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Is The Cypriot Government Crazy Or Do They Really Fear Bankers That Much?
Reading a Bloomberg article on the topic of ass-backwards EU area government moves this morning caused me to query, "What is the extent of the fear the European (and US) governments have of the financiers?" In Cyprus, we have a case of a government that would actually rape the depositors of a bank rather than the investors who voluntarily, directly and explicitly accepted the risk of bank failure through speculative investment (ex., the bondholders).
The bank tax was the alternative to imposing losses on investors in a so-called bail-in, a step opposed by the Cypriot government, the European Commission and the ECB, German Finance Minister Wolfgang Schaeuble said on ARD television last night.
So, you will bend the mom and pop depositors over, but leave the monies of the institutional guys who should have known better sacrosanct?
“It’s up to them to explain it to the Cypriot people,” Schaeuble said. “Clearly, the taxpayer should not be asked” to rescue banks from insolvency, he said, adding that Cyprus faced a “very difficult time” unless it accepts the tax.
Bullocks! The taxpayer should be hit before the depositor to maintain the confidence in the banking system, but they should all stand behind the bondholders who accepted the investment risk in the first place. Yes, I'm aware that the banking system of Cyprus is about 9 times the size of its real economy, but that's pretty much the case with much, if not all of the EU, as clearly delineated 3 years ago in Ovebanked, Underfunded, and Overly Optimistic: The New Face of Sovereign Europe:
I will attempt to illustrate the "Overbanked" argument and its ramifications for the mid-tier sovereign nations in detail below and over a series of additional posts.
Sovereign Risk Alpha: The Banks Are Bigger Than Many of the Sovereigns
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This is just a sampling of individual banks whose assets dwarf the GDP of the nations in which they're domiciled. To make matters even worse, leverage is rampant in Europe, even after the debacle which we are trying to get through has shown the risks of such an approach. A sudden deleveraging can wreak havoc upon these economies. Keep in mind that on an aggregate basis, these banks are even more of a force to be reckoned with. I have identified Greek banks with adjusted leverage of nearly 90x whose assets are nearly 30% of the Greek GDP, and that is without factoring the inevitable run on the bank that they are probably experiencing. Throw in the hidden NPAs that I cannot discern from my desk in NY, and you have a bank that has problems, levered into a country that has even more problems.
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Of course, this boneheaded move will backfire tremendously because it appears as if the members of the Cyprus government are not aware of the true financing structure of the banking system. DEPOSITORS SHOULD REMAIN SACROSACNT! They are the most important source of funding, not to mention the most liquid (as in potential for capital flight) in the entire banking ecosystem! I reviewed this structure and the inevitability of European bank runs two years ago in The Anatomey of a European Bank Run!
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Using this European bank as a proxy for Bear Stearns in January of 2008, the tall stalk represents the liabilities behind Bear's illiquid level 2 and level 3 assets (including the ill fated mortgage products). Equity is destroyed as the assets leveraged through the use of these liabilities are nearly halved in value, leaving mostly liabilities. The maroon stalk represents the extreme risk displayed in the first chart in this missive, and that is the excessive reliance on very short term liabilities to fund very long term and illiquid assets that have depreciated in price. Wait, there's more!
The green represents the unseen canary in the coal mine, and the reason why Bear Stearns and Lehman ultimately collapsed. As excerpted from "The Fuel Behind Institutional “Runs on the Bank" Burns Through Europe, Lehman-Style":
The modern central banking system has proven resilient enough to fortify banks against depositor runs, as was recently exemplified in the recent depositor runs on UK, Irish, Portuguese and Greek banks – most of which received relatively little fanfare. Where the risk truly lies in today’s fiat/fractional reserve banking system is the run on counterparties. Today’s global fractional reserve bank get’s more financing from institutional counterparties than any other source save its short term depositors. In cases of the perception of extreme risk, thesecounterparties are prone to pull funding are request overcollateralization for said funding. This is what precipitated the collapse of Bear Stearns and Lehman Brothers, the pulling of liquidity by skittish counterparties, and the excessive capital/collateralization calls by other counterparties. Keep in mind that as some counterparties and/or depositors pull liquidity, covenants are tripped that often demand additional capital/collateral/ liquidity be put up by the remainingcounterparties, thus daisy-chaining into a modern day run on the bank!
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I'm sure many of you may be asking yourselves, "Well, how likely is this counterparty run to happen today? You know, with the full, unbridled printing press power of the ECB, and all..." Well, don't bet the farm on overconfidence.
