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Guest Post: Post-Cyprus Blues: Confusion And An Erosion Of Faith

Tyler Durden's picture




 

Submitted by Charles Hugh-Smith of OfTwoMinds blog,

It is far too early to be projecting much from Cyprus except a continued erosion of faith in Eurozone banks and leadership, and by default, the euro as a placeholder of purchasing power.

 
What do we know now that the Cyprus bank crisis has been resolved? What we know--that the resolution follows basic capitalism 101 guidelines of matching risk and loss, unlike the rejected across-the-board tax on all deposits--is dwarfed by what we don't know, for example:
 
Does the Cyprus "bail-in" set a precedent for much larger Eurozone banking/debt crises?
 
Though the Cyprus resolution is being held up by some as a model for all future Eurozone bail-outs, is the situation in Cyprus truly applicable to larger economies?
 
Is the Cyprus crisis a tipping point that marks a sea-change in perceptions of systemic safety and risk?
 
Though no one can claim with any certainty to have the answers to these questions, we can seek a coherent context for our inquiries. One way to do this is to have a wide-ranging discussion with a well-informed, knowledgeable commentator: in my case, that person is Alasdair Macleod of GoldMoney.com.
 
Here is our half-hour conversation in podcast format. (video format is posted below)
 
Of the many points raised in our discussion, I found these especially relevant to establishing a useful context of the Cyprus crisis:
 
1. Banks have perfectly legal claims on the money you have voluntarily chosen to deposit. Sovereign nations or multinational organizations like the E.U. may provide insurance on deposits in member banks, but collecting on that promise is not the same as withdrawing your money in a non-crisis situation.
 
2. Political expediency is often served by changing the rules, either by dictat or by hastily prepared legislation pushed through a legislative body desperate to resolve a crisis in such a way that it retains its own power and autonomy.
 
3. Cyprus is an offshore financial center designed to attract large deposits from wealthy foreigners (apparently mostly Russians and Britons). In this, it is more like a Caribbean banking center than a large, diverse economy like that of Spain or Italy.
 
4. The Cyprus banking crisis is fundamentally different from that of Greece. Cyprus is not indebted to foreign banks; its banks are insolvent due to their own mismanagement of loans, assets and risk. The foreign capital is not at risk of a sovereign default; it is at risk of a bank collapse and the seizure of deposits by creditors.
 
For these two reasons, it may be misleading to project the crisis and resolution in Cyprus onto other quite different financial crises in other quite different economies. The common ground may be a rising fear of capital controls and the search for safe havens that won't implode or change the rules overnight.
 
5. Loss of faith in one's banks, government and currency may play out in several ways. Those depositing cash in Cypriot banks were very likely hedging the perceived risk of holding that cash in local currencies and local banks.
 
The sudden emergence of risk in what was perceived to be a safe haven will likely spark interest in non-banking safe havens, for example, precious metals, and what correspondent Mark G. calls the Glass Jar Bank, which he observes is still a popular alternative in Eastern Europe to entrusting one's cash to banks.
 
6. A lack of alternative investments leads to asset bubbles in whatever asset is perceived as a safe haven. Households in China, for example, save a prodigious amount of their earnings, but this is not just thrift: the social safety net is rudimentary in China and cash is the only safeguard available.
 
Since the stock market is rightly perceived as a rigged gambling den, the vast majority of Chinese households choose to invest their cash in real estate, as this is about the only alternative to a savings account available to non-Elite households.
 
Alasdair noted that the Chinese government has encouraged its citizenry to buy gold, and I noted that the government is well aware that the real estate bubble--inflated by housing being the only available place to park savings other than low-yield savings accounts--poses a great hazard to the nation's financial stability.
 
7. As faith in the Eurozone's banks, leadership and currency erodes, the U.S. dollar will gain value as a mathematical function of the dollar index. Add in the devaluing yen and the dollar will rise significantly against the other major currencies.
 
8. There is a much larger geopolitical game being played in Cyprus. Despite rumors of Russian participation, the Status Quo remains firmly in place: the Troika managed the banking crisis, Great Britain retains its naval base and the West retains access to any offshore gas/oil that might be recoverable off Cyprus.
 
