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Sunday, March 17, 2013

Two Sides of Cyprus

 

Let me first (try to) give you a justification for the seizure of bank deposits in Cyprus.

Everybody who knows any thing about Cyprus also knows that the domestic banks were a parking lot for Russian hot money. I wrote about this back in 2011 (Link). There are a gazillion other articles saying the same thing.

That being the case, the seizure of some of the black Russian money as part of a bailout for Cyprus is not really a surprise. With dirty money flowing in, the stupid banks in Cyprus used the deposits to buy crappy assets like the sovereign bonds of Greece. To a significant extent, the hot money caused the problem – and therefore the E5.8b ($7.5b) hit to depositors is justified.

The folks in Berlin, Brussels and Paris all understood that Cyprus was a Russian front. To bailout Cyprus is one thing, but to bail out Russian Oligarchs is quite another. What else could the Euro Deciders do?

I struggle to come up with a valid comparison for what has happened in Cyprus. Think what the backlash would be if somehow the FDIC/Federal Reserve were forced to step in to bailout an entity that was a depository for the Mexican drug lords. If faced with a similar situation, America would do the same as the EU. Screw the hot money crowd.

 

And now the other side. This is a huge development, a potential game changer. If the seizure of accounts had happened in Greece (or the other PIGS) the European Monetary Union, as we know it today, would not exist. The EU would have imploded within months. This outcome would have resulted in some form of Euro break up, and a return to national currencies. That scenario has broad global implications.

The decision to clip depositors was not taken lightly. The ECB, and all the other Finance ministers contributed to the decision to take the depositors money. While making that decision, they had to have considered the consequences. Certainly there was recognition that this was an unprecedented step, and that it was extraordinarily hostile to bank depositors.

 

How are markets going to react to this? Will people care if some Russian money was stolen? Will they conclude that this was a unique event, and the depositors in Italy, Spain and France will never face the same losses that depositors in Cyprus have realized?

Given the significance of what has happened it would be logical to assume that a huge safe-haven trade could be the market’s response. If the Cyprus seizure had happened a year ago, the market would have reacted with:

- The Euro trades cheap against all crosses.

- The Yen strengthens against the Euro and the dollar.

-European bond spreads widen. Money moves to Germany, while Spanish and Italian bonds get crushed.

-The EURCHF comes under attack. The Swiss national Bank floor of 1.2000 is tested, and the SNB is forced to intervene to maintain the peg.

-US bonds trade rich.

-Money moves to the UK (where banks are ‘safe’) and Sterling strengthens.

-Money moves to gold, and other PMs.

-Stocks would take a beating globally.

 

While all of those things might have happened a year ago, I’m not sure that is the case today. As of Friday, the markets hated gold/PMs, Sterling, the Yen against everything (including the Euro), the EURCHF, US bonds and everyone loved stocks.

Is it possible that everything that was in the market on Friday is going to be reversed? I would think not, but these are very unusual circumstances. Nothing like the seizure of depositor’s money has ever happened before, so we are on uncharted ground.

Given the fact that the EU deciders were well aware of the potential consequences to financial stability within the EU, I wonder if some additional “market friendly” steps might be in the offing. (There must be a plan ‘B” in place – that or the guys pulling the strings are idiots.)

Because of the Russian money angle, the step to seize deposits might be glossed over. On the other hand, there is a great risk that what has happened is a turning point in modern finance. I’m not aware of any precedent for what has occurred. I say again, if this had happened in any other country in Europe – the monetary union would be dead within months. That possibility still exists, even though it was just crooked Russian money that was stolen. We shall see the market’s reaction in a matter of hours – I can’t wait.

 

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Comments

  1. Dear Mr. Krasting
    I usually like your comments. Not this time at all.
    1) any seizure of deposits money is not acceptable
    2) all the accounts in the US could be seized based on the assumption it is drug money
    3) why do you think banks in Cyprus are more stupid that all the other banks in Europe who all have bought a lot of sovereign bonds
    4) do Americans really screw the hot money crowd (Corzine, JPM, HSBC,etc….)
    5) sterling was a lot stronger prior to this decision. Why? Euro/CHF was lower as well. Yen was higher. What are you talking about? Even gold was higher….US bonds yields went lower…..
    Take care.
    speedyves

    • What does ZIRP and QE cost depositors each year in the US? Hundreds of billions is the answer.

      Which is the greater theft? % years of ZIRP, or a one time hit of 6%???

      Zirp is a far greater theft of depositors money.

      • I’m with Yves. Bruce seems to have little empathy for the thousands of innocent depositors vs. the handful of evil oligarch’s “hot money.” As for ZIRP, the little guys were still going to get zip interest even after their 6% deposit haircut.
        What this event really is is a sort of trial-by-fire-balloon, which if swallowed would help desensitize the public to ever-greater depredations.

