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A Word Out Of Place Sends Europe Tumbling
Perhaps the best example of a "word out of place" comes from the new Eurogroup head, Dijsselbloem, also phonetically known as Diesel-BOOM, who just may have ushered in the next, next wave of the Eurozone crisis:
- "Cyprus a Template For EU"
Er... wasn't it a special case, inside a unique case, wrapped in a one-time case? We will ignore the rather hilarious Freudian slip, and focus on what he was explicitly talking about with Reuters, which is the resolution model which was just put in place in Cyprus:
A rescue programme agreed for Cyprus on Monday represents a new template for resolving euro zone banking problems and other countries may have to restructure their banking sectors, the head of the region's finance ministers said.
"What we've done last night is what I call pushing back the risks," Dutch Finance Minister Jeroen Dijsselbloem, who heads the Eurogroup of euro zone finance ministers, told Reuters and the Financial Times hours after the Cyprus deal was struck.
"If there is a risk in a bank, our first question should be 'Okay, what are you in the bank going to do about that? What can you do to recapitalise yourself?'. If the bank can't do it, then we'll talk to the shareholders and the bondholders, we'll ask them to contribute in recapitalising the bank, and if necessary the uninsured deposit holders," he said.
After 12 hours of talks with the EU and IMF, Cyprus agreed to shut down its second largest bank, with insured deposits - those below 100,000 euros - moved to the Bank of Cyprus, the country's largest lender. Uninsured deposits, those accounts with more than 100,000 euros, face losses of 4.2 billion euros.
Uninsured depositors in the Bank of Cyprus will have their accounts frozen while the bank is restructured and recapitalised. Any capital that is needed to strengthen the bank will be drawn from accounts above 100,000 euros.
The agreement is what is known as a "bail-in", with shareholders and bondholders in banks forced to bear the costs of the restructuring first, followed by uninsured depositors. Under EU rules, deposits up to 100,000 euros are guaranteed.
The punchline:
The approach marks a radical departure for euro zone policy after three years of crisis in which taxpayers across the region have effectively been on the hook for resolving problem banks and indebted governments via multiple rescue programmes.
That process, with governments and taxpayers bearing the costs and providing the back stop, had to stop, Dijsselbloem said. Recent financial market calm meant now was the time to make the change, although he conceded there was some concern that it could unsettle markets again.
If adopted by the euro zone, Dijsselbloem's template could also sound a death knell for a plan hatched nine months ago when the euro zone debt crisis was threatening to blow the currency area apart.
Then, euro zone leaders agreed that the bloc's future rescue fund should be allowed to recapitalise banks directly, thereby breaking the debilitating link between teetering banks and weak governments forced to bail them out. That may now never happen.
Asked what the new approach meant for euro zone countries with highly leveraged banking sectors, such as Luxembourg and Malta, and for other countries with banking problems such as Slovenia, Dijsselbloem said they would have to shrink banks down.
"It means deal with it before you get in trouble. Strengthen your banks, fix your balance sheets and realise that if a bank gets in trouble, the response will no longer automatically be that we'll come and take away your problem. We're going to push them back. That's the first response we need. Push them back. You deal with them."
Translation: it now officially sucks to be an unsecured creditor in Europe. In other words: an uninsured depositor.
Why this ad hoc dramatic shift in the European approach to bank solvency, which if anything makes the link between bank and sovereign closer than ever, and crushes all that Draghi achieved in the summer of 2012?
Simple: because what Cyprus allowed was the effective usurpation of democracy - the only reason the Cypriot bailout "passed" (at least so far) is because it was structured as a bank restructuring, a financial system "resolution", not a tax, and thus not in need of a parliamentary, democratic vote. Because as Cyprus also showed, votes to deprive depositors of cash, whether insured or uninsured, simply won't fly.
Hence the shift.
However, there is a problem: it means that depositors are now fair game everywhere, and that the ESM or EFSF, with their unlimited scope but "democratic" impleention pathway, are on the backburner.
And now, the scramble to pull uninsured deposits out of banks everywhere begins. Thanks to the new Eurogroup head.
"You ask for miracles, Theo. I give you Diesel-BOOM"
And now, every European depositor is going to their local financial dictionary to look up the definition of General Unsecured Claims, only to see a picture of... themselves.