Here is a precis of geopolitical issues revolving around Cyprus: Trouble in the Eastern Mediterranean Sea: The Coming Dash for Gas (Foreign Affairs).
 
What can we conclude about the longer term consequences of the Cyprus banking crisis? In my view, the present confusion is legitimate: it is far too early to be projecting much from Cyprus except a continued erosion of faith in Eurozone banks and leadership, and by default, the euro as a placeholder of purchasing power.
 
Alasdair and I discuss a variety of other topics as well, including the Keynesian endgame playing out in Japan:
 
 
For more on the the eurozone credit crisis by Alasdair, please read Europe is Drowning Under Too Much Government (PeakProsperity.com)
 
For more on why the U.S. dollar will strengthen by CHS, please read What Will Benefit from Global Recession? The U.S. Dollar (October 9, 2012)

 

 

 

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Tue, 03/26/2013 - 21:17 | 3379797 DJ Happy Ending
DJ Happy Ending's picture

Confiscation and erosion of funds was the working title.

Tue, 03/26/2013 - 21:23 | 3379817 cifo
cifo's picture

Do they open the banks tomorrow?

Tue, 03/26/2013 - 21:40 | 3379873 Ahmeexnal
Ahmeexnal's picture

Angela Merkel should know that her actions will not go without consequences. After all, she claims to be a physicist. Newton's third law states that for every action (force) in nature there is an equal and opposite reaction.

Germany's confiscation action will be met with a re-action force by those who have been robbed of their freedom/money/lives. Question to the parasitic german usurer kleptocrats that are bent on robbing the rest of europe: How will you defend all german assets abroad?

It's only a matter of time for the Greek, Italian, Spaniard, Cypriot, Irish, French, Portuguese to up the ante and go from useless marching to torching BMW, Audi, VW, Mercedes-Benz, Porsche dealerships all around the world.
And flashing a kraut passport in southern europe will be the most stupid and dangerous activity very soon.

Tue, 03/26/2013 - 21:43 | 3379886 jus_lite_reading
jus_lite_reading's picture

Just an FYI: The banks will not open tomorrow. Tyler needs to update this ASAP!!

Latest news is that they are scheduled for THURSDAY now but I'm hearing it's all BS because "the MONEY IS GONE!" This coming from good sources! HOLY SHIT if true!

Wed, 03/27/2013 - 04:48 | 3380378 css1971
css1971's picture

 

"the MONEY IS GONE!"

DOH... That's how banking works.

THEY DON'T HAVE YOUR MONEY! None of them. That's what the "fractional" in fractional reserve banking means.

When you give them your money and get that book keeping entry you call your bank account. The bank, just as fast as their little feet will carry them, GIVES THE MONEY TO SOMEONE ELSE. Y'huh.

It's called "lending".

Tue, 03/26/2013 - 21:44 | 3379887 ZerOhead
ZerOhead's picture

Yes they will open tomorrow but for new deposits only.

Other than that they will remain closed for as long as it takes to figure out a way to keep money from leaving the country.

Tue, 03/26/2013 - 23:07 | 3380107 Solarman
Solarman's picture

I think they are waiting for some freshly minted bank notes to arrive, as just about everybody will be withdrawing great sums of money.

Wed, 03/27/2013 - 00:24 | 3380209 fourchan
fourchan's picture

faith is the same asshole the the whole eu has its head up. 

 

now is the time for inlightened reason and rejection of the shackles of world banking and paper masters.

the old ways have failed the whole world and enriched few.  take back the world, now is the time to strike!

Wed, 03/27/2013 - 04:39 | 3380373 Debugas
Debugas's picture

G4S 950 workers are working 24/7 distributing cash all over Cyprus ATMs

Tue, 03/26/2013 - 22:00 | 3379942 johngaltfla
johngaltfla's picture

Thursday. Just wondering when the stories hit the financial media about reported dollar shortages in parts of the Eurozone (again).

Tue, 03/26/2013 - 21:26 | 3379828 tom a taxpayer
tom a taxpayer's picture

Erosion of faith yes, especially because the Bank of Cyprus and the other lame bank were closed to the peasants (except for ATM) but open to whales who could request large withdrawals for humanitarian reasons. The peasants also have humanitarian needs (medical emergencies, etc) for larger withdrawals than ATM.  In fact, if anyone needs emergency funds for humanitarian needs for basic necessities it is the peasants caught in a suddenly cash economy. Another injustice to the Cypriot people is that the two banks were open to the humanitarian needs of the whales but not of the peasants.

