Thursday, March 28, 2013

How to Butcher a Metaphor: The Cypriot Bail-In

So, let's get one thing straight. Cyprus is neither a bail-out, nor is it a bail-in. Either metaphor fails, and the tortured extension of the metaphor to 'bail-in' illustrates the poor grasp of language by a) the people who came up with it and b) the people (mostly journalists) who gaily leapt on it.

The first deployment of the metaphor was in relation to the 'bail-out' of Greece, then Ireland and others. The metaphor was OK - like a boat in trouble, taking on water, the troika were providing assistance in relieving the problem. In cash terms however it was a reversal - the cash was coming in to the country, while the water would have been hurled out of the boat. Nevertheless, the assistance (in terms of muscle for the bailing, so to speak) was inbound, so the metaphor was sustainable.

Moving on to Cyprus, and the structure of the 'rescue' was different. Instead of a complete external injection of cash from the ECB, ESM, or other socialised lender, there was a combination of external support, and internal redistribution. This, it was announced, was a 'bail-in'.

Now, if we look to the origin of the metaphor, it seems impossible to imagine a scenario where a boat would need to have water bailed into it, save in some convoluted rectification of imbalance, and a need for ballast. Still, the image that the communicators were trying to convey was one of Cyprus redistributing assets from depositors to the sovereign in order to make up some of the shortfall, a kind of internal bail-out. Now, an internal bail-out is still a bail-out, it;'s just not an external one.  The only way in which the metaphor could possibly find relevance is if one presumes they were attempting to emphahise the differentiated nature of the Cypriot 'event' from the Greek 'event'. That was an 'out', this is an 'in' - it couldn't be more different!

The irony, of course, is that if bail-in were an accepted construct at any level, it would be a more appropriate metaphor for the Greek and Irish 'events' than the Cypriot equivalent, being as they were injections of capital and liquidity from the outside in. As for what the Cypriot event should have been called? Well, simple wealth redistribution would probably have sounded too communist. Marx may be back in vogue, but not to that degree.

Meanwhile, I wish those thirty-something economists who devise these schemes would go read a book. They might begin to understand how language actually works.  It might also help them to understand why their first effort at redistribution (taking from the poor and giving to the banks) failed so badly, and maybe, just maybe, they might begin to understand how the principle they have just established (taking from the relatively rich and giving to the banks) might completely revolutionise European politics for a generation. Because I don't think anyone truly understands that yet.

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