Reserve Bank of NZ claims it's "not a bimbo."

New Zealand's Reserve Bank is putting in place a bank rescue plan that would include forfeiture of deposits. It denies, however, that these deposits are like Cypriote deposits. The bottom line, however, is that bank deposits have entered the mix of assets available to government to solve government problems.

Here is a report from Fairfax New Zealand News:

The Reserve Bank is rejecting suggestions that its new policy for banks facing a collapse is anything like rejected plans to sort out the present banking crisis in Cyprus.

The RBNZ plans that will mean a "haircut" or partial loss on all deposits if a bank fails, are due to come into force in New Zealand at the end of June.

Reserve Bank Deputy Governor Grant Spencer said today that the RBNZ "Open Bank Resolution" (OBR) policy would mean a quick and orderly resolution of a bank collapse.

"It is markedly different from proposals to resolve the banking crisis in Cyprus," Spencer said

Depositors' money in banks here had never been guaranteed, apart from temporary periods, such as under the Deposit Guarantee Scheme from late 2008 to December 2011.

"If their bank fails, depositors have always needed to understand that deposits are not guaranteed," he said.

The perception and reality of deficit spending.

Perception can diverge from reality for a considerable length of time.  Here are two comments that reflect this:

Mayor Bloomberg on the radio:  "“We are spending money we don’t have,” Mr. Bloomberg explained. “It’s not like your household. In your household, people are saying, ‘Oh, you can’t spend money you don’t have.’ That is true for your household because nobody is going to lend you an infinite amount of money. When it comes to the United States federal government, people do seem willing to lend us an infinite amount of money.… Our debt is so big and so many people own it that it’s preposterous to think that they would stop selling us more. It’s the old story: If you owe the bank $50,000, you got a problem. If you owe the bank $50 million, they got a problem. And that’s a problem for the lenders. They can’t stop lending us more money.” (Observer.com)

Warren Buffet on CNBC:  "If the Fed bought $3.5 trillion of Federal debt a year then we would have no deficit and would not have to pay any taxes at all." 

Buffet was being ironic but Bloomberg was not, or was it the other way around?