Tue, 03/26/2013 - 21:41 | 3379881 duo
duo's picture

so I should risk losing half my money in real estate rather than lose it all by keeping it in a bank or buying stocks?  That explains the SoCal real estate frenzy.

Tue, 03/26/2013 - 21:18 | 3379799 kushmere
kushmere's picture

It will be Cypriots, Russians, and soon Spanish and Italians driving the growth of Bitcoins. Driven to it by thier idiot governments.

http://Bestbitcoinsites.wordpress.com

Tue, 03/26/2013 - 21:21 | 3379814 dick cheneys ghost
dick cheneys ghost's picture

I heard a rumor that the Saudi's were going to trade Oil for Bitcoins............

Tue, 03/26/2013 - 21:26 | 3379830 kushmere
kushmere's picture

I heard it was Iran. I doubt either, but if so.... Straight to the moon.

Tue, 03/26/2013 - 21:41 | 3379879 Ahmeexnal
Ahmeexnal's picture

Monopoly money is also starting to appreciate.
Get on the woolsvagen before it's too late!

Tue, 03/26/2013 - 21:27 | 3379835 sunnydays
sunnydays's picture

He is saying it is no big deal and Cyprus won't affect the other nations because it was a place for Tourist and Russians?  I don't believe he has taken in account that the Russians know they were targeted by the EU and that is why Cyprus was targeted. 

Jim Willie did an interview today too.  It is a lot different from this one. Info about his insider source and Russia and Cyprus.

http://www.youtube.com/watch?v=P5OBHqQkiAI

 

 

Tue, 03/26/2013 - 21:33 | 3379858 dick cheneys ghost
dick cheneys ghost's picture

Thanks for the link........I enjoy Jim Willie

Tue, 03/26/2013 - 21:34 | 3379853 Dewey Cheatum Howe
Dewey Cheatum Howe's picture

Looks like Jamie finally decided to take one for the team.

http://dailycurrant.com/2013/02/22/jamie-dimon-resigns-jp-morgan-put-ban...

 

Jamie Dimon, often cited at the most responsible head of a Wall Street investment bank, reigned as Chairman and CEO of JP Morgan Chase today.

In a blistering letter published this morning in Britian's Financial NewsDimon says he is tired of working in the "bankrupt moral culture" of finance and called for a criminal investigation into wrongdoing at JP Morgan and other major investment banks.  

"For too long I have been a witness to what I consider to be unethical and sometimes even illegal behavior at the highest levels of Wall Street," the letter reads. "I thought that I could change the system from the inside. But over the past few years I have been proven wrong.

"Despite the concerted effort of myself and my closest staff, the recent losses at our Chief Investment Office and the global LIBOR scandal show that firms such as JP Morgan have simply become too big to manage.

"For that reason I am resigning from my posts as Chairman and Chief Executive Officer of JP Morgan Chase effective at noon EST today. And I urge global regulators to introduce new rules seeking to limit the size of scope of the largest international financial institutions."

Starbuck's Pequod

Long recognized as a less corrupt institution than competing banks such as Goldman Sachs and Barclays, JP Morgan has come under fire in recent months for a number of trading scandals. Most notably the bank lost over $6 billion on bad derivatives bets in the notorious London Whale fiasco.

But in his resignation letter Dimon did not limit his reasoning to recent events, explaining that he is disgusted by the behavior of investment banks during the financial crisis.

"Over four years has passed since the greatest financial collapse in the history of this nation," Diamond recounts, "and still no one on Wall Street has been held accountable for the crimes which have been committed.

"Washington says they can't find one single banker guilty of fraud. I can think of 15 people off the top of my head who should be behind bars.

"Why aren't more people in jail? If you rob a bank, you go to jail. If a bank robs you, it gets a bailout. We need to end this cycle of impunity on Wall Street. And I am prepared to testify against my fellow bankers if need be.