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No, I am not 'nuts'.
I just wasn't born with an insurance policy in my mouth. Part of having money is being responsible for it----not leaving it up to poiticians to protect with non-beneficiaries' taxdollars.
Running your business or profession with non-insured deposits and without interest bein paid on them seems un-professional and un-business-like, to me. Don't you have an accountant to hep you with these problems---or a broker?
I am sorry these things are a part of life, but, they are.
Good luck to you
So who do you believe should make sure your $100K is good? The taxpayer? Should Ben print it if the bank in which you keep it accumulates a lot of bad loans? What happened to all the libertarians who patrol this site? Now everybody wants some government to guarantee them, at someone else' expense.
When a bank reaches a point of insolvency, it's equity, bondholders, uninsured depositors in that order absorbing the loss. All this TARP stuff and printing is the new evil.
There is an agreed upon way to dole out assets in a bankruptcy and what happened here just end arounds all bankruptcy laws period. That violates the basic rule of law something libertarians do believe in. You make fucking promise (insurance) you better keep it, libertarians didn't set up the banks or make those promises or deal with the consequences. Requiring someone to keep their promise is not anti-libertarian. If they can't keep it they better have a good reason why and no double speak kick the can bullshit excuses. Something my mother used to say is appropiate for this whole mess. Don't write checks (promises) with your mouth that your ass can't cash.
To put it simply in a bankruptcy proceeding which this is without calling it that. The secured creditors get first crack at the assets then the unsecured if enough assets are left over after fullfilling the secured obligations. When there isn't enough assets then the depositor insurance kicks in. That insurance aka promise is what makes those under 100,000 euro accounts secured as opposed to unsecured. If those accounts are not backstopped now the ECB, EU et al have admited they are broke or won't adhere to agreed upon bankruptcy procedures for failed banks. They can play all the semantics they want but a failed anything is bankrupt or else it wouldn't be failed.
chindit13
Thanks for this:
"When a bank reaches a point of insolvency, it's equity, bondholders, uninsured depositors in that order absorbing the loss. All this TARP stuff and printing is the new evil."
This is how it was all of my life until the 'boomers' took over things in the 90's. I never could talk to them; they knew it all and were 'oh, so multi-tasked', and now I feel like I am reading the 'opinions' of their brainless prodigy.
I'm too old to comment here; my memory is too acute, and I am not bright enough to compete with the brilliance of the Tylers and their minions. Thanks again for your post----well said!
ZH forgot to mention that routinely in the US tens of corps go belly up without any approbation vote by the congress. This is outrageously undemocratic.
Furthermore, in the case of banks, ZH is and has always been proponent of bail everyone out, cause it's the taxpayer's role to pay for the errors in banks' management.
All this because as everyone knows, it's infinitly better to give away money to bankers than to have them face the consequence of misplaced über leverage.
And stock markets down is a definite proof that this is bad politically.
</sarc>
Sometimes I wonder how much context some people can put in their head before writing. It seems that this is often close to zero, and just yelling with the herd what was written in the article seems to pass for deep thinking. What's next ? 15mn of wrath everyday ?
So tell me the true true situation of french big four banks and to what extent the new "bail-in" meme applies to them.
WIth a balance sheet nearly four times french GDP and books not marked to market, and liquidity abysmally low compared to Us banks, how will they support :
1° Depositor nervousness in eventual bank runs generated in club med countries spilling over.
2° Bail in strategy as announced by Diesel-Bloom, now Eurogroup chief spokeman. If he implements this big time in Spain and Italy we will see the french core banks coming under stress.
Lets have it from the horse's mouth of an elitist french top bureaucrat like yourself.
Or are you constrained by "devoir de reserve"?
I never knew the word "haircut" meant bank robbery or blatant theft.
Lesson of the day, now you know/
q: how do you know a banker's not robbing you?
a: the suicide note was followed through with
Dijsselbloem is an ass. What the EU does is not proper bank resolution, it's midnight knock on the door by the Gestapo:
All done in the ugliest way possible: the arm twisting, the blackmail, the capital controls, the failures by the ECB leading up to the bailout, the evasion of accountability, the blatant theft of customers' money. There is an order of liquidation that must be followed. It hasn't been followed so far, what has taken place is a charade!