  2. I normally hugely enjoy you postings, but only half of this one.

    “Everybody who knows any thing about Cyprus also knows that the domestic banks were a parking lot for Russian hot money”……well, i know a fair bit about russia and cyprus. Let me assure you, nobody with any brains parks (parked) his money in Cyprus banks.

    “There are a gazillion other articles saying the same thing.”…well than it must be true!!! ;-)

    Cyprus has double taxation treaty with Cyprus, so a lot of investments by both foreign money going in and Russian money going back passes through Cyprus.

    Passes is the key word. Of course, by definition some of it stays in Cyprus for a while. Not too long. Big Russian money sits in Russian and non-Cypriot banks.

    TAs for “hot” Russian money – it ain’t that “hot”. It is exactly the same type of money that sits on the balance sheet of Apple, Google, Starbucks, GE and over which Dell is willing to screw his shareholders.

    But when Dell does it, its tax optimisation, transfer pricing and capitalism. When Russian companies do it, it “hot” money. PUH-LEEZE!!!!

    • I don’t think Russians would share your opinion, mister.
      Yes the Russian Cyprus money are stolen. But let us not to forget that companies of a certain type around the world widely use offshores to avoid taxes in their home countries, and American companies are not an exception. I believe all companies that use the model of avoiding tax payment hide dirty money. No matter it’s a Russian oil company (hiding 90% of profit in offshores) or Europeam companies, or American ones, etc. Correct me if I’m worng in general.

      • I wonder how much hot drug money the guy with the tractor had in the bank?
        What part of thou shalt not steal do they not understand?
        You can get a life sentence for three petty thefts in California.
        Got rope??????

        • What the f**k ! I guess the maid, gardener, or garbage collector who is lucky enough to set a few bucks aside won’t mind giving 6% of their hard earned savings to the bond holders (think bankers). So, I guess that stealing money from those that stole, which is not even provable, is o.k. Governments and bankers can take the moral high ground, were doing God’s work: it’s for the common good (theirs). Governments and bankers have always engaged in the propagation of theft, only it was by fraud and deception. Now it’s ,brazenly, in the open. ” Disparate time calls for disparate measures”. The government is like a tiger. When you’re starving to death with a tiger, the tiger starves last.
          Trust is the basis of all economic transactions. Without it commerce fails. People aren’t dumb when it comes to their self interests. People are going to be pulling Euros out of banks and that’s very contagious. It’s good that we finally have transparency in what governments and banks are all about.

  3. I am shocked at Mr. Kasting’s muted response to the events in Cyprus.

    Well at least some are a little upset…and rightfully so.

    • The article was “Two sides of Cyprus”. One side for, one against. I did the “fair and Balanced” thing. Don’t shoot me!

      • Hey, “-don’t shoot me?” The BOLSHEVIKS like you shold be HANGED! … unfortunately now there are to meny of them around…
        …There is not enough rope….. I see it black for the world….

  4. Bruce,

    One thing I am slowing coming to realize- almost all people are sheep, and seemingly happy being fleeced. I predict no adverse consequences tomorrow, and that this action will be repeated over and over, to greater degrees as the crisis moves forward in time.

    • Bruce, I think that is very disparaging to sheep, but I know what you mean. Look, most everybody is busy leading their lives, working, going to soccer practice, dealing with mundane things that complicate living. There is only so much time in a day. People delegate, trustingly, to the government, schools, and others to handle some of these chores. What is happening in Cyprus is 6 degrees of separation. It’s not in their orb, it is too far removed. Of course, “if the world is a stage, everyone is desperately under rehearsed” (meaning under educated and under informed), than your right. But beware of the “unwashed many” when they understand and rise up. In the deep recesses of their mind a light is beginning to brighten harking a sense of foreboding.
      Also, it’s not that people like being fleeced, they hate it. They just don’t know that it is happening to them. However, at 1 degree of separation ( that’s when their neighbor is taking their money out of the bank) their uneasy feeling clarify and they take action. The cascading effect is over whelming. This is a true panic. The “unwashed many” are volcano ready to blow! What will be the straw that breaks the camels back? The “chaos theory” says it is unpredictable, but it will surely happen.

  5. Will the depositors in spanish and italian banks be stupid enough to believe the crowd that says this would never happen to them?

    Yes, this is much better than a movie. Much better entertainment.

  6. First, just wanted to say that I have been a regular reader for quite a long time now and always look forward to new posts from you. Not to be excessively adulant, but the world needs more ex professionals who take to blogging and share their knowledge and take on this. Also, you are quite concise and direct, its effective writing. The various pictures at the end are a nice touch, please maintain that part, it taps into my misspent youth. I would imagine you have a large number of silent fans who appreciate the blog but don’t comment.

