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JPMorgan On The Inevitability Of Europe-Wide Capital Controls
With the Cypriot government still 'undecided' about what to 'take' and the European leaders very much 'decided' about what to 'give', the fact of the matter is, as JPMorgan explains in this excellent summary of the state of affairs in Europe, that because ELA funding facility is limited by the availability of collateral (and the haircuts applied to those by the central bank), and cutting the Cypriot banking system completely from ELA access is equivalent to cutting it from the Eurosystem making an exit from the euro a matter of time. This makes it inevitable that capital controls and a capital freeze will be imposed, in their view, but it is not only bank deposits that are at risk. A broader retrenchment in funding markets is possible given the confusion and inconsistency last weekend's decision created for investors relative to previous policy decisions. Add to this the move by Spain, which announced this week a tax or bank levy (probably 0.2%) to be imposed on bank deposits, without details on which deposits will be affected or timing, and the chance of sparking much broader deposit outflows across the union are rising quickly.
Via JPMorgan,
Capital Control Risks
What was widely viewed as an ill-conceived Cyprus deal last weekend renewed fears of a re-escalation of the euro debt crisis. The original proposal to hit insured depositors below €100k caused a bank run and set a new precedent in the course of the Euro area debt crisis, with potential negative consequences for bank deposits not only in Cyprus but also in other peripheral countries. Once again, as it happened with the Greek crisis last May, the Cyprus crisis exposes the fragmentation of the deposit guarantee schemes in the Euro area and its inconsistency with a monetary union.
Even if the original deal is eventually revised and the guarantee for depositors with less than €100k is respected, the damage from the original proposal will be difficult to undo, in our view.
Cypriot banks are relying on ECB’s Emergency Liquidity Assistance (ELA) to avert a collapse once they open next week. ELA reflects collateralized borrowing from the national central bank rather than the ECB directly, not only at a more punitive interest rate relative to refi rate but more importantly with much larger collateral haircuts. The ECB is still on the hook under ELA because the national central bank borrows these funds from the ECB, i.e. it generates a liability against the Eurosystem. The ECB’s provision of liquidity via ELA is admittedly not a given but it will be provided to Cypriot banks for as long as Cyprus is looking to finalize its revised bailout plan, the so called Plan B.
Although the ECB always states that it provides liquidity to only solvent and well-capitalized institutions, past experience with Irish and Greek banks and even with Cypriot banks shows that the ECB has tolerated long periods of liquidity provision to undercapitalized institutions. Greece is the most characteristic case. Greek banks had access to ELA even when the bank recapitalization was pending between April and December 2012. And Greek banks had access to ELA in-between the two Greek elections when it was not even clear whether Greece would stay in the euro. Cutting the Cypriot banking system completely from ELA access is equivalent to cutting it from the Eurosystem making an exit from the euro a matter of time. This is a political decision rather than a decision that the ECB can take alone. This would effectively cut the Central Bank of Cyprus off from TARGET2 and force it along with the Cypriot government to eventually issue its own money.
But even assuming that a new deal is agreed between Cyprus and the Eurogroup and ELA continues for the Cypriot banking system after Monday, this does not mean that this ELA is unlimited. ELA is limited by the availability of collateral and the haircuts that the central bank applies to this collateral. The Greek case is the most characteristic example of how punitive haircuts on ELA collateral can be. As of the end of January Greek banks used €122bn of collateral to borrow €31bn via ELA, i.e. an implied haircut of 75%. In contrast, they borrowed €76bn via normal ECB operations posting collateral of €97bn, i.e. the implied haircut on their normal ECB borrowing was 22%. The higher haircut on ELA collateral i.e. is mostly the result of the lower quality of this collateral, typically credit claims, vs. that accepted in normal ECB operations, typically securities. But it perhaps also reflects the higher riskiness the ECB sees with its counterparty, i.e. the national central bank and eventually the sovereign, when a country's banking system has to resort to ELA.
Because of the recapitalization issue which has been pending since last April, post the Greek PSI, Cypriot banks had been steadily losing access to normal ECB operations and had been increasing their reliance on ELA steadily since then. By November 2012 Cypriot banks had access to ELA only. This ELA borrowing peaked at €10bn last November and stood at €9bn as of the end of January.
What is the maximum ELA borrowing for Cypriot banks? Looking at their assets, Cypriot banks had €72bn of loans to non MFIs as of the end of January, roughly equal to total non-MFI deposits of €68bn. Assuming that all these loans are acceptable as ELA collateral with the same average haircut as in the case of Greek ELA, i.e. 75%, results to only €18bn of total ELA. Given that Cypriot banks have already €9bn via ELA, this leaves them with another €9bn of potential additional ELA. Of course the ECB could be more lenient with its ELA haircuts with Cypriot banks relative to Greek banks, and indeed even in the case of Greek banks, ELA haircuts appear to have been as low as 50% at certain points of time during 2012. But we doubt that total ELA could exceed €30bn, which represents more than 40% of the loan assets of Cypriot banks. In the case of Greek banks ECB reliance never exceeded 40% of total loan and security assets. So further liquidity support from the ECB seems limited, and not enough to offset the €21bn of non-euro area deposits with Cypriot banks, largely Russian (80%) and British (20%) and the €5bn of deposits with other euro area residents outside Cyprus.
