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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.
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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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The scenario you describe could explain why Big Sis is buying 2 billion bullets, 2700 APCs and huge numbers of checkpoint booths - and why she won't answer questions from Congress.
The central strategy of all the players in all that is happening is really quite clear in my mind.........make it up as you go!
Agreed. It it appears that a group of bumbling fools is running the show. Every day brings a new surprise. There is no strategy now, there never was a game plan.
THAT CAN'T BE TRUE.
The need for a Cyprus deal has been know for a year (more). The decision in Brussels was made to wait until the last election (one month ago). There had to be serious consideration of policy options months before last Friday. Decisions were carefully weighed, the ultimate strategy to nick depositors was undertaken only after all the heavyweight deciders spoke up. Certainly Merkel and Draghi signed onto this plan.
Now, if you believe in the second paragraph, we're in for a rough ride. If the first para. is correct, then we still have a problem - that means the idiots are in charge.
I'm not sure which is right. Where's the good news?
A) Does Merkel benefit from a Cyprus exit as she comes into an election - Yes or No ?
B) Moving money around over there is already a nightmare. If they aren't [way] out in front by setting up the processes for controls, then they don't have control. You can't do that overnight, especially if the situation is in flux. Are they prepared for a Cyprus exit - Yes or No ?
Great stuff, Bruce, both literally and visually. Thank you.
You have a typo in the article:
> If the intent was the latter, this will not stop will little Cyprus.
Interesting times!
Yeah, unlike good policymakers in the United States. They would never do something in the very last second. Europe is a circus, just like the USA. Things differ here and there. And people have lost already a lot of money - in the US as well. Clowns can be found in Washington as well.
But what did you expect? Funny to see that bankers are mainly leading the protests in Cyprus. Yeah, they better be afraid. They fucked up. You could save a lot of money, if you parked your money there. But it was a dysfunctional system from the beginning. Have you ever gambled? They miscalculated their chances. Now it is bad luck and the money will be gone.
There is a dysfunctional system out there, Bruce. And it will crash and burn. Sooner or later. And at the very end only a few people will be able to keep their hard earned money. But they refused to park it in some dubious bank, in some dubious country. Ben is trying to blow the biggest bubble the world has seen. You might watch in awe, you will think it worked, you will be amazed to see it floating through the air and then...
Better be prepared.
There is always a plan. The thing is, its always about the unintended consequences and I believe they are always the actual intended consequences. The stated cause at hand is a cover to do what they want to do. Rationalization is something we all use but our leaders have taken it to a high art. The fear and destruction that we see as avoidable and a sign of ingnorance, are part of the play we are all experiencing. Fear and greed are major motivators and the people of the world are being herded like sheep, and our shepherd is NOT concerned about OUR best interest.
Everyone has a plan until they punched in the face.
Mike Tyson
"Everyone hath uh plan untew dey gate punched in the faith"
I think the deposit grab looked reasonable to the guys who were seeing how freaking ugly the real situation was,...compared to what will happen .....they knew 10 percent loss would be an amazing deal compared to capital controls, losing all the money etc....they forgot they were telling everybody else the banks were pretty okay...if regular folks knew what Merkel and club knew they would have taken the 10 percent cut even on insure deposits happily... But regular folks were surprised, which should have surprised EU, they lied to them all this time...also they were greedy, they could have spread pain better and protected insured deposits, kept trust in system...
Everybody has a plan until you get punched in the face.
Mike Tyson
..or finds Polonium 210 in your tea.
Valdimir Putin
Or take a nice open air convertable drive through town.
John F. Kennedy
Or a quick plane trip through the mountains.
Reminds me of 2008, in spring they mopped Bears Stern just fine, everybody sighed relief, but then they said no to Lehmans...
Bruce: a great article. You outlined the scenarios well.
Now it's time to dish....given all your experience and knowledge, which one or ones do you expect? Or ones? Please explain.