The only reason the bondholders and preferreds were knocked over in Cyprus is because, a) there were hardly any and b) they weren't VIPs. Best to target the 'evil Russians' instead.
The ECB caused the problems for Cypriot banks in the first place with its improper Greek cramdown. There was no need for the depositors to pay anything.
Haircutting depositors is the EU cannibalizing bank collateral. What else is there? Most of the assets in EU banks are worthless. Who winds up with this collateral?
A: the same financiers who got the bailouts ... who still get the bailouts. Nothing has changed, Cyprus is 'Greece 2.0'.
The difference this time is not repaying the depositors is an EU default ... papered over with lies.
I vote we make him chief global economist alongside Paul Krugman!
And for Fed chair-Satan…. DAVID COPPERFIELD!!
Come on, we need levitation, this man’s an EXPERT!
Yes, I'm afraid gold confiscation is so 20th century, the rewards are far greater confiscating your fiat bank holdings. No bank account is safe, if they can lie about stealing deposits, they can lie about the deposit guarantee scheme.
Yes this is a new template for the EU, outright theft.
The Eurozone deposit theft T-Shirts are ready;
http://germanywatch.blogspot.co.uk/2013/03/cyprus-just-say-nein-to-german-eu-nein.html
This may be a stupid question - Does ANYBODY know whether the EU can claw back deposits from people who take money out of the bank before the onset of such a crisis?
I am worried about this one too. They just look at what you HAD in the bank and say you owe.
Clawbacks are usually always in place.
Thats why he/she who panics first, panics best !!!
I don´t understand all this focus on "undemocratic". Whether or not a bank can repay you the money you lent it is a matter of finance, not democracy. Obviously, no one is going to vote to receive less than 100% of their deposit.
Interestingly, we will start to see some price-discovery of bank solvency - market style. Bank´s with perceived solvency risk will have to pay higher interest rates to attract deposits.
LOL exactly right on...if I get a loan and dont repay it, I doubt the banks would reply that I'm being 'un-democratic'...I'm just a deadbeat tht cant repay my loan!
Curious...
If "Whether or not a bank CAN repay you the money you lent it is a matter of FINANCE..."
What is it should it become "Whether or not a bank WILL repay you the money you lent it..."
FUK-U-NOMICS!
As someone whose family got hosed in the first Argentine Default, i'd say to those interested on the next play, keep your eyes peeled on Argentina this week to see if they make the bondholders payment by the 31st or not.
will you go into details on what happened to you?
The Recession may have started in 2007/2008 for everyone else but it started in 2001/2002 for my family when we lost most of our investments in Argentina.
Don't fall for the rhetoric about 'Foreign Vultures' they trot out everytime they pull the same act. I know many normal families and pensioners who also got fleeced, hardly Goldman Sachs, JPMorgan etc. tier supervillains.
Now fast forward 11 years later and history looks to be repeating it's self in Argentina with another possible Default on the cards, thankfully i'm not one of the suckers at the blackjack table this time as I learnt alot about the markets and the world from the previous horrific experience.
That country and money will never change, they'll hose foreigners every time as long as they can get away with it.
The new pope could tell me that God himself personally guarantees any future investments in Argentina and they'll still never see another red cent from me ever again.
if it is any relief to you, the kondratieff winter started in 2000. it is still bitter cold out there.
Five words that have sent Euro BTC up another 15% or so today, not to mention the reaction in the pathic markets.
Confidence is now a four letter word.
"If there is a risk in a bank, our first question should be 'Okay, what are you in the bank going to do about that?
Does this go for the ECB as well?
The bankster heist is now in your face muppets!
What are you going to do about it?
Next the banksters raid the IRAs and 401Ks muppets.
If we get away with robbing Cyprus then we get even more bolder and take more!!!!
The banksters,
When you deposit money that you know is uninsured you assume risk in exchange for some expected return. It seems like wiping out the investors in a shitty bank while making the insured deposits whole is just the opposite of what the bankster's bitchez in Washington did with TARP where they've made the bond holders whole (and then some) while decreasing the purchasing power of the depositors (and everyone else holding USD.)
Seems to me threatening the insured deposits in the first place is where this deal really shit the bed....
The same can be said for 401Ks and IRAs.