    However- I clicked on the tab your site occupies on my browser bar this morning looking forward to a nice, healthy dose of measured indignation and shock. I realize there is a place for the devil’s advocate, and if I was going to pay someone to hear the most plausible justification for this move, it would be someone like you.

    This move is totally insane, from both an ethical and utilitarian perspective. I truly can’t wrap my head around it. The first thing that came to mind when I heard about the plan was that the risk of an Iberian bank run just went through the roof. There are so many things wrong with this plan.

    The idea that this is either designed to go after Russian crime money, or justified on that grounds, is absurd. That is very obviously the cover story and an “excuse”. If that was the intention, why would they not exempt deposits under a certain threshold? 99% of the time, when someone plays the “What about grandma?” card of outrage, it is a sign they have ulterior motives. But it is truly outrageous that middle class Cypriots will have their savings slashed while bondholders, etc, go unscathed. Why not a threshold of 10k, 20k, etc? Further, if the goal was to go after ill gotten gains, there are methods consistent with the rule of law which could accomplish that. Slicing 10% off a mobsters money pile hardly makes sense if the entirety of it is suspect.

    The EU officials who thought this up are either completely out of their minds, or have something sinister planned (the latter, obvious, not that they aren’t stupid). This almost seems designed to piss off as wide a range of people as possible. A friend tells me that the move has started to provoke outrage in Britain because they have military bases on the island, and many of the soldiers have bank accounts. Get ready for a stream of stories along these lines.

    Why are they raising the risk of bank runs across the continent, pissing off a wide range of the average person on the street, totally breaking the rule of law, in exchange for a measly 6 billion? (apparently it is being called a “tax” because confiscation would be illegal. So, if its not a tax, why is it a “one off” action? That’s not how taxes work. Ludicrous.) To bail out a minuscule country? You would think if the EU bigwigs were going to do something with such serious implications, it would only be in exchange for a chip like protecting a vital, huge member.

    Someone like myself can only speculate, but this is very clearly a “test run” or preparation for future confiscations. Maybe they thought of this method at some point during the Greek negotiations that took place over the last few years, and wanted to do it there but couldn’t bc it would push things too far. So they waited for an opportunity like this. I don’t know- but the move is so stupid, and will provoke so much anger, for so little, as idiotic as the people running the EU are, there is more to this than meets the eye.

    Btw- over the next few days and weeks, it will be very revealing how various media outlets and blogging “personalities” cover this story. If you read closely, you will see a handful of supposedly reputable or independent journalists parroting lines very clearly provided to them by what are obviously high up EU officials. It is a good habit when reading someone, to think “Could an independent person possibly have thought this up on their own?” Particularly in terms of phrasing, the precise arguments and facts alluded to, etc. There is being wrong about something- I am not saying everyone who justifies this move or downplays the harm inflicted on the middle class Cypriot is in the pocket of someone, by no means- and there is being “wrong” about something not possible without external influence.

    Thanks for the blog though. Please keep at it and don’t stop. I 100% would bet only a small fraction of your readers who value the blog highly comment or get that across to you.

    • Let’s see what the revisions to the original plan bring. I think they will soften the hit to smaller depositors.

    • WOW! Riversteiner, an erudite blog! I always knew that there was someone out there, who would write a great blog. I had to read it 3 times, basking in the warmth of it’s postulation and conclusions. Well done

      I’m in the process of reading “THE FRENCH REVOLUTION, A Study In Democracy” by Nesta H. Webster, c 1919. I came to it thru Gary North’s website. It is taking a long time to read, not because I am a slow reader, but because I have to pause often and think about what I just read and correlate it to today’s events, many of which, you so briefly touched on in your blog. It’s a playbook for what is happening today if you read between the lines. It is said that “those who fail to understand history are doomed to repeat it” or as Mark Twain said, “history may not repeat but it sure does rhyme”.

      The ideas you express fit me like a worn shoe. Partly because of this book and also because of the missives of bravehearts like Bruce Krasting, Gary North and others too numerable to mention. I have come to a different conclusion concerning world event, conspiracies and the like thereof because of this book. GOD, I hate being taken for a sucker!!!

  7. Nice post, Bruce. And nice reply, Riversteiner. This story has legs…

  8. Few people are mentioning this: without a bailout, the Cyprus banks would have went under and all depositors would have lost most of their deposits. This is old school banking. Cyprus has their version of FDIC insurance, but can’t print euros like America can print dollars so the insurance is useless without ECB or IMF stepping in to give them euros. Cyprus really had no leverage, but I think it was a mistake to hit the smaller accounts. If you wanted to minimize backlash, just go after the $1m+ euros. From what I heard, it was the Cyprus government that wanted to tax every account and it was the troika who only wanted to go after the big accounts. I think Cyprus is prioritizing foreign hot money as an important part of their economy and refused to make them take the fall. At end of the day, this might be a huge nonstory. If the Eurozone was going to break up, it would have happened by now. There are too many rich and powerful people getting richer and more powerful with its continued existence for the EU to fall apart. I hope I’m wrong.