I'm currently preparing the release of a report that will make the Cyprus affair look like peanuts as this contagion reinfects the core and I produce so much evidence of apparent fraud as to make your nose bleed. Stay tuned, and follow me:
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Schaeuble is an arrogant asshole who cares about one thing and one thing only: Wolfgang Schaeuble. He's a career political whore who will hitch his wagon to whomever he perceives to be the most powerful within his circle of contacts, none of whom represent the common folk.
Some say that what he's doing is smart, that it's a proper attempt to get nations to adopt a more disciplined set of fiscal policies. He says himself that the periphery suffers due to its self inflicted lack of competitiveness. Both these statements demonstrate an appalling lack of understanding of the mechanisms of the euro.
The euro guarantees less competitiveness as it promotes greater concentration, lower diversity and kills local businesses (the huge multinationals absolutely wipe the floor with the rest). I've experienced it first hand, watching family businesses, hundreds of years old, get wiped off the face of the earth to be replaced by enormous corporations with which there can not possibly be any competition. For the saving of a few lousy euros, security, pride, diversity, unique products and culture are lost: a lousy trade.
Schaeuble seriously expects nations coming off a very poor base to be able to be competitive against the might of Germany industry without any protection. He bashes the little guy then blames the little guy for getting bashed. The man is a total prick.
As for getting nations to adopt better fiscal policy. Yes, just ignore everything that makes Europe Europe. Pretend that different languages and cultures don't exist, pretend that fiscal policy is independent of culture, pretend that every nation can be Germany, ignore reality, drag the horse to the water and force its head into the water to make it drink, then cry out in surprise when it kicks you squarely across the way.
The Euro is a homogenizing machine, mashing people into Eurozens and it will meet the same fate as every single dickbag in history who has attempted to unite the tribes of Europe under his own deranged banner. The sooner it fails and Europeans can go back to being freely diverse, the better.
Every word you say is correct. I have returned to Germany after a decade living in Central Europe, the country is a mess. Schaeuble is in my opinion what informer times would have been called "Hochverräter". His arrogance is only topped by his ignorance. He pretends that he understands everything, but he is a complete failure. She is the boy of angela Merkel, the Drone in chief to destroy everything German in Germany. Her background is as obscure as Obamas.
This government is the worse this Republic has seen. TV and public radio are censored, no mentioning of 1,5 million portugese peaople demonstrating, no mentioning of Iceland or Sweden or any other country with successful politics.
If they fuck with russian money in Cyprus, they will get it back with the Gas bill. Putin is no fool, but Schäuble and Merkel are puppets of the New World Order. Also, I am convinced Schäuble is lot of times -if not all the time under medication. His Boktor Morell feeds him with Ego feeding substances.
Thanks mate. Not only did I learn something new, but your counterparty run scenario is spot on, imo. They remind me of the Lloyds "Names" fiasco, counterparties who were suckered into riskiest deals with promises of great returns whilst insiders creamed the top accounts. Looking forward to it.
Now I need to decide whether you are telling us what we want to hear, or what we need to hear. You have great analytical skills mate, and I hope you will stay true to form.
911 was a mossad/US neo con operation
Afraid of banksters? No, what you have to be afraid of is an armed and angry russian that you have just cheated. They really don't give a fuck.
Compared to that, a bankster, even a mean jewish one, is a pussycat.;-)
Is it possible that the bondholders, even though strictly speaking, should be last in line, actually hold all the cards? A wholesale liquidation of bank bonds would be catastrophic. Ripping off the depositors is only a mild irritation.
It's a bit naive to think that any gold currently privately held in banks won't be at least partially if not wholly confiscated.
Sad but true - history has a way of repeating.
In fact, confiscating (stealng) gold by making it illegal to privately own gold and making amnesty returns worth only say $50 an ounce is much more socially palatable than stealing from the peasants bank accounts.
Once they (banks etc) get all the gold back then they can open the market again - simple.
Rinse - repeat
Reggie, the whole debt based monetary system is a fraud engineered, from the ground up, to bankrupt the host society.
Debt Money Tyranny
http://www.keepandshare.com/doc/4768883/debtmoneytyranny-6-1-pdf-60k?tr=77
Every $1 you own is $1 in someone else's unpayable debt.
People with net monetary wealth are actually DEBT SLAVE MASTERS by definition!
