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Tuesday, March 19, 2013

Impact Imminent?

 

Zero Hedge has the latest Cyprus update – There is no parliamentary support in Cyprus for any bail-in deal. Tyler Durden begs the question:

 

Neither we, nor anyone else, has any idea what comes now.

 

The folks at FTAlphaville have some thoughts on the state of play:

 

A bank run spreading to Spain looks a non-starter in the short term.

 

The risk of any wider bank run looks pretty small so far, with market reaction relatively benign.

 

I’ve been following the Press coverage of Cyprus, the talking heads are saying that Cyprus is a manageable issue. Nothing to worry about at all.

I’m going to disagree with FTA and the TV folks. The chances of a bank run have never been higher. Tyler’s right. We’re looking at a black hole.

 

The “Other” scenario for Cyprus is a shell shocker. Forget the shareholders or the senior bond guys – they will end up with Dick’s hat band. Those Russians who were at risk of losing as much as 15% of their deposits – They get zip too. At best, they are getting an IOU. That IOU will have a value of 10 cents on the dollar.

Those small depositors that were going to get hit for an unfair loss of 6% now face a vacuum. Their bank statements may not reflect a loss of principal, but they won’t be able to withdraw a dime from those accounts. The local banks will remain closed, when they do reopen those deposits will be converted to some new currency. It’s possible that the new currency will be the Turkish Lira.  You thought the poor folks in Cyprus were getting a bad deal on Monday? Wait till Friday before you pass judgement.

What happens if Cyprus does a “drop out” of the EU? That result immediately makes a lie of Mario Draghi’s words that the Euro was Uber-Ales. This is precisely what Super Mario said “would never happen”.

If Cyprus goes turtle and leaves the Euro, the credit spreads on peripherals will widen. This sets up a market “call” on the ECB. But remember, for Mario Draghi to give the market the “put” that it will demand, the governments of Spain and Italy will be forced to get down on their knees and beg to the gods in Brussels and Berlin for a helping hand. To do that means that they would have to have very harsh terms imposed on them. An IMF team would run the finances of the countries involved.

Given that there is zero chance that Italy and Spain will do the necessary begging, the value of the promised Draghi “put” is now also zero.

 

There is a chance that something can be done to stop what looks like a slide into an abyss. Those chances are now well below 50-50.  The markets/seers are calling for a soft landing, while at the same time that outcome is looking less and less likely. The markets seem poorly positioned for the events unfolding. And this story is running at hyper-speed. That’s a very bad combo. Seat belts on – Impact Imminent!

 

impact

 

 

Comments

  1. Just thinking outside the Geithner box here … but the world has faced bank failures before. A bailout of political cronies is not the only answer, no matter how many sky is falling stories get sent around the media.

    Goldman Sachs, through their employee Mario Draghi, was instrumental in preparing false accounting that allowed Greece to meet the Maastrict Treaty requirements for joining the Euro in the first place. They have made billions off this financial disaster, and they started with billions in equity before hand.

    If the courts were working, Goldman would get a bunch of IOUs worth 10cents on the dollar. Depositors in Greek banks would be made whole with the seized from the crime. And people who trade financial assets for a living will take their licks and move on to the next trade (remember the “no tears” clause in Liars Poker?)

    This isn’t the end of the world. It (hopefully) is the end of a crony kleptocracy. Good riddance.

    • backwardsevolution says:

      Bubba Joe – as I read the article, what you said was exactly what I was thinking too (Goldman Sachs and Greece). Let’s turn the clock back, and let’s go after every single one of these shysters who caused the problem in the first place, strip them of their wages and bonuses for the last eight years, and go after them for fraud, corruption, etc. Perhaps we should explain to them that giving the money back is better than the inside of a jail cell.

      Oh, little depositor, you’d better just take the hit, or else risk losing ALL of your money? Are you new?

      Thanks, Bubba.

      • Its not about the bailouts …its the system that’s got every cp’s nerves on edge.
        Banks, being a vital cog in that system, are not allowed to fail.
        Like it or not, BAILOUTS will continue….until all the bad debt is absorbed by the CB’s.
        This charade has to continue, for the game is bigger than the collective players.

    • If the Cyprus banks defaults, will insurance pay off all the bonds and derivatives issued by the banks? Is this going to be another Lehman Bros failure or even worst?

  2. But What Do I Know? says:

    I guess you could look at it another way–the EU and ECB could come out of this with their hand strengthened. The way I understand it, Cyprus wanted 17 billion euros and the EU told them to come up with about 40% of that themselves. The PM of Cyprus, not wanting to have his fingerprints on the confiscation of the hot Russian money, deliberately devised a formula which would get the country up in arms, blame the Germans, and get the Russians to sit down with the EU and figure out a deal. Now the EU is in put up or shut up territory–they can cave to Cyprus and give them the money, or they can let them go to the wall (and the Russian government), let the banks fail, and move on. If they do that, it will certainly demonstrate their resolve to force the periphery countries to meet their demands, and do it in a place which will not bring down the whole house of cards.

    If the EU is smart they will stick to their guns and let the Cypriot banks fail (or get the money from Russia). To me, this makes the Monti put more credible because it will be clear it will not be extended to everyone–a presumption which made it weaker, IMHO. The EU and the Germans can use the sh*tstorm on Cyprus to encourager les autres; the next time they tell an insolvent government to do something, they will d*mn well do it.

    • The Draghi put does not have any credibility — never did. It was and is just desperation on the part of bad bank CEOs.

      Draghi does not have “unlimited” (and he will have a lot less when Goldman and he finally are held accountable).

      The ECB does not have “unlimited” — actually most of the ECB’s members are insolvent. Germany has consistently said from the beginning that debts are not co-guaranteed. The only lies in the EU system were the false accounts of Italy, Greece, Spain, etc.

