This page has been archived and commenting is disabled.

Guest Post: Why Cyprus 2013 Is Worse Than The KreditAnstalt (1931) And Argentina 2001 Crises

Tyler Durden's picture


Submitted by Martin Sibileau of A View from the Trenches blog,

Why Cyprus 2013 is worse than the KreditAnstalt (1931) and Argentina 2001 crises

The Cyprus 2013, like any other event, can be thought in political and economic terms.

Political analysis: Two dimensions

Politically, I can see two dimensions. The first dimension belongs to the geopolitical history of the region, with the addition of the recently discovered natural gas reserves. The historical relevance goes as far back as 1853, the year the Crimean War began. The Crimean War took place in the adjacent Black Sea, but the political interest was the same: To avoid the expansion of Russia into the Mediterranean. The relevance of this episode was the break-up of the balance of power established after the Napoleonic Wars, with the Congress of Vienna, in 1815. From then on, a whole new series of unexpected events would lead to a weaker France, a stronger Prussia, new alliances and a final resolution sixty years later: World War I.  It is within this same framework that I see Cyprus 2013 as a very relevant political event: Should Russia eventually obtain a bailout of Cyprus (as I write, this does not seem likely) against a pledge on the natural gas reserves or a naval base, a new balance of power will have been drafted in the region, with Israel as the biggest loser.

The second political dimension refers to a point I made exactly a year ago, precisely inspired in the KreditAnstalt event of 1931. In an article titled: “On gold, stocks, financial repression and the KreditAnstalt of 1931” I wrote:

“(The KreditAnstalt event) was triggered because France, a public sector creditor, introduced a political condition to Austria, in exchange for a bailout of the KreditAnstalt. Today, like in 1931, in the Euro zone, the public sector is increasingly the creditor of the public sector. In 1931, England and France were creditors of Austria and demanded conditions that no private investor would have demanded.


Private investors live and die by their profits and losses. Politicians live and die by the votes they get. Private investors worry about the sustainability and capital structure of the borrower, the collateralization and the funding profile of their credits. Politicians worry about the sustainability of their power. It’s a fact and we must learn to live with it.


In 2012, Greece and increasingly other peripheral EU countries owe to other governments, the IMF and the European Central Bank. Private investors have been wiped out and will not return any moment soon. We fear that just like in 1931, when the next bailout is due either for Greece again or Portugal or Spain, political conditions will be demanded that no private investor in his/her right mind would ever have demanded.


Think of it... What in the world had the customs union between Austria and Germany in 1931 had to do with the capitalization ratio of the KreditAnstalt??? Nothing! Yet, millions and millions of people worldwide were condemned to misery in only a matter of days as their savings evaporated! Ladies and gentlemen, welcome to the world of fiat currencies! You have been warned! If months from now you read in the papers that the EU Council irresponsibly demands strange things from a peripheral country in need of a bailout, remember the KreditAnstalt. Remember 1931.


Please, understand that this is not a tail risk. The tail risk is precisely the opposite. The real tail risk here is that when the next bailout comes due, politicians think like private investors and give priority to economic rather than political considerations. That’s the tail risk! If such a crisis occurred, the media will speak of increased correlations and tell you that everything is actually fine on this side of the Atlantic. But if you read us, you will know that all that led to such a situation was perfectly foreseeable and nothing is really fine on this side of the Atlantic either. You will have remembered 1931…”

At this point, I think all is said and I have nothing else to add. My worries a year ago are proving too correct.

Economic analysis: Confiscation and two broken promises

Cyprus 2013 is worse than the KreditAnstalt and Argentina 2001 crises because it has an element of confiscation and two broken promises that were absent in the latter.


Neither in 1931 or in 2001 were the depositors in Austria or Argentina subject to an explicit and arbitrary confiscation of their savings by their fellow representatives, meeting at a Parliament. This is a totally new element of violence in the drama. Back in 1931 and in 2001, depositors simply run against their banks for price discovery: to discover the true value of holding US dollar bills –physical- vs. their respective fiat currencies (shillings and pesos). That was all what these exercises (i.e. runs) were about. The governments did not intervene to distort the final discovery. In the ‘30s, through contagion to the US, such discovery allowed depositors to realize that their US dollars were worth a lot less than 1/20.67th of an ounce of gold. In the 21st century, the final act of the same game will see holders of fiat gold realizing that there is a premium for physical gold.

Both in 1931 and 2001, governments intervened only to slow down the process of price discovery. But could not change the outcome of the same. In the case of Argentina, with a credit multiplier for US dollars of 1/0.3 (30% was the reserve ratio), the US dollar ended trading at 3 pesos by 2003. Nobody should have been surprised in Argentina therefore, that the peso lost 2/3rds of its value vs. the US dollar. The devaluation was not a confiscation. Depositors did not bail out their banks or the government. Depositors simply suffer a market priced transfer of wealth that benefited those who held physical US dollars. And neither the banks nor the government had physical US dollars. That’s why they both went bankrupt.

In Cyprus 2013, depositors have no clue as to what the final recovery of their capital will be. The expected losses have no connection with a public credit multiplier (In Argentina everyone and their grandmothers knew that as of March 1995, by regulation of the central bank, for every three fiat US dollars circulating there was only 1 real US dollar as backup). In Cyprus, the final recovery is being “debated” at this moment by members of Parliament and is consulted to powers outside the country, in Brussels, in Berlin, in Washington DC and in Moscow. This is far worse. This will bring an element of social conflict, of resentment, that will not be easy to appease.

Broken Promise no. 1: The promise of a banking union

During 2012, real efforts were made by policy makers to convince the public that the Euro zone was shifting towards a banking union first, as the stepping stone to a political union. The cornerstone of that promise was the role of the European Central Bank as lender of last resort. It had to be an unanimous promise; a promise to every jurisdiction. For all practical purposes, it should matter very little what the GDP or population of a member of the union is. In fact, if the European Central Bank can not come up with the EUR5.8BN package that is claimed to be minimally needed to kick the Cypriot can down the road….what can we expect when this problem gets to Italy, which doesn’t even have a government to negotiate with yet???

