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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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After they roll over and die, I wanna be there to kick the corpse until my leg goes numb.
You are absolutely correct,this is a game changing event.
That Bruce would even dare make such a specious argument, and assign some sort of collective guilt to ALL Cypriot bank account holders based on the supposed crimes (nothing has been proven here) of some of them, is not only indicative of the loss of any semblance of morality, privacy, responsibility and individual freedom in the financial sphere today, but also representative of the rabidly predatory parasitism of today's banking establishment as well.
Even if 99% of Cypriot account holders were known and proven Russian mafia, with every euro in their accounts consisting of proven illicit money, that is no justification whatsoever for stealing from the remaining innocent 1%.
Bruce, your collectivistic argument is revolting and disgusing, but perhaps not surprising given your European nature. I have lost a lot of respect for you today.
akak, what happens wiith cash deposits when a bank goes in bankrupcy?
This is silly shooting of a messenger
would you really prefer a full showdown so that their losses are 100%?
Well, first off, given that the bank bondholders and shareholders here are not being asked to pony up an equal amount to the depositors, nor anything at all, then it can be presumed that these banks are nowhere near bankrupt. But if the banks are in fact near bankruptcy, then it should be dealt with legally, morally and equitably, as in any normal bankruptcy --- with the bondholders and equity owners taking the first hit, not those normally first in line for their share of the remaining assets.
Ramming through an overnight theft of those lowest on the ladder of blame here, and highest on the ladder of claim, is hardly the action of honest or honorable men.
And yes, I would prefer that "full showdown", as it is the only morally and ethically principled course of action. Which is exactly why the bankster scum will never pursue nor follow it.
"legally, morally and equitably" - well, let's see how the Cypriot parliament will see this in the afternoon
on one hand, you dont get it
and on the other hand you get it
you are trying to reconcile two mutually exclusive ideas: morality vs. predatory parasitism. if you go to the root of the problem, which is central banking, you will realize that central banks are privately owned by hofjuden, which eliminates any idea of morality and leaves you with predatory parasitism. due diligence should tell you to protect yourself from them and not do business with crooked banksters. stop with the morality shit. fractional banking is immoral. you've been here long enough to know that; unless you are a slow learner - in which case stop commenting on subjects that are over your head: fractional banking is immoral; despite the fact that it is run by immoral money changers.
bullshit:
the moment you left money in the bank, you gave up property rights. you loaned your money out for interest; and if it doesnt work out, you should lose it. money in the bank is not your money. the bank is paying you interest so they can use it for "whatever".
" the bank is paying you interest so they can use it for "whatever"." ????
You found a bank that pays interest ? They charge me fees for the pleasure of leaving my money in a checking account. Seems they owe a custodial and fiduciary obligation to me.
But, yeah, you're right. When you leave your money with the Mob, what do you expect.
When you put your money in a bank, you assume the risk of that bank failing.
You don't assume the risk of the government confiscating your deposits...
wrong
you deposit your money (capital) with the bank for interest which is the risk premium that you will get your money, which you loaned out, back. http://tinyurl.com/cner4my but you know what is said about ass(u)me, you make an 'ass" out of 'u' and 'me' when you assume.
The previous poster was exactly correct, and you are only beating a strawman while talking out of your ass.
To argue that the overnight, draconian Cypriot bank asset scalping is NOT theft only serves to demonstrate that, despite the superficial impression given by your rhetoric, you are just a pro-bankster troll, justifying the bankster's crimes by suggesting that depositers implicitly consented to having their deposits stolen by the bank, or by the government (two entirely different scenarios, by the way) simply by the act of depositing money in the bank.
the more you comment on this topic the more you show what an ignoramus you are. if you were not lazy and read the link i provided for you above, you would understand the diff. yes,
becasue they did not do their due diligence, did not read the fine print and loaned (by deposit) their funds to the bank so the bank could invest the funds in "other" loans at interest. those "other" loans were stupid and failed. the banks could not collect on their stupid "other" loans and now are faced w/ failure. rather than going out of business entirely and no depositors getting any money at all, the banks chose to stay in business and give all depositors (read business partners) a haircut. across the board. can you follow that logic? or is it too difficult for you? study the fucking link i provided you with before you continue making an ass out of yourself.
Banking is a trust business,
violate the trust,
have no business.
the end.
Lmfao, arguing with no communication. Well at least both sides distrust the "as good as money in the bank" quote
underlining the russian money is what the MSM is doing at the moment. i am surprised that you approach the situation from the same angle.
