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Cyprus - Who's to Blame - Brussels? The US Navy?
If you listen to the likes of Jeroen Dijsselbloem, (LINK) you might conclude that the problems in Cyprus were all about the big offshore depositors who flooded the local banks with cash. It you start with the 'logic' that the depositors are to blame, then it's not hard to reach a 'solution' with haircuts of 40-80%. I think that whole line of reasoning is bullshit. Brussels and Berlin were more responsible for Cyprus than those evil depositors. I believe the US Navy also had a hand in the collapse.
When were the problems with Cyrpus's banks made public? Eh, that would be in August of 2011. Why was this situation allowed to run totally amok for so long after that? Brussels ignored the warning signs.
Okay, give the technocrats some slack. They were busy with other problems in the summer of 2011. But Brussels ignored this request for help too:
The folks in Brussels sat on their hands for eight more months before they finally came around to a fix for Cyprus. That delay cost everyone. It cost Brussels - it put all depositors at risk, including the small ones. If Brussels had acted decisively after the official request for a bailout the +100k depositors would not be feeling the 40-80% gouging they are getting today.
Is it possible for depositors to file a suit against the Troika? Why not? There's plenty of evidence that suggests it's the likes of Jeroen Dijsselbloem who are responsible for the extraordinary losses. They fell asleep at the switch. (or it was deliberate - triple damages for that!) The folks who have their fingers burned have a reputation for not "rolling over". I wouldn't be surprised if someone tries to get Brussels to kick in some cash to soften the blow. At a minimum, Jeroen Dijsselbloem should shut up. He's making the case for the lawsuit.
Separately
I spoke with a friend in Athens today. He has family who live in Cyprus. Nothing new to report - the country is a shambles. These people live well south of Nicosia - no access to money, stores running out of goods - no credit cards allowed.
My friend contacted me in July 2011 after his relatives had their windows blown out by a huge explosion on a military base. They were miles away, but still felt the blast. At the time, he stressed that this was a very big deal, a game changer for the country. I wrote about it (Link).
Short story: In January 2009 the US Navy intercepted a cargo ship filled with munitions. The vessel had come from Iran, and was headed to Syria. The Navy confiscated the munitions and brought them to Cyprus for "storage". There was a brush fire, and the whole damn thing blew.
The head of the Central Bank of Cyprus had this to say about the July 22, 2011 explosion:
There is an imminent threat of Cyprus joining the European Union Support Mechanism, with everything bad that this entails.
Every day of inaction increases the problems and risks. We must act today, not tomorrow.
Brussels totally ignored this cry for help. Cyprus was forced to go begging to Moscow for an emergency E2.5B reconstruction loan. This was a strategic mistake by both Washington and Brussels.
In preparation for this article I spoke with my friend regarding who he thinks is to blame for the cock-up in Cyprus. He's biased; he and his family have lost money (there was Greek money involved in the +100k accounts). So he blames Brussels. He also blames the bankers who made the bad loans/investments; he lamented that bankers always make bad loans and never pay. He thinks the depositors ignored all the evidence, including the high yielding deposits, so don't feel so sorry for them either.
But he also included the US Navy as one of those who must share some responsibility. He may have a point. Those munitions should not have been brought to Cyprus. It was an accident left to happen. Thousands of tons of explosives were stored under a tent. There was huge damage to the infrastructure; the blast leveled a power plant.
Would Cyprus have collapsed if the explosion did not take place? Probably, but the accident made it a sure thing. Is the Navy responsible for accidents? Sure it is:
Is there a lawsuit in this story? I don't know. Connecting the dots between the Navy's decision to dump confiscated Iranian munitions in Cyprus, to the losses depositors have felt is a bit of a stretch. But then again you stretch when there's the odd billion at stake. And then there's the fact that the Navy has some very deep pockets.....
Notes:
- Navy - Don't blame me. Someone was going to write this one, just happened to be me.
- Readers from Cyprus, others - do you think the Navy had a hand in what you face today? How? Why?
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Searching for someone to blame.
Face it, you left your money in a bank you knew was going under. And you left it in amounts that exeeded the deposit guarantee.
Human nature.
<So he blames Brussels. He also blames the bankers who made the bad loans/investments; he lamented that bankers always make bad loans and never pay. He thinks the depositors ignored all the evidence, including the high yielding deposits, so don't feel so sorry for them either. But he also included the US Navy as one of those who must share some responsibility.>
It never seems to be the investor's fault when it comes to financial loss does it?...since they can't possibly be responsible for the loss right?