"I don't know why I've held my nose for so long. Honestly it was probably the money. But I started doing yoga last month, and have been thinking about researching Buddhism. I'm ready to turn over a new leaf, and find something else besides money upon which to base my self-worth and value as a human being. "

House of Cards 

Dimon says he's not surprised by the lack of inaction in Washington, given the symbiotic nexus of corruption between political actors and big banks.

"Let me explain how this system works," Dimon writes. "Politicians protect us from competition and criminal prosecution, and in return we give them money to use in their campaigns.

"There's only one word to describe such an arrangement: bribery. And you know what's really insane? Its not even illegal. Those idiots in Washington actually write laws regulating the manner in which they would like to be bribed.

"Only $2,000 per person, unless its funneled into a SuperPac or whatever or into a primary fund versus a general election fund...I mean who cares how much goes into which account? Its all just corruption plain and simple. And sadly I have been a part of it."

Plus Ça Change

Financial equities analyst Ferdinand Pecora says Dimon's resignation and public rant against Wall Street could change the financial sector, but its impact will likely be limited.

"If even Jamie Dimon is calling for jailing bankers, you would think the FBI and SEC would at least start investigating," Pecora says. "But they've ignored every other clue they've gotten so far about financial crime, so I don't expect things to change.

"Goldman Sachs, Bank of America, Citigroup, JP Morgan...these companies have nothing to fear from the government. Jamie Dimon is just one man. The banks own thousands of lobbyists, congressmen, and government regulators. They'll be just fine."

Carter Glass, a political analyst for the Center for American Progress, agrees that Dimon's cri de coeur won't change a thing.

"It's great that someone has finally mustered the courage to take on the banks," Glass explains. "But we've got an election next year in Congress. Our lawmakers aren't gonna piss off the people who pay their bills."

Admitting that the chances of affecting change on Wall Street are slim, Dimon writes that he's already planning for a simpler life.

"I'll will be retiring to South-East Alaska, where I will run a small salmon fishing operation cum Bikram yoga retreat. If anyone in D.C. is interested in bringing criminal bankers to justice, just give me a call."

Tue, 03/26/2013 - 21:48 | 3379905 Ahmeexnal
Ahmeexnal's picture

April fools came early?

Tue, 03/26/2013 - 21:51 | 3379919 Dewey Cheatum Howe
Dewey Cheatum Howe's picture

Depends who the fool is.

Tue, 03/26/2013 - 21:58 | 3379929 ZerOhead
ZerOhead's picture

I've been there before but this time it's you unfortunately...

May I suggest a lawsuit against the originators of this disinformation? I strongly recommend the crack personal injuries team at Cox, Leakey & Hertz...

Tue, 03/26/2013 - 22:01 | 3379936 Dewey Cheatum Howe
Dewey Cheatum Howe's picture

Maybe I should have prefaced the initial post with a /satire.

The dailycurrant is an onion styled news site. So much for deadpan humor here.

Tue, 03/26/2013 - 22:32 | 3379957 ZerOhead
ZerOhead's picture

Deadpan humor died here when Attorney General Jr. Dick Holder told us that Wall Street Bankers wouldn't be held criminally responsible for their criminal actions becaues it could ruin the nation's confidence in the whole TBTF criminal enterprise...

I was laughing so hard for 15 solid minutes that I had tears streaming down my face and could barely breathe...

Turns out the joke was on me.

Tue, 03/26/2013 - 21:47 | 3379895 ForWhomTheTollBuilds
ForWhomTheTollBuilds's picture

I’ve taken steps to prepare for the zombie apocalypse, but looking at the market reaction and the minor protest movement in Cyprus, I have come to the regrettable conclusion that no mass withdrawal from the system is coming anytime soon.

95% of people younger than about 90, have no concept of wealth outside of dollars, savings or investment outside of certificates or of purpose not articulated by a corporate or govt official or an image based advertisement.
Face it, we are beat.

The system will collapse eventually, but under it's own weight at an agonizingly slow pace as the powers that be take f*cking *everything*. There is no chance the wealth most people would still have if they withdrew and forced reckoning today will be available to support a speedy rebuilding when the time finally comes.

