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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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remind me why Cyprus banks needed that bailout in first place?
knowing the mentality of russians and eastern european types in general, i guess `hot money` was long gone before these news. actually, maybe the whole bailout was needed because fucking banks were left empty after the `hot money` left for some reason for safer pastures.eh?
just the hype here on ZH. tommorow it will be forgotten by majority (if they now anything, anyway), in two days by minority, in a week by everyone else.
It's really all a show, and it has more with trying to get the "other side" to blink. This is about Russia, the US and energy. The entire aim of this episode was to paint another black mark on Russia as part of the propaganda campaign necessary to get US citizens to send more of their young to die for oil.
Can anyone do a word cloud from MSM articles to see what the emphasis (subliminal messaging) is? Here on ZH it's clearly "hot money" and "Russia" having a strong running. When things settle down all that will be remembered by the masses (who are the feedstock for the actual war) is the word cloud. Pavlov and Bernays would be proud...
excellent idea
http://www.tagxedo.com/artful/d7da60b8d73e4b05
generated from all the reuters articles posted this weekend.
a couple things stand out:
--no mention of Germany, Merkel, et al.
--the words "contribution" & "demanded" weigh fairly heavily.
--oil made the cloud.
The first part of the argument sucks. Sort of like an argument against freedom of speech and against innocent until proven guilty.
This is the real world. The drug cartels launder their money through the US banks. Holder supplies them with weapons. The banks have to pay a fine, as a form of tax, now and then. The banks have been placed above the law publicly. This is what their next step is now that everyone knows they will not be prosecuted. Once they have everyone's money they are going to kill us. Is that too hard to understand.
The EU kleptocrats just put a "Star" on the jacket of every EU depositor. Don't be a fool. Leave town before they start rounding you up and give you a haircut.
Looking for clues? Why crash Cyprus?
http://www.naturalgasasia.com/content/4195/leviathan%202_550x300.jpg
Maybe oil?
The obvious was always there, wasn't it?
It's feeling like war. ALL WARS ARE ABOUT RESOURCES; and, the MOST important resource is energy-related.
It's a fun practice, people, pick a hot spot and see if you can spot what treasure is at the heart of the disturbance.
This map tells a lot. The so called Leviathan field is not in front of Israel. Its in front of Gaza. Given the map is correct it means, that all the propaganda that Israel is soon going to be a gas exporter to Europe and does not need anymore gas from Egypt is, propaganda only. The gas belongs to the people of Gaza (who else, that says already the name Gaza). Israel needs to through out first the inhabitants of the Gaza strip. Goood Luck. It did not work the last 50 years and it will not work for the next 50 years. So to whom belongs Gaza if not to the people of Gaza.
Cyprus is clear, The Brits and the US want to have it out from the Eurozone, because otherwise Euroland would suddenly have substantial quantities of NG, but priced in Euro - not in Dollar. No Dollar needed since its not leaving Euroland. This would fix an energy price in Euros for the first time. A Euro benchmark price for NG, completely independent from the US Dollar.
Israel could bulldoze Gaza tomorrow if it needed to. All it has to do us flatten it with fuel-air bombs and then bring in the monster bullzoders. I suspect that Israel will get that gas, and the current "Gazans" will either one day become Egyptians, or will be plowed under the Gaza sands.
Everyone wants out of the Euro, but no one wants to be the first to leave.
So they resort to an increasingly dangerous game of insults and chicken.
Merkel may be a physicist, but she's no rocket scientist.
Euro = gasoline.
No Middle East exporter will take the currency of a bankrupt country. If the euro fails it will be because the countries are bankrupt. If a country is bankrupt with the euro it will be moreso without the euro.
Europe imports 80%+ of its energy supplies, mostly from Russia, also from Middle East and Northern Africa.
Right now it pays with empty promises. What about tomorrow?
Thank you, Steve, for chiming in on the energy aspect.