      The new lie is from Draghi. He didn’t save Europe, he basically committed a second fraud. It is against the law to use someone else’s credit card, especially when they explicitly told you “no”. Draghi has no legal authority to pledge Germany’s credit. Who cares what Merkel may have winked at during some 5star EU conference? German voters have been very clear and very consistent from the beginning: there are no joint guarantees.

      The Euro started as a fraud — that is the underlying problem. Many starting members lied about their accounts and never met the membership terms … and those lies are now coming back to haunt Europe.

      No empty promise from a con-artist to “spend what it takes with someone else’s credit card” is going to save Europe.

      I can’t think of any legal or sane reason why German taxpayers or Cyprus taxpayers or Greek taxpayers (or … ) should be penalized for the lies of EU politicians and their bankers. It is rather insane to even suggest the idea before all the guilty parties are first picked clean.

      As long as Goldman Sachs doesn’t have to pay for their accounting fraud — the people of Cyprus (and the rest of Europe) should tell Brussels Eurocrats to go to hell (or jail!). Mario Draghi should be penniless and in prison. Bunga-room Burlesconi (spelling?), Chirac, Sarkozy, and Gordon Brown aren’t looking too innocent either.

      The last of the leaders born during the WW2 era, Gerhard Schroder and Mitterand/Chirac wanted a unified Europe before their time in this world was up. They wanted it so bad they were willing to cut corners and overlook some accounting issues that really should have postponed the creation of the Euro. Its impossible to argue why Turkey was excluded, yet Greece was not (except for French anti-Islam feelings). And like everything else in life … when you cut corners, there is a cost to pay later on. You cannot legislate that cost away (plenty have tried before Europe)

      The bill is coming due, whether Europe likes it or not. Smart traders will take their first loss, dumb traders will put their faith in the false omnipotence of central bankers and corrupt politicians — and then they will take a much bigger loss.

      • @Bubba Joe And who do you think will hold Goldman Sachs and Draghi accountable? Since U.S. Atty. General Eric Holder has said he will not prosecute the TBTF banks, because it would upset the financial markets! How likely is it that the IMF will act independently and counter to the U.S.? It is part of the problem. What other entitite(s) are in a position to sufficient political and financial power to have influence? China? Russia? I cannot imagine a scenario in which any of the organized crime execs or organizations, i.e,., TBTF banks, are held accountable. If you can imagine such a scenario – who’s involved and how it unfolds – please share it, I’m sure I’m not the only one who would appreciate your insights.

        • @Public sector –

          I think it is already happening, but not the way you are thinking. As the people of Europe refuse to prop up the scam with endless bailouts (and throw out governments that are corrupt enough to accept them) … the Euro is coming apart

          Guess who has the most to lose from the Euro collapsing? Guess who benefited the most from creating it? Hint: its the people shrieking that the world will end if they don’t get their next bailout

          • Last time they thought they were clever enough to avoid a bailout….in the words of ex Treasury Secretary and ex GS CEO Hank Paulson to the Banks of America …”You guys created this mess….you fix it”.
            That turned out real fine….thinking the markets would absorb the bankruptcy of Lehman…in a matter of days/weeks. How close the whole financial system came to imploding (only a few people really have any idea).
            You think they want to test that theory again.
            People may have their say and the power of the people is not one to disregard.
            BUT when push comes to shove…the CB’s are the keepers of the financial system.
            Governments are there to rule and adminster law (supposedly). They are mere puppets of the elitists. No matter who is in “power” or replaced…they are all controlled.

            • Simple solution — already happening — the government gets cut off too.

              Who says future generations will choose to honor this odious debt even if the crooks create it? (please look up the legal concept of odious debts before you repeat more Geithner nonsense)

              Also, I would point you to a few history books. When political leaders get out of line (as is happening now) — even the civilized French break out the guillotines. Ask Louis XVI how absolute power works. Ask Saddam Hussein or Momar Qaddafi.

              Face it: when push comes to shove, every government thinks its rule will last forever.

              This is not the first time some arrogant pricks have tried to put Europe under one currency — all the others failed too. I am sure you will tell us how this time will be different

              PS — Remember when Bruce predicted (around New Years) that Geithner would get a crony job working for Wilbur Ross? Turns out no one on Wall Street would touch Geithner (not WL Ross or even Goldman Sachs). The man is “innocent” just like OJ Simpson.

              Hank Paulson works for himself now too. Dick Fuld was last seen with a nasty black eye given to him in the company gym by a fellow employee (and no one standing around saw anything).

              Remember Richard Nixon? he “got away with it” too.

              • AND that’s exactly why “they” created CB’s banks.
                The dont take direction from Governments and they have the absolute power to destroy their currency…as we are quickly finding out.
                So my friend…government displacement doesnt change the game.
                You try to put in different govt. and then rule against these guys….your days are numbered.
                How long will that idiot Hollande last ?
                BANKS are the problem, always have been, always will be.
                They are the leeches of society. The very same who create booms and busts, recessions and depressions, prosperity and wealth and class divide.
                When you have social upheaval ….the masses look to the government for rescue.
                In the face of unrest we all expect protection and rule of law to prevail.
                Where it doesnt or wont exist, then you have grounds for the rise of a dictatorship or totalitarian government. Then where do you sit. No freedoms, no rights…nothing worth living for ?…Except to continue being a slave to a one world order.
                That’s where we are headed if your logic prevails. Think about it….EU dissolution, massive civil unrest across 27 member states…..how do you control that ? We have progressed from caveman mentality but to revert back to that would be unthinkable given our technological advances and progress.
                So keep promoting the “overthrow of inappropriate government and in with a government that has integrity” theme. Wishful thinking…..find another pastime.

