Impact Imminent?

Bruce Krasting's picture


Zero Hedge has the latest Cyprus update - There is no parliamentary support in Cyprus for any bail-in deal. Tyler Durden begs the question:


Neither we, nor anyone else, has any idea what comes now.


The folks at FTAlphaville have some thoughts on the state of play:


A bank run spreading to Spain looks a non-starter in the short term.


The risk of any wider bank run looks pretty small so far, with market reaction relatively benign.


I've been following the Press coverage of Cyprus, the talking heads are saying that Cyprus is a manageable issue. Nothing to worry about at all.

I'm going to disagree with FTA and the TV folks. The chances of a bank run have never been higher. Tyler's right. We're looking at a black hole.


The "Other" scenario for Cyprus is a shell shocker. Forget the shareholders or the senior bond guys - they will end up with Dick's hat band. Those Russians who were at risk of losing as much as 15% of their deposits - They get zip too. At best, they are getting an IOU. That IOU will have a value of 10 cents on the dollar.

Those small depositors that were going to get hit for an unfair loss of 6% now face a vacuum. Their bank statements may not reflect a loss of principal, but they won't be able to withdraw a dime from those accounts. The local banks will remain closed, when they do reopen those deposits will be converted to some new currency. It's possible that the new currency will be the Turkish Lira. You thought the poor folks in Cyprus were getting a bad deal on Monday? Wait till Friday before you pass judgement.

What happens if Cyprus does a "drop out" of the EU? That result immediately makes a lie of Mario Draghi's words that the Euro was Uber-Ales. This is precisely what Super Mario said "would never happen".

If Cyprus goes turtle and leaves the Euro, the credit spreads on peripherals will widen. This sets up a market "call" on the ECB. But remember, for Mario Draghi to give the market the "put" that it will demand, the government's of Spain and Italy will be forced to get down on their knees and beg the gods in Brussels and Berlin for a helping hand. To do that means that they would have to have very harsh terms imposed on them. An IMF team would run the finances of the countries involved.

Given that there is zero chance that Italy and Spain will do the necessary begging, the value of the promised Draghi "put" is now zero.


There is a chance that something can be done to stop what looks like a slide into an abyss. Those chance are now well below 50-50. The markets/seers are calling for a soft landing, while at the same time that outcome is looking less and less likely. The markets seem poorly positioned for what could result in a crisis. And this story is running at hyper speed. That' a very bad combo of events. Seat belts on - Impact Imminent!





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pashley1411's picture

I keep being reminded that the unraveling of the old SU started with the Baltic SSR's, and then the pesky Byelorussia and the Ukraine insisting on chosing their own delegation to the UN, since the seats were in their name.

When you live in a glass house, all it takes is a crack.  

Escapeclaws's picture

There is an easy solution for Cyprus which I'm surprised Bruce didn't mention--namely, the Cypriots have a public pension system that can be raided to pay the banker's debts, just as Bruce feels that Ryan's proposed budget needed to really sock it to aged useless eaters but pusillanimously failed to do so.

Perhaps Bruce didn't mention this because it would be hard to convincingly rephrase "paying the banker's debts (aka bonuses)" as an effort to "balance the budget" in a country like Cyprus.

Joebloinvestor's picture

So the news is now the Germans gave the "OLD TOMATO".

Accept the deal or your banks won't open EVER.



Paracelsus's picture


I like it. The west has Gitmo on Cuban soil.The Russkies have a warm water port in the med on Nato soil. Look,much (not all) of this commentary has left out the Turks. They have been playing this diplomacy stuff when everyone in the west were shagging sheep way back when. My point is this shit could easily escalate out of control.This reminds me of the Falklands dispute moved to the eastern med.

NB: That Galtieri bunch in Rio went into panic mode,played the patriotism card,because their backs were to the wall. Not the first time someone got desperate for a nifty political solution using troops and waving the flag.

I smell hydrogen isotopes in the air....

WallowaMountainMan's picture

ecb et al eats crow, restructures debt over long term. people laugh at ecb. euro bonds within 6 months.

no european country can 'win' from the collapse. europe loses, world loses.

no central bank wants that.

no action on the surface by the fed, japan, or bank of rehypo, russia, china, etc....

all are communicating....

no one is stupid.

mistake was made.

error corrected.

thursday, when cyprus returns empty handed from russia.

power removed from those without money.

power goes back to those with money.

2nd paradigm shift in less than a week.


( turning point for tbtf as central banks very existence was threaten.

central banks required to continue. tbtf not required to continue.

tbtf unwound into good/bad.

populations cheers.)


One eyed man's picture

Act 73 of the play known as "The Continuing Crisis" (aka "The European Monetary Union"). It never seems to break, but it never gets fixed either. It is like a volcano that periodically emits lots of black smoke, but never actually erupts. Disaster looms, finance ministers gather for a meeting which goes on late into the night, an agreement is reached, and "Hurrah!" the Euro is saved (for another few months).

