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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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Uh, don't be so sure. My wife and I have been discussing zeroing out our accounts for two days. Funny thing is, we're saving for a new house.
I agree with WilliamB. This is a slap in the face to every depositor, no matter how you dress it up. It is on line with the outright stealing we are seeing here in the States (Where is Corzine never became a battle cry). The powers that be are openly, and blatently telegraphing their intentions. The sheep hardly notice sometimes.
But what about all that interest on the money in the accounts that you'll lose by withdrawing the money?
Oh wait. . . .
Good. Quicker for me
Look at the Bruce Lee quote in my Bulldozer post.
Now I'm getting junked by Merkel's crotch hunde.
What your photo montage needs is a Wall E type compactor to package all those bankstas as nice diced cubes for the dump yard...after the tractor has demolished their banks!
wall e compactor - Recherche Google
If it was meant to just be Russian hot money why does confiscation start on accounts from $0 upwards? The overriding of the euro wide deposit guarantee of E100k is of huge significance. Basically if you live in Cyprus you, duh, need a bank account so it's widows and orphans too that have been clipped as you so quaintly put.
So the money in our TBTF banks is not hot? Give me a break!
What's wrong with letting the Cypriot banks fail anyway? Get it over with already!
But aren't the "Russians" the bad guys, our (perceived) enemies anyway?
Yes, I figure that this is a two-fer:
1) Helps exert banking control by the EU (with the backing of the IMF [US]);
2) Adds to heating up the cold-war with Russia for energy control/distribution in the region*.
* Russia needs the markets cornered in order to guarantee revenues. The US wants to keep this from happening (long-running chess game for control of energy routes) and wants to displace the Russian military from there (US strategy to encircle Russia and China). Also, the US wants to keep energy costs as low as possible for Europe in order to maintain elevated levels of disposable income for purchasing US exports.
Yes, unless they are a double naught spy agent.
Agreed ... this is primarily a war against little people
And even with the Russian 'hot money', that angle is over-played too
Some of that could be middle-class Russian business people who are decent human beings, who just want to diversify with foreign accounts
Bruce Krasting admits the Cyprus banks were foolishly investing in EU sovereign bonds in Greece ... as EU authorities WANTED Cyprus banks to do
How does it follow that because Cyprus banks do what EU authorities WANTED them to do ... that a bunch of depositors from Russia should take a hit?
Many American bank accounts are ill-gotten gains from some kind of dirty business connected with US political influence and bribery ...
How would Bruce feel if some other country seized 10% of bank accounts of Americans 'because, ya know, a lot of that American cash is dirty money ...'
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What a savage, insane plan ... Cyprus' sovereign bondholders untouched ... average poor working people having their savings stolen ... there will be blowblack for sure ... already happening:
The Cyprus Parliament vote is being delayed till Monday (public holiday there and in Greece), and 'No' votes to the EU-Troika plan are lining up
They might even be on their way to pulling an Iceland
No reason really not to draw the line in the sand, right now, and say 'No' ... better have it all explode now rather than later after multiple confiscations and 'payments'
Here's the breaking news on the Cyprus vote delay
http://www.aljazeera.com/news/europe/2013/03/201331744815178244.html
How would Bruce feel if some other country seized 10% of bank accounts of Americans 'because, ya know, a lot of that American cash is dirty money ...'
I reckon we oughta stay on the good side of the Cayman Islands. That would be quite a blow to some fancy-pants U. S. oligarchs.
Correct, the Russian angle is such bullshit. How many gangsters leave their money sitting as euros in Cypriot banks? If the money is there, then it's merely passing through and all this did is lightly impact the flow ( which will now be diverted). Chances are, the crims have way more money parked in Switzerland than Cyprus, so let's clip the Swiss!
Plus, how much of the flow even sees a Cyprus bank account at all anyway? Money outside the bank isn't touched by this.
This is Germany, demanding its pound of flesh and getting it.
Those fucking Germans.
(1) Ship our gold back from NY
(2) Fuck you Cyprus
(3) ?
(4) Profit
@ Mediocritas: that last line is gold.
'What if somehow the FDIC/Federal Reserve were forced to step in to bailout an entity that was a depository for the Mexican drug lords.' -- BK
Didn't that already happen in 2008 with the bailouts of Wachovia, Bank of America and JP Morgan?
Don't swallow the FinCen Kool-Aid, Bruce.
and don't forget Citibank
Yes, but most of those widows and orphans don't have much by way of a bank account. Of the $7.5b that was stolen, a small portion will come from the actual citizens in Cyrprus.
They could not have just stolen the Russian's money. There was dirty money from all over in Cyprus. So they had to to do accross the board.