In 1931, the promise of international support for Austria was only implicit. In 2001, the promise of a lender of last resort was explicitly absent in Argentina. Nobody in either Austria or Argentina had never expected anything. Nobody was promised anything. Nobody was let down. This is not the case in 2013.


Broken Promise no. 2: The promise that deposits below EUR100,000 are guaranteed

Perhaps I missed something here, but as far as I know, I never saw Mario Draghi calling for a press conference to say: “Dear depositors of Euros in the Euro zone: As long as this central bank I preside exists, regardless of geography or political circumstance, any deposit up to EUR100M is guaranteed by my institution”. If I missed such message, please, accept my apologies and be kind enough to send me the link to watch it online (I cut my cable tv subscription last year, in the interest my kids’ education).

The promised EUR100M deposit guarantee has not been openly defended in Cyprus 2013. To my knowledge, there was never such a promise either in 1931 or in 2001. Therefore, Cypriot depositors were left in the cold far worse than their counterparts in Austria or Argentina, whose expectations had never been high.

Final thoughts

If you look at the case of Argentina 2001, you will realize that it was a pretty clean bet. In Argentina, the reserve ratio on US dollars was known: 30%. We all knew that the USD deposits had been loaned out to the government and that the government faced a significant probability of default. Banks however offered depositors of US dollars a 20% p.a. interest rate. Therefore, an Argentine depositor was faced with a clean bet: Earn 20% p.a. vs. the probability of losing 2/3rds of capital. If you thought that the probability of default of the Argentine government was beyond four years, you would play the bet with a chance of winning it.

What are depositors of Euros faced with today? Anything but a clean bet! They don’t know what the expected loss on their capital will be, because it will be decided over a weekend by politicians who don’t even represent them.  They don’t really know where their deposits went to and they also ignore what jurisdiction they really belong to. Finally, depositors are paid mere basis points for their trust in the system vs. the 20% p.a. Argentina offered in 2001 (thanks to the zero-interest rate policies of the 21st century). In light of all this, I can only conclude that anyone still having an unsecured deposit in a Euro zone bank should get his/her head examined!


- advertisements -

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Sun, 03/24/2013 - 11:35 | 3368448 jonjon831983
jonjon831983's picture

edit: oops - disregard this post

Sun, 03/24/2013 - 11:37 | 3368456 mikla
mikla's picture

EMU: oops - disregard this monetary union.

There-- fixed it for ya.

Sun, 03/24/2013 - 11:39 | 3368461 AlaricBalth
AlaricBalth's picture

Crisis! What Crisis?

Now they're planning the crime of the century
Well what will it be?
Read all about their schemes and adventuring
It's well worth a fee
So roll up and see
And they rape the universe
How they've gone from bad to worse
Who are these men of lust, greed, and glory?
Rip off the masks and let's see.
But that's no right - oh no, what's the story?
There's you and there's me
That can't be right

Sun, 03/24/2013 - 11:45 | 3368475 BaBaBouy
BaBaBouy's picture

PUTIN Enemy "Suicides" In London Over Weekend ?????????????

Russians To Lose 70% In Cyprus ???

Shot Accross The Bow ???

Sun, 03/24/2013 - 11:47 | 3368484 fudge
fudge's picture

New movie comin' out ... 'The Perfect Hit' 

Putin has a cameo :)

Sun, 03/24/2013 - 11:54 | 3368497 BaBaBouy
BaBaBouy's picture

"In light of all this, I can only conclude that anyone still having an unsecured deposit in a Euro zone bank should get his/her head examined!"


Remember, its not even "Printed" Fiats!

It's Just Data On Some Large Banksters HARD-DRIVE!

ONE CLIC, And Its Gone...


Run To Physical GOLD, Bitchies...

Sun, 03/24/2013 - 12:00 | 3368518 fudge
fudge's picture

Run To Physical GOLD, Bitchies...

Got no need to run .. I just pour another rum and and walk to the low water mark ;))


Sun, 03/24/2013 - 12:04 | 3368532 Randall Cabot
Randall Cabot's picture

"Failure to reach a deal for a bailout would mean that U.S. stocks "will open down pretty big on Monday," said John Canally, chief market strategist at LPL Financial, who expects Cyprus to reach a deal. "If we don’t get a deal done there, it does reintroduce some risk," that could lift gold prices and the dollar, pull Treasury yields lower, and result in "anything associated with risk being sold off.""


Sun, 03/24/2013 - 12:25 | 3368588 Rip van Wrinkle
Rip van Wrinkle's picture

It's gonna fall 'big' at some point. Monday is as good a day as any.

Sun, 03/24/2013 - 13:02 | 3368719 pkea
pkea's picture

i would expect rather the blow off top in the next 2 weeks with the following collapse 

Sun, 03/24/2013 - 12:05 | 3368533 Ahmeexnal
Ahmeexnal's picture

Berezovsky might have been a critic of Putin.
But more important, he had billions in Cyprus and would not allow his money to be confiscated by the anglo-franco-teutonic sociopathic oligarchs.
Make no miskate. The MI6 offed him.

Sun, 03/24/2013 - 12:12 | 3368549 fudge
fudge's picture

and I got a koala that says his accounts are now stripped bare. Him and his $$ are nothin' but mondays memories.


Sun, 03/24/2013 - 12:17 | 3368563 Randall Cabot
Randall Cabot's picture

"Make no miskate. The MI6 offed him."

But the Western press is pointing the finger at Putin.

Sun, 03/24/2013 - 13:10 | 3368744 Kirk2NCC1701
Kirk2NCC1701's picture

And this contradicts Ahmen.. How???