              • Liquid Motion says: “So keep promoting the “overthrow of inappropriate government and in with a government that has “integrity” theme. Wishful thinking.”

                I have to agree with that statement. I read plenty of comments effectively declaring — ‘if we just punish and throw out the bad guys and install some good guys, things will improve.’

                Seriously, who is a good guy?? I don’t mean that they don’t exist but you’re going to have to dig really hard and then become disciplined about kicking them out quickly once THEY go rogue.

                Largely, the world has PUNTED it’s moral compass. I’m talking ordinary people…the ones you work with, your relatives, folks you sit beside in church….yea, all of those people. The list I could create with the moral rationalizations by the everyday people that I know would be breathtaking. It’s shocking. And if you rightly, and nicely, point out the error in their thinking or behavior…they will just as soon blow you off than assume any humility about being called out.

                So, the plan is to give some NEW SET of morally vacant people the keys to the kingdom and expect an improvement? No, there’s going to have to be a WORLD OF UNSPEAKABLE SUFFERING before humility and general compassion return.

                Here’s a recent example (just happened 1 hour ago at the YMCA): I’m talking to a 65 year old lady that I know about dogs. She asks if I’ve heard of this new thing whereby people can make a donation to some non-profit that then sends them a service dog-type vest for their canine. So, now the owner can sally around with their dog in environments where animals aren’t normally allowed. She also claimed they can get free airplane passage for the dog with this vest. Don’t know if that’s true but I found HER lack of bother about it all very disturbing. When I commented how ‘bottom of the barrell’ that gig is…..she just shrugged and muttered something about it being handy for some.

                Bubba Joe — I’m asking: where are you going to find these many thousands of honest people to head our goverments, banks and corporations?

              • @M Thatcher “where are you going to find these many thousands of honest people to head our goverments, banks and corporations?”

                Again, I must challenge readers to think a little outside the box.

                Who says we have to replace these crooks? Why can’t the government be made a lot smaller? Supposedly the govt was running a surplus in 2000 / final year of Bubba Clinton (not really, but just to get the conversation started). Lets role taxes AND spending back to Y2K levels. Very important to emphasize the spending part of that so the criminals in Washington don’t hear only the part they want to hear.

                Lets say we shrink government to the size and scope it was during JFK’s presidency (he was hardly an anarchist / small govt guy). Lets measure government as total_spending / GDP (total spending as percent of GDP) to avoid all the inflation issues that Bernanke claims aren’t issues.

                If we shrunk govt to that level, it would be HALF the current size. If you are going to compare the size of the US government with other countries, you need to consider US federal plus state plus local government spending — not just federal. England doesn’t have state governments for example. Canada has provinces that get most of their funding / mandates from Canada’s federal government — so officially they have the equivalent of “states”, but not for spending comparison.

                Lets remember that things are not perfect now, and they also were not perfect back in the day either. But lets remember that economic growth was a LOT higher when government was a reasonable size. Lets remember that when government gets to be bigger than the private sector (aka its own tax base) — the economy collapses.

                Lets remember that no entity can be all things to all people. An entity run by committees of parasites is even worse.

                Lets remember Thomas Jefferson’s idea: That government that governs least governs best.

                Lets remember that big corporations were developed only about 100 years ago (Rockefeller, Carnegie, etc). They created big corporations because they needed a legal structure to govern huge amounts of labor and capital that came with big manufacturing centers. Our economy is no longer centered around big manufacturing — even Detroit gets by with fewer workers and less capital.

                The only reason for massive corporations now is this: CEO pay is closely correlated with balance sheet size. So is Board of Director compensation.

                Where do we find all these honest people to “replace” the crooks? We don’t. Just eliminate the positions — especially in government.

                Why do people do all sorts of scams to siphon government money? Why did Willie Sutton rob banks? because that is where the money is.

                If the government is smaller, there is less money to steal. It becomes a much less attractive place to make a career sucking off the blood of taxpayers.

                We can make this change ourselves, or we can wait for it to be done to us. Roman Empire collapsed, the British empire downsized (way too slowly, but they tried). The longer we wait, the worse our standard of living will be

              • @Bubba – I like your plan. Yes, smaller governments and corporations! Easier to keep our eyes peeled on them and they have less power/money to get stupid with.

                I’ve previously worked in mid-size and big corporate and have had my own small business for almost 8 years now. There is nothing like being personally accountable for the generation of revenue AND for watching expenses to get real clarity about the value, or not, of expenditures.

                And, you know what else? You will find that you rise to the occasion. I’ve never performed better in my working life than when me own arse was on the line with my own business. So, I have long thought that if some social welfare programs were less available or non-existent, people would be mighty amazed how the former recipients somehow manage to kick into gear and provide for themselves. And there’s more dignity in that anyhow.

                However, I still think that there will need to be a world of pain before the change occurs.
                Humans are real dense that way.

              • Liquid Motion says:

                @Bubba
                Smaller government is not the solution.
                Smaller doesnt infer intelligence. It will not obviate corruption.
                Who gave the government/politicians imperical power to think that they can do better with my money anyway?
                They are not productive….. they dont generate any income, they are inefficient and they are a hindrance to the economy.
                They continually make errors of judgement, They attract people who have egos bigger than their own persona, are power hungry and thrive on social acceptance, greed and hubris.
                No thanks. Show me a politician who is humble and then you will have a true leader.

                As for the comment “The only reason for massive corporations now is to grow the balance sheets”….you have only covered part of the REAL reason.
                I assume you havent worked in large corporates or fully appreciate how they function.
                You mention Rockefeller. Good point, but you need to go deeper. Read up on his life , where he started , what he achieved when he was in his early 20′s and how he came to control industries/markets. HINT: Leverage = Power = Wealth.
                @ M Thatcher…I like the idea of removing the social welfare net ( a construct from the depression era thanks to FDR). BUT unfortunately you have too many dependents now addicted to it. Resulting social unrest would imply the people like you/ I who work, we’re no longer safe. There may come a time in the not too distant future where the western governments who have welfare systems , simply withdraw them outright. Perhaps the DHS already knows something about this and the medicare, social security debacles which the bankrupt government can no longer afford. Be careful what you wish for. We know that government do not err on the side of good judgement..only what is in the best interests of themselves and their pay masters.