But you point to the real significance of this. Small guys were affected. Nothing like this has been done before. Is it a game changer? Maybe......
Bruce said: "Is it a game changer?"
Yes Bruce, it is a game changer, this has made me decide to get a goodly portion of my money out of the bank - it isn't earning any interest anyway and I'm sure if it is in my possession it won't lose 6.7%-9.9% overnight at the whim of a corrupt cabal of bankers.
Anyone else feel this way now?
Bruce. You confirmed what I have long suspected; you are a giant moron. As bad as that is, you're an insensitive moron to boot. "The widows and orphans don't have much", so it's ok? What kind of a cretin says junk like that, you channeling Jamie Dimon?
How about an audit? How about arresting some of these Russians, and seizing their assets, since they're so well documented in "gazillion" places?
edit : ok Bruce, you're not a moron. you are just not very good at expressing your position. the insensitive bit still stands, though.
I was with you there. But at some point in the article, you dropped the parenthetical "aside" tone.
The "dirty money" angle is a fig leaf. Irrelevant, but may sound good sold to the public later.
Notice how the spin among Eurocrats hardly ever mentions "Russian hot money"?
Instead the justification runs along the lines of "...this was a hard, hard decision, but was necessary and we have shored up Cyprus' future security permanently with this...blah, blah..."
how about this as per your comment
the parliament will compromise: locals with less than eu100K will be exempted, foreigners will pick up the diff, i.e. 20% levy on deposits. we'll find out on tuesday
edit: i'm surprised you got so many down votes since the russian oligarchy/mafia play in cyprus was well documented in german spiegel for the last 6 months; at minimum. if, in the worst case scenario, the locals get hit as well, it should not be a big deal, more like collateral damage, because the locals benefited from the influx of mob money since the time it started pouring in.
Regardless of what amendments are made Tuesday, Cypiots (and other Earthlings) will have a couple of days to realize what happened. "I got robbed by the bank. Perhaps my money is unsafe there..."
finally you get it:
btw: your money in the bank is not your money. you forfeited rights to your money for interest.
"btw: your money in the bank is not your money. you forfeited rights to your money for interest."
Care to provide documentation?
I've (bothered to) looked for any such language in new account/deposit agreements and do NOT see any such wording.
The basic sense of accounts is that it's YOUR money HELD in DEPOSIT, in YOUR NAME! (in the US the IRS even ensures this so that it can make sure that YOU pay taxes on the interest on YOUR DEPOSIT)
you bet
here is the link http://tinyurl.com/cner4my and with regards to your particular scenario, it is implied that your money is swept into loans unless your contract specifies that your bank is safekeeping your funds rather than loaning it out.
Fuck off you pro-bankster troll.
Nobody has knowingly "forfeited" anything by putting money in a bank. Your apologies for predatory criminality are beneath contempt, unless I am grossly misunderstanding your point here.
why are you such an idiot?
educate yourself before you make stupid comments. but hey, ignorance is bliss in your case; http://tinyurl.com/cner4my
Pseudo, what the hell are you talking about ?? What makes you think anyone gives up their property rights when they deposit their money in a bank. Your last few posts may be the stupidest posts in the history of zerohedge. Go home bank troll.
I think he is just Jamie Dimon slumming on Zh as a prank in honor of St. Patty's Day.
Please take your nit-picking rhetoric and shove it.
pfft, nit-picking rhetoric? fine. put all your money in the bank, dont read the fine print as you would be unable to understand the ins-and-outs of fractional banking anyways, but then dont come here complaining and bitching that you lost your deposited savings because you did not understand that when you left money in the bank, you gave up (invested, risked) your capital for interest and future gains which the banksters promised to deliver to you. good luck with that mr. "i trust my jew bank"
Go fuck yourself, Adolf.
I don't trust banks to almost any degree, but your dishonest and disingenuous claim that one "gives up their property rights to their money" by putting it into a bank is pure horseshit.
AKAK is completely correct from a moral ethical and legal standpoint.
However, pseudo is correct from a realistic standpoint: that if you do business with known criminals, you WILL get burned. You can't deal straight with crooked people - the fractional reserve banking system in and of itself is morally corrupt to the core. Why anyone still keeps any significant money in a bank, after all we've seen this century, is beyond me.
Never trust a bankster. Never trust the government. Never trust the lawyers or corrupt judges who are their minions. Upvoted both you guys b/c you are making two different but true points.
There is no way they did this b/c they thought it was "right" or "fair" or whatever conscience-quieting term they choose. There is no moral question here. The only question is whether they did it because they had to; or just to see if they could. Whether they are monumentally stupid in misjudging the power of an outraged public; or they are right on the pulse, correctly judging this as something more that the public will swallow on top of everything else.
