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Economic Depression Is The New Success

Reggie Middleton's picture




 

The Irish Times AP reports on the latest failure of Cyprus banks to reopen:

The announcement to keep the banks shut last night by the Central Bank of Cyprus came hours after it said all banks except the country's two largest lenders, Laiki and Bank of Cyprus, would open today.

Banks have been closed since March 16th to avert a run on deposits as the country's politicians struggled to come up with a plan that would raise enough funds to qualify for an international bailout.

Reference The Anatomy Of A European Bank Run: Look At The Banking Situation BEFORE The Run Occurs! It won't work.

An initial plan that would seize up to 10 per cent of people's bank accounts had spooked depositors and was soundly rejected by MPs.

All except the country's two largest lenders had been due to open today after the country clinched an 11th-hour deal with euro zone and the IMF to provide Cyprus with a bailout.

Without that deal, the country's banks would have collapsed, dragging down the economy and potentially pushing it out of the euro zone.

But last night the Central Bank of Cyprus said that "for the smooth functioning of the entire banking system, the finance minister has decided, after a recommendation by the governor of the Central Bank, that all banks remain shut up to and including Wednesday".

ATMs have been functioning, but many run quickly out of cash, and a daily withdrawal limit of €100 was imposed on the two largest lenders, Bank of Cyprus and Laiki.

These are the capital controls I clearly warned of last year that are not supposed to be legal.

Under the deal reached in the early hours of yesterday morning in Brussels, Cyprus agreed to slash its oversized banking sector and inflict hefty losses on large depositors in troubled banks to secure the €10 billion bailout.

The new plan allows for the bulk of the funds to be raised by forcing losses on accounts of more than €100,000 in Laiki and Bank of Cyprus, with the remainder coming from tax increases and privatisations.

People and businesses with more than €100,000 in their accounts at Laiki face significant losses. The bank will be dissolved immediately into a bad bank containing its uninsured deposits and toxic assets, with the guaranteed deposits being transferred to the nation's biggest lender, Bank of Cyprus.

Deposits at Bank of Cyprus above €100,000 will be frozen until it becomes clear whether or to what extent they will also be forced to take losses. Those funds will eventually be converted into bank shares.

It is not yet clear how severe the losses would be to Laiki's large bank deposit holders, but the euro finance ministers noted the restructure expected to yield €4.2 billion overall. Analysts have estimated investors might lose up to 40 per cent of their money.

Speaking about the marathon negotiations in Brussels that resulted in the deal, Cyprus' president Nicos Anastasiades said "the hours were difficult, at some moments dramatic. Cyprus found itself a breath away from economic collapse".

The agreement, he said, “is painful, but under the circumstances the best we could have ensured. The danger of Cyprus' bankruptcy is definitively overcome and the tragic consequences for the economy and society are averted”.

Bullocks, Bullshit, and all that other good stuff! As I stated in Mainstream Media Says Cyprus Salvaged By EU Deal, I Say Cyprus Is Sacrificed By Said Deal - Thrown Into Depression, locking up a country's liquidity for an unspecified amount of time, then removing up to 40% of a nations small/medium/large business liquidity (permanently, they're catching haircuts) as well as that of your wealthy depositors, is tantamount to economic genocide! How in the hell do you calculate "The danger of Cyprus' bankruptcy is definitively overcome and the tragic consequences for the economy and society are averted”? 

If anything, "The danger of Cyprus' bankruptcy... and the tragic consequences for the economy and society" are just getting started! I find it amazing that the Troika has convinced so many small nations that boiling slowly in a pot of austerity flavored depression is preferable to a quick and clean exit and rebirth. Is belonging to the EU really worth undergoing an extended depression? Iceland gave the finger to the Troika and they're doing better than nearly everybody in the EU! Think about it.

From the BBC: Iceland's 'tenacity' lifts economy out of crisis

Whisper it - Iceland's economy is on its way back. The frozen island on the edge of the Arctic, which had 10 straight quarters of shrinking GDP, is suddenly on a steady run of seven quarters of growth averaging at 2.5% per annum - something that few European countries can boast. Unemployment has fallen to just below 5% and confidence is returning...

Ready! Set! Bank Run!!!

Cyprus contagion raw Cyprus contagion raw

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Tue, 03/26/2013 - 17:32 | 3379018 damage
damage's picture

Good stuff Reggie, but I don't think you should call it "austerity".

I've yet to see any reduction in government spending from most of these countries who are supposedly undergoing "austerity".

In the case of Cyprus seems more like theft + capital controls + complete destruction of their tourism industry.