    • Have you ever heard of anyone stealing money from KGB guys now the Russian oligarchs who are the Russian mafia? The only ones who would, are those with a literal death wish. They don’t have just a few billions in Cypress, it’s mega bucks

      • I think Cyprus is just a stopping point for laundered money … dirty money comes in, gets “lost” in paper shuffling and rigged trading schemes, and goes out “clean” (almost impossible to trace back to its origin).

        Then the money is used to buy real estate in tax havens like London, Isles of Man, Monaco, BVI, Hong Kong, Singapore, etc. No one in their right mind is going to leave actual assets on Cyprus. PO boxes for trusts / anonymous corporations — sure. But the actual assets are elsewhere.

        If the assets were actually in Cyprus, then the mobsters (including EU politicians) would have screamed much louder and ordered their puppet EU governments to scuttle the idea before it reached the media.

        • That’s not the way it works.
          Governments are stupid…..never act in the best interests without proper due diligence….petrified of bigger concerns (EU directives)…..someone simply forgot to mention that the whole Cypriot banking system is levered off KGB money.
          Dumbasses…quid pro quo.
          That idiot running the IMF needs to have her ears and eyes checked. They wont stop at just checking her appartment…..hmmmmmm !!!

  3. a different tom says:

    I have to agree with Bubba. Why hasn’t anyone talked about what is right and what the law requires as the solution to this? That is, the Cyprus bank in trouble should go into receivership. Make everyone whole up to 100,000 euro (as the law requires) and then close the bank. If the bank management and government oversight were doing their job no one else besides the shareholders and bondholders would get screwed. If a “bailout” is required by the ECB to honor their deposit insurance because aforementioned managers and regulators didn’t do their job, an investigation should be launched that holds those people accountable. Why is it than no one actually demands that the right course of action be taken? Has the world gone completely to hell now? Are there not any honest people anymore?

    • Tom – What is the outcome of your plan? Chaos. It leads to Cyexit, then the dominoes start falling.

      So the rule of law plan is as flawed as any other.

      • Bruce — endless bailouts after bailouts is not a solution at all. How many times are we going to hear that the problem has been ring fenced and Europe’s problems are solved? There is just no credibility in that argument

        When you forecast “chaos” — you are not saying for whom? Depositors have a promise (up to EUR100K) to be made whole. Remember your time in the markets? Your word is your bond, and you promised deposit insurance. Break your word and you are done. No one can have any faith in a system where promises are written in pencil and can be arbitrarily changed at a political whim.

        Bailing out inept bank managers and corrupt politicians was never part of any law. These are the people who face true “chaos” … something they are going to face sooner or later no matter what. They deserve it.

        Please explain to the class why you think chaos experienced by mom and pop is somehow not relevant? Why is chaos experienced by corrupt politicians and bankers somehow more important? These wanna-be leaders brought this pain on themselves.

        Both endless bailouts and bankruptcy/receivership involve chaos — but receivership followed by rebuilding at least offers a light at the end of the tunnel.

      • Bruce maybe the dominoes fall, maybe they don’t. What is the word everyone is talking about? It’s “confidence” because the world financial systems are not backed by anything but confidence. Blatantly stealing INSURED deposits will lead to chaos for sure. If The People see that those in power are held accountable at least the confidence charade is maintained.

      • The outcome of his plan is that people who thought they had savings discover that they don’t; a whole lot of pension funds, insurance companies, and bank accounts above the state guarantee lose money.

        Isn’t that just the truth? We have a had a massive bubble over the years, and most assets are overvalued. Is it really worse to accept that, take the loss, and move on, than it is to keep pretending like it hasn’t happened and let the difference between the nominal value of paper assets and the real value continue to grow and grow?

        • You guys need to take some time out.
          Stop espousing the virtues of stopping the bailouts.
          I dont agree with them either….BUT….they (CB’s) dont realistically have any choice for the time being.
          Bubba….you really dont have any idea about the magnitude of the problem….”receivership and rebuilding”…..omg. I expect that you would be the last in line at the local soup kitchen…searching your pockets for a spare dime. We are all screwed …dont you get it. Fanciful bankruptcies belong in the world of some EUTOPIA. It used to be some time ago, that corporates could die and then we all move on. Not any more.
          How many times does GM have to be resuscitated ? How close was Merrill Lynch from going under….why didnt Freddie and Fannie fail….why wasnt LTCM allowed to fail. BECAUSE they are too vital to the financial system.
          It really has become bigger than most people understand. AND that reality is dwarfed in comparison to the destructive effects of derivatives.
          The system has become too leveraged. Companies are either monopolies or duopolies or oligopolies in an ever expanding world.
          Its too complex. Its too concentrated.
          Its no longer simple arithmetic where 100 -3 = 97
          Its now 10-1 = ZERO.

    • backwardsevolution says:

      a different Tom – very well said. You and Bubba are bang on! Bubba said:

      “Please explain to the class why you think chaos experienced by mom and pop is somehow not relevant? Why is chaos experienced by corrupt politicians and bankers somehow more important? These wanna-be leaders brought this pain on themselves.”

      Thank you, both, for putting it so well!

  4. I agree, let the Russians bail out Cyprus, plus a few other Eastern European countries in case some of them go belly up too in the Euro crisis…

  5. It’s German election year… can’t see Merkel letting this blow up now over a mere 6 billion… a fudge will be found… be certain of it.