This makes it inevitable that capital controls and a capital freeze will be imposed, in our view, even if a deal is reached by the end of the week, to prevent depositors, especially non-domestic depositors, fleeing the country. Article 63 of the Treaty on the Functioning of the European Union prohibits “all restrictions” on the movement of capital between Member States and between Member States and third countries. But there would be certain exceptions for measures justified on grounds of public policy or security, see Article 65 of the Treaty on the Functioning of the European Union. But even if allowed in exceptional circumstances, these capital controls and capital freezes are contagious and appear inconsistent with a monetary union.
The obvious risk is the impact that these capital controls will have on deposits in other peripheral countries. Large deposits, above €100k, and uninsured deposits are mostly at risk as these are the ones to be likely frozen in the Cypriot case. While a modest deposit tax might be acceptable to large depositors, a freeze of deposits for an un identifiable time period would likely be unacceptable to most large depositors such as corporations and institutional investors.
There are no recent data of how big this universe of large deposits is. Data from the European Commission suggest that in 2007 large deposits of above €100k and uninsured deposits comprised more than half of all deposits in peripheral countries. See Figure 1. The current shares are perhaps different from those reported in Figure 1 for 2007, but most likely the share of large or uninsured deposits is likely to be close to half of total deposits.
What cushions other peripheral countries relative to Cyprus is that these large deposits are mostly domestic. As explained in the next section, the share of non--domestic deposits in peripheral banks is rather modest at 7% as of the end of 2012.
But it is not only bank deposits that are at risk. A broader retrenchment in funding markets is possible given the confusion and inconsistency last weekend's decision created for investors relative to previous policy decisions:
1) In the case of Cypriot banks, depositors are hit while senior bond holders are spared, so seniority is not respected.
2) Deposits of foreign branches are protected while deposits of domestic branches are hit. This is the opposite of what happened to Iceland.
3) In the case if Ireland which also had a big banking system relative to the size of its economy, only sub debt holders, accounting for a very small portion of total creditors, were hit. No depositors were hit, in either domestic or foreign branches.
4) In the case of SNS sub debt holders were wiped out and reports suggest that the Dutch government came close to imposing losses on senior bond holders and was only prevented from doing so because of unsecured intergroup loans between SNS bank and Reaal insurance that would be subjected to the same losses as senior bond holders.
But beyond the confusion and inconsistency, all these trends and the case of Cyprus in particular, are not only showing bailout fatigue on the part of creditor nations, especially in Netherlands where economic conditions have been deteriorating rapidly, but they are also pointing to a shift towards bailing in private creditors in future sovereign bailouts or bank resolutions to avoid using taxpayers’ money.
Which funding markets do we need to track going forward? In our view, the excess cash in the Euro area banking system is the most important metric to track on a high frequency, daily, basis. This metric reflects the amount euro area banks borrow from the ECB in excess of their normal liquidity needs due to reserve requirements or autonomous factors. A loss in deposits or a loss in funding in wholesale markets forces banks to either access ELA or the Marginal Lending Facility at any time or, in less urgent situations, to access the standard weekly Main Refinancing Operation (MRO) every Tuesday. So euro area banks can borrow from the ECB and the excess cash in the euro area banking system can rise at any day of the week and not only with Tuesday's MRO. Any potential increase in ELA, such as from Cypriot banks, is reflected in the excess cash in the Euro area banking system via a decrease in autonomous factors rather than an increase in outstanding operations. The excess cash in the euro area banking system actually declined this week, with a decrease in outstanding operations and an increase in autonomous factors, indicating no signs of broad contagion yet.
In terms of the impact on wholesale bank funding markets, we can also track peripheral bank debt issuance directly. This week peripheral banks issued only €600m of bonds vs. €4bn in the previous two weeks. The represents a marked slowing, suggesting that Cyprus might be having some impact on peripheral wholesale funding markets.
On a lower frequency basis, we need to track the monthly Target2 balances for peripheral countries, which typically become available during the first two weeks of the following month, and the ECB data on MFI balance sheets which are published at the end of thee following month.
In what we view as another ill-conceived and ill-timed move, the Spanish Minister of Finance & Public Administration announced this week a tax or bank levy (probably 0.2%) to be imposed on bank deposits, without details on which deposits will be affected or timing.
This is adding to the Cypriot crisis in sparking deposit outflow risks.
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The awful ruin of Europe, with all its vanished glories, glares us in the eyes.
When the designs of wicked men or the aggressive urge of mighty States dissolve over large areas the frame of civilised society, humble folk are confronted with difficulties with which they cannot cope. For them all is distorted, all is broken, even ground to pulp.
From Stettin in the Baltic to Trieste in the Adriatic, an iron curtain has descended across the Continent.
http://history1900s.about.com/od/churchillwinston/a/Iron-Curtain.htm
Freedom and confidence (trust) are the foundations of capitalism. Yet each of these bedrocks of our economic system are slowly being eroded by inept government coinciding with rigged markets and laws in favor of the oligarchs of our society.
With all these articles that we've been getting about capital controls, the bank runs have begun, IMO.
But Krugman said it was all OK, Fink said it didn't matter, Ben wouldn't answer the fucking question as to whether the US'd have depositors take a haircut, Liesman couldn't find his ass in broad daylight with Santelli showing him the way (anywhere, Steve, anywhere) Biden spent a $1.0 million on hotel rooms in Europe (pumping their economy!) and Jesse Jackson wants a demonstration against the dude sent in to manage Detroit. (Is he white?)