    • Kreditanstalt says:

      “Few people are mentioning this: without a bailout, the Cyprus banks would have went under and all depositors would have lost most of their deposits.”

      Yes, and this is being portrayed in the media as we speak as “predatory capitalism”!

      I’m all for some real capitalism: LET those in dodgy banks lose. Remember Northern Rock? I was one of those bailed out – but I SHOULD have taken a haircut.

      • TO HELL WITH “CAPITALISM”!!! Karl Heinrich Marx coined the term in his thoroughly discredited treatise on human actions (which was, what the phenomena of being human is. The age old conundrum which, when skillfully defined, allows you to hold slaves, start wars or to terminate with extreme prejudice). I much prefer the term “FREE MARKETISM” Free marketism clearly states its intentions, whereas the term capitalism is fraught with definitional disarray. People who use the word think they know what they’re talking about and think they are conveying that idea to another. When people use that term, demand that they define it. That ought to be good for a laugh. You don’t define capitalism with another vague adjective.

  9. Imposing the “tax” on small deposits was a mistake. They should have imposed a graduated tax on deposits over a certain level (say 5% on 100,000-200,000, 10% on 200,000-500,000, 15% on 500,000-1mn, etc.).

  10. the germans and the imf wanted a 40% haircut. this is a test to see what the reaction of the peasants is. if banksters are strung up they won’t try it again. if not, you can count on it happening again.

    the fourth reich with banks instead of tanks.

    • Hear, Hear. I think that the last time a banker had his neck stretched was in Sweden in the 1600, I believe. That prospect is certainly one that focuses the mind. Much to remote to be of concern to bankers, today, however. Besides they own the governments.

      Not to worry! If you can’t trust your banker, who can you trust?

  11. Kreditanstalt says:

    “Russian hot money” is still private capital. Hands off.

    If this really were to be the justification for the confiscation, why hardly a peep about “Russian money” since Saturday morning?

    The spin will be: “this hard decision was not taken lightly but was absolutely necessary and will guarantee Cyprus’ future security…”

  12. Vito, the rich people are not there to be fleeced with a graduated wealth tax. The “little people” are there to be fleeced in their small bank accounts as cash is outlawed, forms are required for purchases over a certain limit, limits on transactions, etc. The rich people can leave the country and not return for a generation or more with their money. Little people who can barely make the rent can’t afford to leave.

  13. If it was just deposits over the protection limit that were affected by this action, then I would agree about the Hot Money angle. Or just accounts of foreigners. But this affected the moms and pops of Cypress, regardless of their citizenship. Hello?

  14. Oh…. and some pigs are more equal than others!!!! What OTHER exceptions to the rule will there be?????????
    New: British troops to be protected from Cyprus bank levy – UK Times

  15. The bank went bust. A bank does not go bust because it has too many deposits (dirty, fast, or Russian).

  16. hey bruce:

    i love your blog. you are taking some today, and i don’t want to pile on. but i just can’t resist the following snark (and this is no more or less than just snark). you wrote, while struggling for an apt metaphor:

    “Think what the backlash would be if somehow the FDIC/Federal Reserve were forced to step in to bailout an entity that was a depository for the Mexican drug lords.”

    you mean like, um, Wells Fargo?

    like you said, unprecedented, uncharted waters. anyone who claims to know definitively the outcome of this action, tomorrow, next week, or five years from know, is a liar and/or a fool. keep up the excellent work, man.

  17. I really think this is a watershed moment…..

    The banksters have really shown once and for all what they are about. It is one thing to tax people via hidden inflation or fees….it is another thing to reach in to ones pocket directly. Cyprus being so small may have been floated as an experiment or test case but the test will fail. What remaining trust will be destroyed.

    I expect bank runs by savers throughout Europe and a huge jump in gold. If you had a lot of money in a Spanish bank, would you leave it there knowing what you know now?

    Oh yeah, love the blog!

  18. Everyone loves Social Security, ObamaCare and EU subsidies when they are told they are all free lunches.

    But if you paid attention in 1st grade, you would know there is no such thing as a free lunch.

    Wait till Americans find out we have to pay for all this debt subsidy that Krugman and Bernanke have been telling people was “free” (your kids will get the bill, but you get to party!!!!). You really don’t want to be Krugman or Bernanke (or Draghi) when the stupid masses figure out debt is not really “free”, and someone will have to pay.