As I see it all this banking stuff is more about name-calling and chest puffing leading up to the real fight. Cyprus, like so many other countries, is but a pawn. THE players are the US and Russia. The US is force FOR Europe, with the US's interest being in keeping Europe somewhat stable with affordable energy such that they can import US goods (like military shit). Russia's interest lies in keeping it's energy revenues flowing in. Both the US and Russia are jabbing away at the hornet's nest; most see the bees swarming, and with all the banking BS happening, the swarm is being attributed to bad bookkeeping...
follow the money
eurozone loans 10 billion
cyprus raises 5.8 billion from depsitors and 4.2 billion from russia
exactly how is this a bail out? cyrpus is paying for money laundering by russia and corrupt politicians in greece over the last 20 - 50 years
the net transfer to/from europe is zero (cyprus is -10 bn / non-cyprus europe is + 10 bn)
marked to market and bank fail would fix this just as easily PLUS get the criminals assets
i posted this on another thread, but i repost it here, because..i can :>)
well, looks like there must have been loans falling due in the last week or next week for this to have come ot a head last thing on friday.
i wonder who was on the hook to pay the money back or receive it, to escalate it at this time
paraphrasing one ZH'er on another thread "cyprus just got tongue punched in its fart hole"
only half the money being confiscated was probably russian criminal by origin
this is an illegal action in every country with a banking system. foreigners cannot garnish the deposits of another country, not even a country can garnish the deposits of its own citizens withou due process via the courts.
expect a lot of cypriots to resort to claiming to have british passports, since the british are saying they are going to make good any losses incurred by its ex-pats and military personnel based in cyprus. god only knows that the british have oodles of money they can blow out their own deficit by to make good those who have ceased paying tax in britain and run off to a banana republic.
expect a lot of russians to claim that they should let the two shitty cypriot banks to fail and that their deposits in non big-2 shitty cypriot banks should not have to pay for the sins of the shitty.
cui bono - we have had no transparency on the big 2 shitty banks, i.e. their balance sheets, their depositors, their loans.
there has been no due process within whatever goes for a regulatory authority in Cyprus. if it is so apparent that cyprus is being used for money laundering, why not send in a team of 500 from the regulators within the eurozone and russia to get to the bottom of the money laundering, fraud, proceeds from drug and gun running, tax avoidance etc etc
this is not something that falls under the jurisdiction of Europe, since it is not their money being laundered in the form of loans to other russians and east europeans.
it ought to be apparent that if Cyprus cannot satisfy the rules for adherence to banking, audit and regulatory requirements, it cannot qualify to be within europe and should be trhown out.
imagine
all those who have put down money on a house (10% deposit) into a laywers trust account - 10% of this money (presumably) is confiscated
all those companies with working capital in banks which has now been reduced by 10% - 10% of this money is confiscated
all those with credit card debt who were about to repay their credit cards - 10% of this money is confiscated
now
there are criminals involved. lets get GW's take on this. the corruption has brought down the country, because sure as chips is chips, 899,000 out of the 900,000 living on the island did not collude with criminals or break any laws or act imprudently.
seems to me the two shitty banks should be investigated by a multi-national team of investigators
it is obvious to me that not all the money of the criminals involved in the corruption of the island will have been "invested/laundered" in cyrpus so the gains to the russians and the europeans will be way in excess of the loan being sought from europe and russia.
get that? cyprus needs 10 billion: the criminals who have bankrupted cyprus have assets of (probably) 50 billion, so the "authorities" should go after them and the 1,000 cypriots who facilitated their crimes.
europe should grow some balls before it tries to fuck the innocent.
get the cia and the russian regulator to give the soft cocked europeans a hand.
Re
a) "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."
b) "Nothing like the seizure of depositor’s money has ever happened before, so we are on uncharted ground."
c)"even though it was just crooked Russian money that was stolen."
Wrong, wrong and very wrong, as many here pointed out.