Sun, 03/24/2013 - 13:19 | 3368750 e-recep
e-recep's picture

"Make no miskate. The MI6 offed him." But the Western press is pointing the finger at Putin.


Never let a murder go to waste.

Sun, 03/24/2013 - 12:26 | 3368595 max2205
max2205's picture

Sunday night deals is all the EU does well.  No dip monday

Sun, 03/24/2013 - 16:43 | 3369396 zipit
zipit's picture

Kick the can until their heads are on sticks.

Sun, 03/24/2013 - 13:10 | 3368746 e-recep
e-recep's picture

i agree. it was an obvious government job. first went his lawyer, then boris.

Sun, 03/24/2013 - 13:34 | 3368828 Winston Churchill
Winston Churchill's picture

Why would MI9(wet work dept,) not mI6 need to do anything ?

Just wait for someone else,there seems to have been quite a queue.

Sun, 03/24/2013 - 17:07 | 3369519 Jack Burton
Jack Burton's picture

"Ahmeexnal" You may indeed be on to something there! While the talk on the street is that Putin took him out, this is way off the mark. Putin had no reason to take this guy down, he was no threat at all to Putin. If anything, the British Elite Rulers who use MI6 as their own personal Mafia would have been more likely to have done the killing. Then they send in their puppet police forces to investigate the MI6 hit. What a joke that is. MI6 has a long string of killings of anyone on British soil who may prove inconvinient to the Iron Fisted British Ruling Class and their alliance with the USA's criminal elements. By criminal elements, I mean US Banks, Hedge Funds and Military Contractors.

If Britian's elite want you gone, MI6 will suicide anyone. They have done it in the past, and the fake police investigations always come up with suicide as the result.

Russia had Zero to gain at this point. If they had cause to kill him, then that would have been som,e years ago, not at all today as he became increasingly less rich and powerful.

But he deserved to be killed. His theft robbed Russian people of massive wealth which he stole and left the country with. As those familiar with him say, he never produced a rubel of wealth, every kopek was stolen from the Russian people. Let this bastard rot in hell for all the poverty he left behind when he stole the wealth that working people had produceduinder their communist slave masters.

Sun, 03/24/2013 - 12:14 | 3368543 TeamDepends
TeamDepends's picture

En garde,  LaGarde!

Sun, 03/24/2013 - 12:00 | 3368517 q99x2
q99x2's picture

Nah you left off the "ler". It's a movie about Merkel.

Sun, 03/24/2013 - 12:01 | 3368522 fudge
fudge's picture



+10 to you bud

Sun, 03/24/2013 - 12:10 | 3368546 toys for tits
toys for tits's picture

With the bank runs that will be happening, I'm happy to announce:


Sun, 03/24/2013 - 13:04 | 3368730 pkea
pkea's picture

short in a week or two

Sun, 03/24/2013 - 14:57 | 3369079 Buck Johnson
Buck Johnson's picture

Can't wait to read the article about Russia wanting Cyprus out of the EU.  Trust me even Putin most likely has money via Cyprus, he'll make the EU pay for sure.  Also the article is correct, you have to have your head examined if yo still have money in an euro account that is unsecured (even secured it seems).

Sun, 03/24/2013 - 21:43 | 3370621 StychoKiller
Sun, 03/24/2013 - 12:33 | 3368630 JOYFUL
JOYFUL's picture

What an amazing world we live in...when even on the west's premiere truth-tellin site, with regards to an article all about KreditAnstalt & it's times, we just cannot get down to ummm, truth-tellin.

Given the fact that the bank was a creature of the Rothschilds Empire...the fact that branches of the same families' banks existed in all the other major players of the European spectrum of the time...operating as power brokers and practically parallel governments - in terms of influence - and the fact that the $76 million that the bank was short of was easily accessible from within this power nexus...were it politically desirable for it to be accessed,

one might think we might be talkin about the strange synergy between that event and the current low level financial problem which appears to be insuperable to the masters of the Euroverse...whose will seems to be absent a 'solution' ....

but no. We cannot do that. Nor talk about the possible connection with another event of 31...goin offa the gold standard.

Don't ask me why...I just read here. So many little truth.

Sun, 03/24/2013 - 14:19 | 3368986 Ghordius
Ghordius's picture

+1 it's such a small detail, eh? ;-) as little as the customs union, btw

Sun, 03/24/2013 - 11:35 | 3368451 Silver Garbage Man
Silver Garbage Man's picture

Anybody saving their wealth in fiat needs their head examined.

Sun, 03/24/2013 - 11:37 | 3368455 The Watchman
The Watchman's picture

What is this "wealth" you speak of???

Sun, 03/24/2013 - 12:14 | 3368557 orez65
orez65's picture

Wealth = production minus consumption.

Money is "a medium of exchange and A MEANS TO STORE WEALTH"

"FIAT MONEY" is a PROMISE, WRITTEN ON A NOTE, that a Government will STORE your wealth.

Act appropriately.

Sun, 03/24/2013 - 13:09 | 3368745 disabledvet
disabledvet's picture

how do i "act appropriately"? and since no one can do that wouldn't it be better to ACT inappropriately..."but well"?

Sun, 03/24/2013 - 14:08 | 3368947 ebear
ebear's picture

Yo, I got your "inappropriate" right here:

Sun, 03/24/2013 - 13:12 | 3368754 Imminent Crucible
Imminent Crucible's picture

I'll edit that: ""FIAT MONEY" is a PROMISE, WRITTEN ON A NOTE, that a Government will" CONSUME your wealth and give you a piece of paper, which you can take to the Treasury and exchange for another piece of paper just like it.

A Federal Reserve Note is NOT an irredeemable currency. It can be redeemed at any time for another FRN.