When money is debt, one person's monetary wealth is another person's unpayable debt they have to service into eternity or until that dollar is given up to pay the debt used to create it.
It's a Sun Tzu Art of War operation to seize control of nation states using 5th grade math and dazzling bullsh*t.
We can analyze the fraud until we are purple, but we need to identify the fraud as a fraud and stop pretending is legit.
It isn't - THE SYSTEM IS WORKING PERFEFTLY!
If the U.S. government made it illegal for private citizens to own gold, would you turn yours in? Really? Why? What are they going to do, go door to door? Millions of people in this country possess and use illegal drugs, but I don't see a lot of people running down to the police station to turn in their stash just because the government says it's against the law....
Actually, marijuana is legal, it is the government that is illegal.
Go to the source document and read it - it exposes this government as criminal to the core and gives no authority to criminalize marijuana. Well, you might be able to argue the states possess that power, but I think they did it as a reaction to the criminal federal government doing it (someone with more information feel free to clarify this point).
Let's not allow the social engineers to guide our perception based on their false narrative streams.
The illegal government is protected by a bunch of people that had their ability to think removed from them through the schooling (NOT education) system.
Serach John Taylor Gatto podcasts and Youtube videos for a narrative, complete with source documents, that exposes this operation.
The solution is the diligent application of the first three of the 7 liberating arts - The Trivium.
1. Grammar - spend the time and effort to gather all relevant data in historical context.
2. Logic - Logically analyze the data, identify contradictions and fallacies (study the logical fallacies!!!!) and remove them.
3. Rhetoric - explain to people, in a concise way, the process used to go through 1 and 2 and the result that 1 and 2 reveals.
or,
1. Who, what, where, when
2. How
3. Why
DO NOT misapply Occam's Razor and use it as an axcuse to avoid research. That is not Occam's Razor, that is lacking the tools necessary to distinguish the real from the unreal.
Occam's Razor ONLY APPLIES after a rigorous and exhaustive examination of all the relevant data (grammar) and logic (all contradictions and fallacies identified and removed) and one is still left with multiple theories that explain all the observed data.
ONLY THEN should Occam's Razor be applied as a guide for FURTHER RESEARCH into the question.
Occam's Razor is used by the masses in the same way thay "conspiracy theory" is used by the masses - as an excuse to shut down their rational, cognitive abilities - and that only benefits the deceivers pawning off the unreal as real.
You are because you THINK!
We must teach our neighbors to THINK properly and the Trivium is the model that was good enough for Pythagorus, Aristotle, Plato and Socrates... and none of those guys could be duped by the 8th grade propaganda used to create public opinion in today's 21st century.
There are more endocannabinoid receptors in the body than any other receptor type.
Gold!! What gold?
you had a boating accident too?
Can anyone tell me the difference between a guaranteed bond and a non-guaranteed bond after this fiasco? Aren't they both the same now? Aren't the ideas of collateral and guarantee moot now?
If I'm assured I can't lose on a purchase of a risky bond, which of course would have a higher rate of interest to reflect that risk, why wouldn't I take the risky bond and take a shot at getting the high interest rate?
Why would I buy a 10 year German bond and take 1.4% when I could get almost 5% for the same thing from Spain when in both cases, my money isn't at risk?
Shit, Americans didn't revolt when TARP/TALF was forced upon them. People get the governments they deserve.
over 50% of the population don't vote. People don't want anything to do with this government.
Cept get free shit
'Hard to disagree. People largely choose to be ignorant.
Although, I hate to admit (I REALLY hate to admit this on ZH), but I didn't mind so much the bailing out with loans charging interest of the big banks / insurers (if they were really non-government-entities), but I really hated the apparent tax-payer-gifts (not loans) to GM, Solendra, Fannie, Freddie, AIG, Et. Al.
'One caveat, however.
I think the former managements of all those bailed out who failed to prevent the risk from becoming too large should have all been replaced (with minimal golden parachutes), as would be somewhat normal in a more typical bankruptcy reorganization.
Gee, I wonder why that couldn't have worked.
And, I know, Solendra got a bailout loan and not a "gift", but the difference is hard to determine only a few days after solendra goes out of business never having substantially repaid any of their bailout "stimulus" loans.
But, of course, they already had the ability for their owners and management to apparently make substantial donations to certain politicians and parties, prior to their going out of business.
Imagine that.
Good work reggie!