    PS — anyone in France remember where you guys put those guillotines?

  19. you been drinking a little Jameson today BK? If you want to go after crooks start in our own backyard; be like Boaz Weinstein and ruin a leaderless Outfit member like JPM.

    • If they are going after crooks, why not go after Mario Draghi for his direct involvement in the accounting fraud that allowed Greece (and Italy) to claim to comply with Masstricht Treaty laws?

      Why isn’t Draghi being held accountable for his crimes? Accounting fraud is supposedly illegal — why isn’t Mario Draghi in prison?

  20. WSJ…March 3, 2013
    “Newly elected President Nicos Anastasiades wasted no time setting out his stall for negotiations on a possible €17 billion ($22.14 billion) bailout required before the country runs out of money in June: “I want to be absolutely clear. Absolutely no reference to a haircut on public debt or deposits will be tolerated. Such an issue isn’t even up for discussion,” he told Parliament on his first day in office. ‘Absolutely no reference to a haircut on public debt or deposits will be tolerated,’ says Cyprus President Nicos Anastasiades.

    “The newly appointed finance minister, Michael Sarris, was even more emphatic in his opposition to imposing losses on depositors: “Really and categorically—and this doesn’t only apply in the case of Cyprus but for the world over and the euro zone—there really couldn’t be a more stupid idea.”

    http://online.wsj.com/article/SB10001424127887324178904578338262104986942.html

  21. Whew, I didn’t know it was all Illegal Russian money that was seized. I thought some of it might have belonged to the people of Cyprus. I’m sure glad you straightened me out on that.

  22. One must not overlook the potential political ramifications as opposed to focusing solely on the financial. This is Much, Much larger than meets the eye. One needs to familiarize themselves with Gladio A, which was replaced with Gladio B.

    Is Cyprus the spark that lit the wick for potential military provocation?

    We’ll see.

    Cyprus- Dubai- Cayman Islands- First Merchant- Weapons- Narco smuggling- Money Laundering- NATO- Op. Gladio.etc….On and On and On.

    http://www.youtube.com/watch?feature=player_embedded&v=mOCYMU3zYH0

    http://www.globaltrendanalytics.com/

  23. Anyway you slice it they are telling depositors/savers that money out of the bank/system is safer/more valuable than money inside it. When you let the genie out of the bottle, even if only for a moment, it can not be put back in. EVER! The authorities have crossed the Rubicon, and they know it which is why they are now jawboning about amending the confiscation theme and delaying the vote on its implementation.

    Now ask yourself the following question, and be very careful to not answer it too quickly:

    Do the monetary authorities really not know what they are unleashing, or do they know very well
    what this will usher in? I know what I think.

  24. The sentence should have read…amending the confiscation scheme…

  25. BK. Hope you continue to follow the story and keep us in on the events. Does your Greek ship guy have any information? This thing does not make sense as it is being told.

    Re: you being on the hunt for SS and related to this story. Is there any way you can produce a story or data that could point someone in their 20s toward how to put away something for the future? No doubt you have already done it, and if so would you be kind enough to post some links. There is an ongoing discussion among some 20 something year olds that have been lucky with a degree choice that has landed them a job. They are smart enough to know SS is wasted money but do not have a plan for dealing with the present and projected economy.

    • In your 20s and saving big for retirement?
      Don’t do it. Saving money does not build wealth. Buying real assets is better for you at your age. Buy a house. In 20 years it will be worth twice what it is today. You get a leveraged return.

      Don’t save with a 401k. Invest in yourself. When you are 45 you can start worrying about retirement savings.

      • Bkrasting is right–”Saving money does not build wealth.” Shorten that to money is not wealth. There are many people that have 1 million in the bank and feel that they are wealthy. “Au Contraire”, grasshopper, especially with what we call money today. They are not wealthy.

        Fiat money, which is our money substitute, you know the stuff that exits out of the posterior of Fed Chief, Bernanke. Big Butt Ben as we like to call him. Wealth is real tangible thing. Today’s money is just a coupon that you can redeem for wealth, if someone is willing to accept it for something they have. But buying real assets is a second only to having real asset. Houses may or may not be a good choice. A lot can happen in 40 years. As Yogi Berra said, “The future ain’t what it use to be.” and ” The future ain’t easy to predict until after it happens”. You don’t know whats going to happen down the road. Put your time and effort into something that makes you happy, give you purpose, and is helpful to others. Then regardless of what the future holds ; you will be wealthy in way that money can’t buy.
        Yes, invest in yourself. Education is wealth that brings many benefits. Be diligent and learned.