Sun, 03/24/2013 - 21:46 | 3370639 StychoKiller
StychoKiller's picture

Look up U.S.C. Title 12, section 411.

What is "Lawful Money?"

Sun, 03/24/2013 - 18:37 | 3369803 All Risk No Reward
All Risk No Reward's picture

That's a decent summation of the false narrative that leaves out the poison pill reality.

The reality is that money is all of the above and more, when it is created through debt, as it is in our system.  This makes debt money a covert, societal asset stripping mechanism from society to the people that defined money as debt and who control the debt money system.

The reality is mapped out beyond all doubt in here:

Debt Money Tyranny

The Debt MOney Tyrants are the sovereigns and the nation states are the subjects - this is made clear by both a tyrant and a manager for the tyrant class:

“When a government is dependent upon bankers for money, they and not the leaders of the government control the situation, since the hand that gives is above the hand that takes. Money has no motherland; financiers are without patriotism and without decency; their sole object is gain.”
~ Napoleon Bonaparte

"If all the bank loans were paid, no one could have a bank deposit, and there would not be a dollar of coin or currency in circulation. This is a staggering thought. We are completely dependent on the commercial Banks. Someone has to borrow every dollar we have in
circulation, cash or credit. If the Banks create ample synthetic money we are prosperous; if not, we starve. We are absolutely without a permanent money system. When one gets a complete grasp of the picture, the tragic absurdity of our hopeless position is almost incredible, but there it is. It is the most important subject intelligent persons can investigate and reflect upon. It is so important that our present civilization may collapse unless it becomes widely understood and the defects remedied very soon."
~ Robert Hemphill
Credit Manager of Federal Reserve Bank, Atlanta, Ga.
Source: In the foreword to a book by Irving Fisher, entitled 100% Money (1935) How to be a Crook Poverty: Debt is not a Choice Share the data and the logic...  and then spend some time searching "the trivium" and learning why grammar, logic and rhetoric were removed from your schooling / Biggest Finance Capital social conditioning process.



Sun, 03/24/2013 - 11:40 | 3368463 The Abstraction...
The Abstraction of Justice's picture

I always keep my Deutsche Bank account in the red. Let them confiscate the debt if they so will.

Sun, 03/24/2013 - 11:52 | 3368495 One of We
One of We's picture

I'm not understanding why anyone would keep any more in a bank than they needed for monthly living expenses. With ZIRP giving negative real returns why would anyone leave their money in a bank?

Sun, 03/24/2013 - 11:56 | 3368509 Going Loco
Going Loco's picture

Undertaking a building project using cash, not debt. Have to keep cash for this to pay the contractors. Sick feeling at the moment.

Sun, 03/24/2013 - 12:08 | 3368541 MsCreant
MsCreant's picture

I know the feeling. My house got wacked by a tornado. Needed the money in the bank to pay the contractors. I had ice in the pit of my stomach the whole time. We are done and good.

Many contractors prefer cash over checks.  

Sun, 03/24/2013 - 14:21 | 3368989 DosZap
DosZap's picture

I know the feeling. My house got wacked by a tornado. Needed the money in the bank to pay the contractors. I had ice in the pit of my stomach the whole time. We are done and good.

Many contractors prefer cash over checks

Sure they do, so they do not pay taxes on ONE dime. Hope you negotiated a special dealer for the tax evader.

Sun, 03/24/2013 - 18:03 | 3369736 dunce
dunce's picture

I hate the govt. and like tax evaders, i like to pay cash and not ask questions hoping that they do not report the income. I get what i pay for, and his taxes are none of my business.

Sun, 03/24/2013 - 12:01 | 3368521 RobD
RobD's picture

I started my bank jog yesterday. Stopped by the credit union and tried to withdraw $300 and the damn machine only gave me $240. It was only Saturday mid morning but it seems the machine was out of cash.

Sun, 03/24/2013 - 12:17 | 3368565 orez65
orez65's picture

I'm getting all my cash out of banks.

For my business I plan to open a credit line.

They can confiscate it if they wish.

Sun, 03/24/2013 - 12:28 | 3368604 max2205
max2205's picture

Check the receipt. The bank kept $60. 20% haircut

Sun, 03/24/2013 - 11:40 | 3368464 ziggy59
ziggy59's picture

Dont know what people in the other EU countries are doing but their ATMs should have lines on em too

Sun, 03/24/2013 - 13:58 | 3368905 DosZap
DosZap's picture

Dont know what people in the other EU countries are doing but their ATMs should have lines on em too


The UK has apready told their people if they have funds on deposit in Spain to get it out.

Sun, 03/24/2013 - 11:40 | 3368467 BurningFuld
BurningFuld's picture
Cyprus 2013 is worse than the KreditAnstalt (1931) because ........

It is still built on top of it! Yes the fiat ponzi has been running that long.

Sun, 03/24/2013 - 11:41 | 3368469 hampsterwheel
hampsterwheel's picture

.......and here it is 2013 - 12 years past Argentina's major event and what has happened...bankers hanged...nope, a break out of widespread freedom? a revolution that overthrew the corrupt government enslaving them? Widespread police and military revolt in favor of the people? what has happened is more of the same but worse -- what makes anyone think these Western Black Swans will result in another other than what those in Argentina are enduring... again - TPTB dine on fried black swan - today is as close to freedom and decentrailzed government as one will get over the next decade - and each day it slips a bit further away - check mate -

Sun, 03/24/2013 - 12:06 | 3368536 scatterbrains
scatterbrains's picture

Over here it will be those with deposits under 100k that must take the 40% hits and those more important special groups with deposits above 100k will be free to ride BB's print fueled stock bubble coat tails into a glorious utopian end game while the msm will convince you that the little people must eat dirt for the greater good of the country.. and the folks will eat it up because this would have never happened if whitey didn't hate oblahma so much... or some such

Sun, 03/24/2013 - 14:06 | 3368939 Nobody For President
Nobody For President's picture

A greenie for 'hamsterwheel' alone...