Frankly, the Cypriot banking system got itself into trouble - it is the one that made the bad decisions & put depositors money at risk all by itself so it alone bears the responsibility...
But it plays much better when you can find an unpopular scapegoat (those darn German Nazis &/or beurocrats in Brussels or the US Navy) rather than own up to your screw-ups.
And of course, there is little if any corruption in Cyprus & its politics...so how could anyone not believe their officials & politicians & media???
yes sir...it is everyone else's fault except those poor, honest Cypriots
Re: Explosives sent to Cyprus, which they had NO role in.
Yes, the U.S. Navy made a huge error in forcing Cypriots into holding explosives they had NO hand in. Could the Cypriots have refused and turned the ship away, possible?
But in all fairness the Cypriots could have and should have safeguarded these explosives and sent the U.S. or other countries of origin, the bill for safety, storage and security. That would have been reasonable and something they could have accomplished (maybe), unless of course they were set-off in some sort of sabotage or false-flag event, in which case the explosives should have never been there in the first place.
Did the explosion have a major impact on the economy of Cyprus? Yes DEFINITELY it did.
Here's my "back pocket" theory.
Keep a few crises in your back pocket to reveal when you need a distraction or to get some objective done.
If they knew about it, then they knew what they needed to trigger it to explode.
A fucking lawyer smelling "blood in the water"
How about defending an American being persecuted under the Military Defense Authorization Act?
Or suing the Federal Reserve for counterfeiting US Dollars?
Fuck you bloodsucker!
I blame Bush.
To even suggest the U.S. Navy played a role in this is pretty low. I would tend to believe that while the U.S. Navy was the means of transport and delivery of the munitions, ultimately it was the Cypriot military that made the call as to how and where it was stored.
"Fuck it. Put it over there under a tent, then come join us for some Ouzo."
Additionally, knowing the U.S. military, the Cyps were probably warned about the cache. Most U.S. trained service members with any regular contact with explosives / munitions know better.
[EDIT] Sue the base commander. In the end, it was his/her responsibility for how the munitions were stored.
Bruce, your articles are normally top shelf.
In this instance, I think you may wish to reconsider your baseline premise.
According to Wikipedia:
At the time of the incident in 2011, the explosives had apparently been left in the open for over two years. The Cypriot government had declined offers from Germany, the United Kingdom and the United States to remove or dispose of the material, having feared an adverse reaction from Syria.
Slightly off topic, but it appears that even Canada is planning its own Cyprus style bailout plan for its too-big-to-fail banks. Good planning eh? http://tinyurl.com/cvcf9v9 or see pages 144 and 145 of the budget.
bzzzzz
This one missed the point. Fractional reserve lending, by its very nature, creates problems like cyprus and like the EU and also like the USA. You have overleveraged, fiat currencies run amok destroying people's savings REGARDLESS of who bails out who. Where do you think Brussels or Washington would get the money to bail out cyprus, bruce? Both are dead broke. So spare me this thought process that more technocracy and bailouts would have been the answer. Bank deposits are liabilities of the bank, and when there are no assets left and an entity goes BK, creditors get hosed. Lenders of last resort, deposit insurance and fiat money are used to paper over the crux of the problem which is widespread bank insolvency due to overleverage.
Mr Plum with the candlestick and in the study.
And he landed on jupiter's (HS) without a pie for lords sake.
It's the central banks that are to blame, you stupid motherfucker! Are you gunning to be next in line for Bernanke's job?
I blame the stunningly wonderful world leadership displayed by the O'Bowel Movement..........or it's Bush's fault.......
Good article Bruce. I'm sure many people read the article but never imagined their depostis would be stolen in this fashion. Also, people are so numb hearing about all the fraud they may ignore it these days until lightning (or the Trioka) strikes them personally.
Outstanding article.
I am quite impressed.
Reminder to Mr Krasting:
Finance is a derivative of Military Power.
As Bruce points out, we've been talking about Cyprus needing a bailout for a couple years. What kind of moron would keep their money in Cypriot banks during this time. Do people there have that much faith in government? I'd have my money out of there at the first wiff of trouble. Speaking of which.... Italy, Spain....
"These people live well south of Nicosia - no access to money, stores running out of goods - no credit cards allowed."