The Keynesian Ponzi it's end it's gonna kill off a lot of wealth.
Agreed, and as little hope as I have of ever seeing the money I've paid in to social security paid out or worth more than pennies on the dollar I have the same worry about my 401k. Unfortunately my employer won't match my investment in silver, lead, and storable food so there's a 100% chance I'm going to take a haircut either through early withdrawl penalties, outright confiscation, and of course inflation on the total balance.
The little money I keep in banks is deposited in local banks. The bank presidents live within 10 miles of my house and their kids go to the same schools as mine. They don't drive Ferrari's and I've never heard of them having a $400,000 bar tab or making a fat-finger that cost the banks billions so I have a decent amount of confidence that they will honor my trust in them and I'll never need to find out if the FDIC is solvent.
How to Dijssembowel Europe...
"Oh what a tangled web..."
Banks worldwide about to lose all their unsecured large deposits--how much does it take to tip an overleveraged (on and off balance sheet) bank off the edge? How many off balance sheet counter parties go with it, faced as well with their own loss of large deposits? When do assets start getting sold to cover the loss of liabilities?
un·se·cured [uhn-si-kyoord]
adjective
1. not secured, especially not insured against loss, as by a bond or pledge
Right, big dumb money. It is and will be on the move, disintermediating. Where will it go? And what will banks start selling to keep their reserve percentages. I know, they'll just mark up their crap assets--problem solved.
I thought banks generated income by loaning money? Pretty sure my local bank doesn't have a fed funds IV drip that they use to play in the equities casino but they seems to be keeping the lights on....
The centralization and consolidation of power and control of wealth progresses. This is just one more example of many that have already occurred, and a harbinger of many more to come. Examples of the few winners will be trumpeted and played over and over again for all to see, worship, and aspire to themselves, while the carnage of the many victims will be quickly swept up and buried out of sight.
This is nothing more than a smart move to cut down paperwork. It skips the cumbersome, drawn out song and dance of shackling future generations into debt slavery and just goes straight to officially confiscating everyone's money out of deposit accounts, CDs and bond funds. Bankrupt, corrupt governments will no longer have to bother with the pesky time and efforts of parlimentary debate, since theft technically doesn't require a popular vote.
Sorry to burst your bubble, but the moment you deposit money on a bank, you basically lose all ownership of it. If you want that, get equities. Why do you think deposits are listed as assets on a banks balance sheet in the first place? Or did you not even bother to look into what you are actually depositing your hard earned cash on? Don´t tell me you ZH´ers are THAT naive.
So easy solution, do not deposit your money on a bank you don´t fully trust to handle it well, especially chasing some extra % interest. The fact in Europe at least 100k of it is insured is already quite something. Normally (back in the old "normal") when a bank fails, ALL depositors get whiped out. Welcome to the grownup world bud.
Oh for crying out loud, this is the third time in 3 days I have had to post this on different boards: deposits are LIABILITIES on a bank balance sheet, not assets. Depositors are the creditors of a bank, just like anyone who lends money or provides goods or services on credit to anyone else is their creditor.
Never thought I'd have to make that correction on ZH
I think we´re both correct in this sense mate.
The banking terms "deposit" and "withdrawal" tend to obscure the economic substance and legal essence of transactions in a deposit account. From a legal and financial accounting standpoint, the term "deposit" is used by the banking industry in financial statements to describe the liability owed by the bank to its depositor, and not the funds that the bank holds as a result of the deposit, which are shown as assets of the bank.
For example, a depositor opening a checking account at a bank in the United States with $100 in cash surrenders legal title to the $100 in cash, which becomes an asset of the bank. On the bank's books, the bank debits its currency and coin on hand account for the $100 in cash, and credits a liability account (called a demand deposit account, checking account, etc.) for an equal amount. (See double-entry bookkeeping system.)
In any case, my point still stands.
Methinks that the vast majority of ordinary people who deposit money in a bank do so believing it is for safe-keeping and is available on demand.
How many of them are aware that they surrender ownership of their money at the point they deposit it? Very few I'd guess.
And if they were aware that it is a risk 'investment', they would probably demand a far higher interest rate from the bank. The current interest rate being paid doesn't come anywhere close to what is reasonable in these circumstances. Depositors are being raped by their govts, central banks and commercial banks.