Sun, 03/24/2013 - 11:41 | 3368470 Yen Cross
Yen Cross's picture

 I thought that I had 'astigmatism' Tyler. :-)

Sun, 03/24/2013 - 11:43 | 3368473 Never One Roach
Never One Roach's picture

When they cut off the food shipments to Cyprus the Hunger Games will begin. Sad stuff.

Sun, 03/24/2013 - 14:19 | 3368985 ebear
ebear's picture

Let them eat Turks!

Sun, 03/24/2013 - 15:22 | 3369137 hardcleareye
hardcleareye's picture

Well they are cutting off fuel as we speak.

Sun, 03/24/2013 - 11:43 | 3368478 fudge
fudge's picture

'They don’t really know where their deposits went to'


Sun, 03/24/2013 - 11:43 | 3368479 Kirk2NCC1701
Kirk2NCC1701's picture

Hate to break some Realpolitik to the author but, as long as Israel has the US on its side (back pocket), it will not be a "looser" in this or any other event. Besides, he does not explain why, nor do I see a valid reason for this.

Sun, 03/24/2013 - 12:07 | 3368520 SWIFT 760
SWIFT 760's picture

A Rooskie naval port/bailout in Cyprus (as an ally to Syria and Iran) alters the logostics for USrael attack. Removing Assad from Syria would be the pivotal geopolitocal turning point. Syria is the major player in ME affairs. Russian presence in Cyprus effectively puts the brakes on any USrael plans. 

US is a bitch to israel, agreed. However, Rooskies would be a formidable deterent to USrael efforts. Putin has lost a few key regional geopolitical power plays over past decades. If he doesnt make a valiant attempt to contain his backyard, he loses again. 

Additionally, if Rooskie mafia money helped get Putin re-elected, Putin is under pressuse to protect his chronie partner's offshore holdings. 

Sun, 03/24/2013 - 12:31 | 3368619 Solarman
Solarman's picture

Sigh, three russian naval vessels in the Med is breakfast to our air Force in the event of conflict. We have radar evading drones following every enemy vessel in the world, and every Russian Nuclear tipped bomber, and within minutes of the go order these ships and planes are gone.  I'd be more concerned with Syrian Sunbeam and silkwork anti ship weapons fired from the coast (unless we already figured out how to disable them like the Israeli's did to the vaunted Russian SA-3 radar system in Syria).

By the way, Russia does not need to base in Cyprus, all they need to do is to create an "incident" in Syria and send in enough troops to help Assd control the western highlands of his country from Turkey to Lebanon.  These are where most of his people live, and he can easily control the country from there.  The rebels can have Damascus, and rely on three overland routes for all of their needs.  Good luck living like that.

Regarding Israel, they are quite useful geopolitically for the U.S., a 200 mile long airbase if we need it, with some of the best pilots and technology to boot.  

I agree with you regarding Putin and his backers.  I am trying to figure out Germany's angle, as they knew it would come to this.  Why whack a hornet's nest that provides for all of your natural gas with a country that has chronic self esteem problems


Sun, 03/24/2013 - 13:33 | 3368827 LeisureSmith
LeisureSmith's picture

I think you underestimate NATO's most formidable opponent just a tinsy bit. And you must be thinking about the Sunburn and the Silkworm not the Sunbeam and the Silkwork....if it's weapons and not skincare you are talking about.

Sun, 03/24/2013 - 14:16 | 3368974 Urban Redneck
Urban Redneck's picture

The Russians aren't exactly in the same league as the Palestinians.  Iron Dome might have some (less than 100%) success rates against subsonic and unguided Palestinian rockets, but even the the antique Russian equivilent of the B-52 can carry their 20+ yr proven hypersonic ATGMs which can be outfitted with nuclear warheads and travel at speeds over 1,700 m/s.  

(This is the missle the Chinese made cheap knock-offs of to counter US carriers in "their" territorial waters) 

Or for the truly insane- they can always seek to demonstrate their proficiency against a Topol-M or RS-24, outfitted with a MIRV and reaching "incoming" speeds of over 7,000 m/s, and since they can be mounted on mobile launchers, they could RORO'd in Cyprus (or anywhere else with a port) in a matter of days.

There's a reason it's called M.A.D. and it's been around for over half a century at this point..

Sun, 03/24/2013 - 17:22 | 3369596 Jack Burton
Jack Burton's picture

Estimates vary, but Russia is heavily invested in Syria's front line missile forces. It is believed that Russian missiles sold to Syria are manned by Russian operators and the mobile units have Russian special forces as security. I have heard all kinds of figures and types of weapons that Russia supposedly had operating in Syria. The Tor anti aircraft systems are confirmed and so are the "Iskander" surface to surface missiles, along Sunburn anti shipping missiles. A whole range of less modern systems are in Syria as well. As to the S-300 Moible Anti Aircraft systems, I have heard yes and no. This system is if great concern to Israel, who have lobbied hard to keep it out of Iran, I had heard Syria had been equipped with some.

Clearly Russians would be needed to operate these missiles with any ability. Syrians have proved in the past to be totally unable to operate modern Russian missiles systems. And Russia itself is clear that their troops are in Syria.

Cyprus would be a nice place for Russia to access the Med. As to surface naval vessels, these are nice to have around for political pressure and to show the flag. In a real shooting war, with any NATO force, they are useless, and would be sunk in minutes. I know, because when I was in the Navy, one of my jobs was to track and target Russian submarines for instant destruction should war break out. The surface ship of the Soviets were much more vulnerable.

Sun, 03/24/2013 - 11:46 | 3368485 Van Halen
Van Halen's picture

I'm seeing warnings against having your money in an unsecured this or that but at this point, why would you have your money in ANY Euro bank?