Where's Timmah when we need it fixed all over again?
Dsintermediation Bitxchez!
Means there'll be no cash left in the banks, the liability side of the balance sheets collapses!
Where oh where will the loans come from?
The ECB?
The Fed?
Holy Shit and Shinola Kids, and you thought it was a Lehman moment?
Lehman was but one single Second Tier B rated brokerage firm
We're talking the whole fucking banking system in Europe.
Booyah, motherfuckers!
Who, and I mean WHO was it bought the $900mm notional August S&P puts 2 days ago?
Shades of 9/11 front running.
Booyah!
LOL Been sayin' this shit gonna happen and nobody listens... in just a few days all them wonderful gains gonna be gone POOF!
Love your thinking Knuks, You should start a religious cult.. oh, I don't know... maybe call it "KNUKOLOGY" or sumthin...
just don't piss off the FBI to receive some Waco-style justice
I don't disagree, but don't forget that at the individual level there are plenty of exceptions of excellence. E.g., their guy at the Phoenix office, who warned his bosses repeatedly about terrorists, and who died in the Twin Towers shortly after he was relocated there.
El Oregonian
Right, don't believe any of them. Free yourselves from the system.
EDIT:
Getting money out of the bank is a small step, first of many...
I'm three drinks into my Friday unwind and I think I'm signing off. Tomorrow I'm going to come back and read the following comment to see if it still makes sense (currently I think it does):
Why's it always fucking Europe? What the fuck is up with that place? Is it so close to the middle east that it's somehow contracted the same disease of "unfixability"? It's worse, in fact. It's the middle east WITH BANKS.
England is the slick 3-piece suit con of the family, Germany wants everyone to do as they say and rule the family, France is just.... who gives a fuck about liberal asshole France, all of southern Europe is the deadbeat cousins constantly borrowing money they will never repay and Switzerland is just trying to stay out of it, praying like mad nobody notices them.
Every few decades they get together for a family reunion, somebody gets drunk and mouths off, then there's a fight and everyone swears they will never talk to eachother again.... but thei always do, eventually. It's like they're a giant disfunctional family.
I just want to know who's the perverted uncle who molested all of them when they were kids?
Chris Martenson and others stress the important point that these collapses always start small on the periphery and work their way to the center as they grow, like turds circling the drain or debris orbiting a black hole. In this instance, Europe is peripheral to the United States. The crisis really escalates when it finally manifests here. Continuing the analogy, our banks are TBTF ("Too Big To Flush"), and Bernanke thinks adding water eliminates the need for a plunger.
Draghi where are youuuuuuuuuuuu?
Draghi: “Within our mandate, the ECB is ready to do whatever it takes to preserve the euro,”
Cyprus: "I call"
I think you're capable of answering your last question: Who was it who can mess and bugger them up to that extent, generation after generation, in every European country? Who, besides the feudal aristocracy with their ultimate Entitlement program? Besides them, who else?
Hint: for bonus points, think of Diderot and his thoughts on peace.
When you figure out the core problem in Europe, and maybe the Middle East, turn your sights on Asia and answer me this:
In 1900, Asia had one half the world's population, but a larger percent of the world's GDP than it did in 2000, when it then had two thirds of the world's population...and this relative GDP decline in spite of a plethora of self-claimed "economic miracles".
Perhaps it's not Europe or the Middle East or Asia (or Africa). Perhaps it's humanity. Perhaps we are hard wired to trip ourselves up. China today is incapable of being the scientific cutting edge it was three thousand years ago (though they might make a comeback after missing out on those five centuries since the Renaissance). Egypt is incapable of building the pyramids today, but had cutting edge technology forty-five hundred years ago. Greece couldn't build the Lion Gate at Mycenae, much less the Parthenon today, but they once could. Byzantium? The Coliseum and Rome's aqueducts? The Mongols could slaughter 20% of the world's population and rule the largest landmass in history, while today they have a few yurts, export a few Sumo wrestlers to Japan, and negotiate deals with Ivanhoe & its partners to mine copper.
We all fall down. It's just become our turn.
chin
speaking of mongols, a genetic study(wish i could site it) found that the male Y chromosone of (sic) Gubla Khan (son of Ghengis) is found in 1 in 200 males on the PLANET. At his peak he added 30 new virgins to his harem every year.
Sounds as if another part of Kublai was found in 30 of 30 virgins a month. You know what they say:
A virgin a day keeps the gene pool in play.
And with it the "rape and pillage" chromo is passed on for generations to come. Seems a lot has ended up on Wall St. Thanks for the correct spelling on Kublai
.
so, what you're saying is 1 in 200 males today have something of the sociopath in their genetics?
"30 new virgins" in his stable yearly. . . most likely very, very young girls, what would be considered "pedophilia" by most standards today - perhaps this is where the predisposition to rape children comes from? I'm sure Khan's army didn't make much of a distinction when they raped whole villages, boys included.
eventually, perhaps, many people see this type of war on humanity behaviour as harmful to the whole, as something that destroys lives, destroys community, destroys humans at their core, demeans the whole notion of what is "human" and what "civilisation" even stands for.
warriors. village destroyers. rapists and murderers, in organised corporate/military gangs, on behalf of their overlords, the scourge of nature.
yeah, humans haven't really evolved much these past centuries. . .