Sounds like Sonic Diesel Boom just threw all the smaller banks under the bus here. Redirect the mob with the pitchforks, torches and guilotines towards the lower lackeys on the financial food chain while protecting the bigger players who drive this whole mess. That is fine there are plenty of blades and plenty of patience. Once the lower value targets are exhausted and the blood lust is in full frenzy they won't last long.
Actually, it might be the opposite. He might drive money away from the large banks (which have bucketloads of bad assets and trillions in derivatives) and toward small banks, who operate in a small locale and are more likely to know both their area and their customers rather well. That local knowledge should mean fewer bad assets, and thus less likelihood that the bank is going to need a restructuring that would necessitate absorption of uninsured deposits.
Possible at least on local levels and I don't know what the equivalent would be in Europe if any but I can see a possible inflow to their equivalent of credit union banks. That is assuming people have any trust in the traditional banking system (large or small) once reality sets in a few days or weeks after the initial shock wears off.
Maybe events have happened too fast and I'm confused, but reading this it seems that if the US had had Jeroen Dijsselbloem as SecTreas in 2008, instead of Hank Paulson, there would have been no TARP, and Goldman, BAC, Citi and Morgan Stanley would have been wrapped up, restructured, and sent into the arms of new owners. The equity would have been wiped out. The bondholders would have been wiped out. Management would have been removed. If assets were still below liabilities, uninsured depositors would have been hit (at least in the banks). The taxpayer would have been off the hook, and Bernanke wouldn't have had to crank up the printers.
At that time, the finance sites on the web were full of folks who would have applauded that (bankruptcy/restructuring). When Zerohedge came on line in early 2009, I recall most of the posters used to champion the same sort of thing. People with skin in the game get skinned according to bankruptcy law and tradition, while people without skin in the game are neither asked nor forced to contribute.
Granted there are some inconsistencies in how the Cyprus problem was attacked, but the final version (absent some lingering uncertainty over bondholders in Bank of Cyprus) is pretty much what everyone had championed 4-5 years ago in the US, and which most everyone preferred to TARP and QE.
The funds in Cyprus, or at least a large portion of them are gone. Nobody can steal what is no longer there, they merely break the bad news. What solution would those now complaining propose? That German taxpayers foot the bill? That Draghi prints?
Again, this was handled badly (capital controls will create a two-tiered euro), and the initial demand to hit insured depositors at about the same time as uninsured depositors (and before bondholders) was absolutely incorrect and wrong, but the way it ended up is not so far from what everyone demanded 4-5 years ago, which was no taxpayer-funded TARP, and no printing. What happened is a reminder and a warning that uninsured means uninsured.
If this is incorrect, how do people here propose it should have been handled?
(I think I see where Tyler is going....which is another matter entirely and suggests capturing depositor wealth to erase sovereign debt...but that isn't what happened in Cyprus. Yet.)
2008 was the first act. This is the second act. You had little over 4 years to get your affairs in order and protect your wealth.
The days of the Richie Richs are coming to an end everywhere. The most beautiful cars and yachts were built just before the big bang in the Thirties.
Short : Ferrari, Lambo, Bentley, Mega Yachts
@Chindat
Banks assets be it sov debt , mortgages or gold was always worthless..........these "assets" only function as wealth conduits , they are not intrinsic wealth.
Government law gives them the sanction to farm the value hidden in the fiat.
The solution is simple.
Regard the banks asset money as useless & worthless.
Declare the debt null and void.
Turn the deposits and so called sov money into equity like pure fiat money.
Any "assets" remaining would be valued on their utility value and not on their "growth potential"
Debt problem solved.
We can then concentrate our energies on life support problems.
" and the initial demand to hit insured depositors at about the same time as uninsured depositors"
This was apparently the initial demand of the Cypriot PM to try and dilute the damage done to rich (Russian) depositors, not the EU or ECB. They make for easy scapegoats though.
lots of outrage, incredulity, confusion. . . but for me, the bottom line you mention chindit13,
if one has been reading ZH for any length of time, this should be in your bones by now.
that "money" hasn't been "there" for a long, long time. wish-full thinking, will-full ignoring of truths.
where to from here then.
Bottom line is that confidence is fleeting, cash and pms will be king and fractional reserve lending is dead until it comes back a couple hundred years from now.