And again we get to the crux of what money is supposed to be...counterfeited fiat or not.
Bruce laying a smoke screen for the idiot Cypriot bankers who bought worthless Greek debt. Blame is all on the bankers!
The Blame Game ... you've got to love it!
Nobody blames Merkel??? WTF? She's German, it has to be her fault! Sieg Heil, Bitchez!
Blame Mario Draghi, who knew Cyprus' banks were underwater with Greek bonds and didn't exclude them from his creditor cramdown last year. When Greek bonds tanked so did the Cyprus banks.
Blame Mario Draghi again. He was hoping to squeeze Italian pensioners after his Goldman associate Mario Monti won in Italy ... nobody told the Italians who voted for Grillo instead. He took umbrage and aim @ Cypriot depositors, instead. The Cyprus emergency occurring right after the Italian election is unlikely to be a coincidence.
Blame Draghi one more time: the ECB has been floating Eire for years by way of ELA, why not Cyprus? It's a few piddling billion euros. What was the rush? Why not announce a clear policy regarding bank liabilities, bail-ins, seniority of claims, etc? Why not have public discussion ... THEN act? A: Draghi & Co. are not adults.
Blame Dijsselbloem who had to bail out a big Dutch bank at great cost last month and has been on a rampage since. Guess what? All these guys -- Draghi, Monti, Bunga-Bunga, Hollande, Merkel, Dijsselbloem, Rehn, etc. -- are all going batshit insane under stress. Managing the end of the world as we know it is hard work, it requires real men who are not afraid of anything including the truth ... instead there are pip-squeaks whose cowardice is becoming legendary.
Blame the auto- and energy tycoons who profited from capital destruction, blame the bankers who enabled the waste. They all deserve to be hanged for crimes against humanity.
Blame the ordinary Europeans who felt entitled to live beyond their means and are now casting those they can into the fire ... so that they might continue to live beyond their means for a little while longer. They were lied to and believed it. FACT: nobody can live outside thermodynamic limits, it is impossible. As fuel supplies dwindle there will be more outrages over what scraps remain.
If you think things are unlued now just wait. What people don't understand is this is an energy depletion crisis. It is permanent. There will be no recovery. Ever. The 'good old days' are gone. They will not return. Ever.
Ever. We change or we get changed.
Of course, Cars are to blame Steve.
It wasn't the buying of Greek bonds that blew up Cypriot banks ... instead it was CARs.
CARs are to blame for EVERYTHING. Global warming, War in the Middle East, DHS militarization, inflation, deflation, resource depletion, the abuses of the Fed, declining incomes, cancer, bulging waistlines, receding hairlines, lack of libido, Whatever.
It all can be traced back to Cars.
Tell me though, is it 2 door or 4 door models that we should single out for exceptional umbrage?
The very self-organization of life itself is "living outside of thermodynamic limits" since we constantly reduce the entropy (increase the order) of our world in apparent violation of the second law. Of course, on a long enough time scale (the limit for all thermodynamics and our motto on this site), its heat death for the entire universe. But in the meantime, party hardy as the banksters elevate the stock indexes while destroying real wealth at a furious pace.
As we real a critical point expect a major phase transition in our standard of living.
Thats why I drive a bright red car.
Ummm ...
Life on Earth requires free-energy flux from the Sun or heat flows from the interior of the Earth.
Life can move entropy around but not alter it fundamentally.
The ECB does it and Bruce looks everywhere else but the ECB????!!! What a fucking shill for the banks this guy is.
The good old days will return in this century. Important incremental strides are being made, in many places around the world (mostly research labs and universities) in understanding photosynthesis and the sun's radiant energy. Science won't be the roadblock; it will be the unchannging nature of human behavior (greed, fear, mistrust, hate, etc.) which will challenge my prediction of abundant food and energy for this world.
Only God lives outside the thermodynamic limits, brother.
if the usa was percieved to 'NOT have any money' to get in a lawsuit, would everyone constantly talk about sueing.....i think not. ALWAYS SUE THE GROUP WITH THE MONEY.
THIS ARTICLE IS POORLY WRITTEN BULLSHIT....an explosion caused corrupt bankers to mak bad loans...WTF...?
+55 kazillion.
one of the dumber posts he has made, and that says a lot.
I remember all these articles... still tought that Cyprus would be just a new Greece and they would get their money and it would be a big nothingburger... but apparently the EUrocrats decided to screw it up even more.