A) Nothing unusual at all. Since greed, liquidity and trust drove the markets up, fear, loss of liquidity, economics and trust will implode them again, same story, different day.
http://richcash8tradeblog.blogspot.com/
B) Where were you hiding out vis a vis unrecovered Madoff, MFG/JPM, Peregrine, Stanford, Argentina, Chile, China, Hungary, Japan, Mexico, UK, USA, USSR, Venezuela, Zimbabwe stolen deposits? Consider the nature of fractional reserve Central Banks and the Federal Reserve system since 1913, when gold was $18.92 an ounce and currencies were confiscated/devalued by force majeure or slowly by debt tax usury in the name of stability with the recurring results of 1929, 1937, 1973, 1987, 2000, 2008. Gold contract deposits were grabbed by FDR and dollar deposits were converted into local currencies and devalued everywhere, even Switzerland, doh:
http://www.nma.org/pdf/gold/his_gold_prices.pdf
C) Are Bermudan, Cayman, Cyprus, Dutch, Hong Kong, Irish, Isle of Man and Jersey offshore deposits all crooked money that apparatchiks can steal with impunity, while Putin keeps his $40 B hidden safely in Lichtenstein and Zug, western billionaires in tax-free foundations?:
http://www.guardian.co.uk/world/2007/dec/21/russia.topstories3
A line was deliberately crossed again by "authorities" and we shall see how quickly what's left of free markets respond...
well said
don't forget corzine, the £400m transfer from europe lehman to us lehamn to jpm, the 20 cents in the dollar bear sterns after bear sterns had crashed from 60 bucks..etc etc etc
BS traded at 133.20 52-week high and JPM first offered $2 a share, accepted by BS management:
http://en.wikipedia.org/wiki/Bear_Stearns
More "No deposit seizures ever before":
10% yacht tax by Clinton.
So-called American Taxpayer Relief Act of 2012:
2.8% medical device tax, 3.8% tax surcharge, 33% capital gaiuns and dividend tax hikes, 45% payroll tax hike, 58% income tax hike, 20 new Obamacare taxes with 20,000 new IRS agents, but my fingers grow weary...
http://apiexchange.com/index_main.php?id=8&idz=236
I thought our flood of QE money was propping up Euroland? Why didn't Bernanke fire up the printing presses a little more? The Raping of Cyprus looks more like a demonstration/test to me like many others here have said.
The EU could have papered this Cyprus thing over with Bernanke Bucks and some more creative accounting. They pointedly decided not to do so.
If I had any money in PIIGS banks, it would be out of there tomorrow.
I don't think that Cyprus has any banks in the US. That was the criteria used by the Fed. If they were to step past that line Congress would get VERY snoopy... (there's NO way legislators could look at financially hammered people in the US and tell them that Their money is going to Cyprus [to alleviate financially hammered people there])
The 'flood' of 'QE by the Fed' is not real. There never was any money, only some cheap talk.
"Let me know when I can buy groceries with bit coins."
>> I just bought a can of soda and some chewing gum in a Kowloon convenience store with btc. Let me know when I can do that with gold. They wouldn't trust that it wasn't fake. Unlike bitcoins.
And what do you do when the bitcoin electrons stop flowing for "cybersecurity"?...
I'll take my gold, which I also own and try to not get killed/mugged trading it in person. If the internet is down, everything is down. If I trusted bitcoins more, I wouldn't bother with PMs anymore. They are too easy to fake and who will trust them not to be tungsten?
Are you kidding? The vast majority will trust gold coins! You do realize we live in a world where 99.99% of the world population trusts fiat, fake, fraud, fiction, fantasy, fractional-reserve debt-note toilet-paper, don't you? And none of those sheeple will trust a nice, pretty, heavy, gold coin? You must be kidding!
To be sure, a tiny minority will be more careful. And for them, quite a few inexpensive models of ultrasonic testers will be available to verify the coins and wafers they receive.