The masses will keep their chips on the table until the bitter end choosing to believe whatever they need to in order to justify the choice even if it contradicts what they told themselves during the previous crisis. When Iceland was in trouble the yahoo finance tards were screaming the deadbeat Icelandic citizens had better make good on losses suffered by foreigners who deposited money in good faith. Now those same guys are saying the Cyprus depositors need to learn that you have to be aware of the dealings of any bank you deposit money into or its your own fault when you lose.

And these are the people who like to think they are educated…

I'm gonna give it another week. If there aren’t sizable bank runs in at least the southern countries by then I will conclude that the Troika (or whoever) can take 90% of everything we have and people will just take it even if they do wave some signs for a few days.

Game over man… Game over…

Tue, 03/26/2013 - 21:57 | 3379931 Dewey Cheatum Howe
Dewey Cheatum Howe's picture

As far as bank runs goes, I don't think you will hear about them in the media.... Only in an indirect manner depending how severe it is. Money velocity is a good thing as far as the FED is concerned especially if that velocity of money goes crashing into equities or bonds. If it goes out of the system then the indirect capital controls kick in. Anything to get that money that doesn't belong to the cronies off sidelines and onto the field is fair game at this point if they have no intentions of allowing the natural deleveraging process except for outright dollar destruction.

Tue, 03/26/2013 - 22:00 | 3379940 Ahmeexnal
Ahmeexnal's picture

The fact that you are not seeing sizable bank runs is also due to the reason that a lot of sheeple turned from savers into debtors. Hence, there are no savings they can withdraw from the bank.
Smart money has already dumped the f. system.
Those that still have money stored there are divided into two.
80 percent of them believe the state would never harm them and believe someone with a PhD in finance, or an institution with hundreds of years of banking experience are best prepared to manage their money. They will not take their money out as they are unable to think for themselves.
The remaining 20 percent will take action and extricate part of their assets from their accounts. Even that small percentage will be enough to bring down the whole system.

Wed, 03/27/2013 - 00:58 | 3380245 Bobportlandor
Bobportlandor's picture

I for one have given up figuring out what people will or won't do.

 

Wed, 03/27/2013 - 07:14 | 3380467 CJHames
CJHames's picture

The Toll builds for thee.  And we are all Thee.

Tue, 03/26/2013 - 21:54 | 3379928 Cabreado
Cabreado's picture

There is a pattern emerging...

wherein the pundits become increasingly neglectful of corrupt leadership and the controls that come with it,
neglecting an undercurrent of chaos and the controls that evolve from it,

as their personal voice grows louder.

Where is the pundits' attention on false leadership, I wonder?

Tue, 03/26/2013 - 22:04 | 3379952 Big Ben
Big Ben's picture

Rajoy and Hollande are saying that Cyprus was a unique, exceptional case. I agree. One thing that distinguished Cyprus was that IT WAS SMALL ENOUGH TO BAIL OUT. And it only got a partial bailout.

The handling of Cyprus makes it clear that handling of deposit insurance is a function of the individual governments. A Spanish bank account and a German bank account are no longer equal. So I suspect that we will see a continued movement of money from southern Europe to northern Europe. If I were a Spaniard, I would definitely try to move any uninsured funds into a German or Swiss bank (or into gold). And I would be tempted to move at least part of my insured money out of my Spanish bank account, just to be safe. I would look at Cyprus and think: "Maybe it would be a good idea to keep a bit of cash in the mattress, just in case. And maybe a modest Swiss account wouldn't be such bad idea either."

It seems to me that the Europeans haven't actually fixed anything. They've just dodged another bullet. But I kind of wonder how long they can keep it up.

 

Tue, 03/26/2013 - 22:38 | 3380053 Aquarius
Aquarius's picture

It is my opinion thsat they are both lying - see my Post on Australia; Here, it is real and well advanced.

 

frogs in water, in pan, on fire = pop!

 

Ho hum

Tue, 03/26/2013 - 22:12 | 3379974 dunce
dunce's picture

This article predicts a strong dollar relative to other currencies which might mean that all the money printing can continue. Ahshit.

