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On the Circus in Europe
I'm flabbergasted that Cyprus is the cause of the circus in Europe. Cyprus was an avoidable problem in my opinion. That view is supported by the fact that all of the words, actions (and threats) by the deciders in Northern Europe have been decidedly negative. There was no "Can Do" talk. All I heard was, "We won't do" or "Here is a deadline" - "Here's a gun to your head".
Two possibilities - Either this was a completely bungled effort in Brussels. Or this this was a deliberate effort to weed out the weak members of the EU. If the intent was the latter, this will not stop will little Cyprus.
Next week there will some broad confusion following the resolution in Cyprus. Either Cyprus is out of the Euro zone by Wednesday, or the +E100k depositors are going to get whacked big. There is no soft landing potential any longer. If the folks in Brussels and Berlin who are pulling the strings are really serious about stabilizing the Euro zone they will respond with a series of "positive" measures next week. Things that might be considered to ring-fence Cyprus include:
- Doubling the deposit guaranty to E200.
- Creating a Transaction Account Guarantee. This would insure all accounts that were related to the settlement of goods and trade. (protect the economy)
- Financial measures - From some minor stimulus stuff, to monetary measures like LTRO or a cut in % rates.
These would be "calming" steps. They would be proactive in that the intent would be to get ahead of any contagion. We could also see "nothing" from Brussels. That silence would be a "tell" that "they" don't want to resist gravity any longer. The most significant sign would be if capital controls were established more broadly in Europe over the next few weeks. These will scare the crap out of folks, especially those in Spain and Italy.
- Restrictions on the amount of withdrawals at an ATM.
- Restrictions on money transfers.
- Restrictions on the ability to acquire foreign exchange (Dollars Swiss Francs, etc)
Three possibilities. "They" either (1) act in a coordinated way to head off any problems, (2) do nothing, or (3) they turn up the heat with more scary stuff, and the SHTF.
I'm not sure what comes next, Door #1 might buy some time. Doors #2 &3 are trouble. Bad odds.
++
The Circus
Europe looks like a three ringed circus to me. Think of it, the tent is packed with awe stuck patrons. In the center stage is a clown show. Slapstick comedy. Clowns running clumsily with their big shoes carrying rubber mallets, chasing after other clowns who have buckets filled with confetti, ready for a water fight. A riotous scene that many in the audience cheer and applaud. But there are also those in the audience who fear clowns - the reasons vary - the results are the same. They are revolted by the antics of the clowns. The clowns are the politicians and technocrats in Berlin and Brussels.
On one side is a smaller ring. This one has a large metal cage, in it are a bear, a lion and a dozen "little people". The wee ones are dressed in funny, colorful outfits. They carry miniature whips and are desperately trying to get the beasts to perform the hoop jump and barrel rolling tricks. The lion swats with a paw, knocking the bear off its perch and onto one of the little ones. A rescue squad of more little people comes up with a stretcher and carries off the "injured". Some children watching are crying, they think the little one has been crushed. Mothers try to soothe sobbing children with, "Don't worry, it's only make believe".
In the final ring is the high wire act. The famous Estes family from Milan is the main attraction. Three generations are balanced on a small wire. The family forms a pyramid three levels high. A young boy, the youngest Estes, climbs to the top and does a handstand. Most in the audience stand and cheer at this amazing feat, others turn their heads in fear. There is no safety net below the Estes family. How could they take such risks with their youth?
Off to the side of the final ring are a troop of actors. Some are dressed in brown shirts, others white. The stage has a back drop of the famous fortress in Toledo, The Alcazar.
The circus show is a re-enactment of the 1936 Siege of Alcazar. This battle was the start of the Spanish Civil war. The Brown shirts, led by Franco and armed by Germany defeated the defenders. The battle was fought over the control of a munitions plant. There were many heroes of this battle.
Few in the circus audience understand (or care) about this portion of the show. But some of the older ones do remember, others know that this siege was an important step to a much larger war.
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My head hurts.
I think I'll wait for the official autopsy report on Cyprus.
Most probably a unique method of suicide will be determined to be the cause of death.
To what purpose?
LONG white face paint and red lipstick. Short timeshares.
"Door #1 might buy some time"
Then why in the heck wouldn't they take door #1? All they've been doing for the duration of this crisis is buying time at great public expense to delay the inevitable.
Clowns have always scared me silly.
How 'bout toilet paper? Are you scared of toilet paper too? ;-)
Looney
Bruce is a shill for the banks. Notice he never puts any blame on them
One cannot even make it one sentence in without spotting the bullshit.