And how will those ultrasonic testers run without power? A bitcoin can't be counterfeited. Gold coins can. I've seen them and I can't tell the difference. I can buy a bitcoin for USD, using email, from someone who I've never met, on the other side of the the world and who doesn't speak english. Would you do the same with a gold coin? I guess I'm fortunate that I used to work with crypto so maybe I get this easier than other people.
So, you're expecting that in the future some centralized store (of bitcoins) is going to be available and that you'll be transacting with people across the globe for products that will have to be shipped? If there's value in the shipped good you think that IT isn't going to fall prey? Yeah, perhaps your bitcoins don't get looted...
"I guess I'm fortunate that I used to work with crypto so maybe I get this easier than other people."
PHYSICAL security is usually the thing that gets breached: most would likely not secure their phone/computer, in which case cryptology is kind of meaningless. You've already noted this concern regards protecting physical PMs.
In the long-run conservation of energy wins. Since you know all about cryptology I'm figuring that you're pretty good with math, so please do feel free to do the energy math here (the world run by bitcoins vs. the world ruled by PMs)...
The ultrasonic testers can easily be powered by a hand-crank generator. Can you run your computer and internet with a hand-crank generator?
I have little doubt the bitcoin people are honest... today. But mark my words, ANY system in which ANY party fails to retain real, physical, valuable goods in his hands at all times (gold, silver, platinum or any other real, physical good)... will eventually be corrupted. It may not even be corrupted by those who nominally control it, but other predators who refuse to accept alternatives, and shut them down.
I'm a scientist, engineer, inventor with decades of programming experience. I understand the basics of crypto. That doesn't make me assume their scheme is foolproof, even if they are eternally honest. The fact is, the entire internet can be shut down. No line exists that the predators are not willing to cross.
When I first bought bitcoins I used a bank wire to buy them. It took two days while the banks en route collected their interest rates etc for a transaction that would take ten minutes using bitcoins. The most obvious security holes in the bitcoin world are the exchanges, the merchants and the end-users. Even if the internet goes down, so long as it's temporary, when it comes back up, I will still own my bitcoins. If I send BTC around the world I only need to stay in bitcoins for ten minutes. I can exchange into any other currency before and after if I like. For minimal fees. Even if BTC dies because of whatever reason, it is a huge threat to banks and paypal etc and once you're a little familiar with it, it is analogous to having a debit card. From a speculation perspective, even though Max Keiser is annoying, his point that if BTC transactions become one percent of the global FX markets, then each bitcoin will be worth $100K is interesting. It is a game changer and it could do for the banking industry what napster did to the music industry. Even though napster died, it changed the face of that industry. This is not something to ignore. If you like PMs, this is worth learning more about.
By the way, as I predicted, the predators will come after bitcoins and [attempt to] destroy its usefulness. Frankly, if bitcoins complies with the demands of governments, it is WORSE than fiat currency? Why? Because you can take a pile of $100 bills and buy stuff with them without identifying yourself. If the predators take their current attempts to dominate bitcoins by means of laws, no private transaction will be guaranteed to be private, which a transaction with a stack of $100 bills is.
##### PREDATORS SUCK ######
PS: I hope everyone is clear, it isn't bitcoin folks who are the problem, it is the predators-DBA-government and predators-DBA-[central]-banks.
I wish bitcoins and everyone with bitcoins well. I really do. And nobody wants fiat, fake, fraud, fiction, fantasy, fractional-reserve debt-notes to die a quick and permanent death more than I do.
I simply don't believe bitcoins are foolproof and guaranteed non-manipulable. Just the possibility that early adopters might make 100,000 to 1 gains proves bitcoins is inherently not a fair medium, even if we personally benefit from it massively.
To be fair, physical gold can be lost or stolen if you're not careful enough. But the key point here again is... that fate is largely controllable by the owners, not random predators around the world. Note to PM owners... hide them securely!