    • @micheal — a “mere” 6 billion???

      The EU was going to be saved by “lending” EUR12 billion to Greece … then it was a bailout of EUR12 billion… then they said it was “ring fenced” and promised there was NO WAY the contagion would spread to Ireland.

      Then Ireland needed a “mere” EUR20 billion — if only the Irish people who did not make the stupid loans would accept responsibility (down went the former Irish government). Now, the EU claimed the situation was really ring fenced, cross their hearts, hope to die, stick a needle in your eye.

      Then the bill for Greece increased to EUR40 billion. We are up to a “mere” EUR60 billion for those of you who can do addition, and we haven’t even talked about Portugal, Spain, and Italy. So then the problem that was a “mere” EUR 60 billion, and really ring fenced — grew to be the EFSF for a “mere” EUR420 billion … down from a “mere” 600 billion because someone was rude enough to point out that most of the countries backing the fund were the ones needing the bailout.

      Iceland, as another commenter pointed out, took their lumps about this time. bankers predicted the end of the world. World is still here, Iceland had a rough time but doing much better — and the EU needs more bailouts.

      The “mere” 420billion EFSF is morphing into a “mere” EUR650 billion ESM … assuming the EU lasts long enough to implement it, which was in very serious doubt since the credit backing the ESM was again the countries that needed the bailout.

      To solve this lack of credit support, Mario Draghi promised to do “whatever it takes” … buying toxic garbage by the barge full and putting the ECB’s own solvency in doubt. Remember all the way back to last August when the CNBC talking heads announced the Euro was saved? That didn’t last long.

      Andrea Merkel’s party in Germany lost its majority because Germans still support the Euro in concept, but absolutely refuse to write the EU an unlimited check. The German high court rules that endless bailout money is unconstitutional, and Merkel must clear all future “mere” billions with the Bundestag. The Bundestag tells her not to bother asking, the answer is nein. Merkel is forced to accept a much broader coalition government to even remain in office. Bundesbank officials openly defy Merkel and denounce the EU bailouts publicly. German newspaper polls show the German public (like the Bundestag) supports the “no unlimited bailouts” position of the bundesbank … same position they have held consistently for decades, which is why the German people insisted on the Maastricht treaty long before Merkel was Chancellor

      The idiots watching CNBC somehow interpret this as meaning Germany without Merkel would support bailing out irresponsible bankers … and they are somehow surprised when the Germans refuse more bailout money.

      So now, we are told another “mere” EUR6 billion will ring fence / solve this clusterf#ck crisis once and for all … I call bullshit.

      First, check your math … the bailout total (so far) is well into the hundreds of billions. There is no support for endless bailouts from the people of Europe. The Irish voted their banker puppets out of office, the Germans nearly kicked out Merkel, Monti lasted only a few months in Italy, the Greek government had to back pedal, and not surprising (to those who think for themselves instead of letting CNBC do it) … the people of Cyprus don’t want to pay for Brussels stupidity either.

      The only people in Europe that are really happy now (after a period of pain, but not the end of the world) … is Iceland. They didn’t subscribe to the banker scare mongering or the perpetual bailouts. They took their licks, wrote off the bad debts, and then got back to living their lives without a financial crisis every four months for something that was allegedly ring fenced years ago.

      The EU and the bankers are full of it. The end of the world will not come if bad banks are allowed to fail and dumb management are sent to the unemployment line. This is how things were handled for decades … until 2007 when we started all these lies from corrupt politicians and bankers.

      Enough is enough.

    • What?? She let this happen. She caused this to happen. If she had said, “No problem, German tax payers will foot the bill” she would have been done politically.

      Without Merkel, the monetary union is dead. For those who believe in the EU, to throw Cyprus under a bus is much better than to throw Merkel under the bus..

  6. Oh, come on…! “…a slide into the abyss…”??
    Think carefully: SHOULD anything even be done to prevent this? Because this is manifestly NOT a slide into an “abyss”, but a slide into honesty, truth, market forces, market pricing.

    It’s a downhill slope only for those who have been swimming naked all these years…

    • I was wondering if there is another possibility. Considering how mute the Russian reaction was to the compensation of about $2 billion from their rich and powerful, and that Russia must have a considerable spy network in Cyprus and would have know about this well in advance, and how quickly the Gazprom offer came, that his whole thing was engineered by the Russians. They can essentially buy the island as a “rescue”, establish a large navy base, and use the banking system for money laundering.

      • Russia already has a navy base in Syria … not far from Cyprus. Cyprus is “half” Turkey, and “half” Greece; both countries being part of NATO (Turkey being a rather important member, Greece is on-again, off-again). There is also the matter that the UK maintains lots of troops on Cyprus (and has for many years).

        Russia is trying to keep NATO from expanding to include Poland … taking Cyprus (which the Russians really don’t need) to lose Poland? Seems like a really bad trade.

        Given that Greece and Turkey have each refused to accept Cyprus is “owned” by the other … why would either of them accept Russia as the owner? Both countries retain their “halves” because the people on the island don’t want to be Greek / Turkish (the other half). No one has said they want to be Russian citizens, and unlikely Turkey would give up their claim even if the islanders were willing. Greece and Turkey have fought wars over the place.

        Turkey claims sovereignty over the waters that supposedly contain natural gas fields. I have no idea if their claim is “valid” … but that doesn’t matter. The point is the Russians won’t get a clear claim even if they “buy” Cyprus, placate the islanders, and actually find economic gas fields (which is still uncertain). There are gas fields present, but it is not obvious they are commercially viable. Turkey itself would probably get (and use) the gas if it is there. Russia already has lots of natural gas domestically, and they would have no way to sell the Cyprus gas.

