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Brush Fire Bailout – The Straw that Breaks the EU?
I’m always amazed when relatively minor events somehow conspire to change the course of history. In this example a lousy brush fire may be the catalyst for an unwinding of the EU.
Go back to January of 2009. A freighter (Monchesgorsk) carrying munitions from Iran and headed to Syria was interdicted by the USS San Antonio (this action was taken under UN mandate and the interdiction was made possible by “knowledgeable sources”. This development precipitated an international incident that included all of the big powers including the US, Germany and Russia. As this memo confirms, the ship was escorted to a port in Cyprus where there was a naval base.
What was in the 98 containers? What else? Munitions. The ship was transporting 120 mm, 122 mm, 125 mm, and 160 mm high explosives. Also included were 7.62 mm shell casings, compressed gunpowder, silver dollar-sized slugs, primer, and magnesium primers. All in all it came to about 2,000 pounds of super high explosives.
Cyprus didn’t want this crap. But the Germans French and Italians said they would not take it. The Americans made an offer of “assistance” in getting rid of it. But no one did a damn thing. As indicated in the above memo the entire cache of explosives was delivered to the naval base.
Guess what the local naval commander did? He stored all the explosives in a tent! It sat on the base with apparently no one doing anything about until July 12th . Then an unfortunate thing happened. A brush fire got started near the tent. It spread with wind and the tent caught fire. KABOOM!
I know people who were fifteen miles away. It blew out windows even at that distance. Only a dozen people were killed (including the naval commander). But the explosion destroyed the largest electric generating facility on the island. The economy has hit the skids as a result.
So what happens today? The Central Bank of Cyprus has asked for a bailout, ASAP. A portion of the statement today:
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.
In economic terms Cyprus is a nothing. 2010 GDP was only $25b (Rhode Island is $50b). I don’t have a recent debt number but the CIA put external debt at $40b in 2008.
The economic problems of Cyprus have been caused by a catastrophe rather than economic mismanagement. All of the big powers (especially the UN) had a hand in this. As a result of these unique circumstances I anticipate that a very favorable support package is going to be made available to Cyprus.
Germany could (and probably will) write a big check. In the scheme of things the amounts are miniscule. But I do have a question on how all of this will be perceived.
Ireland, Portugal and of course, Greece have all been forced to accept crippling cut-backs. The people in these countries have paid a very big price already. There is nothing but misery in front of them for years. And Cyprus is about to get a blank check. The pot in Europe will be stirred again as a result. I wouldn’t be surprised that the problems in Cyprus end up on the streets of Athens.
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Ilargi over at the automatic earth wrote some good stuff about this a few days back "Real Black Swan": http://theautomaticearth.blogspot.com/2011_07_01_archive.html
Unbelievable, you can't make this shit up.
Cyprus has been a russian mafia base since 1991...when Soviet collapse occured. Not surprising its rife with prostitution and a stultified economy. Like Sicily, like Naples and S. Italy, it is a dormant volcano of contrived, controlled, misery and apathy, realm of the corrupt who encourage local indolence as they hate real competition.
I'm always impressed by the wide cope of Bruce Krasting's steely gaze.
I suspect that if Bruce was bitten by a rattlesnake, after three days of agonising pain, it would die.
+1
So inquiring minds want to know ... was the Naval Chief who was killed the guy who ordered the stuff stored in a tent??? If so, talk about bad feng shui.
Damn TEA party terrorists, picking on the Cypriots like that.
So Why did Cyprus allow the freighter with arms to go to it's port in the first place? All Cyprus had to do was say okay if nobody won't help us, the ship can go on it's way and you decide another port to take it too. And if no crew, scuttle it out in the deep ocean and be done with it.
Where would you send it? Italy and France were the only alternatives. They used their NATO muscle to force the ship to Cyprus. Shit goes downhill.
But what a screw up once it got there.
The couldn't scuttle it. They wanted the evidence of Iran's bad deeds out in the open.
Like sticking your fingers in holes at the Dyke !
I was just looking at a video of the aftermath. To the right of those smoke stacks is what appears to be a huge petroleum storage facility. Looks like it could have been even worse if things had spread just a bit further.
http://www.youtube.com/watch?v=Z9WB5Ab8a9o
Also, even if you have the cash immediately, how long does it take to reconstruct a power plant that size that is mostly destroyed? Anyone?
What about all those barrels stored in the Arizona desert?