Even "Russian hot money" is private capital...this is just confiscatory socialism masquerading as "predatory capitalism" masquerading as a "Euro business decision"...
pfft,
yeah? it is private until the russian idiots deposited "their" money in the bank w/o reading the fine print. the moment money is deposited, presumably earning interest, it was loaned out and private capital was "risked" for future gains: http://tinyurl.com/cner4my
Yes: and the clipped deposit ballances are not `just russian money` as BK states - but the deposits of everybody, Cypriots both personal and business, ex pat retirees etc etc.
So to me the prescedent now looks like `there was some dirty money in the institution where you bank, so you have to take a haircut as well`
Show me an institution that does not have some dirty money on deposit ... anybody, HSBC - JPM - Wells ?? hmmm
Broke in any language! http://shutupnsing.wordpress.com/2013/03/17/the-pope-you/
Bruce,
If "Everybody who knows any thing about Cyprus also knows that the domestic banks were a parking lot for Russian hot money"...
Why wasn't the seizure of bank deposits ONLY targeted at the accounts containing the Russian hot money?
Why are we not hearing of the arrest and imprisonment of the Cypriot bank officials complicit in the domestic banks becoming a parking lot for Russian hot money?
Why does the term "Russian hot money" not equate to "Federal Reserve hot money" in your mind?
Do you believe a substantial amount of the TRILLIONS OF DOLLARS in Fed hot money has not also found it's way into "crappy assets like the sovereign bonds of Greece"?
Last question - Do you even read what you have written before you hit the "Publish" button?
Would have been simple to separate the accounts that had a bona fide local address from the ones that were just a PO Box or had a mailing address in the Ukraine or Russia. Also, a few more tiers would have worked: <100K, no haircut, 100-1M, 3%, abouve $1M: 15%
Agreed. This was done poorly. I think it will be revised so that that the bigger accoounts get hit harder.
Yes, in those cases it would have been less of a crime --- but still a crime nonetheless.
No discrimination for individual cases, no due process, no demonstration of guilt for any of the parties involved, just pure and simple theft, "Because we can".
Bingo!
Bingo!
Bingo!
Bingo!
BINGO!
Another mostly rhetorical question - why do all of the pundits love to talk the "russian angle"? Russian mafia or such?
What about the British angle? There are lots of (the number is measured in hundreds of thousands) british seniours in there, most of them likely hit by this "tax".
From BBC: British .gov stated that they will compensate British solders (about 2,500) and expat (25K).
I would love to see Putin put a 25% tax on oil and NG going to Germany. That would make Merkel smile a lot.
there are 59,000 ex-pats apparently,
this from uk yahoo news
"Those that will be compensated will be armed service personnel and anyone who is working out there on behalf of the Government."
There are also 59,000 British residents in Cyprus and 1.1 million Britons visit the island every year, the Foreign Office said.
http://uk.news.yahoo.com/troops-savings-must-protected-073445525.html#Tr...
Because it's what the Eurocrats actually believe
That can of worms I mentioned sounds something like this:
https://www.youtube.com/watch?v=0bDY0DfEjmo
Eins, zwei, drei, fuckers!
Breaking News: "DC seizes banking assets in Grand Caymans"... same thing.
Bruce, Bruce, Bruce. You stated it yourself very clearly:
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.
WTF do you think they did when they allowed HSBC to launder drug money in the billions for decades? Not holding them to account for that is also a bailout/handout, pure and simple.
...USA lucky. Caymans doesn't supply our winter fuel...
So Russia just doubles the price of natural gas to the Eurothieves. You think this is one sided? Fuck, they leveled Berlin 68 years ago...sheesh
Oh but wait! Perhaps Putin was in on this and shorted the Oligarchs and is benefiting from this too!
Yes. It is probable that Putin is happy to seen the oligarchs singed. But he will no doubt make pro-forma objections.
This action is not without precedent. Iceland stiffed many foreign depositors, and during the depression of the 30's many US depositors lost part or all of their money when small banks failed.