Chin,
Interesting historical observations. They make for a frightfull possibility for the future. These civilizations did not decline in a matter of a few years.
The modern world however and especially the debt based banking system do not have a lot of time when confidence is lost. At current world population, what happens when billions of people are suddenly deprived of their "money?"
Why the different treatment between Greece and Cyprus by the Troika? Seems clear to me... the losers in the Greek meltdown would be French and Italian bankers while the losers in Cyprus appear to mostly Russian? (apart from the Greeks and the Cypriots themselves of course, but, when you are part of an elite banking cartel, they are just peasants)
Lemme tell y'all sumptin'
Just sos you all think I'm not crazy, I even took some bucks out of bank deposits and the like and placed it in bonds this last week.
Not just a natterin' and a jawin' about the shit.
Shithellfire, dudes and dudeettes.
Ain't heard nobody yet nattering about mutual funds, even money market funds, exposure to European Banks.
Anybody?
Ding ding ding ding
That's what I did.
I'm too old to take risk and measure it by how well I sleep at night.
Which I really like to do, anymore.
Think of all the peaches and mongos you could sell for me _ Frank Ocean
Knuks 2016
The Russians are depositors and don't own the (traditional) debt or equity of the banks in Cyprus, so in effect the treatment is exactly the same, anyone pays EXCEPT the Eurozone ponzi bankers.
Yeah, isn't it amazing how the spin was that 'depositors' and their money "stinks", but not when they accepted it?
Sanctimonious hypocrisy all around: if it had been Americans, then they'd be "innocent investors and job creators"; if they had been, say, Israeli depositors (although this is unrealistic), it would have probably been 'anti Semitism'.
Clearly the casting, dialog, effects and music is adapted to suit the play of the banking directors and producers. If the play is a flop, it's never ever the fault of these 'leaders'.
we are hearing only one side of the story.
boris-out there? chime in!
so are humans (everywhere)really this afraid of these bankstas?
i mean isn't this the heart of the matter?
or are the bankstas this shrewd-either more debt or you are fucked(collapse).
do they have bullets to back there implied power?
something tells me, because the people are gunless, therefor ultimately powerless to this new financial terror brought on by ruthless people operating behind a political curtain of spinless paid off chicken shit two faced cock sucking snake oil selling mutha fucks commonly called politicians...
.......in just a few days all them wonderful gains gonna be gone POOF!
rumors of "DisInflation" and Gold @ $900 and Silver @ $12 ..... if only for a few hours.
Uh oh. Gotta go. That tooth fairy getting out of the closet again.
when the Third Reich rule the roost there was no money. Was there hyperinflation? Nope. In fact the first thing that made Hitler "a sensation" was that he crushed the hyperinflation of the 1920's. Germany went back to work...their depression ended with that election. I will admit the whole "war thingy" didn't go that well...nor was it "functioned" in a way i could possibly fathom. But the USA which had to run flat out in order to be "the arsenal of democracy" experience in terms of gold and silver basically zero inflation. i freely admit i'm struggling with a deflation thesis even in theory given all the debt monetization reckless spending (we're not simulataneously fighting the Nazi's and Imperial Japan here...how did we go bankrupt fighting 500 terrorists in Afghanistan again?) but QE looks to me like a real downer for the "hot money" crowd. sure the equity market has surged...but trading volume has dried up the economic reocovery seems to have hit a soft patch here. it's at this point my eye's gloss over and i think "isn't this the point where the bankruptcies finally hit?" how do i buy gold with no money...at ANY price? the rest of the world is collapsing it seems...an acre of land in India is now $750,000? really? this really has the feel of an epic "bug meets windshield" moment coming. cash is King in this world. "assets get depreciated to at or near zero...and are simply paid for by what's in one's wallet." forget the bank...who believes in these asset prices? if it ain't a working asset and it ain't got cash flow i say NOBODY. "and the stock market agrees with me 100 percent" i might add.
And answer me this. Germany because of War reparations were so broke they couldnt borrow a cup of sugar. Yet Hitler put Germany back ot work with........?
It was a brillant move but the banks hated it because they were shut out.
The only way out of the Euro is this way and it works (until you build armed forces with its purchasing power.
Where did Hitler get the collateral to fund his "miracle"? He offered the gains from war with the USSR and the banks bought it. Enough about Hitler. Among other things he was a war-making statist. Hitler? No friend of mine.
Hitler re-fucked the economy. Why do you think he went to war?
wonder if the elite even meet any more...
"I told that asshole Ben what's his nuts to rip off the minions, then have the african american go to war! Don't bother me again!
Big time, big time. This system is about to come down and for the EU to do what they did last saturday was stupid. They essentially scared the sheep into running and they are trying to run. All our gains are going down the tubes in a week or two.
"Who, and I mean WHO was it bought the $900mm notional August S&P puts 2 days ago?"
Lemme guess... A Jew?
My guess is someone who knows the plan or can shape events.
That's just it. We had runs on US banks in 2008...but you didn't see folks lined up at cash machines. Money was being wired out of banks with the click of a mouse...and it was this big corporate cash exodus that no one could see that caused the FDIC to raise its deposit insurance amounts.
My guess is...the big money has been moving very rapidly already...out of Europe and to who knows where. Seems to me Tyler put a chart this week which revealed that euro inter-bank lending stress has already begun...in fact, has been underway for some time now.