Get out what you can, now and not tomorrow. Doesn't matter if you're in Europe, North or South America or Asia. The biggest grab is yet to come.
You thought bailing out the banks with future tax revenues was bad? Wait until your statement balance has been reduced 25%, 40% or 60% from one week to the next because the money is simply not there.
The same thing could happen with gold-backed currency and no fractional reserve banking.
Imagine a bank in a pure gold society. Everybody deposits gold. The bank lends gold. Somebody borrows gold and uses it to build a house. He defaults. There is no longer enough gold in the bank to match all deposits. Some depositors lose.
You're going into the extreme. The banks have lent out too much, have created too much paper out of thin air, have created too many exotic financial vehicles. It's created them fees upon fees upon fees. The underlying assets became less and less relevant in their schemes ... until the day these assets are becoming very relevant again. That time is now. MFG was a crucial factor in the level of warnings.
MFG was code orange
Cyprus is code red
Harder to predict if the markets will take a dump because of the way they're being manipulated. How much money is still positioned in the market as opposed to money held in cash accounts?
How is that the same? That’s no more risk than if a person spent their OWN gold to build a house & did a crappy or incomplete job.
Risk isn’t magically removed, never can be, but it isn’t amplified.
In THIS case of the banks risk is highly amplified, losses to depositors far exceed any expectation because there’s fraud involved, part of which is leveraged trading, part of which is reckless lending. Leverage is like a wrecking ball, works great for you if you’re swinging it at your target, real bad when you’re too dumb to not swing it back at yourself. In this case the operator is swinging it back at his/her own depositors & everyone will suffer. No one was forced to use a wrecking ball.
Using just gold for lending & spending by comparison is a moderate-sized hammer, not even a jack-hammer. You can still hurt yourself with reckless spending, borrowing or risk-taking but when it’s not leveraged it’s not so bad.
How can they be unsecured
I thought ALL EU banks were insured up to 100,000??????????/
Hahaha! An the FDIC fully insures trillions of USD deposits with its $9 billion backstop....LMAO....
This is a template for a broken Eurozone. This is the description of what the Eurozone is going to look like in the coming months: the people vs. the bankers.
One of the exits is to pull these people out of power. It’s the start of a breakup.
i don't want to be rude to the autor but Dijsselbloem isn't phoneticaly "Diesel Boom". Unfortunately the dutch dialect isn't much translatable in english since it's made out of funny sounds you guys never heard of ... but Dijssel is probably a town in Netherlands and Bloem means flower ... well let's just agree to call him Mr Springfield :-)
Considering he just added fuel to the fire just started, I think
Diesel Boom
makes me think of him as a prophet, not just another average turd in the toilet. And I think history is going to remember this dude.
EURUSD 1.285 ... paging Larry Fink.
It is whatever the traffic will bear. That is how they are proceeding with the Rape of Cyprus. If they can't bunghole her through the front hole, they will do it through the back hole.
A critical point to make here is that virtually every bank has been compromised by the greatest Ponzi in the history of the world. And information about the health of individual banks is highly suspect. How does one trust a thoroughly corrupted system to direct you to a bank in which you might exceed insured limits for business purposes, (or even park money under the insured limits?).
This will kill growth even further around the world. Friction is what it is called. And that creates hesitancy and fear to do anything other than to hunker down and figure out how to beat the plunderers rather than to create new wealth.
So instead of fiscal reform of the Welfare State they now go down this route for avoiding the inevitable overt dismantling of it, (which would cost the pols their jobs).
It’s the signal…
“Get Your Assets out of the Banks – NOW” | Matterhorn Asset Management AG/ Gold Switzerland
by Egon von Greyerz - March 18 2013
CYPRUS
The Cyprus event may later, in the history books, be seen as the catalyst of the fall of a century long Ponzi scheme. This could rank in line with the shot in Sarajevo as the start of WW1 or the collapse of Kreditanstalt in 1931 as the start of the Great Depression.
Isn’t it ironic that exactly 100 years after the creation of the Fed (a private bank created for the benefit of bankers) that the fragile and bankrupt financial system is likely to fall due to the insolvency of a couple of Cypriot banks.
But what is happening in Cyprus will not be the reason for a collapse but just the trigger for what has always been inevitable.
