different from what’s happening in Cyprus? Both are robbing savers, just via different methods.

      While many would agree with you there are plenty of analysts and readers on this site that make excuses for the Fed’s corrupt activities.

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