It's pretty easy to time your quick and quiet exit...if you're a bank causing the stress to begin with.
That's why having even small bank accounts in various places in the world (even a few hundred or few thousand in each) makes SO much sense. With signs of trouble, a few clicks of the mouse greater amounts can be relocated at least temporarily out of the incremental financial or currency weather. The exact same way you'd shelter anything of value from a storm front.
toys for tits said: "With all these articles that we've been getting about capital controls, the bank runs have begun, IMO."
I'm doing my best.
Of course control the money. After all it is just the little inconsiquential people that have their money in the bank. The elite are the ones who deserve the money, not those who work hard slaving away and after paying their taxes put their savings in the bank. the people should be slaves only to support the elite, thus they feel they have a right to all the money.
The Smart Rats already jumped ship last year or two:
Super-rich investors buy gold by ton(Reuters)GENEVA | Mon Oct 4, 2010 1:13pm EDT
(Reuters) - The world's wealthiest people have responded to economic worries by buying gold by the bar -- and sometimes by the ton -- and by moving assets out of the financial system, bankers catering to the very rich said on Monday.
http://www.reuters.com/article/2010/10/04/us-wealth-summit-gold-idUSTRE6...
If so, then isn't the PM suppression convenient for them also, not just for the dollar's dominance?
In other words, "Let's see how this Guinea pig cooks."
Coming to shores near you ...
Like I been telling everybody forever, it will be the Eurozone political brainiacs who kick off the next big shitstorm. I get dismayed at being right all the time.
"Take not thy thunder from me, but take away my pride"
W B Yeats
I seriously am sick and tired of being called a tin foil hat conspiracy theorist, bad omen, sky is falling person...
So them non believers can go "fugemselves".
Long treasuries and PMs gonna come thru this the best
And cash, of course....
I am seriously fed up with the namby pamby everything's all A fucking OK propaganda and media perceptions management.
According to the state-$ponsored orifices, we have been in a recovery for four years. "I feel your pain."
Knuks, just because everyone tells you they're not REALLY watching you, doesn't mean it's true. LOL...sigh...now I've got ME thinking.
Me too knuckles, not to rant but I'm just saying... everywhere you look fraud, fraud, fraud, psychopaths running shit, good ole boys smacking dicks to the tune of the average folk on this space rock getting the shaft.
To me the "normal" people are the fucking TV programmed Prozac izombie idiots sheeping along with the illusion that has been sold to them in many forms. We are all being bombarded by bullshit from every direction it's enough to make one mad as hell which many are but still most slave on in denial of the deception that has them. People should have figured out by now that pretty much EVERYTHING is rigged, fixed, cooked, etc... nothing left is sacred, nothing left but for Rome to burn once again, truth is treason in all the empires of lies. Just know a little bit of history and you can see where this goes.
Long PM's, gardens, barter, communities, and people eventually figuring it out.
Yup
It's all fucking fixed, rigged, 00's and boxcars.
Unless you own or regulate the Casino.
Yeah, I think most us here at ZH are in good company.
Thanks Knucks
Fuck the Morgue...
struck me as substandard actually. Capital controls for the whole Continent of Europe? Jamie Dimon's wet dream fer sure....but it's totally ridiculous. Germany goes back to the d-mark, get's whacked with inflation because of the massive devaluation...but suddenly "Made in Germany" can compete with everyone but the Americans. people are already migrating out of Spain and Italy. The French don't buckle so easily...they put their gold in holes in the backyard, make wine and sing "Yankee go home" con gusto. they ruled Germany and gave them and themselves "a code" to be governed by...not some "rule of law" b.s. you can get capital controls in France...but on the rest of the Continent? I think that's ridiculous.
Can't/won't happen here, so I don't give a fuck
Did you learn nothing from 2008? Is it not obvious that all major banks are tied together inexorably? Did our subprime crisis, culminating in the Lehman and AIG failures, not "jump the pond" in a matter of days and throw Europe's banks into chaos? Do you think if the chips were down that Obama wouldn't sign the order to make all depositors over the $250K FDIC threshold take a hit?
I know, we have a printing press so it can't happen to us. If that is where you place your faith that's your choice. Just realize that the money will simply be stolen more slowly and less overtly from you. Nonetheless, it will still be stolen.
What the fuck is going on here? I gotta put a /sarc tag on everything? Come on guys/gals. I know I'm not on MBD playing field, but...sheesh
And another thing; what are the implications of all those junks i.e. because most people are fucking idiots y'all can't even entertain the thought that I was joking?
We're fucked...
I'm with you ghengis...
Seems like every time Krugman shows up shit gets weird.
YOu gotta be a known troublemaker round these parts before we overlook comments like that. Sorry. Carry on.
I might have been funny if it hadn't already occurred in the US (several) times with different twists over the past few years, so it actually just comes across as ignorant.
Just one example from the way back (pre-Corzining) era- "investors" in the Reserve Primary Fund, which was fully invested in "risk-free" US government debt backed by the full "faith and credit" of the US. How long do think that banking holiday was for investors who socked some of their blood-in-the-streets shopping-spree dough in the supposed safety of the original MM fund? For a proper calculation of haircut one needs to look at both the time value of money as well as the opportunity cost of forgone alternatives during impairment
That banking holiday was actually more causal to the broader bank run on the US in 08 than anything related to Dick or Jimmy's not so excellent adventures.
uh...it makes it even funnier and more ironic since it has already occurred...you realize that, right?