There are only two possible outcomes of the crisis we are now in:
The second outcome is the most likely although the risk of an systemic implosion is very high if central banks are too slow in flooding the system with money. The deflationary outcome would lead to no banks surviving and no money in the system. And the hyperinflationary outcome would lead to money being totally worthless. In both cases gold will be a major beneficiary.
But printing money will of course not solve anything since worthless pieces of paper with ZERO intrinsic value can never create wealth. At best it will just kick the can down the road for a very short time.
Cyprus is a mini model of the world financial system. The IMF, ECB and the politicians thought they could get away with the depositors taking part of the loss. But they have clearly not considered the consequences. This action (if ratified) will not only lead to a run on the Cypriot banks but also on banks in other weak areas such as Ireland, Spain, Portugal, Italy, Greece etc. Eventually it could spread worldwide.
The IMF, Fed, ECB, BoE, BoJ and other central banks are likely to very soon come out with a concerted action to support the financial system in order to avoid a total collapse.
For well over ten years I have advised investors to get their assets out of the banking system. This doesn’t mean just their money but also all other investments (stocks, bonds, gold etc) which are likely to be lost when banks go bankrupt.
Wealth preservation is now absolutely critical. This involves eliminating counterparty risk whenever possible. Everything within the banking system has counterparty risk even if it is segregated or allocated. Lehman, MF Global and Sentinel are all examples of client assets being lost in the financial system.
Gold (and silver) will continue to reflect the total destruction of paper money that the unlimited money printing will lead to. But investors must hold physical precious metals and they must be stored outside the banking system.
http://matterhornassetmanagement.com/2013/03/18/get-your-assets-out-of-the-banks-now/
Now that I think about it (and add to today's pixel count), I suspect Jeroen Dijsselbloem will become the most hated man in the halls of JPM, Goldman Sachs, and every other institution that is TBTF. More people will go small and go local, knowing that such small banks know their customers and areas better than a NYC bank lending to an Angolan driller. Also, the small guys aren't loaded up on derivatives. Small is less likely to blow up. Funding might start to get a little more equal, as the TBTF premium disappears.
This could actually be the first shot in the market ending TBTF through disintermediation, since neither Treasury/Fed nor Congress is likely to ever do it..
everybody will spread their accounts above 100k. Then the next step will be lowering the 100k deposit insurence to say 50 k, then 25 k etc etc. Be sure they are not that stupid, they are just criminals....
It was only ever levered up to a 100k to deal with the current financial crisis.
Dijsselbloem never made a secret of the fact he thinks it should be brought back to the 30k (or maybe 50) limit it was before.
And/or nowadays when banks have "to know their customers", they'll use their shiny computers to produce lists of people who have spread their deposits around to avoid exactly what's happened. Meaning if you have €60,000 in one bank and €70,000 in another bank, they'll be aggregated and you'll get hit by theft.
What's happening is classic socialism. They always steal everybody's money to spread poverty equally.
One simple answer to deposit crises. Make depositors super senior creditors. The banks will change their entire risk profile if all liabilities are junior to depositors and you wouldn't have depositors taking haircuts before all junior liabilities were wiped out (at least barring an Obamaesque breach of seniority a la GM)
I'm not sayin, I'm just sharing. Don't yell at me.
http://dollarvigilante.com/blog/2013/3/25/worlds-first-bitcoin-atm-is-an...
Notes & questionables...
"If there is a risk in a bank, our first question should be 'Okay, what are you in the bank going to do about that? What can you do to recapitalise yourself?'. If the bank can't do it, then we'll talk to the shareholders and the bondholders, we'll ask them to contribute in recapitalising the bank, and if necessary the uninsured deposit holders," he said.
Bank shrugs shoulders, says "Nothing". Bondholders shrug shoulders, say "Nothing". "Okay then", says ECB, "Let's just take the deposits!" Boy, that was easy. I'm glad they figured this out finally! I can relax.
"After 12 hours of talks with the EU and IMF, Cyprus agreed to shut down its second largest bank, with insured deposits - those below 100,000 euros - moved to the Bank of Cyprus, the country's largest lender. Uninsured deposits, those accounts with more than 100,000 euros, face losses of 4.2 billion euros.