Reggie has been crying wolf for years...sooner or later we will have a market correction...DUH....then Reggie will proclaim himself a genius....all he is is a total loser who peddles fear!
Reggie reminds me of Gerald Celente, within the relatively smaller context of the financial markets. Of course, being relative right about many little things in a row does not matter much in a real world controlled by triumphant frauds, where guys like Bernanke can be spetacularly wrong, over and over again, and yet, still be promoted and have almost infinitely more power to effect the market than guys like Reggie.
There is a surreal thing playing through here, which somebody, like you, calling themselves "the edge of chaos," should appreciate more! We went from a civilization controlled by War Kings, where violence was backed up with dishonesty, in which context the violence was physically real, and therefore, their systems of social slavery were based upon more physical reality, to the world we have today, run by Fraud Kings, the central banks, where the sovereign powers of states back up the Frauds of the Banksters, but those Banksters' systems ARE based on huge lies, which are not real anymore!
That is WHY our entire civilization is headed towards psychotic breakdowns ... Everything is controlled by huge lies! Quadrillions of units of fiat money are being made out of nothing, as debts, and then mostly used to gamble with. The people who use those fiat units to pay for food and fuel, etc., are now relatively trivial players in the big banksters' systems.
The real world system has become a runaway fascist plutocracy juggernaut, where the privatized fiat money system has become inhuman, as illustrated by more than 90% of the economic trades being not much more than automated frauds, done through the specialized algorithms of supercomputers!
Since money is backed by murder, the magnitude of the "market corrections" coming is likely to take almost bottomless buckets of blood to balance the books. Guys like Reggie do their best to help people attempt to adapt to these runaway insanities, by attempting to present a clearer analysis of the precise dimensions of that madness ...
I think, within that context, Reggie does a relatively good job. However, I think that nobody does anything remotely close to satisfactory in the context of the bigger picture, where our REALITY is global, privatized, fiat money as debt systems, backed by nothing, but weapons of mass destruction, where, otherwise, the amout of actual collateral backing that system is about as absurd as debating how many angels can dance on the head of a pin!
I have been reading doomsayers for almost 50 years. The failures of their dire predictions to come to pass often demonstrate, not that they are wrong, but that they should not be timing their calls. That is a crap shoot. Reggie consistently provides solid fact-based analyses but he rarely if ever says anything like "the Euro will be toast by June." He is smarter than that. There are too many variables; and the clowns are surprisingly creative at postponing the inevitable. Six years ago none of us would have believed that the central bankers, the banks and the sovereigns would or could pull off the bailouts and violate treaties and laws with impunity. Surprising.
Almost all of the posters on ZH in the investment advisor business are using ZH as a marketing vehicle. What they post are teasers. If their public analyses are consistently wrong, they will lose credibility and their marketing will backfire.
It's not rocket science. You don't need a PhD. Governments cannot spend more than they get and they have only three ways of getting it: tax, borrow and print. They each have their limits. At no time in history has the entire globe been approaching their limits in tandem. Perilous times. We are fortunate to have so many doomsayers as doom approaches. Glean what facts from them as you can, listen to anyone else who proposes to dispute the facts and draw your own conclusions. Seek truth from facts.
And, come on, Chaos . . . ZH can be described as many things, but someone susceptible to, or offended by, fearful possibilities being described should probably go to a different site.
Unless you made a bundle following his advice on when to get out of AAPL and when to get into GOOG.
Thank you, Reggie!
What have you ever done for me, Chaos?
I can't say I've been following Reggie for years, but his advice on AAPL was spot on. So far I have yet to see any of his predicitons fail to come to pass, within a year ish. (I have no skin in the game as to the markets.)
Does make me miss Capital Account tho everytime I see one of his articles.
Reggie - I enjoy and learn from your insightful analysis.
Reggie,
What is the catalyst that will make PEI see reality?
TIA Rick.
FEAR? No. Depend on? Yes
Yeah, them "precious metals", might just be coming into play, sooner than most believe!
got enough?
Rape of the Innocents seems the Fad nowadays:
http://jamesbrantley.net/17Ruebens_massacre%20of%20the%20innocents.jpg
<<In Cyprus, we have a case of a government that would actually rape the depositors of a bank rather than the investors who voluntarily, directly and explicitly accepted the risk of bank failure through speculative investment>>
Better load up on KY Lube.....
I'm feelin ya!