[i]Of the $7.5b that was stolen, a small portion will come from the actual citizens in Cyrprus.[/i]
Wishful thinking?
http://www.centralbank.gov.cy/media/xls/2ndMonetaryFinancialStatFeb13eng...
http://www.querschuesse.de/zypern-zum-aderlass-mit-dem-sparer/
43bn Euro from locals, 21bn from abroad.
Get facts before blerping.
+1
Thanks for the due dilligence, Fips.
The worse, most ill thought and poorly researched article Bruce ever put up here.
No. Violating the rule of law isnt a good president. If they wanted to do it the right way they should have grabbed the Russian money. All of it.
You don't steal everybody's money.
This was a bad idea
And Obama is?? The last good one was Reagan. At least he appeared genuine, maybe he even was. I think so.
RR might have appeared genuine, but his image was carefully manufactured, much like that of Obama. Like Reagan, Obama is also a homosexual.
Homosexual or not, I really don't care who they fuck as long as they stop fucking me.
Gotta wonder if homosexuality is consensual. If u don't fight big Bubba from stickin his elitist dick up ur ass. What r u?
Not personally respond to you just the statement
Take your money out of the bank, stop paying taxes, get some guns and ammo, and start hanging out with like minded people.
Not that there's anything wrong wih that
This was a bad idea
Looks like it was the least worst of a lot of bad ideas. The collateral damage to "regular folks" is part of their acceptable scenario. Lots of that happening here now in the U. S. Just how much collateral damage, and to whom, are we willing to tolerate? Ah! That will be an interesting chain of events to witness.
BTW, I think I voted for President Precedent... twice.
Yup, all of this should point out how really fucked things are behind the scenes. I don't for a minute believe that they're salivating over doing this; rather, I'm thinking that they look down one alley and see some highly predictable and horrific things, and down the other alley they see not-so-predictable things and figure that they'll go that route (which means that they'll keep control over the banking infrastructure, though it's likely it'll only end up being a shell [bulk of people not using the banks (maybe why the big deal with EBTs? FORCE people to run transactions through the banks? pretty clever...)]).
The "natural" (human nature) progression is in consolidating power and control. This won't turn out well. But, it's all THEY Know to do, in which case that's the direction they'll go...
President Precedent
Habitually law-breaking presidents set bad precedents.
Interesting rationale...
Whether or not that statement be true -highly debatable - it inevitably leads one down the path to where a justificatory response to a Stateside grab...like MFG... goes along the same lines...hey, you know, most of those who lost were traders, or people in the industry; they knew the risks!
Or, to paraphrase the recent declamation of Mr Marc to Market here recently....:
A guarantee of the return of your capital is not associated with modern capitalism.. sounds more like what you're both trying to say here.
Either there is a rule of law, or there isn't. Self-proclaimed 'modern capitalists' appear to believe that contracts are involiable...until they interfere with their right to make up the rules to suit their own positions!
this is not applicable to banking
everybody needs to practice due diligence. everybody should know that your money is not safe in banks - it's risky. everybody should know how to protect themselves from unscrupulous banksters - dont do business with them. it comes down to due diligence. always. in banking and investing, the law should not protect the stupid and gullible. it's a dog eat dog environment. if you're risk averse, buy pm, take possession.
"if you're risk averse, buy pm, take possession."
Careful! There's still plenty risk there... Confiscation, theft, boating accidents...
And why only Russsian mob money is so important right now, what about any other mobs? Why we hear all the time about monetary settelments out courts for huge amounts of money without admitting any guilt, are those mobs ok? Where the seized money will go? To the other kind of mob?
excellent article, Bruce. It will be... interesting
no, it's just that Cyprus' banking system was imploding - the mob part is "collateral damage". I wonder what Moscow thinks about it
sending fleet to guard club med permanently...
Mobs rule, mob rules.
As for your comment that "they had to do this across the board," I guess that means that deposits in Greek banks' Cypriot branches will also be haircut? Oh wait, no. It's not *that* across the board. Just deposits in Cypriot-headquartered banks. Because it's a single market, no discrimination, yadda yadda.
This will not be quickly forgotten.
You are correct, the primary reason for the action taken was (supposedly, cause starting at zero has a toxic oder to it), the all encompasing tax evasion schemes, that paralized the gvts ability to function at all without monetizing bond debt to keep the wheels on the car. This is going on everywhere and we here in the USA are proud to announce a fat 35% corporate tax rate, but silent to announce the all time low collection rate of these same corporations.
Get the widow on the set, we need to air some dirty laundry.