Sun, 03/24/2013 - 12:29 | 3368609 Rip van Wrinkle
Rip van Wrinkle's picture

If the Euro banking system fails, why would you have money in ANY bank, anywhere?

Sun, 03/24/2013 - 12:55 | 3368700 Mike7.62
Mike7.62's picture

Why would you have your "money" in ANY bank, Eurozone or US, especially after MFG, PFG Best, and the US 7th Circuit decision regarding Sentinel v. BONY Mellon? Bank of Seely or some midnight gardening would seem apropos IMO.

Sun, 03/24/2013 - 11:47 | 3368486 Atomizer
Atomizer's picture

Cyprus 2013 is a non-event. Get it together proles. March madness is your importance.

 The People's Bracket



Sun, 03/24/2013 - 15:19 | 3369126 hardcleareye
Sun, 03/24/2013 - 11:51 | 3368492 Gromit
Gromit's picture

Broken Promise #3: Free movement of capital both within and out of the Euro Zone.

Sun, 03/24/2013 - 12:42 | 3368656 AynRandFan
AynRandFan's picture

I can see cap controls instituted at ALL Eurozone banks in order to "stabilize" interbank transfers.

Sun, 03/24/2013 - 12:47 | 3368672 Gromit
Gromit's picture

Capital controls are enacted when more money goes out than comes in.

During the Euro era they have soaked up capital from around the World, China Japan etc.

This may change. Once you enact them no more comes in and everyone wants to get out, think Argentina.


Sun, 03/24/2013 - 13:15 | 3368764 disabledvet
disabledvet's picture

so when does the money start flowing back again? and if the answer is "sometime later" what happens to what has to paid for in the here and now?

Sun, 03/24/2013 - 13:55 | 3368891 Gromit
Gromit's picture

Still more money coming into EU Zone than far.

Sun, 03/24/2013 - 21:20 | 3370511 dunce
dunce's picture

Some places must be safer than others, but there is no where to run, nowhere to hide, in this mess.

Sun, 03/24/2013 - 11:52 | 3368494 10PastMidnight
10PastMidnight's picture

everythings fine, fuck bernanke, hail obama yada yada yada i just hope this dance speeds up because i would like to know whos been fucking me in my ass so long, before i croak.

Sun, 03/24/2013 - 11:53 | 3368501 machineh
machineh's picture

'Therefore, an Argentine depositor was faced with a clean bet: Earn 20% p.a. vs. the probability of losing 2/3rds of capital.'

Sibileau omits their third choice: get the hell out of dodge. The Argentine elite who knew what was coming exported billions in flight capital, which helped bring the system down.

And it's happening again today, as the Kirchner regime makes buying dollars illegal and posts currency-sniffing dogs at airports and border crossings.

Cyprus will have to do the same to enforce its capital controls. But still its banks will drain cash for years to come.

Sun, 03/24/2013 - 11:57 | 3368504 Kirk2NCC1701
Kirk2NCC1701's picture

Van Halen: "... Why would anyone have their money in Euros?'

The Best PR line for the beleaguered Fed and its USD I've heard. They paying you in FRNs?

Sun, 03/24/2013 - 12:00 | 3368515 gatorengineer
gatorengineer's picture


Love the site but this article is off the mark...

The 100,000 euro guarante is NOT an ECB guarantee, never was, its underwritten by the central bank of each state.....

IF there would be a banking union which there isnt then this would revert to the ECB.

Cypryus is broke, so is their underwritting mechanism.  Just like the FDIC in the US is insolvent, and only backed by the promise to print....

Secondly there is no confiscation, there just is no deposit guarantee insurance.  They are nationalizing the losses.  In theory the savers at the 2 failed institutions would get zero, and in theory the savers at the solvent institutions would be un touched.  However, this was not allowed to happen, because of the way this has played out the losses or loss potential is much higher than the 13 billion orginally projected....  Hence the capital controls.




Sun, 03/24/2013 - 12:09 | 3368544 Herbert
Herbert's picture

You are a lawyer, right?

Such nitpicking is pointless. 100.000 EUR were clearly guaranteed by the governments. To circumvent this promise by a so-called "tax" would be considered as "evasion" if a taxpayer did it.

Sun, 03/24/2013 - 12:34 | 3368628 gatorengineer
gatorengineer's picture

the government is broke too.

so your assumption is the German / Finnish taxpayer is supposed to cover it, without a vote?

Sun, 03/24/2013 - 14:22 | 3368996 Urban Redneck
Urban Redneck's picture

No, whoever, extended credit based on based on the worthless bonds of Cypriot State and banks should be forced to realize a total loss before the bank depositors take a haircut.  The bankrupt and worthless and Germans and Finns don't want to admit that they are no better the Cypriots, and in fact they want to STEAL from the depositors in order to cover their own deficiencies.

Sun, 03/24/2013 - 15:15 | 3369109 hardcleareye
hardcleareye's picture

Those worthless Cypriot bank bonds were pledged to the ECB as collateral....  so come Monday those bonds will be worthless.....  this should be interesting.

Mon, 03/25/2013 - 03:59 | 3371343 Herbert
Herbert's picture

No taxpayer should cover bank losses. Bank insolvency, according the the laws, had been the right solution. In that case, perhaps, the guarantee had not been feasible.

As handled by the amateurish EU, the guarantee wasn't desirable. This makes a big difference, I think.

Sun, 03/24/2013 - 15:10 | 3369101 hardcleareye
hardcleareye's picture

Guaranteed, but with conditions... and each country has their own conditions..... you have to read the fine print!

This insurance is like any other insurance policy, it is only has good has those making the guarantee.  The government of Cyprus is insolvent, the "guarantee" is worthless.