Here is Widowmaker's suggestion, anywhere one sees the word Cyprus, replace with the word finance. It truly is revealing how pervasive the rot is. Example, "I'm flabbergasted that "finance" is the cause of the circus in Europe."
Life is great to blog AFTER you have gutted the risk averse and rule of law. What could be more exemplary than commentary on failed finance that returned nothing to the greater good of society, but only the countless Mr. Krastings.
When all out war breaks out, these faggots and fools will be shown for exactly the empty spineless suits they fill.
Money can't solve problems, but it can cause them or make them worse and that is the point (MISSION ACCOMPLISHED!).
It is now 18 years since I was a banker. Am I still to blame for all the ills of the world?
You use words like, faggots, fools and spineless suits. I doubt you ever got close to the financial world. So what do you know? It's like saying "All farmers are thieves". Keep in mind that your average baseball player makes a ton more than the bankers do, and those farmers are getting richer by the day.
It's been about 15 since I was and I still use the term recovering
"If Tartars were to invade Europe today it would have been very hard to explain to them what or who is a somebody that we call a financier"
Footnote in Marx's Capital by French thinker (long name), 17th century.
Banker: one pouring water from one bucket to another and collectiong enormus fees and interest in the process.
Weak. We should all be interested in insuring the integrity of our chosen professions, period. If you're admitting that bankers stole the wealth of millions, and that's what it sounds like, then you should be working to help that injustice be righted, less you face the guillotine yourself. Widow maker is dead on and that which cannot be sustained won't be. Compensation will return to those who's labor is of real value either way. In any case, a complete lack of accountability exists in finance and has for quite some time.
I didn't know baseball players got reimbursed by the taxpayers when they mismanaged their finances....
This is just a small, polite example.
With all due respect, you are talking out of your ass with the analogy in your above reply. That's your right.
If you want to play "banker apologist", don't expect a lot of love from most of the people here.
Bankers cause more harm in the world, than good.
its a DIFFICULT concept to grasp i know but if a bank goes bust...the STATE is not going to bail the bank out..thats right
HOLD THE FRONT PAGE-BANK GOES BUST!-nothing to do with the state!
banks have always gone bust in a capitalist system.look at iceland best thing that could happen.
What's the big deal? Far stranger things can happen; think of Archduke Franz Ferdinand of Austria as a triggering event (whether substantive or pretextual) for WWI.
Or think of the Credit-Anstalt Crisis of 1931
Most of these major events have a long history (the best book on the causes of World War 1 is entitled The Long Fuse) and build up for years. Quite often it is a seemingly random or inconsequential event (such as the assassination of Arch Duke Franz Ferdinand or the Bastille or Harper's Ferry or Luther's 95 Theses, etc...) which is the final catalyst for cataclysm. Talk of Black Swans is all the rage in economics and finance, but I assure you that good historians have long understood the concept of "black swans."
Unfortunately, there are not many real historians left in today's university, dominated by social history, socialism, race-studies, and angry lesbians, where all of history is a story of repression until the tri-force of democracy, socialism, and feminism arrived (in that order) to free everyone from the oppression of white males. Since 1776, all modern history is the story of the progress of humanity. Of course, this is why everyone thinks Taleb is brilliant, because no one is aware of how many very brilliant people have pointed out this idea long ago. It is also why everyone thinks democracy will save us all (when it is apparent to anyone with eyes that democracy is a big part of the problem).
The important thing to remember is not "black swans." The important thing to remember is the the victor's write the history... and your understanding of the events of the past 400 years has been written by the victors... not by the righteous or the right.
Is it just me or is this shit just really messed up and like totally out of this world and completely whacked?
Who can actually still make sense of this shit?
Here is the most talked about subject in Europe.
Euro faces big trouble in little Cyprus:
http://www.japantimes.co.jp/news/2013/03/24/business/euro-faces-big-trou...
Mr. Krasting, I thing you are a juxtapost 'Worldly Trader' .
I think you are about to be lost in a world of confusion . QUOTE; "SHORTLY".
Great post, Bruce.
Regarding the situation at hand, I do not buy any of this, even for a moment.
As pointed out in an earlier comment above, they must have known they would end up here. If this is the case, then the various responses of Cyprus, Greece, Italy and Russia must have also been gamed out already. Someone probably has a 3 ring binder with the flow charts. "If they do this, GOTO Pg 73 and do this....."
I am beginning to wonder if all this is just for show and is intended to be used as the excuse for everything imploding.
There is much more going on here than meets the eye.