Duplicate
So what is the morality litmus test that distinguishes "hot money" from "righteous money"? How do we draw that line in a broader context if this becomes the precedence? Can we? Today "hot money" = "Russian Mafia". Tomorrow "hot money" = 1%'ers, suspicious foreigners, pretty much anyone that we don't like. It's the worst mix imaginable of tyranny of the mob and violation of basic principles of soveignity and property rights. It's the essence of dog-eat-dog, and it only ends one way.
LOL... like Russian "Hot Money" is somehow worse that the Fed making up $85 billion a fucking month? And what of HSBC et al doing Their money laundering bit?
"Russian Hot Money" is a propaganda piece aimed to assist in pushing out Russian influence in Cyprus. This is ALL about US vs. Russia for control over energy markets. And this dirty little war has caused a big uptick in banking instability in Cyprus, which benefits the sub-plot of IMF banking controls (i.e. EU and Western banking). Running the banks allows you to oppress the opposition.
This shit is so easy to spot...
Honestly, Seer, one would have to be utterly naive and ignorant to presume that the Powers That Be can not and will not be able to come up with some specious excuse, justification, or rationalization, or in fact ANY specious excuse, justification, or rationalization, to do exactly as they wish, all due process or legal precedent be damned.
And that is why they pick their "battles". It one thing to dry run this on Cyprus (or Spain or Italy). It's another to try it in the US. People feel 401(3)s will be "seized" and converted to UST. That may be, but that will be the last act before everyone (including low information voters) will realize the jig is up.
It's starting small, but will progress, until war or whatever intervenes.
There's a reason why they did this to Cyprus, they are smaller and want to see what will happen when this was done. As the one poster put it they didn't have to go after every account but they did. They weren't going just after Russian hot money (I don't buy it, because I'm sure most of the Russian hot money left a long time ago with Cyprus having trouble with it's banks. If you have 1,000 euros in a Cyprus bank account, that isn't from some Russian or tax evader. They are using this to obfuscate that no one but the Russians where hurt and they are so far from the truth. And your right, eventually they did what you described about going after all those groups, because they went after ALL THE ACCOUNTS.
When their banks open on Tuesday you can excpect that there will be a run on their accounts to get whats left of their money out. Because why keep your money in there if they decided on a whim to take money from your account to save banks that made bad loans, and also to them what about the protection of depositor insurance that they had on their accounts, that doesn't matter anymore? If the rule of law isn't being followed and they can do that, whats to stop a few months from now to go aftet these accounts again with another tax and/or they charge a withdrawal tax?
People in other countries and in Cyprus is truly thinking about how safe their money really is.
I get the feeling they are hearding the world into the "safety" of US Treasuries after th "Great Rotation" plan ran its course and the insiders are now positioned to benefit from the flow into Treasuries. Treasuries, btw, are one step closer on Exter's Pyramid to the ultimate safe-haven...gold. The end game is getting close....one sign to look for is the simultaneous rise of gold and the dollar....
Russian hot money is parked elsewhere and have been since Russia sort of bailed out Cyprus earlier, so yes it's a good justification for seizing private funds, but it has little to do with money laundering etcetera.
Bingo! This Russian "hot money" will be from a mix of sources, much of it simply siphoned off from legitimate business to avoid taxation and much of it stashed outside of Russia out of distrust of the regime. In the early days, the regime had a habit of attaching and confiscating assets of its political enemies. Perhaps a fraction of it is from drug trafficing and other clearly illegal activities. The irony here is that most of the money fled Russia only to have the EU do precisely what the hot money feared the Russian regime would do.
Thus EU inspired confiscation will have the effect of forcing reform in Russia so that deposits will be safe at home. Perhaps in 20 years Russia will be like Switzerland 20 years ago. And unlike Switzerland, impervious to external pressure, armed as it is with nukes.
ever hear of the quaint concept of "due process of law"? clearly a dying concept around the world... back in the day, arbitrarily taking something that doesn't belong to you was called theft.
Let's ask a GM bondholder about due process.
"Hot Money" is a ridiculous distraction from the fact that the fundamental contract between a bank and a depositor is broken. If the alleged target was strictly "hot money" like that reportedly associated with money laundering (for example), then we might expect every major bank in the United States to shut down overnight.
The precedent of breaking the trust between banks and their depositors is already set through Quantitative Easing and its European equivalent. Depositor wealth is being stolen to the tune of $85B+/month in moneyprinting. The effect is the same. Really, the only difference is that the Cypriot approach is more direct.
Markets aren't completely stupid or manipulated. You may be right to anticipate some blip of strength in US bonds, at least by comparison, but the Federal Reserve has already demonstrated by QE to Infinity that it is at least equally willing to screw with citizen wealth in its host nation.