Cypriot banks are among the eurozone’s largest holders of Greek bonds.
So what. Do like other banks, put the crappy assets off balance sheet... problem solved. Or do mark-to-fantasy accounting... it's been working so far.
No problem. After the Cypriot economy crashes, the Russians will swoop back in to 'save the day' they will control all the naval bases on Cyprus -- so Cyprus will be the last place a US Naval ship will go.
There are definitely global political overtones to this story; the details of which are unknown now. They will be revealed eventually. (Too bad most Americans have the attention span of a gnat, otherwise they might know some important facts about what really goes on - they would be horrified).
Anytime you get a strategic location (NATO military base and Russia NOT wanting Cyprus to join NATO), an oil and gas deposit of some size (there is a potential pipeline story here for Turkey, US, Britain and Europe that would somewhat free Europe from Russia Gazprom monopoly and a port location of great interest to the Russians, ME and West, you get some drama.
I was surprised a little by the "screw job" imposed on Cyprus given the interesting geopolitical negotiation potentials I thought it might have but alas due to its small size (ex, Grenada, Haiti, Cuba to name few more small guys who had significant treasures) it will definitely be a mere pawn in the bigger hegemonic game AND in that game, people do not matter.
Actually it is a BRITISH Sovereign Base rather than NATO. It has a listening station too. It is akin to Gitmo being a US base on Cuba rather than a NATO base.
It's Krugman's fault because, because... just because.
Blame the Iranians. Or how about who lit the fire.
IMO The reason why EU didn't proceed with the bailout in 2011 or 2012 is because the President of Cyprus was a Moscow-educated communist. A real genuine communist. I don't think he'd allowed EU, ECB and IMF to dictate the terms. Instead HE decided to get cash from his commie buddies in Moscow. That, and let a russian spy to escape which couldn't have won him any friends in the CIA/NSA/DOJ/FBI circles (and you don't want to piss off CIA, just as you don't want to piss off KGB.)
You see, less than one month since his term ended - bam! Here comes EU bailout plan. Coincidence? Better question: are there such things as coincidences in the world of politics and high finances?
Slowenia is next
WTF?
Is this the admission that you were wrong about the hot money?
Throughout this whole sordid episode (Cyprus) of pushing one financial crisis (socialization of losses) over borders a few things stand out.
1) Brussels (the EU) didn't give a tinkers damn about "Russian hot money" when it was scrounging around under the seat cushions for a bailout of Greek debt. Ethics schmethics.
2) When the above "government" gets their ass in a crack their very first instinct is to grab what is available to them, ALL deposits in closed for the weekend banks. Trust, anyone?...Bueller? Hello?
3) Most importantly, why is it that creditors have to be bailed out for making bad investments? Could it be they were forced by number one above?
And the wave of socio-economic bullshit & abject failure continues apace.
Another outstanding article.and outside of Cyprus does anyone know the costs to Cyprus,also which if any insurance companies were involved in payouts.
insurance doesn't cover taxes or assessments
Lawsuits against governments and TBTD are fruitless.
The rule of law no longer exists. Numerous examples: Corzine walking; TBTF banks bailed out instead of punished; money stolen from Bank depositors; the list is long.
TBTD -- typo, or Too Beautiful to Die?
Merkel?
German investors are preparing to sue their banks for putting them into "safe" Cyprus bonds
Bruce said: "If Brussels had acted decisively after the official request for a bailout the +100k depositors would not be feeling the 40-80% gauging they are getting today."
Bruce, I think you meant "gouging" with an "o" not an "a", but no doubt the Bankers in Brussels gauged the gouge to benefit themselves and punish ordinary people.
Brussels didn't act decisively 18 months ago because they wanted to steal depositors money all along.
This is why Jeroen Dijsselbloem justified the measures, he and the ECB have been rationalizing their skullduggery and equivocating their way to this endpoint for at least 18 months.
This is also why Bernanke condoned it and did not say he would not do the same in the U.S.
Transference of blame and guilt onto others is hard work.
Thus the talk of "long and difficult" talks and meetings.
The poor dears. Theft is such hard work!
63, and I still get the 'o' and the 'a' confused. Hopeless....
No biggie, I knew what you meant.
The ECB also gouged the gauge of safety in banks.
The ECB and the FED have, in not so many words, said they are justified stealing deposits and controlling people.