  26. Wasn’t HSBC shown to be laundering drug money?…and we’re therefor accomplices to beheadings, rapes, and murdering of police? Didn’t HSBC bypass sanctions on Iran and N Korea?….thereby being guilty of treason?
    They were fined $1.9 Billion. No individual fines? No criminal indictments? No curtailing of their banking charter? Isn’t this a failure of the executive? Where are truth, justice, and the American Way?
    Cyprus? HSBC? What’s the difference? Where are our elected officials sworn to uphold the constitution?

    • Well said.

    • MD says: “Wasn’t HSBC shown to be laundering drug money?…and we’re therefor(sic) accomplices to beheadings, rapes, and murdering of police? Didn’t HSBC bypass sanctions on Iran and N Korea?….thereby being guilty of treason?”—-It’s good work if you can get it.(just kidding)—-Hmmmm—Sounds like a bunch of criminals!!!

      MD says: “Where are truth, justice, and the American Way?”—-Old re-runs of Superman, starring George Reeves, I suppose.

      MD says: “Where(sic) are our elected officials sworn to uphold the constitution?”—You really didn’t believe that they really meant it did you?

      It’s time to wake-up and smell the coffee and stop drinking the Kool-aid.
      GET EDJICATED.

      What you’re seeing today is the logical outcome of the “God is dead” 60′s young people, who have come into power. The Hippie philosophy with the lack of responsibility, free love, free drugs, free every thing,–Consequences don’t matter, etc. These kid’s philosophy hasn’t changed now that they’re in power. They secretly, still deep down in their troubled hearts, believe it still. Consequences don’t matter, “deficits don’t matter” F**k my neighbors, F**k my depositors, F**k everyone, it doesn’t matter, all that matters is that I get mine. This is why it is going to end badly. This philosophy will be reconciled with reality with pain and the gnashing of
      teeth. This has happen over and over again in history, it’s nothing new. As A.C. Holtmann said, “Man’s capacity for stupidity is unlimited.” and as Rodney King said, “Can’t we just learn to get along.” The answer to the first is Yes, it’s unlimited and second, It just doesn’t seem so! It’s up to you MD!

  27. hats off! Article couldn’t it be more to the point than this. Re mom and pop money: I believe people rely to cash like greece and italy, the wealthier anyway have accounts elsewhere.

  28. Conscience of a Conservative says:

    There are a few ironies here.

    * Russian money is being confiscated. And Russia was once seen as bailing out Cyprus

    *Cypriot banks attracted a great deal of Greek money which feared the same event back in Greece.

    *And I’m sure the bureaucrats in Germany and Brussels thought Cyprus was too small to matter, but this will register in countries such as Greece, Italy, Spain and perhaps even France & the U.S. The term guaranteed deposits just lost a whole lot of meaning.

  29. Riversteiner says:

    “Someone like myself can only speculate, but this is very clearly a ‘test run’ or preparation for future confiscations.”

    I agree, this is a test run.

  30. Hey, what exactly the “hot money” is. And who decide about which money were “hot”? Mr.Krasting? Steeling is just steeling. I wouln’t lend money to the person like Mr. Krasting. And be very careful in his presence. And watching my wallet. Maybe he starts to think there is “hot money” in and he has right to “take” it just cause he “needs” it just now.
    I wonder over the moral of this people. Were they got from?

  31. How hot money accounts work:

    1) This starts with $1m.
    2) It is no fun to have hot money and not be able to use it.
    3) When one has hot money in a Cypriot bank the have two accounts. One a big one, the other a small one. The small one starts at $100k.
    3) the small account is a checking account that clears a credit card.
    4) With a credit card hooked to a $100k account, a hot money guy can travel the world in first class and just pay with Visa.
    5) This is done every single day. The numbers are huge.
    6) The reason that the went after the “smaller” accounts was that these accounts (many of them) were just clearing accounts for the credit cards.

    • God. And Mr Krasting can’t sleep if some guys fly first class. OK. But what IS “hot” money. Are they won by selling children in slavory? The money the “freedom fighter” are paied in Syria is surely cool one.

  32. If they have to backtrack on this deposit confiscation, it will just prove that the only feasible option is to print money and confiscate the necessary value in that way instead of directly in the way they are attempting to do it here.

    My sense is that the Eurozone regulators are trying very hard not to go down the money-printing path…and I think what they are going to discover is that it is the only path that the public will accept. The public will accept having the value of their savings diluted with money-printing because most are too ignorant to understand what is happening. But if you try to directly saddle people with losses, maintaining the integrity of currency in the process, you get kicked out of office.

