Phoenix Capital Research's picture


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.


The Mindset

In all of the tortuous moments that have taken place with the European Union the one thing that has become apparent is a radical change of mindset. In the beginning there was a kind of democratic viewpoint. All nations had a voice and while some were louder than others; all were heard. This is no longer the case. There is but one mindset now and it is decidedly German. It is not that this is good or bad or even someplace in between. That is not the real issue. The Germans will do what is necessary to accomplish their goals. There is nothing inherently bad or evil about this but it is taking its toll on many nations in Europe. It is the occupation of Poland in a very real sense just accomplished without tanks or bloodshed as money is used instead of armaments to dominate and control a nation. Politically you may "Hiss" or you may "Applaud" but there are consequences here for investors that must be understood. First and foremost is that they will not stop.

The Global Stagflation-O-Meter Brings Even More Bad News For Cyprus

Even more bad news for Cyprus, which now has not only a depression to look forward to but a depressionary stagflation to boot. Bloomberg has ranked countries based on their risk of stagflation based on the following methodology: First, the average real Gross Domestic Product and average Consumer Price Index was calculated for each country from 2012 to 2014. Then the Stagflation Score was determined by multiplying average real GDP by average CPI if the average real GDP was negative or by dividing average real GDP by average CPI if the average real GDP was positive. The lower the score, the greater the risk of stagflation. The winner, or loser at the case may be? Cyprus was found to be most at risk of stagflation with a Stagflation Score of -4.733, followed by Portugal (-2.671), Italy (-2.133), Spain(-1.745) and Greece (-1.366). Switzerland was ranked least at risk with a score of (7.560), followed by China (2.612) and Japan (2.446).

The "Wealth Tax" Contagion Is Rapidly Spreading: Switzerland, Cyprus And Now ....

It was only yesterday that we wrote about comparable problems to those which Russian depositors may (or may not be?) suffering in Cyprus right, this time impacting wealthy Americans and their Swiss bank accounts, where as a result of unprecedented DOJ pressure the local banks will soon breach all client confidentiality and expose all US citizens who still have cash in the former tax haven under the assumption that they are all tax evaders and violators. And in the continuum of creeping wealth taxes which first started in Switzerland, then Cyprus, and soon who knows where else, there was just one question: "The question then is: how many of the oligarchs, Russian or otherwise, who avoided a complete wipe out and total capital controls in Cyprus, will wait to find out if the same fate will befall them in Switzerland? Or Luxembourg? Or Lichtenstein? Or Singapore?" Today we got the answer, and yes it was one of the abovementioned usual suspects. The winner is.... Lichtenstein.

GoldCore's picture

Importantly, Cypriots and other Eurozone citizens who own gold saw the value of their holdings rise 2% in euro terms.

The demise of gold and the "death of the gold bull market" is "greatly exaggerated" says Mr. O’Byrne.

He said that while the risk from Cyprus has abated, in the light of capital controls in EU country and the treatment of Cyprus, there are now huge question marks over the future of the European Union itself.


Goldman's Cyprus Post Mortem And A Review Of The Forced "Depost-To-Equity" Conversion

As before, the Eurogroup will contribute, via the ESM, up to EUR 10bn (roughly 60% of Cyprus’ GDP), the bulk of which is to be used to cover debt roll-overs and the primary deficit now that the country has all but lost market access. The restructuring of the two banks will be conducted under the new and extensive bank resolution authority conferred to the Central Bank of Cyprus last week, and will not require parliamentary approval. The operation will involve losses being inflicted on the (few) junior and senior bank bondholders of the two institutions and, more crucially, on deposits above the EUR 100K threshold (a communiqué by the Eurogroup talks about a deposit-to-equity conversion, but no details are provided)....  Reaching a deal has raised awareness that inter-country fiscal transfers in the Euro area remain a messy business, leaving public opinion damaged. Until more clarity emerges on how Cyprus will settle after the banks re-open, however, and with an attempt under way to form a new government and find a new President, we prefer to stay on the sidelines until the dust settles.

Eurogroup Press Conference - Live Webcast (And Full Eurogroup Statement)

It's 2:30am, do you know where your deposits are? Tune in to see the Eurogroup explain how this is in the best interest of the Cypriot people, how the 'deal' illustrates the solidarity of the European people, and how the worst of the crisis is now behind us.


Guest Post: Why Cyprus 2013 Is Worse Than The KreditAnstalt (1931) And Argentina 2001 Crises

The Cyprus 2013, like any other event, can be thought in political and economic terms. Politically, I can see two dimensions. The first dimension belongs to the geopolitical history of the region, with the addition of the recently discovered natural gas reserves - should Russia eventually obtain a bailout of Cyprus (as we write, this does not seem likely) against a pledge on the natural gas reserves or a naval base, a new balance of power will have been drafted in the region, with Israel as the biggest loser. The second political dimension relates exactly to Kreditanstalt and the imposition of direct political conditions upon which the 'bailout' is given. Economically, Cyprus 2013 is worse than the KreditAnstalt and Argentina 2001 crises because it has an element of confiscation and two broken promises that were absent in the latter. If you look at the case of Argentina 2001, you will realize that it was a pretty clean bet - earn 20% p.a. vs. the probability of losing 2/3rds of capital. If you thought that the probability of default of the Argentine government was beyond four years, you would play the bet with a chance of winning it. What are depositors of Euros faced with today? Anything but a clean bet! They don’t know what the expected loss on their capital will be, because it will be decided over a weekend by politicians who don’t even represent them. In light of all this, I can only conclude that anyone still having an unsecured deposit in a Euro zone bank should get his/her head examined!

El Pais Retracts Article Alleging "Merkel, Like Hitler, Has Declared War On Europe"

What does it take for the Spanish "first amendment" journalistic override to kick in? Apparently, in the case of local media leader El Pais, putting up the following in print: "Merkel, como Hitler, ha declarado la guerra al resto del continente, ahora para garantizarse su espacio vital económico." For the Spanish-challeneged this translates as follows: "Merkel, like Hitler, has declared war on the rest of the continent now to secure their economic living space." Ah yes, the touchy verboten topic of German "Lebensraum" - its invocation, and ostensibly the unflattering Merkel comparison (seen so often in Greece) were enough to get the article by Juan Torres López in the Andalusia version of El Pais titled simply enough "Alemania contra Europa" taken down.

Michael Pettis Asks "When Do We Call It A Solvency Crisis?"

Up until just a week or so ago, the euro, the market seems to be telling us, has been saved, and peripheral Europe is widely seen as being out of the woods. Thanks to the ECB - who are willing to pump as much liquidity into the markets as it needs - it seems rising debt levels, greater political fragmentation, and a worsening economy somehow don't really matter and it is impolitic to sound pessimistic. But is peripheral Europe really suffering primarily from a liquidity crisis? It would help me feel a lot better if I could find even one case in history of a sovereign solvency crisis in which the authorities didn’t assure us for years that we were facing not a solvency crisis, but merely a short-term problem with liquidity. A sovereign solvency crisis always begins with many years of assurances from policymakers in both the creditor and the debtor nations that the problem can be resolved with time, confidence, and a just few more debt rollovers. The key point is that bankers are not stupid. They just could not formally acknowledge reality until they had built up sufficient capital through many years of high earnings – thanks in no small part to the help provided by the Fed in the form of distorted yield curves and free money – to recognize the losses without becoming insolvent.