That to me is the real discussion, and it is something no-one knows yet. But we will soon find out.
can you provide a link to your claim
or, are you just shooting from the hip? read the analysis at this link ( http://tinyurl.com/cner4my ) and let me know how you have any legal right to all of your deposit after you let your bank risk your money for interest. furthermore, dont forget that when you deal w/ a bank and open an account, you entered into a contract and you would be bound by an agreement you consented to when you placed your signature on what the bank presented you with. and if it is clear that your cyprus bank is not safekeeping your funds, but it is loaning the funds for you at interest, you stand no legal ground when those loans, on your behalf, go tits up.
heh - not a lawyer, don't play one on the internet, and yeah, frankly what's "legal" at any given time is what the government allows. Having said that, most of us "general public" understand "legal" to enshrine protection of property rights. Your bank account is not "legally" at risk if the government is in trouble, if foreign governments are in trouble, if the neighbourhood down the road is in trouble. There is no way this "risk" was fairly "disclosed" to most depositors, however the fine print may read. They can't "legally" just take your money out of your account for any and all reasons, which is why they are crafting legislation as we speak, which they can only hope will pass, to MAKE this "legal".
So if you want to say I'm shooting from the hip, I'm not a lawyer, so sure. I'm just one of the great unwashed crowd of rabble who "knows 'illegal' when I see it", without consulting the letter of the law. If that makes me a moron by your lights, I can live with that.
You are correct that interest paid is to cover risk of losing your funds if the bank goes belly-up, but I think it is quite a stretch to extend this to mean they are entitled to grab your money for any reason they consider fit. I doubt that a significant majority of citizens will understand this as "legal".
Leaving this discussion only b/c I have to get to work now and anyway have no interest in quarrelling with you on this, since I basically agree with you. If it is "legal", then it is in the sense that American assassinations of American citizens without trial or due process is "legal" too, or that it's "legal" to make banksters whole for bad loans, and if I espoused that then I'd probably have a lot more sympathy for lawyers than I do. I guess I'm saying there is such a thing as a legal principle, and it is much more important than the letter of the law.
thank you for making my point with your statement
you dont trust them but you are still willing to leave your money with them. go to court, make such a stupid admission (that you knew the party couldnt be trusted) and you still gave them your money, and see how much you get back - the legal way. the judge will most likely tell you that you failed to do your due diligence and you willingly risked your capital (gave up your property rights) by dealing w/ a party that you knew could not be trusted. you admitted, on the record, that you were not deceived because you knew they were not trustworthy; thus, you proceeded on your own volition; thus, you deserve to lose your money because you gave up your property rights in order to have the bank invest the money for you for future gains..
Merely because I personally do not trust the banks has nothing to do with the fact that one does NOT give up their property rights by depositing money into a bank. The breadth of your illogic is, well, breathtaking.
Yeah? How many "widows and orphans" should we tolerate being robbed to protect bondholders who knowingly invested in these shitty banks? Just a few thousand be enough? If not, don't worry; we got plenty yet.
Where is your money Bruce?
I would be very much interested in your feelings when you become the participant of a 'bail-in'.
Safely sleeping in a Cantonal bank in his mother country.
.. we still love you Bruce.
learn to yodel and you'll not be far away. Vaults are not just about poles also about gold.
Pole vault a Patek Phillipe gold watch from Swiss to France and I'll give you 10% commission if its payable in roubles from my ruski friend hot out of Cyprus prison.
Would it be a "game-changer" for you if we all stole 10% of your life savings?
Bruce, what you seem to be oblivious to is the basic premise of property rights . I do not care whose money it is or if it is ' black ' money, or if it is a poor widows' money - the bottom line is that the gov is stealing.. The consequences of this are going to be serious and this will be the beginning of a shitstorm for the entire banking industry in Europe. IF SOMEONE CANT SAFELY LEAVE THEIR MONEY IN A BANK, THEN THEY WONT LEAVE IT THERE AT ALL.
Bruce is from NY - so he thinks the govt does not steal. I bet most of his pals and relatives in LI, New Ropchelle and Oyster Bay voted for O. They are about to reap what they have sown. So will the rest of us.
His LI cronies probably love the muslim. Typical NE libturds like Billy Joel, Springsteen and Bon Jovi who love the islamic.
All clueless evil f**ktards like Alec Baldwin. Baldwin used Kim Bassenger as his sparring partner and punching bag until her father and brother said they would kill fat Alec. typical NY'ers - F thjem.
As a Long Islander I totally resent your accuracy.
"IF SOMEONE CANT SAFELY LEAVE THEIR MONEY IN A BANK, THEN THEY WONT LEAVE IT THERE AT ALL. "
At which point the banks roll over and die. This is a bad thing?