Sun, 03/24/2013 - 12:18 | 3368566 Quinvarius
Quinvarius's picture

Really?  Because this sounds like the ECB said they were going to backstop deposits:

At the international level, the fi nance ministers and central bank
governors of the G7 countries agreed on 10 October 2008 to use
all available tools to prevent the failure of systemically important
fi nancial institutions, to take all necessary steps to unfreeze
credit and money markets, to ensure that banks can raise
suffi cient capital from public and private sources, and to ensure
that national deposit insurance and guarantee programmes are
robust and continue to support confi dence in the safety of retail
deposits. These actions were to be taken in ways that protect the
taxpayers. The leaders of the G20 countries committed at their
Washington summit of 15 November 2008, among other steps,
to take whatever further actions are necessary to stabilise the
fi nancial system.






Sun, 03/24/2013 - 12:33 | 3368621 gatorengineer
gatorengineer's picture

as part of the banking union yes....

If you see a train comming down the tracks and you get hit by it, then your fellow man should pay for it?  I think not...

Was this situation a surprise to the average cypriot?  or Russian Billionaire?  I think not.

The surprise so far is that the German tax payers havent volunteered to pick it up....  That is the lesson learned.

If the sheeple here werent so asleep it would be a wake-up call for PMs here, and money in the mattress.  Or to quote Grelimins time to go long Canned food and Shot gun shells.  Its long been simply a question of when, not whether...  the time to prep is drawing to a close kids, and the fat lady is warming up....



Sun, 03/24/2013 - 13:01 | 3368720 Quinvarius
Quinvarius's picture

I think it is a departure from stated agreements, goals, and methods.  It surprised me that they were this stupid.  But, if they are clearing their throat on the new plan, or what you say was the original plan, it is time to get out of dodge.  Whether it was extrordinary circumstance or by law, they were backstopping and now they clearly don't want to continue.  I don't think any central bank using the Euro except the ECB has the capacity to effectively backstop anything without the power to blindly print Euros.

Sun, 03/24/2013 - 15:03 | 3369089 hardcleareye
hardcleareye's picture

I concur with your understanding on the first part, the ECB does not insure the Deposits, the Country that the bank "originates" provides the insurance.   The country of Cypress is insolvent, hence they will default on the insurance guarantees and the terms of joining the EZ.

Further, both the ECB  and UK have provisions that allow the counties to use the insurance guarantee funds to provide a "ball in" to the bank(s) in trouble....  aka the depositor may not see a penny of the insurance funds...... (that got an "oh shit" from me when I read it on a BoE web site.......)

Remember the quote, “When it becomes serious, you have to lie." -Jean Claude Juncker

Your second point while "accurate" in detail, losses sight of the fact that the ECB is trying to fix a debt issue with more debt.  The real cost of the losses that are going to be incurred to address this insolvency issue have yet to be determined, but the will be much larger than what is on the table today.


Sun, 03/24/2013 - 12:01 | 3368519 MsCreant
MsCreant's picture

Got Skynyrd on the brain this morning:

Simple man

Sun, 03/24/2013 - 12:04 | 3368531 MsCreant
MsCreant's picture

And be a simple, kind of man. 
Oh be something, you love and understand. 
Baby be a simple, kind of man. 
Oh, won't you do this for me son, 
If you can? 

Forget your lust, for the rich man's gold 
All that you need, is in your soul, 
And you can do this, oh baby, if you try. 
All that I want for you my son, 
Is to be satisfied. 

And be a simple, kind of man. 
Oh be something, you love and understand. 
Baby be a simple, kind of man. 
Oh, won't you do this for me son, 
If you can?

Boy, don't you worry... you'll find yourself. 
Follow your heart, lord, and nothing else. 
And you can do this, oh baby, if you try. 
All that I want for you my son, 
Is to be satisfied. 

Sun, 03/24/2013 - 12:03 | 3368524 q99x2
q99x2's picture

Wealth is commenting on ZH. By comparison skydiving is poverty.

Sun, 03/24/2013 - 12:03 | 3368526 Gordon Marock
Gordon Marock's picture

Secured deposits?????? Ha!!

Sun, 03/24/2013 - 12:04 | 3368527 Atomizer
Atomizer's picture

Off topic, new emerging story.


U.S. Foreign Aid to Israel

Biden Exaggerates Aid to Israel


After pinocchio meeting, the loafers begin to spend your unborn children’s monies. We must install a new Central Bank in this region.

Israel fires into Syria after Golan attack on troops

Sun, 03/24/2013 - 12:06 | 3368534 MFLTucson
MFLTucson's picture

Nothing that money printing cannot fix.

Sun, 03/24/2013 - 12:08 | 3368537 ebworthen
ebworthen's picture

The ECB and the IMF have shown their hand; they are willing to STEAL to maintain their power AND profits.

They are a crooked cabal of politicians and bankers, a rabid equivocating hydra that represents no one but themselves and a failed idea.

They are money-changing profiteers that serve no purpose but to defraud and rob taxpayers and depositors using the gavel and ledger rather than the gun and tank.

Sun, 03/24/2013 - 12:16 | 3368561 Atomizer
Atomizer's picture

Once you filter out all distractions, you begin to see the opponents Chess playing strategy.  At that point, you’ll never turn back!

The XX - Intro

Sun, 03/24/2013 - 12:13 | 3368556 100pcDredge
100pcDredge's picture

Anyone still having a large amounts of unsecured depositcashgoldstuffwhatever in a bank, somewhere, might get his/her/it's head examined!

Sun, 03/24/2013 - 13:26 | 3368801 Kirk2NCC1701
Kirk2NCC1701's picture

What amazes me is that some cash-rich ppl don't start buying into ownership of these banks. Probably easier said than done.

Sun, 03/24/2013 - 12:17 | 3368564 mkgone
mkgone's picture

All fiat currencies will face the same fate. The US are in the same miserable situation but are able to draw attention to EUSSR.