        Seems more likely that the Russian mobsters, such as they were, knew the problems in Cyprus weeks if not months ago. They already got there money out. More likely, they just used it to launder funds … keeping only minimal amounts there even before the EU disaster. Many of the banks on Cyprus are Greek (aka they have always been money pits).

        The Russian mobsters don’t care because their losses will be minimal. Newspaper rhetoric in France is all very well, but mobster money probably was small to start with, and fled Cyprus as soon as they smelled smoke. Cyprus banks only held amounts the mobsters were willing to risk / part with if necessary.

        Gazprom might want to create trouble for Turkey — to stop a proposed pipeline that will bypass Russian territories and ship middle eastern natgas into Europe. But actually getting involved in Cyprus’ centuries old territorial disputes?

  7. If you use Iceland as a recent example, they jailed their bankers, took their lumps and after a couple of years are in way better shape than most other countries. This whole bailout thing is an idea concocted by the banksters themselves anyway and is totally nuts (private profit when it’s there, public bailouts when it goes south–show me any other business that gets away with that). Its true they have purposefully ran the debt so high that it will hurt everyone else if they are held accountable, but the alternative is to let them stay in control and milk everyone into oblivion one of these days. Maybe if they drown in the debris of their own smoke and mirrors exploding some real money solutions might sneak in during the (temporary) chaos and noise. Our kids can sit around drinking wine with their friends some day and reminisce on how screwed up it was in the old days.

    • Iceland is an interesting example. Were the accounts of residents seized? Depends.

      There was no reduction of principal in the accounts. 1,000 Kroner was one day worth a tank of gas. The next it took 3000 to fill up. That was the Kroner devaluation. As you say, the residents took lumps and then recovered.

      One can lose money in a bank with a tax on deposits or a devaluation of the currency. Sudden Death.

      Or you can lose the money from ZIRP or inflation. Slow Death.

      If you have to go, the fast option is the better. But it all ends the same way.

      • @BK — “If you have to go, the fast option is the better. But it all ends the same way.”

        Not if the crooks in political office try to pretend the banks / nation is still solvent. When they do that, the country ends up with bailout after bailout after bailout. Six years of “temporary” ZIRP (and counting).

        One and done was better — and it really was done. The lie from the EU bankers was that Greece was “solved” four years ago. How many times are we going to hear this “final solution” bailout nonsense?

        Write off the bad banks. Send the crooked CEOs and politicians to prison (for accounting fraud). They lose everything (they never earned it). The rest of us, take our lumps. Then get on with life. Stop the perpetual crisis / bailout lies.

        And for God’s sakes Bruce, stop whining that we are going to slide into an abyss and the sky is falling. You are better than that

      • Good point…but we all will likely suffer both fates.
        Buy gold. Even with what we are now seeing there are still too many trusting the central planners.

      • If memory serves, the crooks in Iceland were also thrown out of office, the owners of the banks lost their equity and the bond holders their’s, before any saver’s deposits were touched (whether by writing them down or by devaluing the currency). How’s that compare with Cyprus?

  8. I never liked Draghi. He has a vampire look about him. It’s in his eyes

    • Draghi used to work for the face sucking vampire squid (Goldman Sachs). His group did the swap trades with the Greek government (off balance sheet) that allowed Greece to falsely claim their national accounts met EU guidelines. In fact, Greece never qualified to join the EU — it wasn’t even close. Italy itself was “better”, but there again the government had to do a lot of fudging (aka accounting fraud when anyone else does it).

      Why should some random guy in Greece (or Cyprus or any other EU member state) take massive losses on his savings, while people like Draghi who perpetrated the initial fraud walk away unscathed? Draghi gets a taxpayer pension (from Italy) and another one from the ECB. His victims get the bill for his crimes?

  9. Dave from California says:

    I think what the markets are predicting is that EU/ECB will blink and let Cyprus keep going.

    I agree with you though that in the short term, Cyrpus is better off taking the deal as 90% of something is better than 5% of something. But a treasured principle is being violated and people don’t always act rationally.

    Also, even if they do take the deal, if I were individual Cyprans I’d take my 90% out right away. You never know what a second bail-in is necessary! (cue Greece). That run makes this bail-in sure to fail in the medium term (a fail-in?).

    I suppose the only solution then is for the EU/ECB/IMF to back down. I think the fail-in is a fight they don’t want to win.

  10. backwardsevolution says:

    Like a drunk you keep bailing out, it never ends. Chaos will ensue? Really? What do you call what we’re living through right now? The little guy who is just trying to keep his head above water is already living the dream.

    The people who caused this absolute disaster and the ones who know how to profit off it, they’re not living in chaos. They’re banking money, laughing all the way to their bank that keeps getting bailed out. “Life is sweet; oh, please, don’t end it. It would cause me such chaos.”

    Enough. Bring it on!

  11. It’s interesting to read people looking and high and low for explanations as to who is behind this
    event and what they are trying to achieve. But no one, including Bruce, has considered the following, which is directly related to this comment from Bruce.

    “One can lose money in a bank with a tax on deposits or a devaluation of the currency. Sudden Death.”

    No one should be keeping their “savings” in a bank. If folks only had small amounts of cash
    in these bank accounts (to pay for daily necessities and bills) this would be a very different situation and consist of a very different conversation. That is the endgame. Don’t save in paper and things denominated in paper and the role of banks will forever change in ways that will preclude this set of circumstances from happening again.

  12. I think it should be pointed out that Japan has been doing this bailout / zero interest rates / fiscal stimulus / debt binging nonsense for more than 20 years

    What do they have to show for it? Debt levels > 400% of GDP. People near Fukashima now glow in the dark. The LDP lost power after decades of rule. And the Japanese economy has been at a standstill (lost years) for more than 20 years.

    Other than the obvious “need” of incompetent leaders to maintain their status quo — at the expense of everyone else — there is absolutely no upside to this foolishness.