Tue, 03/26/2013 - 16:26 | 3378756 CustomersMan
CustomersMan's picture

 

Thanks Reggie,

 

If they went out of the Euro, how would they handle the depositors at their various banks? Give them new money in their own new currency? How does a country like Iceland prevent other countries from manipulating their currency?

 

I to am surprised that they didn't bolt as well as other countries.

Tue, 03/26/2013 - 16:14 | 3378694 assistedliving
assistedliving's picture

i want a list of ALL WIRE TRANSFERS ex CYPRUS from 01/2013 thru "a long enough timeline..."

Tue, 03/26/2013 - 16:08 | 3378667 thewayitis
thewayitis's picture

 

   I'm from Europe and I feel DEPRESSED(tion). Coming on deeeeeeep.

 

Tue, 03/26/2013 - 15:48 | 3378555 Mad Mohel
Mad Mohel's picture

Kept waiting for a backhand at Apple in there, but it never came.

Tue, 03/26/2013 - 15:55 | 3378584 machineh
machineh's picture

*puts on serious June Cleaver face*

'Reggie ... I'm worried about the GOOG.'

Tue, 03/26/2013 - 15:36 | 3378475 Bingfa
Bingfa's picture

JUST AS NEW REGULATIONS ON DERIVITIVES GOES INTO EFFECT CYPRUS WEALTH CONFISCATION SENDS FINANCIAL WORLD INTO TAILSPIN

[link to www.sfgate.com]

The $639 trillion over-the-counter derivatives market began the largest transformation in its 30-year history Monday with rules intended to contain another financial crisis, trimming profits for Wall Street banks.

Companies from JPMorgan Chase to BlackRock are now required under the 2010 Dodd-Frank Act to have most of their privately negotiated swaps trades backed by a clearinghouse that's capitalized by the world's largest banks.

That means dealers and their customers have to post up-front collateral to absorb losses if a firm defaults and settle daily losses.

Regulators are overhauling a market that complicated efforts to untangle the worst financial crisis since the Great Depression by obscuring how interconnected and vulnerable banks had become to each other.

Executives from at least three dealers are concerned they may not be ready for a surge in cleared trades, while Sanford C. Bernstein & Co. said the rules may cut pre-tax margins at bank trading units by a third

Tue, 03/26/2013 - 14:52 | 3378164 steveo77
steveo77's picture

Funny how Cyprus is fixed, and the most popular post on my blog is "Maui Fun" which is a good one, by the way, if thinking of going to Maui, this is the real deal shite to do.

http://oahutrading.blogspot.com/2013/03/maui-fun.html

Tue, 03/26/2013 - 13:55 | 3377892 The Duke of New...
The Duke of New York A No.1's picture

Keeping the Bond Holders/Bankers whole to keep the Bond Ponzi going is all that matters to the TPTB - everything elese is just collateral damage.

Tue, 03/26/2013 - 14:09 | 3377968 rsnoble
rsnoble's picture

Yep.  Including our deaths. Fuck the elite.

Tue, 03/26/2013 - 13:52 | 3377882 Caviar Emptor
Caviar Emptor's picture

Depression yes, but BIflation is the key enabling device! Impair bank funds and impose capital controls crippling the economy. But keep prices on eveything up to ensure that the citizenry gets wrung like a towel until the last drop is extracted.

Tue, 03/26/2013 - 13:49 | 3377872 They Tried to S...
They Tried to Steal My Gold's picture

Ive been saying this exact same thing...Capital Controls are worse than the confiscation...Its like taking a loss on a stock trade and then the broker says oh here's a couple grand allowable allocation to trade this week....

 

This is really the beginning of the end of the World Banking system....and its going to happen i nthe US as well...

 

You can bet on that....

Tue, 03/26/2013 - 15:58 | 3378607 Ratscam
Ratscam's picture

in your avatar you not only look like Marc Faber, you also sound like him. For readers, just add the swissie pronounciation in your imagination.

Tue, 03/26/2013 - 13:43 | 3377851 Lordflin
Lordflin's picture

, "The danger of Cyprus' bankruptcy... and the tragic consequences for the economy and society" are just getting started! I find it amazing that the Troika has convinced so many small nations that boiling slowly in a pot of austerity flavored depression is preferable to a quick and clean exit and rebirth. Is belonging to the EU really worth undergoing an extended depression? Iceland gave the finger to the Troika and they're doing better than nearly everybody in the EU! Think about it.

When your choice is payoff, brought up on charges ranging from corruption to sexual misconduct, or simply suicided, the choice is not a difficult one...