I'm not sure you aren't giving the politicians involved more credit than they deserve. Merkel faces election in a few months in an electorate that is tired of bailing out the ' profligate' southerners. There is a general sense of the history of Europe again coming to the fore with all of the national stereotypes ( both of north and south) becoming strongly entrenched. I suspect this will get very rough. My own feeling is that incompetence is more common than conspiracy
I'm not sure that your statement about the Germans getting tired of bailing out southeners is valid. There are some demographic groups in GER that are clearly tired of the bailout, but the last numbers I saw indicated that an across-the-board majority supported the bailouts. I had a conversation recently with a GER national on holiday in the US about the situation in Europe. I was floored when he and his compatriots told me that... and this is a near quote... "it is the responsibility of the stronger countries to take care of the weaker countries". So I'm not sure what to conclude.
Indeed, my motto is "never invoke conspriracy when incompetence will suffice". The nannycrats really are clowns on acid to use the moniker of one of my favorite commentors. They're just making it up and pulling it out of their ass as events unfold.
Obama's trip to Israel-Rumors of WMD use in Syria-Banking crisis in Cyprus...coinsidenence? I think not.
Is the west staging for an armed intervention. The Russian oligarchs and mafia may have been used as a funding conduit for military support comming from Russia to rearm the al- Assad regime. Stop it by taking a large share of their money and put tight controls on the rest. That leaves Iran as the sole supplier. Israel's timeline for Iranian intervention suggests Spring or Summer of this year.
Signs of an approaching Black Swan perhaps?
The box cars are getting old Bruce.
Not as cool as the Banksy pics, but still a signature.
Losing my $ in the FX is getting old Yen...
Cyprus isn't leaving the Euro. The threats you're reading aren't detailed enough.
Does anyone have any idea how it would work?
Let's see, what are the options ...
1) ECB stops processing interbank intra-Eurozone wire transfers from Cyprus.
Okay, that seems easy. But where does the ECB get the legal authority to do that. Can it do so by majority vote of the ECB council (basically Germany and France and friends) or does it take a two-thirds vote (can't do it without support from some southern Europeans). I've looked into this and the answers are not clear.
But this doesn't prevent the Cyprus NCB from lending more euros to Cypriot banks against mythical collateral. Nor does it prevent the Cyprus NCB from delivering banknotes to those banks. Keep in mind that the Cypriot NCB like every EZ NCB can print euro notes. Oh what a mess.
2) ECB orders Cypriot NCB not to lend any additional funds to Cypriot banks.
Again, seems easy. Again, it's not clear if the ECB council can do this by majority or if it needs two-thirds.
On the ground, Cyprus does seem to have agreed not to lend any additional funds to Cypriot banks for now. That's obviously a condition for these bailout talks. If bailout talks fail, will Cyprus re-start lending to Cypriot banks? Who knows.
3) ECB orders Cypriot NCB to call in loans previously lent to Cypriot banks.
The nuclear option. The "f... you get the h... out of the Eurozone" option. This would almost certainly require a two-thirds vote of the ECB council.
The loans that could theoretically be recalled would be those the Cypriot NCB has made against collateral that doesn't meet ECB standards. The so-called Emergency Liquidity Assistance, where an NCB accepts particularly junky collateral while guaranteeing to the ECB that if the bank and the collateral fail, the NCB will make good on the loss to the ECB. Since NCBs have little capital, and any hits to their capital are supposed to be covered by their national government, this amounts to an implied guarantee that the Cyprus government would make good on the loss. Which is also broke. Ooops.
So what such an order would do is create a default of the Cypriot NCB on its obligations to the ECB. What would be the legal implications of such a default? Nobody knows. Nobody planned for this kind of stuff. It wasn't supposed to happen. Ever. Oooops.
Surely another option is that eventually the Germans realise this can't work, get tired of stumping up good money after bad and decide to leave the euro, possibly along with a few of the stronger northern currencies. The southern nations, along with France get the euro with a possibility of introducing some European federated fiscal integration . The euro can then appropriately devalue and Germany, perhaps with the Dutch and the Finns develop a ,more fiscally integrated and stable second currency. Anyone for GuilderMarks? The original reason for the EEC was political rather than economic, hence the imbalance in its structure.
The reality is that the euro is a camel that was intrinsically unstable, fatally flawed from inception. Despite promises of doing "whatever it takes" one cannot but imagine that at least a few bankers and polliticians are looking for a way out that doesn't bring on another, larger Lehman's moment.
I've no idea about all those options (I sure hope you didn't spend too much time thinking them up), but I'd say the scenario is simple: the ECB pulls the plug on all interchange between Cyprus and the rest of the eurozone's CB's. Game over.