    If Cyprus gets a bailout, they will need another one in a few months or a year. Greece will need more money in the interim. Italy and France are teetering, Spain is teetering — at least one of them will need help in one way or another.

    And each time, the shrills will scream that we are all going into the abyss if we don’t steal another hundred billion from future generations (lets be honest here: none of the debt will be paid back during this leadership’s lifetime).

    There is absolutely no hope for any country that enables this debt binging. None.

  13. These are the great “leaders” who we are supposed to trust with trillions of Euros (OUR money) to bail out THEIR mistakes: French police raid IMF chief Christine Lagarde’s flat

    http://www.telegraph.co.uk/finance/financial-crime/9942794/French-police-raid-IMF-chief-Christine-Lagardes-flat-in-Bernard-Tapie-probe.html

    Not to be confused with Italy’s Berlusconi’s many indiscretions. Not to be confused with Mario Draghi’s actions at Goldman.

    These are the people we are supposed to put our faith in?

  14. Bloke impersonating Bruce Krasting says:

    Reuters: Britain’s growth halved, Osborne turns to Bank of England for help

    http://uk.reuters.com/article/2013/03/20/uk-britain-budget-idUKBRE92G08920130320

    If we don’t steal … um **borrow** … trillions of pounds from future generations, the sky will fall and the whole world will slide into an abyss!!

    Quickly now lads! The bank CEO’s corporate jet isn’t going to fuel itself!

  15. This makes Preppers in the US not look so like stupid doomsdayers. Sure glad I have a small collection of Gold and Silver and keep a minimum of cash in a bank. Could Cyprus go the way of Iceland? The Western World Governments grew and grew and now squeezing blood out of our garden turnips. How about downsizing Government to what it was in the 60′s and then give everyone a tax break. Are you ready when the SHTF in your country?

  16. My “domino” is bigger than your “domino”! That certainly means that if your domino falls over, mine will still be standing straight up.

  17. The Euro in Cyprus is going to be replaced by the Turkish Lira? Now that seems like a bit of a stretch. The Russians getting paid 10 cents on the dollar for snippets of paper? Hmmm. Prove it! Is your article trying to provoke fear mongering? Perhaps. Is there a chance of bank runs within the next few days? Of course. What happens when those expectations are met and a black hole with so much gravity and anti matter is encountered that it can change atomic weights, and, as in quantum mechanics, destroy matter? Yep. You might be on to something. If those banks have actually lost all of their loot and have nothing left but the stockpiles of derivatives weapons of mass destruction as their back up, then I’d say we have a bit of a problem. Question: how can you fill a black hole? You can’t. It explodes! This is why people need to keep their money in their own homes and why it is so important to own physical gold and silver.

  18. The only thing I know is true is that interest rates in the US will remain very low for an extremely long time.

  19. Excellent comments, folks. Very insightful dialogue.

  20. During the chaos, let us (+99.5% of world’s people) make sure of one thing: every Goddamn satan-filled, zionist jew-rat on this planet gets hunted down and exterminated.

  21. “Nothing has changed in 250 years.” — RJM
    From the “Maxims of George Washington” by A.A.Appleton & Co.:
    “They (the Jews) work more effectively against us, than the enemy’s armies. They are a hundred times more dangerous to our liberties and the great cause we are engaged in . . .It is much to be lamented that each state, long ago, has not hunted them down as pest to society and the greatest enemies we have to the happiness of America.”
    –George Washington, Father of America

    • Sir, although your sentiments in re banking and usury which were brought to us courtesy of some jewish families and their banks, This is NOT a verifiable quote attributable to G. Washington. Prove me wrong with a link to a verifiable quote besides a non – existent book you made up.

    • HOLY COW!!! I don’t believe for one moment that Geo. Washington said that. Here we have the division, the separating, one from another. We will classify this segment of humanity as sub human not worthy of life, therefore giving us permission to do what ever to them. This is the diatribe that the Egyptian leader espoused on tv giving justification to killing (his rational for not feeling guilty for doing so). Ever hear this, “the only good indian is a dead indian”? Gen. T Sherman et al, and their pogrom. We are all part of the same human family. Some are good and some are not so good, but there is so much good in the worst of us and so much bad in the best of us, that it behooves us all to temper our judgements. It’s the beam in the eye thing.

  22. Least I remind the gentle readers:
    “Wikispooks.com Israel Did It 9/11″
    If you read anything ever again, you must read this – NOW.

  23. Dear Bruce,
    Like to hear your comment about why in 1997 Asia financial crisis, all Asia countries accept IMF bailout all success and had not been bail out again and again but Greece need to bail out several times?
    What’s the difference between Greece and those Asia country?

  24. ANY price is a good deal to escape being a slave [to the EU predators]. Even if they lose 100% of their euros, and get replacements in a new “cyprus lira” or something else, they are FAR, FAR, FAR ahead.

  25. This is an excellent thread and I have passed it on to many other rabbits. Now is the time to hide and pack your food away- in more than one warren. Do not lose sight of the religious freedoms granted to all our citizen, coyote: do not blame those innocents abroad (here in our home on american shores) whose evil “brethren” have brought ruin upon our planet and us… they have sacrificed many of their “own” in the past upon their altar of Moloch, and are ready to do so again for their own evil agenda. Do not so readily become one of “their” tools. when seeking knowledge, one must search behind many curtains… illumination has many faces, and not all of the masks hide babylonian mysteries… coyotes will not survive hunting such obvious prey (it makes them prey themselves)- and rabbits will need many many offspring… and warrens… the balance will come again someday…