+1 anyway for the reference
Point taken, now that I've re-read the thing for umpteenth time...
Well, the hard bitten sarcasm and gallows humor that was once the norm here and would have been automatically understood for what it is sometimes eludes more recent folks who may see that sort of thing as serious.
Look at the number of indignant responses MDB, Dr. Paul Krugman, and (long ago) Harry Wanger etc. receive(d).
It ain't necessarily you, the ol' neighborhood has changed as its notoriety has spread.
Yowza, brother!
Many of the hard core have left...
Which means there's only one thing to do
When the going gets tough, the tough get weird!
Which makes you one tough bastard Knuks, and don't you dare stop. :-)
Yeah I know. Im. The cunt who refused to accept the change. Dipshits are arguing with MDB and actually think "Paul Krugman" on ZH is the REAL FUCKING PAUL KRUGMAN!
Harry Wagner/Hamy Wanger bring back memories. Where's that rat fuck Robot Trader while we're at it?
On second thought, all those douches could be Ben S Bernanke, Tim Geithner, Jamie Dimon, Paul Krugman, Blithe Masters, etc.
Have pity on those whose chances grow thinner.
Rat fuck Robot Trader is busy banging the escorts he bought by piling everything into "stawks".
You may not like it. I do not like it. But that is the reality.
Keynes was right about one thing. In the long run...
...so rally on Wayne. Rally on Garth.
The end game may just be that the worst of all possible worst cases happens.
Namely... the world discovers it can operate just fine with Central Banks having negative capital, that they can in fact backstop everything, that the world breathes one big exhausted sigh of relief that liquidation will never happen, and goes muddling through, too exhausted and dispirited even to power the "animal spirits" that hyperinflation would require.
That capital becomes obsolete, the .gov/.com collective is happily handed authority to do as it sees fit, that the neo-fascist state crowdsources its panopticon via facebook and the troublemakers are neutered, that savings are vaporized and nobody givin' a fuuk because they get their free shit anyhoo...
Revolution is a cascade, a shattering. You can't shatter putty. Humanity as a melted puddle will never reject its slavery, never even recognize it.
I've come to see the "inevitability of collapse" as hopelessly optimistic.
This is my nightmare. It may not come true, but it appears that TPTB want to test it out, so we get the nightmare or the destruction from a failed (but noble /s) experiment.
Obama doesn't have to sign any kind of order. If you are over 250K in any bank, your money over that threshhold is at risk of total loss. The "full faith and credit" of the USA only applies up to 250K. The FDIC will sell the assets of the failed bank for cash, and if that cash doesn't cover the insured deposits, the uninsured deposits will be totally gone.
If you have really large amounts of cash to store, I would suggest Treasury Direct.
ghengis86:
?????????????
Dude, it was sarcasm.
no sarc tag = who knows?
I work with 2 dozen douchebags that won't even consider 911 an inside job.
Two questions for yer coworkers: "How hot do jet fuel flames get?"
"What is the white-hot melting point of steel?"
Let their own cognitive dissonance show them the way...
they are a special - though unfortunately not unique - brand of dipshit. Bring up WTC7 and its free-fall collapse without having being hit by a plane and you really get that silent, glazed over stare. It's like their brain's are running DOS and their's face is telling me
BAD COMMAND OR FILE NAME
BAD COMMAND OR FILE NAME
BAD COMMAND OR FILE NAME
BAD COMMAND OR FILE NAME
ghengis:
Huge IndyMac Bank Run in Southern Californiahttp://www.youtube.com/watch?v=IVRgZ9LizZQ
I htink that was the summer of 2008 ... this time is different, eh?
Fucking idiots...
I have one savings account at one institution that has $5 left in it. Their new "fees" for savings accounts with less than $500 are $5 a month. See if I care if you close that shit down. I have about $123.64 in their "free checking" account, which will also get a new maintenance fee next month of $11/month for balances less than $1,500. Another bank I have accounts at will be increasing transaction costs - and get this - will charge me $6 to cash a check DRAWN FROM AN ACCOUNT AT THE SAME FUCKING BANK! My credit union rocks, but by Tuesday of next week, it will have ~$300 left after my kids tuition check clears.
I keep as little fiat in my accounts as needed to make certain payments, and I've been doing this since 2008 when I finally fucking woke up. Everything else is held outside the system, converted to hard assets and/or blown on hookers and blow.
Ben Shalom Bernanke's ZIRP is forcing banks to shove their dicks further up our asses until we're flossing with their pubes. I made my mind up years ago that I was done being their ATM Lolita bitch and took my balls in both hands and went fucking home.
Edit: spelling and shit. The Talisker's is catching up to me
You are going off topic,
You said it can't/won't happen.
I gotta comment later, I have to run to the bank to withdraw EVERYTHING.
Hey Wendy, maybe we should stop giving away those tote bags as free gifts to our depositors. We don't want to give them any ideas.
Right Joe, I'll hide them all in the safe, with what little is left of the cash.
Yeah, free toasters instead. Oh wait, no, that's really no better.
No, no, ya got it all wrong son: Buy a toaster, get a free bank!
Remember back when the greek debt crisis was flaring up and there was all this hype about that UK bank note printing company getting a massive order?