All I read about the Greek part of Cyprus is that it is a favorite domicile of Russian Oligarchs and Russian mafiosi. They love to stay there and they are welcome because they share the same religous background Russian/Greek orhodox Church plus they bring in enourmous amounts of black money. I m sure these Russian immigrants could come up with the cash to fix the problem with the power plant within hours.
funny they normally might have scuttled the ship in deep water and be done with it. illegal weapons trafficing in violation of international law.or simply dumped the stuff over the side, 2000 pounds is a couple pallets worth. i thought the Navy was smarter than than ;)
You are correct, of course. However, given the 98 containers and the destruction caused by the explosion, and windows blown out @ 15mi, i'll make a guess the 2000 lbs was a misprint and 2000 tons was meant.
I think 2000 lbs is probably correct, and that size explosion can blow out windows at several miles away. no one would try to store 40K of high explosive under a tent. That would be 2000 of one of the Navy's larger payloads, unarmed. no way that much sits above ground with one guy watching it.
agree it was
So when will Sarkozy step up and "protect the civilians" in Syria? I read the Gubberment there is killing "innocent civilians" by the handfuls.
When they find a proven reserve.
it's obvious that man made global warming caused the brush to be dry
Man,, THAT never hit the news in my town!
Wow, WHat A fuckup.
`I understand that the people on the ground may not have had the materials to properly deal with the stuff that pretty much got dumped in their lap. But Couldn't they at least have buried it? Stored it in a water tank?
Sadly poetic justice that the guy who set it up got killed by it. Remarkable good luck that fewer were killed.
The economic problems of Cyprus have been caused by a catastrophe rather than economic mismanagement.
If a small brush fire can trigger an economic collapse then it is indeed mismanagement. Why would an island nation have all of it's energy production eggs in one basket? It would be one thing if it was a continental nation that can temporarily buy from the grid which it is or can quickly be connected to, but an island with one central power plant and no backups is just spoiling for problems. Anyway, if the economy was so close to the brink of the debt trap that a power outage can tip it into default, even with thousands of emergency generators sent to the island, then guess what, the place was as mismanaged as Greece.
Iranians exporting rockets and heavy munitions to syria, lebanon and gaza? it must all be israels fault. Swarms of rockets are coming, and with China, N. Korea and Iran ramping up production it won't be long until they appear at Europe's back door.
No silly, it is because of global warming!
With all the student loans outstanding. more than consumer credit card debt, colleges and universities have been subsidized to the point of constituting a bubble. Decrease future loans --Poof!. Increase interest rates--Poof! Graduates cant find jobs to repay loans--Poof! Obviously negative multiplier effect worse for economy. Teacher salaries stagnate, college enrollment goes down, building plans put on hold, economists leaving Washington have no place to go. Last part is a plus to economy.
Ice-9
This is not rocket science.
Uh, well.. yes it is.
They should have let it arrive in Syria and then detonated it with a Tomahawk.
Bruce, you seem to have an uncanny knack for uncovering all the victims in this great theater we call Keynesian Ponzinomics.
DaddyO
Cyprus debt at 167% of GDP and the banks are on the hook for another 140 billion.
And the funny part.... If Cyprus falls, 120billion WILL COME OUT OF GREECE IT'S POCKETS!
And guess who will stuff Greece it's pockets when Cyprus burns a hole into it...
GERMANY TO THE RESCUE!!
The Cypriot cygnet may yet graduate to a full swan with the Turkish leadership crisis and military resignations shaking the leading "moderate regime" in the mid-east. That kettle of fish is no help in this pinch. Many Turks with strong ties to Germany is yet another transmission mechanism for chaos.
When will Bulgarian wet agents or Serbian Arch Dukes pop up on the swan radar?
No one should expect any less from a centrally planned world. Someone else is always responsible.
Other examples of how a small change in the system has an unexpected impacted is senior health care. A small change in medicare allocation has sent these stock down 80%. Another shoe to drop will likely be online for profit universities where a small change in the Federal guidelines for pell grants and student aid will decimate these companies. IMO the next subprime is education related spending.
To extent we cut govt spending on things that yield no value to us, it is the right thing to do in long term, but since that money comes out of economy and given it's just slowing our rate of indebtedness, not reducing taxes, the economy will contract and In short term there will be much pain. We spend 16 percent of our GDP on health care, half on private plans, half on govt spending...while other countries spend 8 percent of GDP. If both our private system and govt system could find a way to deliver similar health care/outcomes for half what we pay now, that would be of great value to us, it would free thay money to be spent on other things of value, like all new roads and bridges everywhere, or lower private health care premiums would allow more money for bigger house or IPads. But Wall Street loves health care sector because it is a growth sector. Cut it and pay down deficit and you have contracted a previous growth industry. Deficit down good, economy down bad.