Tue, 03/26/2013 - 22:36 | 3380026 earleflorida
earleflorida's picture

poor cyprus,.. painted on the world's 'msm's' canvas as a 'tzar's oligarch haven'. an island where the illicit trade of various ormolu spices flow through the tributaries... 'washing-their-sediment' upon the lush mega banks of a mediterranean wadi-fish... out of water, and unedible for any trioka's palate?

a picture perfect seque? a diversion so unequal it parallels a maritime travesty from the greeks... now long forgotton-- that of  pinning the tail on the unicorn unwilling to grow a horn! such effluvium hubris! how dare these insolent 'cypr`ussr' stand-tall to this collective-fiduciary, and sanctimoneous free-world? their insidious isolated shame be their just ruination so be god, so proclaims our infallible trioka deity! alas, garnering the entire global`celestial ire of free-men towards these ill-bred and pesky transitory snow rabid's from the north-- that must be quarantined at all cost? even if it means, sacrificing a few million rancid 'cypriot`rusky's beneficiaries'!

god bless the 'Queen'... hear yee, hear yee 

Tue, 03/26/2013 - 22:35 | 3380042 Aquarius
Aquarius's picture

Australia has led the trend for Government confiscation of funds of the Cyprus/EU nature in 2011 - 2012 and are currently well advanced now in early 2013:

1. Legislation commenced by the Oz government to confiscate all superannuation for the government accounts,

2. Legislation completed and confiscation of "foreign workers" superannuation is 2012 and foreign workers - also completed: need to sue to claim (too hard and too costly)

3. Legislation passed and the cash grab started to confiscate all funds in Bank Accounts that have not had movements over 36 months. Expect this to be completed within the next 60 days or before June 30, 2013.

4. Government now looking to Tax superannuation as well as transfering all superannuation funds to government accounts.

5. Australia is also leading the field with the Carbon Fraud tax.

It is clear that funds appropriation in the West Nations such as Australia / USA / Europe etc., by governments is not isolated to individuals but a global driving force which one should correctly identify as a coordinated concerted strategy by Central Banks and their superior central Authority and with politicians and bureaucrats eagerly doing their bidding.

The message is that this is a trend; a coordinated strategy.

As Farage says: Get your cash converted to things that cannot be confiscated by "government". And, Get Bullion and put it where it cannot be found.

Change is coming.

 

Ho hum

 

Tue, 03/26/2013 - 23:59 | 3380181 Kirk2NCC1701
Kirk2NCC1701's picture

From my perspective, in spite of what Australia claims in all its 'bravado', it always toes the line -- like a good colony it was and still is.  Just like Canada. I'd therefore tread very carefully about setting up any "libertarian/Libertarian" camp in either place (outside the US).  Personally, I'd look further afield -- regardless of (English) language comforts & biases.

Sorry, in spite of my great fondness for both, I have to call it as I see it, Aussies & Canucks.  The day you "grow a pair" and tell your former/present masters to take a long hike (in the Outback or Ellesmere Island), is the day the world actually believes you that you are "independent".  Till then, keep sending your acting and comic talent to Hollywood.  :-)

Wed, 03/27/2013 - 00:38 | 3380226 Bobportlandor
Bobportlandor's picture

And I was thinking of moving there.

Wed, 03/27/2013 - 02:25 | 3380301 Aquarius
Aquarius's picture

Think again,

The Prime Minster is a rampant Fabian Cultist (declared) and Totalitarian Communist of the Trotskyite persuassion who is rapidly destroying the Nation - not that it needed any help, mind you - but she is giving the UK Crown's Agents - that is the Opposition "Liberal Party (coalition)" the ammunition to create such "austerity" that will even make the Bureaucrats and Maoists at the EU blink a few tears of horror. Abbott the "Leader", Yep, you guessed it, is a Keynesean neo-liberal, down on his knees, obedient servant of the UK Crown (and the Holy Fathers of the US/Israel Quantum Entanglement; an "Economist". We are truly doomed.

Last time I looked Private Sector Debt was the huge problem which nobody in power (or Economists) will acknowledge, and house prices the most unaffordable in the World.

Besides, the US Military have done a deal signed and delivery for full occupation, drones and all. And we are a mere ~23 million without any means of self defense.

http://verbewarp.blogspot.com.au/2011/03/operation-death-star-australis....

And, Australians are totally dumbed down and the MSM worships the Communists in Power; even when they are not in power.