Uninsured depositors in the Bank of Cyprus will have their accounts frozen while the bank is restructured and recapitalised. Any capital that is needed to strengthen the bank will be drawn from accounts above 100,000 euros."
Let's see? You get to choose a bank with lots of uninsured (above the limit) accounts, and just steal transfer money to a bank (the largest lender) that needs to make good on collateral. AND, you freeze any account holders out, while you "strengthen" Bank of Cyprus. This is so simple, a caveman could do it! If you've got, or are in, the right club!
Draghi's statement "“Within our mandate, the ECB is ready to do whatever it takes to preserve the Euro, And believe me, it will be enough”, is now shown to be a bunch of bull, and he was just trying to buy time and boost the markets. Him and Bernanke are one in the same. The markets would have reacted badly without Dijsselbloem's "Cyprus is template for the EU" statement, this just makes it worse, because it is an official dictate from the Eurogroup. I know where I would be today if I had an uninsured bank account in any of the southern European countries, for that matter, anywhere in Europe. Let the bank run begin!
You have to be a complete and utter idiot to leave your money in any bank over there.
"What we've done last night is what I call pushing back the risks"
In my experience if you don't attack the risks, the risks will attack you. IMHO, bad call.
In the early-middle 00s ex-Chief of the CIA's Bin Laden search unit Michael Scheuer authored his landmark "Marching Toward Hell." In it he quotes six of the world's top demographers who agree that Islam would take over Europe "within ten years" IIRC. This may be the long anticipated end of the white man's rule over the west. We had our day. Judaics started their long climb up the ladder over a hundred years ago to run the west and this is what we got (one might say Judaics started in earnest to take over the west in the early 20th C when they published the Scofield Ref. Bible, which is when they also started pushing the lie of "six million dead innocent Judaics" i.e. holocaustianity.) BTW, Oxford Judaics still list Scofield as the author even of hundreds or thousands of edits since the convicted criminal Scofield died.
I eagerly anticipate the soon-coming YouTube videos showing what the above demographers predicted: "The only question is how much blood will be spilled."
Three years ago Hillary first utterred her "unbreakable bond" phrase concerning jewland. Then a month later Barry Soweto repeated it. This month Barry repeats the same epithet but with a twist, something like "everlasting relationship." All spitting on G. Washington's advice in his farewell address, of course.
Of course, what Barry meant is that these jew dude's ancestors were born in Israel so the world (especially the USA) must enforce God's will for jews to own that geography.
But beyond that: it's not lost on the world's 1.5B Muslims and the rest of the non-Judaized earthlings that this god-forsaken jew genetic DNA came from NW Turkey, from Khazaria, a blood thirsty war loving usury-loving people finally conquered by now-Russia circa 900 AD. And it's also not lost on the non-western world that the USA/UN displaced the actual genetic descendants of the people who actually were born in Palestine.
Proof that jews run the west is found most easily in the fact that their genetic line does not come from Palestine, yet the west lies and insists in perpetrating the lie that they did come from Palestine. This is false and easily proven. Eventually it will cost only about $20 to prove anyone who claims such ancestry is lying to cover up the biggest lie ever told in the west. I eagerly await that day.
PhD. Arthur Koestler's "The Thirteenth Tribe" is free on the net. The 13th tribe is Khazaria, not Palestine.
G. Washington also said "Let there be no change by USURPATION" in his Farewell Address.
Obama has fulfilled the New World Order wish of foreign influence in the Oval Office as he was born of "an improper ascendant", Barack Obama Sr., a British subject who imparted Barack Obama 2 at birth with British subjectship. That foreign allegiance at birth (and likely still today) voids his municipal eligibility as a natural born Citizen, as defined by Minor v. Happersett, 88 US 162, 167 (1874) ("the natural born Citizens are those born in the US of US Citizen parents"). It is treason of the highest degree committed by a treasonous Congress at the behest of their Central Banker masters of the New World Order. It is no coincidence that the Rs have their own ineligible non natural born Citizens vying for the Presidency or VP--- i.e McCain, Santorum, Rubio, Jindal, and Cruz. All are running protection for the Usurper domestic enemy Obama 2.
The WH has been Usurped, thus their is no law and no Constitution, since the putative President, who is the executor of the laws, is an illegal entity. Prepare accordingly.