Room 101, not sure Bruce could in all honestly say. I think this is a conundrum, nothing more nothing less, no matter which path is chosen by the elite there are consequences.
Anyway let us see of Bruce will make a response.
+1,000 for the best avatar one this site :)
I didn't see the deposit haircut coming. So my ability to look into the future of Cyprus is cloudy at best.
I think it will be door #2. "They" will not do a last minute bailout and eat a E20b loss. They will not take the steps that would ease the tensions that are likely to develope outside of Cyprus. They will not overtly undermine the Euro. "They" will stay mumm.
This is the "Let gravity take care of the problem" solution. Its the slow death approach. I have to believe that the folks in Berlin and Brussels are sick of the Euro experiment. They are looking to hit the reset button. They just want to dress it up for show, a few bells and whistles, nothing more. It's a circus, after all.
Bruce, the guys in Brussels are absolute zealots. NOTHING, absolutely nothing will be put in the way of an all comsuming EU. NOTHING will be put in the way of the Comission taking ultimate power away from every EU country. You misunderstand these guys. They are nuts.
there will only be 10 nations in this last ressurection of the holy roman empire so we need to lose a few....
Thanks Bruce.
For what it's worth....and it ain't much, I agree with you. I think it'll fundamentally be 2 because the paymasters in northern Europe are done paying the bill. But number 3 will follow somewhere down the line. It'll be too late, though. The horsemen of the europocalypse will be out and galloping by then.
Bruce if this gets played out far enough it is very possible DB is stuffed with something that will make it blow up. Do you see the possibility of that, or before that happens Germany recaps it's banks and pulls the plug on everyone else?
That would be stunning.
Deutche Bank is more important to Germany than BoA is to America. It is Uber TBTF. So I say it does not reach this far. Now, some of the Landesbanks, well that's another matter.
Bruce, are you saying that you believe in TBTF?
Alianz also, don't forget Alianz........Germany's very own AIG
Also Uber TBTF.....
No institution is too big to fail.
Does TBTF come with side benefits?
http://www.guardian.co.uk/world/2011/may/19/sex-party-reward-german-sale...
Thank you
Benny has yer back!
I just saw a tweet suggesting that haircut cypriots simply buy Spoos with their remains, and they will easily make back losses and then some by May.
The essence of perversion, because in the end it's what Benny has been trying to do all along, get everyone out of cash and into risk.
Either the author was as cynical as it gets, or it was satire. But that combo really describes the playing field these days.If you don't find that disturbing, you should. It's creating rising instability. Or fragility, as one has recently called it.
The FED will print and save the day. The FED bailed out European banks back in 2008/2009. There is NO reason for them not to do it again.
Maybe the Fed could whimsically, this time, not bail them out right away, just to make things fun. I have a case of popcorn here and enough propane to cook it all.
Nicely done Bruce - At last, evevrybody knows that the ECB and Eurocrats are clowns on acid. I always knew they were.
Best thing of yours I've read. Poetic.
So much better in the long run to let losers realize losses. We are headed to war.
all their efforts are bungled, there are not good solutions, they are reaching for straws.
they cannot kick them out of the EU and to think they could kick out Italy or Greece is just nonsense. The redemptions would cascade throughout the system.
There is no turning back at this point. All peripheray members must be bailed out. Yes there will be some repercussions and some pain inflicted but that pain already existed.
"Either Cyprus is out of the Euro zone by Wednesday, or the +E100k depositors are going to get whacked big. "
I will be willing to make a bet neither happens. Those are not the only two options. The third option is a classic greek/italy style save. Bank reorgs to make bank look solvent. First cyprus will hem and haw for a month or so. And Merkel will get pissed 3.4 more times.
There's a fourth option.
If Cyprus balks on Troika's demands, Troika can't renege or it'll lose face and control. Troika will enlist the help of Bernanke, who's been surprisingly silent, and the Fed will give enough for it to stay in the EZ.