Wonder, what happened with that one... maybe we'll get another "big order" soon.
Remember when they used to pay you to keep money in the bank?
'we need to track the monthly Target2 balances for peripheral countries'
If I were you, J.P., I'd look at Germany's TARGET2 CREDIT balance.
Germany is owed €650 billion. The debtors can no more service these obligations than Germany could pay its WW I reparations.
http://www.creditwritedowns.com/wp-content/uploads/2012/06/Target2-Net-B...
Game over, bItCHeZ. When countries with 25% unemployment owe you €650 billion, YOU'VE got a problem.
[delete double post]
Excellent point.
Germany's TARGET2 balance was closer to 1 T Euros a year ago. It has gone way down.
EUR 612 bn as of late Feb.
Not that they don't have a problem.
I want everything to crash!
JPM would know... they snookered Woodrow Wilson into looking the other way while they unconstitutionally sold steel and arms on credit to the British and French. When the Germans were about to win WWI [rightfully or at least fair and square], Wilson declared war and sent 100,000 Americans to die so JPM could collect.
Can we have a post dedicated to the shitz coming down? Cyprus, bitcoin, permission slips for $100 bills. It really is too much. Is this really how the ending begins? I need more bourbon and popcorn.
bourbon infused popcorn? you may be on to something
come on otto... you're slipping... What the hell do you think bourbon is made out of?
~~~
Then again ~ you may be ONTO something... Better stock up on the "pre-MONSANTO franken seed" batches people [while they're still available]... Unless you know how to do crack corn in the woods without drones coming in to mow you down...
Yup. That might be a better business than Lululemon.
I grew up in England in the 60s and 70s.
During that time no Englishman could legally invest in foreign securities which were not quoted in London.
When does a country enact capital controls? When more goes out than comes in.
You young'uns out there financially active only since the 80s, you are only accustomed to times when net capital flows into the Western FIRE economies.
Good luck god bless happy investing.
As a former ex-pat at the same time, I have fond remembrances of currency runs, devaluations and the like, checking accounts being frozen for days at a time...
As well as the real bear markets of the 70's...
The kids have no fucking idea...
Nixon wage and price controls...
Whadda party!
1975 quotation from Pension Fund Manager to Beneficiaries:
"Do not grow old."
OMG, Gromit...
Sounds like you were around for the Saturday Night Massacre, Dr Doom and The Lawyer's Enrichment Act of 1974 (ERISA) right along with me :)
S & P broke 700 today!
I should know I was one of them.
Yeah, it's tough to wrap your brain around it if you have known no such reality your whole life. I suspect few members on this board have any recollection prior to Ronald Reagan being in the White House. The shock and surprise in the comments as one "rule of financial reality" after another is broken in front of their eyes is my confirmation. It happened before their threshold of experience so it must be "new". But it isn't, of course.
Like reruns of old TV shows "if you haven't seen it before, it's new to you!" If you HAVE seen them before, it's "Ugh, not this shit again. I just can't watch Lucy working in the chocolate factory again."
"Whip Inflation Now"
:)
I was on the bond side of the pension management biz and we were long as we could get and "LoVin'It" a buncha cocky smart assed young punks doin' it right (for that brief several years in time).
Was the trade of the decade, long treasuries, 15 3/8% 30 years trading at a discount.
Whadda gift!
But fear not, more and much worse than the Volcker Medicine is a comin' and it's gonna make that look like child's play.
Could not be clearer and all the talkin' heads yips and yaps about if and when inconsequential craps gonna happen next week.
Forest and Trees.
We accountants had a different name for it, Knuks.
Every Ridiculous Idea Since Adam.
Damn! You remember them days, too!
Good on ya'
Great at times to watch the blabbers on the telly now...
Not a clue...
By the time people decide to start killing bankers, it will be too late for it to do any good...so they'll have to be content to do it for sport.
I just put out the OUZO and some HUMUS backed with a six pack to watch this FUCKING PREMIER....Anyone care to join?
Salute.
And they are just figuring this out???
The establishment keeps trying to save every (big) bank and every senior bondholder, pretending what is underway is a simple liquidity squeeze.
At some point the banks are going to have to go, the depositors protected with lenders to these banks and shareholders taking the losses. The longer this is put off the greater the losses. At some point all the assets are worthless and all liabilities are underwater.
Meanwhile, the Cypriot losses on Greek investments are the responsibility of the ECB which managed the entire Greek lender cramdown. The ECB should pay and the Germans should shut up.
Meanwhile, capital controls = no more euro.
Sorry Steve your stuff is usually very good but I can't agree with you here.
Just put the bad banks into bankruptcy - UK law operates - and bondholders (not many of them) lose 100% and depositors over 100K lose whatever is lost.
It's very lucky really that Big Brother is willing to stump up 2/3 of the shortfall so stop whining and get it done!
The bank assets have little value.
The longer they keep this double entry system going even assets with a basic utility function will collapse to sustain the "growth potential" of these dud (wealth conduit) assets.
I.e. you loose everything.
The money system needs to change.
en.wikipedia.org/wiki/Military_fiat
The Cyprus govt can't even pay the insured depositors their 30B, so that plan won't work. Cyprus has maybe 1 ro 2 B Euros to rub together, and that is it!
Who the fuck red arrowed this?
Jesus, Krugman's here....
Got you too
Yup :)
LOL
Got myself too!
Feel better now.