Greetings from euro land :D

Sun, 03/24/2013 - 12:35 | 3368625 AynRandFan
AynRandFan's picture

The public sector as creditor of the public sector.  Excellent encapsulization of the EU debt situation. No matter the obscure details of how, clearly bondholders have become a preferred class over depositors.  It was sovereign debtholders that were crushed in the 1930's version of the European depression, but today it is private assets. So, political advancements have been made.  Today, the collective must prevail.  Europe yet again becomes the crucible of political education for the ages.  Unfortunately, there is no "new world" to harbor individual liberty anymore.

Sun, 03/24/2013 - 12:37 | 3368641 machineh
machineh's picture

So if ol' Frank Roosevelt were still around, he'd say, 'It's okay: we all owe it to each other.'

Sun, 03/24/2013 - 13:28 | 3368806 disabledvet
disabledvet's picture

i'm sorry..."depositors" are a "class of inferior investors"? REALLY?

Sun, 03/24/2013 - 12:38 | 3368643 Paracelsus
Paracelsus's picture

Agreed,the problem is building something on a foundation of sand.The Cypriot banks screwed the pooch by purchasing large amounts of Greek debt. In a large circular route these are debts to be borne by the German taxpayers. Still,the incompetence of this "linked" bailout,staggers the mind. That they would risk a bank run across Europe at the worst possible time. Nigel Farage was correct all these years. The European parliament is a bunch of idiots. I remember back when they were passing the hat for a bailout (Spain?),and Finland says,"okay,but I want asset backed collateral,no garbage...." then every other Finance minister in Europe says "I want collateral,too!".  The Russian mafia link is an obvious attempt to stigmatize them and justify the criminal acts of the bankers. The Russian hot money has been known for years and given approval in the world media ,i.e.,not much complaining until the crisis hit. This reminds me of Reagan making a fuss about a Soviet mechanized brigade in Cuba,which had been there rusting for about ten or fifteen years (good duty,warm climate,friendly locals,etc.). The media has repeatedly sacrificed all credibility over the years,and it is only a wonder that something like the internet didn't occurr earlier. The real story here is that the world is insolvent,all the smart guys are stacking precious metals,the U.S. has over 800 overseas bases,a huge defense commitment,and has forfeited any moral authority to mobilize the country in a patriotic cause, should a "real" emergency happen. WMD's anybody?


Sun, 03/24/2013 - 12:45 | 3368667 jubber
jubber's picture

Even Lee Scratch Perry gets it...Internaltional Voodoo "1000 Trillion Dollars come"

Sun, 03/24/2013 - 12:58 | 3368712 AynRandFan
AynRandFan's picture

The endgame to this and every debt crisis is monetization. The ECB will once again step in and save the EU. There will be several more cycles of this behavior. Might as well BTFD in European stocks. As Japan has shown, the poker games will continue until Godzilla arrives.

Sun, 03/24/2013 - 13:11 | 3368749 AynRandFan
AynRandFan's picture

Excellent and chilling explanation of the 1931 Austrian banking crisis.

Sun, 03/24/2013 - 13:19 | 3368778 lindaamick
lindaamick's picture

All this sovereign debt rolling around between the EU participants to keep a game going that appears only to enrich the few conducting the symphony.


Sun, 03/24/2013 - 13:22 | 3368788 Chris2257
Chris2257's picture

Shades of " The bubble that broke the World" by Garet Garrett, 1932

History repeats itself,


Sun, 03/24/2013 - 13:38 | 3368840 rejected
rejected's picture

"Politicians worry about the sustainability of their power. It’s a fact and we must learn to live with it."



Sun, 03/24/2013 - 14:09 | 3368954 Hondo
Hondo's picture

Does this mean Illinois and California get 70% haircut on deposits for offset bankrupt state......

Sun, 03/24/2013 - 14:10 | 3368959 Comrade de Chaos
Comrade de Chaos's picture

Not sure, why Israel will be the biggest loser, given Russia gains power in Cyprus.... I guess, it's fanky to say so. 

Sun, 03/24/2013 - 14:47 | 3369060 Pandorable
Pandorable's picture

Just wait until they try to take the Russians' money.....  

Sun, 03/24/2013 - 15:21 | 3369136 Paracelsus
Paracelsus's picture

This is a huge and dangerous moment in human history. Gold should be over $2k/oz. There is massive manipulation going on and good luck trying to get any physical soon. I see no patriotic angle here for the American people (WMD's?) or the Europeans either. The British bases will be left high and dry when the Russkie takeover happens,but then the US still has the Gitmo base in Cuba,waterboarding central. Leave the Cypriots alone to make their own decisions. Look what happened the last time Kissinger and his bunch tried playing the "Great Game". This isn't 1962 and as long as they base no ICBM's there,if they are willing to pony up the cash,they can have the damn place. Now,on to the next crisis...

Sun, 03/24/2013 - 15:37 | 3369203 THE DORK OF CORK
THE DORK OF CORK's picture

The author needs to understand what a true fiat currency is.


A true state should not care about the value of conduit like bank "assets" be it so called sov debt , mortgages or gold.


Debt & money tokens are two very different concepts which the banks have used to their advantage.

Sun, 03/24/2013 - 16:09 | 3369304 lolmao500
lolmao500's picture

Yep depending on what's the final deal, this could be historic or just another Greece...

Sun, 03/24/2013 - 17:09 | 3369536 lordbyroniv
lordbyroniv's picture

I have a hot date on Tuesday nite that I think is gunna put out.


She has massive titties and legs to the moon.


As long as we make it to Tuesday....I dont give a F what TPTB do after that.

Sun, 03/24/2013 - 18:10 | 3369745 tom a taxpayer
tom a taxpayer's picture

Martin Sibileau - Thank you for the trenchant view from the trenchs.

Do NOT follow this link or you will be banned from the site!