In many comments people seem to believe that this is a one-time demand of the Trioka. I guarantee it isn't. In fact ZH already reported that they raised the demanded amount from 5.8 to 6.7 billion euros. That's 900,000,000 euros that they're now short even if they could steal their depositors' money.
Cyprus needs to break up with its abuser that tricked them into getting into Greek bonds and is now trying to fuck their financial industry, which could only be rebuilt if they don't steal the depositors' money, but default instead. Don't forget Cyprus has more banks per capita than any other country.
How would a default help their financial industry? Unsecured depositors will get wiped out regardless ... the money in the deposits is only backed by marked to fantasy assets.
there is a fifth option as well...namely "we are now going to kaput you but pretend it was an accident and it was really your fault." i happen to believe this option has already been tried...and is "succeeding." http://www.row2k.com/video/view.cfm?vid=4986
My screen just said your video doesn't exist.
If recent history offers any enlightenment, I would pick door number 1 as the likely outcome. The time is right for the BOYZ to try a crack down. What will the Cypriots do? Riot? Look at Argentina. The Cypriots will have to take what they get or move away if they can.
The only hopeful part of this situation is that the Italians, Spaniards, Portugese and other EU citizens rightly assess this situation and get what they have left out of the banks. This could reduce the suffering of these citizens later.
I am not sure about recourses available to the common man anymore. How is one to Overthrow corporate executives who are the real behind the scene movers and shakers. You can have new elections everyday and what chance is there to eliminate corruption? Even if a decent individual gets into office, the corporate nexus controls the game.
It is a sad world we live in now. Many leading Americans knew the danger of corporations. We have ignored their warning and now these behemoths are totally powerful because now NO ONE (no person) is ever accountable for the actions that seems so heinous.
It's very simple what to do. Stop feeding the damn beast. Stop spending money with the corporations. Buy local or don't buy at all.
C'mon folks, it's not hard. You jst have to pull your head out of your ass and be mindful where your money goes.
Public service unions plus the UAW provide lots of guaranteed frced dues funds nd easy votes to the Gvernent Party. Much more powerful than single corporations.
Keerist! Do you really think they are really even considering those restrictions you mentioned without setting off the collapse of the Euro?
Damn...When Krasting begins to sound like one of them tin-foil hat wearin' spiracy theorist..Makes ya wanna pinch yourself right?
Monday through Friday I wear a felt hat.
Saturdays I put the tin one on.
bk
Hey Bruce the graffiti pix on your articles now seem kinda dull, since you started doing some of your posts with vintage erotic art of hot babes in scanty outfits and heels
For those who missed Bruce Krasting's quite strong competition to the 'Visual Combat' babes of William Banzai, these are babe pix on Bruce's recent articles (links directly to the pictures):
http://brucekrasting.com/wp-content/uploads/2013/03/sweep_under_carpet.jpg
This latter is especially funny with the article being about 'sliding into' financial trouble:
http://brucekrasting.com/wp-content/uploads/2013/03/Gil_Elvgren_-_Look_O...
Maybe WB7 got jealous of the competition, and that's why Mr Banzai did the very funny cartoon with 'the Bruce Krasting' financial haircut, 'Hot Cuts for Hot Money':
http://www.flickr.com/photos/expd/8577533833/in/photostream/lightbox/
I did make note of the reader interest in the old pinups. I looked for something that might fit with this piece. They're all too "happy" for this one.
"All Over" looked like the right way to end this article, so I went with it.
FYI - Many of the my graffiti pics are original - never seen in print before. A very nice fellow works in the middle of the country at a major rail-yard. These are his pics. He contacted me a few months ago, and has been sending me these images ever since. I think they're great. Enjoy the art show, and thanks to Steve.
bk
I'm a hustler man myself...
Bank Guy, for what it's worth, a personal thanks for you're thoughtful posts on other threads on these matters.
+1,000
PS: Also nice to see your humourous side (i.e. above comments!