I wish they would either fix the Euro or break it up. The deja vu is killing me.

Crawdaddy's picture

Passing along a link I saw here on ZH last year:

 If the link doesnt work, google "walter veith hidden agendas"

Worth a look.

walcott's picture

more printing bitchez!

andrewp111's picture

If push comes to shove the Russians will bail Cyprus out. They will get their pound of flesh (ownership of all the oil and gas and a Naval base) in exchange. The British will get kicked out and Russian troops will move in. But no financial collapse.

Jake88's picture

Alex Jones Infowars. Yeah that is where intelligent minds go for the news.

Zer0head's picture

Jake, where do you get your news from? inquiring minds want to know

Jake88's picture

Alex Jones runs every single lunatic story that is ever published anywhere on the internet. He never but never checks his facts. He is way off the mark with lunatic stories and predictions on a daily basis. And as far as I know he has never retracted a single story.

Element's picture

Agree. Jones comes out with stuff constantly that is complete rubbish, and does not recant his regular tall-stories. He is a menace to objective reporting and is not helping on the internet at all. He treats 'truthiness' as a business model and any old BS will be treated like it's 'true' when basic reality-checks and fact-checks show he's completely full of it. And he sells his own personal weight-loss pills?! Yeah, like those work great for him - not! So how can anyone respect such a disingenuous drop-kick?

Money 4 Nothing's picture

How ' bout channel 7?


LOS ANGELES (KABC) -- Millions of Chase Bank customers across the U.S. who use online and mobile banking saw their checking and savings accounts with a zero balance on Monday.



TheProphet's picture

It was just a glitch in the mobile banking app. Geez.

Stop the noise please.

Money 4 Nothing's picture

Cypress is going to be a glitch soon too. I'm not making non sense,  I'm reporting something I found dick, I don't bank with them and I have no skin in the game. Thought the link may be found interesting.. 

The above poster didn't like the A.J. link so I backed it up with a MSM link.




The Heart's picture

Holy Kats!

Is this what Contagion looks like?

"The National Government are pushing a Cyprus-style solution to bank failure in New Zealand which will see small depositors lose some of their savings to fund big bank bailouts, the Green Party said today."

Is this how fast this kind of thinking can spread, or is it just another testing 1...2...3 to see how people will react to the actions?

Moar on this from down under:

Orly's picture

I have it pegged to a Wednesday (late Tuesday...) in either the first or second week of May.  I figure they can hang on for a few more weeks but, as the saying goes, there's never only one Black Swan.  April is going to be sunshine, egomania and Alpine white bellflowers...until it's not.  The charts are not very friendly here.

We should all pray they voluntarily see the errors of their ways and step aside.

Beware Humpdays in May.  The cascade is going to be brutal and won't let up until early 2016.

Take care of yourselves and your families, be kind to others and know that the end will come soon enough.


AGAU's picture

I got a date of 16th May for Daily QE announcements by extrapolating out decreasing time intervals between previous QEs.


the grateful unemployed's picture

On the 10th anniversary of Iraq (you break it, you bought it) well we broke it and we bought it, and then we walked away. Now in 2008 the same rules apply to the stock market. We broke it, we bought it, and now we'll walk away. The possibility remains that we will REINVADE Iraq, (just to get it right this time), just as me might pull the rabbit out the hat to save the NYSE, but what for?

The stock market seems awfully important to people right now, but the possibility that the NYSE will get much better or worse are remote. it is what it is... No more Weapons of Financial Destruction, and no impending chaos, as long as the US embassy building remains, like the NYSE.

Even the chaos in Vietnam ended. The Helicopters took off the roof, it looked like hell, but today who remembers? What's the next flash point? Bonds probably, that's the latest bubble. Keep your eye on the bubble.

Desperado's picture

Hi Orly,

By way of introduction, I'd like to say that I'm pretty much a novice at all of this.  I love reading ZeroHedge, but I can hardly keep up.  Yet, I can't pull myself away from it. 

Still, from time to time, I've had the surprising experience of seeing what was going on - whether in current events or on a chart or both - clearly enough to be sure I knew what was coming next and when. 

So I can almost take your call seriously.  But, not knowing what you're looking at, I feel like it's just too precise a call to be credible, and you're just playing the antagonist - to the Oligarchy, not Bruce...or maybe to Bruce too. 

What gives?  Are you being serious? 



WmMcK's picture

there's never only one Black Swan.

-- or cockroach or, as Putin would say, White Crow.

victor82's picture

Nobody in middle of March, 1914, nobody, had any idea that the Continent would be in the middle of a civilizational-wide bloodletting within six months.