  33. I can feel the heat from the blowback in the US. Cannot imagine screwing around with Russian thug money. They probably know more then the US CIA and took their money out ahead of time, at least some of it. The world is watching and now much less trusting of banks. Another coffin nail in the banking system driven by big wasteful governments. I’m glad I am not on the Russian Mafia hit list, but maybe some that made the EU decision on Cyprus might be,

  34. Anybody who intermittently reads Mr. Kasting’s posts knows he is a pragmatist. So to him, if someone whispers in his ear that Russian “hot money” is in Cyprus Banks, then “hot money” is in Cyprus Banks and should be confiscated. Sadam Hussein had weapons of mass destruction, so naturally Iraq needed to be invaded. Social Security is expensive, so its promises need to be abrogated. Muslims may know of plots to bomb the USA so Muslims need to be tortured to find out where those bombs are. Should you have to prove Russian “hot money” is in Cyprus Banks, no. You just need to say it is so and then use such pronouncements to confiscate money. Is there “Drug Dealer” money in Bank of America? Yes there is. So, we should also “tax” 10% of all savings in Bank of America.

    • YES.YES.YES, months ahead of time—You don’t think for one moment that the people who were connected had “one thin dime” in Cyprus’ banks, …do you, “Well do you, Punk?” I’m sorry that just came out. Sorry Clint. Do you really think that those in the know said, “Depositor are going to take a 9% haircut Gee, I guess, I ‘ll just leave my money in the bank.” Like Duh!

      There’s an old saying in Poker, ” When ;you sitting around the table and you’re wondering who the sucker is–it’s you. The guys who are connected, whether in politics or banking, know who the sucker is–it’s you. BUT….

      —YOU’RE MISSING THE POINT—It isn’t that they are acting stupidly, causing bank runs. They don’t need that money ; they can just print it up out of thin air. There are a dozen reasons postulated in these blogs as to the whys and wherefores. But folks, you’re missing the REAL REASON. These guys are evil and very. very smart. Most have more letters after their names than Prof. Irwin Cory and those who aren’t very smart are”useful idiots”. There is nothing new under the sun , here! It’s old hat! It’s the FRENCH REVOLUTION all over again. Their evil purposes are the same as was
      then, with the same “modus operandi”. Their evil purposes is to create dissension,
      disharmony and divisiveness among the classes. To create panic and hardship amongst the peoples. Creating inflation, shortages of food, fear and separation.

      You’re not going to be dragged into the “NEW WORLD ORDER” kicking and screaming. You’re going to embrace it like a lover with his bride. They are going to make things so painful and fearful, with confusion and enmity toward whomever, you’re directed, by the “bought and paid for” mainstreet media, that you cry for it. To look at what is happening in the world will leave you confused, because you are a rational person seek a rational answer. Now ;;;you know their aims and what is happening in the world (which is seemingly against all logic), so what is happening should make sense to you now. Do your own due diligence, trust your gut. Due pray and pray fervently. This is the battle of the ages as it has always been. A battle between “Good and Evil”. Between freedom and slavery. Choose friendliness, helpfulness, co-operation, and strong deliberate action for good . ” May the Force be with you “

  35. While I was intently reading this peice, I thought I felt something in my back pocket. Oh man, they got me again!

  36. ManAboutDallas says:

    Here it is, in plain and simple terms : the IMF and the ECB have picked Vladimir Putin’s pocket, just as surely as if he’d been walking down some street in Brussels, Belgium. Think he’s going to just “grin and [Russian] bear” it ? Not likely. This is The Law Of Unintended Consequences, writ large. Apparently no one at the IMF or the ECB has ever opened a history book in their lives and noticed what happens when some fool decides to take on Mother Russia. [ see : "Bonaparte, Napoleon"; see also : "Hitler, Adolf" ] Both, and their armies, turned into Crispy Critters when Russian unleashed its might upon them.
    If not contained, and quickly, this is really going to end badly. ( for those unprepared )

  37. EVIDENTLY, M. Krasting is suggesting that the means justify the ends. My feeling is that the ends generally morph into what the means happened to be with not really good consequences down the road.

  38. Hi!, Patrons Of Bruce Krasting Et Al:
    If this is taking Russian hot money, why only a paltry 6.75% or 9.9%? Looks like a divesion tactic from the mean to me. 2nd: shouldn’t hot money be returned to the fleeced and not provided to the banksters/governments etc.? Make no mistake though, because TRUTH is the daughter of time; as all TRUTH shall be discovered in the coarse of time. In the meantime folks inflation is fleecing US all with no chance of the return of lost buying power to the fleeced…..ever!!