:)
Krugman, Ben, Timmy, Lew; or their accolytes.
"The establishment keeps trying to save every (big) bank and every senior bondholder, pretending what is underway is a simple liquidity squeeze."
Of course they do. If they fail (and they will), then the derivative default debacle begins to unwind nearly a quadrillion dollars notational. As ZH has said many times, notational becomes net as countrparties fail.
Don't eat all the popcorn, we ar just watching the previews now. Save some poppers for when the main attraction comes to a climax!
Agreed with the analysis. Disagree with the concusion. Eat the popcorn now. The main feature will be the theatre burning down. There will be no movie (because it implies you are allowed to remain a spectator). When they yell "fire" you can sit in your seat to avoid getting trampled in the rush to the exits, but you'll still be burned to death.
You are certainly right but I haven't been in a movie theatre in about three decades and don't plan to ever be in one again.
I plan to survive and prosper but know it will take a lot of careful preparation and good luck to do it. At any rate, I want to save some popcorn for later. If I don't make it the surviving roaches (always roaches forever and ever) can have it.
Cordially,
TwoHoot
"The ECB should pay and the Germans should shut up."
Steve,
This is where you and I disagree.
It is not - and should not be - Germany's responsibility to backstop all failures resulting from the imbalances within the Euro system.
On the other hand Germany should act to mitigate the imbalances and pro-actively attempt to rebalance.
By this I mean follows policies which reduce German exports to and increase German imports from the periphery.
As a simple example incent Germans to travel to and spend money in Cyprus.
So the solvency problem can be improved. It doesn't help to give liquity where the real issue is solvency.
If people can't get their money out of a bank, they sure as fuck aren't going to deposit any. Don't these retards get that?
Evidently not.
Mandatory deposits from your paycheck, just like tax witholding. The banksters can always find a way to make you pay.
The Russians don't get pay checks in Cyprus. They are pissed like hell and won't bring a single penny to Cyprus over the next 10 years.
Does polonium go well with ouzo?
Can't the ECB simply force every European to? Problem solved.
It's not the question if they can, but when they will.
Larry Kudlow @larry_kudlow
Looks like #Cyprus is a done deal. Stock market sniffed it out way in advance.
https://twitter.com/larry_kudlow
So is he saying it's OK or fucked?
I cannot abide by 40 character pearls of wisdom.
(my attention span is way too short)
I don't know what he is talking about. Cyprus has to find 5.8 bln EUR. The most important vote is tomorrow on bank tax. They need 25% of deposits over 100.000. It all depends on this one. The other 9 votes were easy today. MPs might get some "love" letters from Moscow overnight. Bottom line: by no means a done deal yet.
kudos to larry k for banging on DHS for ammo purchase tonight- at the end he said " they should stand in a circle and shoot one another"
Right on Brother Larry!
(In this case)
I like that.....The circle target practice, that is...(Few types I could think of would do there..)
"Cyprus has to find 5.8 bln EUR."
Oh, apparently you didn't hear. The number du jour is now 6.7. When they figure out how to confiscate that, it won't be enough.
If they vote to accomodate the EU, then they will be done as a banking center. Bankrupting and fucking the bondholders is the only way to possibly stay relevant.
Isnt it funny how they wait until friday evening to publish this?
Happy New Years, NDAA bitches...
Love Obama
Cypriot: The straw that broke the Camels back.
Looks like JPM has been following ZH.
Get your money out of U.S. banks and funds.
The FED will be coming after your money, I guarantee it!
The FED prints the money, so they don't care. Just don't keep more than 250K in any US bank, and if Pelosi regains her majority in the Midterm next year, then you should run for the hills. If the Democrats regain full control, they will tax your deposits, confiscate your IRAs and guns, and put wealth taxes on everything else as well.
They'll have a look back period as well. To see where you've been stashing it, so it makes sense to make a few trips to the casino as well.
Never happen. Americans are ignorant but they ain't stupid.
So come all you good time rounders
Listenin’ to my sound
And drink a round to Cyprus
Before they tear it down
Back, savings, back in time
I wanna go back when you were mine
Back, savings, back in time
I wanna go back when you were mine
With apologies to Gillian Welch...
"Beasts of England, beasts of Ireland........"
G. Orwell.
.2% ....the mississippi can be jumped over at its starting point......the levy will grow like the mighty mississippi until one day all of those depositors find themselves washed out into an oil slicked ocean
Look at this whole charade from a different prospective. Uncle Ben told you everything is improving while humping his printing press.
IntercontinentalExchange (ICE) Merger With NYSE Euronext Will Reshape Markets
Are you beginning to see the farce?
Actually, all I got visually was Ben, no pants, just his socks, butt up in the air, pumping some 62 1/2 y/o grandmother about to retire from the Mint on one of the presses clattering along full speed...
It's the absurdity of the vision of him with his socks on from the back that does it.
wow
(Ben, honey, why do you keep coming home with ink in your beard? Can't they get rid of those quill pens and ink wells?)
Looks like our thumbs down guy is working overtime today. :>)
He Works in Mysterious Ways
This week peripheral banks issued only €600m of bonds vs. €4bn in the previous two weeks. The represents a marked slowing, suggesting that Cyprus might be having some impact on peripheral wholesale funding markets
You think???
The crash in bonds is well under way.
JPM, destroyer of nations, states, municipalities, speaketh.