  26. Pretty good blogs today. A lot of you are hitting the high notes. I do want to throw this out.
    Months ago, I read a site that said this—That the US will support the bond market. It will do this in the following way. It will suppress the commodity market, which has happened, It will crash the stock market, which is in the process of happening. (Drive prices higher and then collapse the market) This will drive money into the bond market. This is certainly less inflationary than outright Fed purchases. The bond market can be summarized as follows: Sacramento is the commodity market–Sacramento County is the stock market–California is the bond market. The bond market is the big enchilada that must be preserved above all else. The IMF (think Washington, Fed) with the ECB cooperation (this is what 16 trillion bailout will get you) decide to scare up a bunch of moola from the Europeans by threatening to confiscate their bank deposits. Of, course there is no real intention to do so and I predict that Cypress will get bailed out and the depositors left intact. However, the alarm bells are ringing at 100 decibels in the minds of depositors everywhere that maybe they should move their money to somewhere safe. What’s safe, why US Treasuries of course. (not) Wa-la, support for the US bond market and dollar hegemony. Whew! Maybe Ben will make it out of Dodge after all.

    John William’s Shadowstats.com has been on record stating that the rubber meets the road this May if something isn’t done. Maybe it’s been done.

    For those of you that are looking for punishment for the crooks like Goldman-sachs and asking why it hasn’t happened, need to ask why. THE REASON IS BECAUSE THE GOVERN.-FED-GOLDMAN SACHS ARE ALL A PART OF THE SAME GANG.
    You don;t off a member of your gang unless they break the gang rules (the laws be dammed). Goldman Sachs et al are dutifully following orders. And Congress comes off sounding like the rube that got took, wondering how’d it happened (it definitely is the speculators fault the say, we need to close loopholes, pass ineffective nonsense laws to protect the real rubes, you and me, buster. What great theater. Hahaha.

  27. When the proposal “agreed to” broke on Friday, for the first few days I could not wrap my head around the move. It made no sense- First, why risk a bank run across Europe and break a taboo over deposit insurance to raise a measly 6bn? Especially when 10bn is already being kicked in by the EU? (It’s not that I am naive enough to put any violation of the rule of law against the troika- I’d just expect them to only break that taboo if they were getting a little more in exchange. It is not like there is a 100bn hole in balance sheets and there is no other option). Second, it is CLEARLY OBVIOUS the cypriot parliament would never agree to this. A) the vote was scheduled 72 hours away, allowing anger to coalesce, and B), there was no exemption for deposits under, say, 20k. The lack of an exemption threshold was mindboggling to me.

    The rejection of the deal is not a flaw, but a feature. Here is what I think happened (roughly): For years the big German politicians have known there were a handful of pending bank insolvencies the EU would have to deal with, and because of domestic/electoral pressure, they knew any packages or deals involving the German taxpayer kicking in $$ would get them fired. So, they needed to come up with a pay of resolving these problems without doing it. At some point during the Greek negotiations, they ran the numbers and realized a mass depositor haircut of 20,30,40%, would make the whole thing work with the rest kicked in by the various EU bailout mechanisms that exist. They couldn’t do this in Greece bc they had simply pushed them too far, there were already violent riots.

    So the Germans thought up a way of resolving the periphery bank insolvency, but theres one big problem- how the hell do you get parliaments to agree to this? Theres no way the Spanish parliament would ever vote through confiscation of their citizens assets. After this debacle, there will be.

    The Troika offered this deal to Cyprus on friday, *KNOWING* it stood no chance in parliament. If they actually intended on it being approved, they would have made it more progressive (instead of as backwards as possibly, as it is lacking a threshold), and snuck it through parliament 3-4 hours after announcing it.

    Yesterday, it struck me that it is exceedingly difficult to see of a way that we get from “here”, to “there”, “there” being any scenario where the Cypriot banks ever reopen in a way that gives their customers more than 30 cents on the dollar. I can’t say with any certainty what will happen next, but the money in those accounts is not coming back in any meaningful way.

    So, in the near future when the Spanish banks can’t meet their payments, and a similar deal is offered, or even one taking 15-35%, the legislators voting on it are going to be left thinking this- “Shit, if I don’t approve this, either in 7-10 days we’ll be forced to accept a worse deal, or our banks simply will never reopen. So, I reluctantly vote yes on this monstrosity.” It gives these lawmakers a way to approve reneging on deposit insurance and keep their jobs.

    Initially it made no sense to me why EU officials were unleashing hell and the risk of a bank run over tiny little Cyprus, you’d think they’d want a bigger “chip in exchange” for such a taboo.

    Now it does make sense. The small size of Cyprus (and relatively manageable hit of losses the ECB would face in an exit) is a feature. The Troika is using them to send the message to the other periphery countries- Next time we offer you a deal that slashes your countries savings- Take it- The next one will be worse.

    • Interesting! However, I really don’t think it was a rehearsal for Spain or Italy. Too, risky. Besides monetary events happen in a surprising way on holidays and weekends. How does it help to telegraph the ECB’s intentions. People will just start taking their money out of the system, pronto. The “unwashed many” in Spain are not going to like walking around “bald”. They will riot, burn capital structures and generally express extreme displeasure at the prospect of involuntary “haircuts”, aka Greece. The people did nothing wrong and that would be their belief. I think that Spanish politicos would be fearful for their lives after agreeing to this scheme.. It would break up Spain into regions, with the attending civil war. The Brussels Bunch have already destroyed capital, fishing boats in Portugal, chickens, olive oil, etc. in order to facilitate trade in the Eurozone. Why capital destruction? Society loses. There are ulterior motives here. I don’t think that the Troika is trying to save the system. The system is a means to an end. They just want to keep it going just a while longer. Then it’s curtains.

  28. I agree with Coyote – 100%. 250 years is long enough. When the jews that run senile uncle satan’s show get caught red-handed cheating China, guess who’s on the hook fellow citizen. Satan needs cannon-fodder.

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