Had 35lbs of 10 oz Sunshines prior to my mishap on the Mississippi thalweg. but plan on purchasing many more lbs after purchasing RE in SW WV
Happy Stackin'
of course you did princess!!!! ....loser
If things get too good, the free money dries up. Housing starts are up, unemployment down, stocks at all time highs. How do they justify $85 b a month of free money? Gotta have a new crisis.
They can't let things go back to normal ever again, because the gravy train stops. They're making more money now than ever before.
"unemployment down"
uhemmmmmmmm, ever see the labor participation rate chart?
A little gold and silver go a LONG way ..........
Everybody Fears the shadow "Banking Cartel".
Crazy like a fox this whole maneuver is designed to trigger public outrage, they have computer models, everything is going according to plan, i dunno know what's next in their plan, but they* do.
Ask Long Term Capital about computer models, especially on illogical human behavior.
Reinstate Glass-Stegall. Isn't that what helped send Keating to jail in the S&L crisis of 198x?
Glass-Stegal was done to protect the people from scurrilous bone-head bankers that only shoot for the moon with Other-Peoples-Money!
Oh yeah, the politicians that allowed these travesties are TBTF (Too Bought To Function), duhhhhhh.
Stop talking about new legislation and reactivate that which is proven to be effective!
A contrarian view from the banker's brigade : BUITER: Euro Recovery Starts With Cyprus - Business Insider
This man has much clout in the banking world and in Euro circles. Just saying, I don't necessarily agree with his take.
....However, the bigger point here is that European officials are finally moving toward more private-sector involvement in these bank bailouts. That means, instead of fighting more debt with debt, Europe is finally getting serious about restructuring....
Read more: http://www.businessinsider.com/buiter-euro-recovery-starts-with-cyprus-2013-3#ixzz2NwEuty8o
Yes the Cyprus bail-in is dynamite. Suddenly it becomes clear that there are difference between banks.
There are still a lot of small banks and credit unions doing their business as they ever did since centurie. Trying to make a small money on the difference between interest paid and interest received while beeing fully aware of the risky nature of banking business. These banks do act carefully and simply just trying to survive. These banks are the lifeblood of any sound economy.
But these banks do have a problem. A big problem which is slowly killing them. Its caused by the big banks which are the in bed with government all over the world. Government tries to save this banks by all means on the cost of the population. This has to end otherwise there will be soon no more banks at all left in the Western hemnisphere.
The Cyprus banks are the blue print now. For the first time it becomes obvious even for the biggest idiot that not all banks are the same. There are banks which are sound and there are bnks which aren't like the Cyprus banks. Make your choice.
However this does not account for the US and the UK. There the problem is solved in another way. Print more money and give it to the banks. Problem solved for now and thats it.
But the bill comes no doubt and this bill is going to crush these economies. out of a sudden all their money is becoming worthless.
not sure why you got junked so much..so i up arrowed you :>)
"Buiter clarifies that he would have preferred the "tax" on deposits to be more progressive – shouldered less by those with smaller bank accounts and more by those with bigger ones."
Fuck you Buiter. It's theft asshole and it can never be "progressive".
I don't know. Don't you feel better when the mugger takes more from you than the poorer guy he mugged yesterday? It make me feel very politically correct.
neither tax payer nor depositor should have been directly impaired....the evil nazi asshole banksters should have their goddamned banks plowed under in liquidation.....but the nazis are extremely powerful and very determined in their aims to rule the world....the 3d reich never ever ended - even for a moment...
yes liquidation leads to losses for all parties, but at least morality is preserved.
oh, do you also favor cutting off every male's dick at the university because Delta frat house has a tendency to rape girls on campus? Is that your brand of morality?
DEPOSITORS SHOULD REMAIN SACROSACNT! They are the most important source of funding, not to mention the most liquid (as in potential for capital flight) in the entire banking ecosystem!
Come on Reggie. You know that Ben can print any funding that the banks need! Control P!!!
/sarcasm off
I was young in1991, but I still remember the RI banking crisis. The banks closed including some credit unions. People could not get their money, even a year later people were waiting. I think this story will strike a nerve with many Rhode Islanders.
I have never trusted the banks because of this. So many lives ruined.
they want to protect stock and bondholders but they had to know the bank run, deflationary effects of fleecing depositers, especially domestic depositers under the insured limits, people who had to bank locally, small businesses etc. They have to know that the protection of their buddies will have bad effects, but they still do it.
Do they want deflation? Are they making money off the fallout?