Tue, 03/26/2013 - 13:42 | 3377850 MrBoompi
MrBoompi's picture

I suppose when you take other people's money, your crisis has been "averted".  I also suppose these very people don't think they are causing a severe crisis for those who have had their money confiscated?  Who cares about them anyway?

Tue, 03/26/2013 - 13:35 | 3377814 THE DORK OF CORK
THE DORK OF CORK's picture

A previous post regarding the chief shareholders of the IMF and their quest for total power comes to mind.

Tue, 03/26/2013 - 13:25 | 3377766 Navymugsy
Navymugsy's picture

Everbody I spoke to today here in Limassol is stunned, pissed off and wondering why the fuck they went into the Euro in the first place. Oh well, it's a little late for that.

Wed, 03/27/2013 - 15:29 | 3382614 moneymutt
moneymutt's picture

are you a Cypriot or just visting, tell us what its like there.

I just don't see how defaulting adn Cyprus starting their own currency could have been worse. For a while imports would be terribly expensive, but outside money could be had by tourists etc...and no debt hanging over everyone. Start some public banks to get credit economy going again, to make banks okay with interantional rules, use assets of the state to show reserves. Govt wouldnt have to pay interest to banks, rather interest to their pbulic anks could be used to offest taxes, pay govt services. In two years things would be pretty decent.

Once Ziumbabwe defaulted via inflation, savers being totally wiped out, thier economy did pretty decently, as no one paying huge debts, rents down etc...

 

Tue, 03/26/2013 - 13:07 | 3377684 madcows
madcows's picture

Perspective matters.  If you believe that preserving the banks and power structure over the people is important, then Victory.  But, ask a Turkey how he feels about Thanksgiving, and he probably ain't all that thankful.

Tue, 03/26/2013 - 13:03 | 3377669 Ban KKiller
Ban KKiller's picture

Banks will open on Thursday...which Thursday will be decided later. By "open" we mean soon to be shut forever. 

Tue, 03/26/2013 - 12:58 | 3377642 TrustbutVerify
TrustbutVerify's picture

Gotta love the title to this article!

Tue, 03/26/2013 - 12:54 | 3377613 JOYFUL
JOYFUL's picture

At this point, Reg, you're the only thing propping this whole farce up. Those of us who actually took you seriously from the start have gotten ready as much as ready can be...

those who aren't just never gonna be.

 Which bank? Just Pull it! Please! NO More Tease!!!

Tue, 03/26/2013 - 12:52 | 3377604 Fuh Querada
Fuh Querada's picture

I told you so.

Tue, 03/26/2013 - 12:45 | 3377568 Passage
Passage's picture

How many Europeans does it take to change the lightbulb?

Q1. How many British does it take to change a lightbulb?
One, but the rest will protest about changing it.

Q2. How many Swedes does it take to change a lightbulb?
Every Swede loves DIY.

Q3. How many Italians does it take to change a lightbulb?
All. They love screwing around.

Q4. How many Dutch does it take to change a lightbulb?
None. The Dutch sues to get the Greeks to change it in Hague.

Q5. How many Greeks does it take to change a lightbulb?
The whole parliament. They will get bailouts from ECB to pay for the electrican.

Q6. How many French does it take to change a lightbulb?
None. The French lightbulbs last a lifetime, they are nuclear-powered!

Q7. How many German does it take to change a lightbulb?
Three. One taps the electricity from the French, one gets the bulb from the Swiss and one installs it.

Q8. How many Swiss does it take to change a lightbulb?
None. The Swiss bankers love it dark.

Wed, 03/27/2013 - 09:09 | 3380763 Passage
Passage's picture

How many Cypriots does it take to change a lightbulb?

We shall see... ...

Tue, 03/26/2013 - 12:00 | 3377328 lunaticfringe
lunaticfringe's picture

No shit Reggie. The market ramp continues.

Tue, 03/26/2013 - 13:12 | 3377697 Buck Johnson
Buck Johnson's picture

Reggie they are afraid of a credit event happening and in so doing it causes the derivatives to be called and the issuers and insurance would have to pay out on the financial instruments connected to Cyprus, and they don't have it.

Tue, 03/26/2013 - 16:37 | 3378803 CustomersMan
CustomersMan's picture

 

Remember,

RE: International Swaps and Derivatives Organization?

These same criminals own the firm that decides whats a default and what isn't. In Greece for example they were able to say it wasn't a default even though everyone knew it was, therefore certain payouts did not need to be made. You can be sure when their on the right side, at a time of their choice, they'll do just the opposite, and expect to get paid.

 

What a farce

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