Archive - Mar 2013 - Blog entry

A brief note on what to look for in the capital controls Cyprus will soon announce. The purpose is not to pass judgment on the merits of capital controls, but to discuss the implication.

Do you think that depositors in Cyprus are being taxed? That their money is being taken from them to go to the government in Cyprus or to Europe? Most analysis of the Cyprus bailout is wrong...

Today, the very orders that make HFT a beneficial trading strategy and one worth the massive capex, are controlled by the exchanges.  That's the difference between this form of "technological advancement" and those of the past, the direct ownership of the critical intersection between information processing and order execution.

Events in Cyprus stem from precisely the same source as the surge in US home prices, namely monetary expansion by the Fed.  

While Germany quietly bailed out all investors in one of its own rotten banks.

What is the robbing of a bank compared to the founding of a bank?--Berthold Brecht

The MSM and Cyprus pretend to yell victory after wiping out the business sector and upper middleclass & wealthy's liquidity stores - all to remain part of the euro. It's worth it! Depression is the new success!!!

True, Germany has promised more than this in the form of its supposed contributions to various EU bailout funds, largely due to the fact that German banks are exposed to the PIIGS and other problem countries of Europe. However, at the end of the day, when it's time for ink to meet paper, Germany is unlikely to pick up the tab for this.

An increase in safe haven demand, particularly in periphery European nations such Spain and Italy will likely support gold. Citizens in these countries are alarmed by how depositors in Cyprus were treated and the more aware and prudent ones are taking the requisite action in order to protect their families and businesses from the growing possibility of capital controls.

Whether to sell Italy's national gold reserves is an interesting question. A perhaps as interesting question and more important question in the light of the Troika expropriation of bank deposits is will Italians begin to diversify some of their savings in Italian banks into gold bullion?

This divergence between the global economy and the US, Europe, and Japan is really just the difference between the money printers and those that devalue their currency and everybody else.

Calmer markets today, but European officials are finding it hard to put the cat back in the bag.

Well, that was a fun day, eh? Spills and thrills the whole day long.

Importantly, it’s the end of the quarter and performance bonuses are on the line. So any excuse to rally is built in to conditions.

Overview of implications and consequences of Cyprus 2.0.

In other words, the ECB’s balance sheet, which backs up the entire EU banking system it essentially a work of fiction. Unless the ECB officials feel like admitting something is an asset or liability, it doesn’t exist.

Who said the circus left town?