    RUSS SMITH, CA. (One Of Our Broke Fiat Money US States)
    resmith@wcisp.com

  39. Hi!, Patrons Of Bruce Krasting Et Al:

    My deceased mentor had me read The French Revolution by Nesta H. Webster decades ago plus the compliment to that great reatise is Fiat Money Inflation In France by Andrew Dixon White; the co-founder of Cornell University. You can go to the Von Mesis Institute Website to click on authors which will take you to Andrew Dixon White where you can find his book for sale but then click on the PDF File which will take you to their FREE online version of around 70 pages. If you decide to read this treatise on inflation it will take you quite awhile so first fix yourself something to drink & eat before you start. My mentor precautioned me that economics is too dry for most people and so most people don’t bother to read such history but there comes a time when regardless of how dry the information may seem, it’s worth reading to become more thoroughly informed. This treatise should give you as it did me every incentive to realize why OUR US Constitution in Article 1; Section 10 calls for only gold and silver coins as OUR money. For my concerns this also meant that the gold in Fort Knox etc. should be provided by the US Mint to all US citizens for FREE as part of OUR money supply skipping all commissioned brokers including the present status of OUR US Mint selling US their gold and silve eagles on commission. Also readers please go to the website for The Natonal Invlation Association and watch their video MELTUP in which towards the end Dr. Mark Faber, one of the world’s formost billionair commodities/currency traders, says gold should be pegged at around $1,000,000 per troy oz. If his astute assessment were to take place and we had our gold for FREE from Fort Knox, we the people would resurrect an immediate economic recovery on OUR own without the so called transient help we are suppose to believe is being supervised for OUR sake by OUR present leaders in the White House in league with The Federal Reserve under Ben Bernanke. Gold today is being whipsawed around up, down and all around in price; based upon developing geopolitical events priced by the Futures Market but Dr. Faber is saying the price should be fixed whereby it no longer trades up, down and all around in price anymore governed by the Futures Market. Isn’t it time we began to listen to him and OUR US Constitution? To me the true and only price for a house should be measured in silver $’s. If that were to happen what would be the actual price of an average US home today folks? 1st of all who has silver $’s in such amounts or even close? This analogy shows each of US just how truly broke we are?

    RUSS SMITH, CA. (One Of Our Broke Fiat Money US States)
    resmith@wcisp.com

    • Russ Smith,

      Article 1, Section 10 – Powers Prohibited of States
      No State shall enter into any Treaty, Alliance, or Confederation; grant Letters of Marque and Reprisal; coin Money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debts; pass any Bill of Attainder, ex post facto Law, or Law impairing the Obligation of Contracts, or grant any Title of Nobility.

      This rule about only using gold or silver as money applies to the states, not the federal government.

      The rule about money that applies to the federal government is

      Article 1, Section 8 – Powers of Congress
      To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures;

  40. Bruce:

    Do two wrongs make a right, or is it only the wrong that you want to make a right? If it is both which are wrong, then say it. But you didn’t and you were wrong.

  41. So, let me get this straight, the Russians have a lot of money “parked” in the defunct Cyprus banks. The banks gambled with this money and everyone else’s and lost it and now you are saying it is alright for these criminals to steal other people’s money to pay off their gambling tabs? Is it justifiable that this theft occurred due to the fact that the stolen loot was apparently owned by the Russian KGB? Nope! That is a poor justification, just as was your article!

  42. Why Bother? Do you believe the proletarian are stupid and unable to read? Why do you think there is a growing number of North Americans (USA, Canada, Mexico) who simply are dropping out of “the system” and shun banks? I do not have any data regarding Europeans shunning banks and dropping out, but I can only surmise their numbers are growing as well.
    A person working for wages can only support so many parasites, be they bureaucrats, politicians, bankers or others who attempt to steal a living off of those who work and perform a service of value.

    Attempting to rationalize outright theft clearly makes you a mouthpiece for those EU Criminals.

    And why should Cyrpiots be “guilty by association” with these “hot Russian money” people simply because they have their money in the same bank? And as others have commented, who has proven that this Russian money is hot? Or any “hotter” than the money in the Big Western Banks?

    From your limited biography on your site, you probably had wealthy parents to send you to college or you received government financial aid, and discharged your student loans through bankruptcy when that was still possible and quite acceptable in the liberal 70′s and 80′s. Your entire world has been “in the belly of the beast”.

    Move down here to the trenches. Get your hands dirty trying to work in the truly free market place.

    Get a real education.

    Here’s an education from a man who holds a Phd in Economics:
    http://www.paulcraigroberts.org/2013/03/14/when-truth-is-suppressed-countries-die-paul-craig-roberts/

    Here’s a history lesson from my favourite professor:
    http://townhall.com/columnists/walterewilliams/2012/11/28/parting_company

    How about a lesson on MONEY?
    http://rense.com/general79/tril.htm “Let me issue and control a Nation’s money and I care not who makes its laws”

    You’ve lived a sheltered life, you’ve never gone hungry, you’ve never been cold and you’ve never had to wonder where you were going to sleep at night. And you’ve never had money STOLEN from you. HAVE YOU?

    You need to come down from your ivory tower and see what your career in derivatives and other “manipulations” of markets and finances has done to this world.