We live in interesting times, but are led by men inadequate to the task.

IamtheREALmario's picture

When Russia decides to attack Germany, Switzerland and Israel (the center for the banking cabal), hopefully the US will have the sense to just let it happen and mind its own business.

The Heart's picture

"Wait till Friday before you pass judgement."

Yes, the confrontation energy is building as the people are made to suffer. What is vital now is the promotion of calm, even in this crisis, and to encourage a peaceful transition as more people find that these banks a) might not have enough cash for everyone, and b) these banks might be insolvent. Is that a dirty word?

The funny situation looks like the EU says, do not do any dealing with Russia, and the govt of Cyprus says stick it where the sun don't shine. The prospect of Mighty Mouse coming to save the day is not on the horizon. There could come a day that the announcement comes, Cyprus has accepted a deal from Russia. Or, the EU will cave in because this is the last thing they want to see happen.

Friday is a day of reckoning. The forces of chaos lay in the eves. Only reason and sound community can find the clarity in this fast approaching storm.

Pray for Peace.

Bear's picture

The FED will save the day, loaning the ECB the money to bail out Cyprus without having to pay it back (and without telling anyone) ... since the FED will never be held responsible for their debts

Plumplechook's picture

Krasting.  Isn't this the same guy who two days ago wrote a lenghty article in support of the outrageous raiding of private bank accounts in Cyprus?  Yes it is.  As a result we can safely ignore anything this idiot has to say from now on.

Praetorian Guard's picture

I've got a bad feeling WWIII just started...

Bruce Krasting's picture

I did not support anything. The article was "Two Sides of Cyprus".


You seem to think there is just one side. That the folks in France and Germany should pony up more money to bail out Cyprus. And all those poor Russian depositors.


Let me ask you, did you support TARP? No? Then how can you support an EU baiout that accomplishes much the same thing?


Did you like how Iceland worked out? No depositors lost a Kroner. That should make you happy, right?

Wrong! The Icelandic depositors lost 60% of their assets in banks when the Kroner was devalued.


What is the difference to what is coming with Cyprus? Devaluation, negative interest rates, outright theft - it's all the same thing.


So please, I want to know, did you support TARP?


Attitude_Check's picture



The "correct" answer is neither Germany continuing to bail-out insolvent banks, nor hair-cutting INSURED depositors first.  The CORRECT answer is:

Follow well established seniority rules

 1.  Wipe-out equities

2.   Wipe-out junior bonds

3.   Haircut UNINSURED deposits and Senior Bondholders


4.   Nationalize the bank(s)

5.  Recapitalize the banks with ECB money

6.  IPO the banks in 6 months.

GoldIsMoney's picture

4-6 is absolutley is a no-go area. 1-3 is the normal way. The normal way also includes that bond holder get the new equity. And they usually are not directly happy but the do accept that. The nationalization is the wrong signarl. And no gettin the ECB involved is just restarting the wheel.


The central banks have to be aboished. The money must be something of worth not just an IOY.  The ECB has intiated all the booms because of their way too low interest. And the ECB is a monopoly, controlled by states. So if you think that is a sound ground, you really have not learned much from the current catastrophes...

mikem54321's picture

"So please, I want to know, did you support TARP?"

Huh? Bruce you are sounding like Piers Morgan now....If I were you, and wanted to rebuild your once highly regarded opinion, then the Piers Morgan method of attack is probably not the way to go. Maybe you can come clean and just admit you made a mistake by immediately taking the side of the EU banksters. I'm sure the more the facts came out, you realize that jumping to the conclusion that it was all Russian crime money that was being stolen back, was simply wrong.  

Mike in Tokyo Rogers's picture

I don't know jack. But I did vehemently oppose TARP - as should have anybody who wasn't asleep.

Dollar Bill Hiccup's picture

These questions may be naive but what's the difference between :


1) a "tax" on a deposit

2) a currency devaluation, i.e., if Cypress dropped the EUR the new currency would be devalued

3) inflation eroding deposits

4) a combination of inflation and financial repression, or negative real rates, eroding deposits?


Many differences from a legal / technocratic point of view. Very little terms in actual return on investment?

dunce's picture

Sounds like 4 chapters from Kama Sutra, different ways of getting screwed.

JayKitsap's picture

but in the Karma Sutra, it felt good getting screwed.  I don't think this drama will have any good feelings or laughter.

mendigo's picture

Some things are undesirable or we disagree with.
Some things are possibly violation of law.
Its not all the same.
I don't think that confiscation of ones property can be properly described as a tax.

Dollar Bill Hiccup's picture

I don't think they are all the same either. But the final effect is similar in all cases. You lose purchasing power.

I do think that they are all primarily controlled by governments / central banks.