I studied all this pretty closely back when it was Greece in question. My conclusion was the same, the ECB actually was totally unprepared to kick Greece out of the euro. You can judge the seriousness of a threat by looking at the preparations. And there are no preparations. There's no legal opinions, no nothing. It's just talk.
In theory, yes, cutting off interchange between Cyprus and the rest of the Eurozone NCBs would be close to "game over". That's one of the options I listed. It's not 100% game over, the ECB would still need to formally order Cyprus to stop lending to Cypriot banks.
The point I'm making is to make good on that threat, the ECB needs to follow the rule of law. It can't just say to Cyprus: you're ordered to stop. It has to go through a legal procedure. And that legal procedure isn't clearly defined.
When you see the ECB, say, publishing formal legal opinions that lay out how these kinds of things can be done, then you'll know they've really got the kick-em-out-of-the-Eurozone gun to Cyprus's head. They don't. Cyprus is doing what they say because it wants the bailout.
I agree that it'll all be papered over, as always (until one day).
Just in terms of kicking them out it's technically easy - as soon as you ban them from the euro system they can't circulate euros outside of their country. They could attempt to sell euro cash at hand to say North Korea or Iran, but I doubt other CBs would take their euros.
What's to stop the Cypriot Govt from changing the Cyprus designator (to Germany's, let's say) on the Euroz they print, and then start printing them? (To infinity, and beyond!)
Desperate people do desperate (and usually illegal!) things, just saying.
You're saying you've checked and confirmed Cyprus actually prints euros?
I know the answer to this question.
So, you're still afraid of clowns
http://www.youtube.com/watch?v=dwHlko8X-uw
Funny :o)
+1 trillon Joe for clip and avatar
".... yeh"
However, I think we are beyond this stage now. Time to nut up or shut up ;)
https://www.youtube.com/watch?v=Bm-q6GSc6ic
"Fuck this clown"
i dont think the problems in europe are any greater than those in the us, the uk or japan
by all means highlight them, but the analagoy remains - there are bunch of hostages (economies) saying to the kidnapper (bad debts) "point your gun at that hostage, i am fine"
sheila bair has a new book out, she chats to jesse's cafe here
http://jessescrossroadscafe.blogspot.co.uk/2013/03/sheila-bair-with-bill...
and you have the asswipes in the senate working all hours to produce something that will fail immediately
http://edition.cnn.com/2013/03/23/politics/senate-budget-bill/index.html
the circus is not restricted to Europe..just because the US has found a way of taking a stealth tax on deposits by the Fed holding rates below inflation, does not make the US circus any smaller.
The only difference is that Japan is a homogenous country, with one culture and language.
The US for the most part is homogenous. There are different races and ethnicities, but they are pretty evenly spread across the states. Most people speak English and consider themselves Americans. Even then, there have been rumblings about secession or the country breaking apart, especially if the economy collapses.
The EU is a bunch of different countries, cultures, language and ethnicites, each one balkanized. These countries have been at war for a thousand years and now everything is hunky dory and they will give a shit about saving each other?
Imagine if all the blacks lived in 6 states, all the hispanics lived in 6 states, all the Asians live in 2 states, and all the whites lived in the other 34 states. How long do you think the 50 states would stay united? In Europe, you have 20 different countries, languages and cultures trying to unite.
Imagine: I'd say they'd remain united for a long time as long as they used sound money and respectedthe Constitution.
Sadly neither is true today.
yes, except in the EU you now have a homogenous continent because you have mr. momo and his huge extended family living everywhere.
Not only difference, EU is not one country under one set of overarching federal laws with one elected executive leader and with one legislator that decides all federal matters, EU nations are not sovereign over their currency, EU is, but what's that, not their elected leaders I way US president and Japan PM are. Having a currency unio. When you have no political union makes it rickety.
"These would be "calming" steps. They would be proactive in that the intent would be to get ahead of any contagion." Bruce, WE, and I believe I speak for the majority here, DON'T REALLY GIVE A FLYING FUCK ABOUT CALMING STEPS. WE want to see the fucking sinister, fraudulent, corrupt, all encompassing diaster known as the Global Banking Cabal taken DOWN! Any means to prolong this cancerous spread of theft and corruption needs a spark to ignite it, and hopefully Cyprus will be that spark. Let the Dominoes tumble, where they will eventually come to our shores. NOT a pretty picture, but WE, the "average Joe", on the streets of America, to the streets of Athens and beyond have been the downtrodden victim in this WHOLE Ponzi of wealth redistribution. Whatever your circumstance is now, it could've been better for you and your family over the last couple of decades were it not for the corruptness of the Federal Reserve, Wall Street, the Central Banks of the World, and ALL of the complicit governments. LET THE FUCKERS BURN! Say Amen Brother!
Bravo +3 BTC
Amen!
+1 BTC
I don't want elite parasites sucking off us, but I'm more than willing to let them skim some before I wish for armeggedon. As messed up as our banking systems are, their debt money creation, which typically increases money supply thru kending new money into existence has been a benefit to commonwealth...granted with unnecessary wasteful lending into speculation and with elite skimming but still, on net because it creates money suppply and trust, fractional reserve banking has helped us....if we crash it without othe, better money supply option, public bank or currencies, if we go back to silver and gold for money, no credit, no trust etc..and if we do that suddenly ..it will not be pretty,....don't ever wish for that. It's like starting a WWIII nuke war with old USSR...would have scorched earth, and in end Russia not a threat to us, worked out without a war
The problem with that is that the fuckers will have allready abandonned ship, just like the captain on the Carnival. Worse, they will also take all of the wealth/gold/silver with them and leave us with burning cities and dashed hopes.
Personally, I hope we can take a few dozen bankers or .govs out before then.
Your absolutely right about the US circus and you could spend the next 20 years debating with others whether there is more than nominal inflation.
The game changer now is that the "coppertops" are becoming aware and freeing themselves from the matrix thanks to the massive blunder/hubris of the Troika by declaring demand deposit accounts are fair game for legal theft.
People and corporations need stability with their financial dealings and the last thing anyone needs to worry about is if the money they have stashed in the safest place that they know of, is going to be legally stolen from them.
Everyone is talking about war. There are references to Archduke Ferdinand and Munich all over the Internet. Somewhere in abeyance the gauntlet has been thrown down. Right now, nobody has any understanding of ... why.
@ Krasting:
If the EU was serious about managing the currency/credit flows there would be some discussion of the foregoing already. In fact there would have been discussions along these lines before last weekend.
Instead there is noise about confiscating deposits in Italy and Europe-wide capital controls. In a currency union, capital controls are a death sentence. The 'natural' control is different currencies for each state. Under the condition of currency controls there are de-facto independent 'euros' with different prices. The next step -- toward indpendent currencies -- is a very small one.
What is underway is beyond the reach of language to adequately describe. Not only have best practices for deposit banking for 200 years been undone but so has long-standing management of capital flows across national boundaries. It can be inferred that every euro sent to Russia since 2000 has been a fraudulent instrument. Why would Russia sell more fuels to Europe under current uncertain circumstances? If the Russians do not accept euros, why would Saudi Arabia or any other oil producer?
Why would they accept French francs or Spanish pesetas, either? It's the same bunch of thieves ... the same bankrupt national economies!
Capital flows across borders: if the euro dies what happens in China? That country holds a trillion in euro-denominated debt instruments. Is Germany going to be on the hook for that? For all those Target 2 liabilities -- another trillion euros?
From here is looks like a German default in the making and a lot of pain around the world. If Gernany doesn't default it is ruined by its 'share' of the EUs' liabilities. If Germany defaults then China's finance system is bankrupt along with Japan's.
This puts all the 'war talk' into context. The only thing that comes close to this idiotic self-destruction is war.
"war " Steve fv? small word that takes on many forms? cyber, mind games, currency, small private affairs, race, civil, existing and on and on. many wars that the average joe does not know he is in the middle of ; to pick one example the current farc v individual v corp. v system for the mineral extraction with the current regime supporting big business and the farc receiving a % of the gold produced Or in niger where the french have had to step up security at their 2 existing uranium producing mines with Areva committed for €3 billion on a 3rd mine All in Agadez/ Irlit with increasing battles on going between gov. of niger and Tuareg rebels & the french gov & kidnappers & human traffickers & weapon sales ( spare from libya etc) drugs etc etc all happening now in that Sahara suheil corridor stretching from Algeria, libya, chad, benin, mali cameroon, nigeria landlocked with Niger.
The french are going to have to spend bundles to securitise the whole Area and protect Uranium or the Lights go Out in Paris&Co.
Prices Inflation Instability its all happening now in Real Time.
So we pick a city in any country in the world by year end and Conflict will exist on some Border
I predict a huge increase in local community wars or regional step up but for sure No Superpower or So Called Superpower has the Resources to Take ANY Communities Wealth Tomorrow. Drones wont do it! Crazy times as the Bankers Paradise Implodes.