The FED is openly pursuing financial repression with ZIRP. If rates were "normalized" to a 10 yr UST of 5% let's say, and deposits earned something like 2%, then since the start of ZIRP US depositors have faired about the same as a Cypriot depositor haircut at 6.75% -- in real terms. Any inflation in the system is also actively encouraged by the FED, even if only marginal since the bank reserves it injects via primary dealers helps to create credit, not in the economy but in capital markets. Eventually the seepage, where capital markets overlap the real economy, will kick off higher price and wage inflation. Much higher.

If the Cypriots were to leave the EUR, and I do believe this may be a trial baloon "tolerated" (read encouraged) by the ECB for just that purpose, the one time hit, as Bruce comments below, to wake up on Monday, would probably be worse. However, the one time hit might then allow for an economy to be kickstart again, being more competitive, etc. But again, a government would decide this. Not you or I. And it would amount to theft of your purchasing power.

So while rule of law might be clearly violated in some cases and less so in others, natural law is violated across the board since there is an agency, the Central Banks / Govts, who will rob your purchasing power, legally or not.

The Heart's picture


Oh the wicked ways they weave so the average Markly does not get it, eh!

The good news is, the people of the world are waking fast, and the tripe and ridiculous BS does not fly very far any more.

It's hard to get traction, when constantly slipping on shat!

Dungeness's picture

#2, the currency devaluation and #3, inflation approach is generally tolerated because it is not immediately visible, delayed pain.

thisandthat's picture

Not just visibly, because a devaluation will impact negatively only on imported goods, whereas a tax hike on wealth/income will impact purchasing power against both imported and domestic goods.

Bruce Krasting's picture

Devaluation always happens on a Sunday night. Surprise the markets. Not unlike the Friday night announcement of the Cyprus deal. Very sudden death.

Inflation or negative interest rates is slow death. I guess that makes it nicer.

moneymutt's picture


Why are only options bailout or hair cutting deposits including insured ones (via tax or devaluation). MISH did a decent analysis the other day indicating wiping out stock and bondholders of those naks first would go a long way towards resolving the gaping hole, then defaulting on some,thing else, some work tof central bank loans, after that, high end unsured deposits deposits could be levied His conclusion was the banks could be easily stabilized without touching insured depositors.

In US we are always told TARP etc were only way to save system, but it seems the govt guaranteeing up $250k in mutual funds stop the mutual fund bank run and seizing banks and wiping out their investors and lenders, while backing their deposits and keep core functions, transactions going, while also providing corps discount window access when private paper markets froze up, was more than enough to keep finacial system working without a bailout costing the price of Iraq war,,,,doubt any of the above actions would have cost US much of anything of several years other cost of bureaucrats to manage,

There are options to bailouts, but no one see,s to want to mention them.

TheMerryPrankster's picture

You don't seem to understand capitalism.Money only goes to bankers, never from them. The bonuses will increase mightily.

If the ECB want to learn how to properly steal insured accounts, the need to hire Corzine and MF capitol, ot Loyd Blankfein doer of God's work.

Capitalism is a four letter word, ask the cop who punched you in the face and took your wallet if he can report a crime and he'll punch you again. The crooks are in charge they own the regulatory and judicial structures, they can fuck us til the cows come home without fear of criminal or civil prosecution.

soon many  will realize they have nothing and nothing left to lose. Change will occur rapidly when desperation takes hold.

Capitalism died 9/2007. The stench of the rotting corpse still fills the air, are those black swans or vultures?

Is that hank paulson on his knees befor nancy pelosi? is he begging or giving her head?

lakecity55's picture


The turmoil about accounts.

Cyprus is a trade-off by Russia for Syria.

The financial crisis allows a fig leaf for the Russians to take Cyprus while NATO gets Syria. Putin is buying time.

SAT 800's picture

The interesting thing about statistics as a science, in this case; is that the statement, "the risk of a bank run spreading to Spain appears small", and the statement; "The risks of a (major, or definitive) bank run have never been higher"; are both true at the same time. Probability and risk analysis are counter-intuitive and there's no way to avoid the actual getting down in the trenchs and grinding on the logic machine in your head. It's a very interesting subject. Black swans are black swans because they're very unlikely; at the same time; it may now be the time when the very unlikely is at it's most likely; although still very unlikely. And it never really gets much better if you keep trying to do analysis on it.

kaiserhoff's picture

True.  You would enjoy Taleb's first book Fooled by Randomness, if you haven't seen it already.

The use of stat analysis in business, especially with stocks, bonds, or banks is suspect on many levels.

Two of the bed rock requirements for sampling or inference are independent variables, and random selection of data.  In a business context, when would you ever have that?

Bankers, traders, and bureaucrats gossip with each other, they panic, they react constantly to real information, rumor, and back ground noise.  Perfect conditions for runs, exuberance, and crashes.