Ho hum

Tue, 03/26/2013 - 23:23 | 3380134 newengland
newengland's picture

Fiat will flow to the USD, and commodity currencies including BRICS. 

The euro EUSSR experiment has failed.

Oh, and flow to gold and silver, the world's oldest and most reliable currencies, for anyone who wants a fiat-free store of wealth.

Tue, 03/26/2013 - 23:45 | 3380172 Kirk2NCC1701
Kirk2NCC1701's picture

Well articulated article on what I've been saying for months:  The US/Fed has at its core of its Geopolitical Master Strategy the continuance of the supremacy of the USD as the Global Reserve Currency (GRC).

As long as the US prints more USD's and foreign nations buy the dollar and its debt, the US Gov is free to pursue not only social programs (butter), but military ones as well (guns).  If it so chooses -- and it does -- it can maintain its printing-financed gunboat diplomacy, to not only protect its interests, but also those of its "friends".

Any and all threats (oil, gold), competing currencies (Euro) and 'rogue' (contrarian) dictators or countries must be and are dealt with accordingly.  Wars, crises and conflicts only serve to strengthen it, as monetary flights to safety. 

More money printing not only debases the national debt to ourselves and foreign debt holders, but also cause more dollars to circulate in the world.  As long as there is no cause or combination of causes to make people flee from or repudiate the dollar, it will be extremely hard -- but not impossible -- to know off its lofty GRC throne.

The only way I say a viable threat to its GRC status coalescing into critical mass, is via (a) the ongoing purchase of PM bullion by foreign nations and their CB's to the point of causing a PM-run, and (b) The ongoing process of the BRIC+ countries of creating its alternate and asset-based GRC basket of currencies.  The two in combination would serve the USD a mortal, perhaps fatal blow. 

Plan and hedge accordingly.

Wed, 03/27/2013 - 01:07 | 3380255 Tao 4 the Show
Tao 4 the Show's picture

Printing with simultaneous low velocity means money pools are accumulating wherever USD and other major currencies are stored. This increases instability. The engineering equivalent would be huge amounts of potential energy and lowering thresholds for release into the system. Fear has actually served as a stabilizing force as printed money has tended to pool. Cyprus raises the possibility of fear producing increased movement as a new response.

Whether one likes the effects or not, having a GRC has been highly stabilizing. Up until now, it was simply backed by force. The change is that it will now be replaced by force. Your a. and b. above are both well underway on the world scene.

Wed, 03/27/2013 - 01:55 | 3380293 q99x2
q99x2's picture

Great image to represent the article. Nice article too.

Wed, 03/27/2013 - 04:47 | 3380381 AnAnonymous
AnAnonymous's picture

Well, it is been obvious for a while that Europe would be the place to be pushed under the train.

At this stage of the 'american' game, the 'american' elite, in order to preserve their master, the 'american' middle class, have figured no other solution but to sacrifice part of the middle class so that the other might endure.

It is an 'american' world and it is global. You wont find much 'american' middle class in Somalia.

Much more of it in places like the US, Japan and Europe.

Middle class'americans' in Europe should not worry though: as they are pushed under the train to save the middle class elsewhere, this will speed up the blobbing up of 'americans', also labelled as Europeanization.

As the crisis unfolds, more and more 'americans' answering to their eternal nature, will feel more and more European, will consider themselves more and more members of the same large tribe in Europe.

'American' social engineering at work. Playbook taken from the FF themselves.

Visible minorities are warned: the 'american' way require them to play a dirty part for the rest to aggregate.

Wed, 03/27/2013 - 07:19 | 3380472 TheFourthStooge-ing
TheFourthStooge-ing's picture

Confused commenter AnAnonymous said:

Well, it is been obvious for a while that Europe would be the place to be pushed under the train.

Funny warping of wordings this guy uses for his means. Could be really something if he was speeching versings of playwright of notoriety. Shakespeare's english is one of old fashion, that you can not read on today version. Requires hours of training to seize the meaning, voice the verses and smell the music in them. It requires training to comprehend the historical context in a genuine way, unblemished by rewritten histories like this guy's Easter Island fantasies.

Yet let it straight. The Europe place will not pushed under the train. Plain for the seeing to all that Europe elite led their subjects to the railroad train tracks and give encouragment them to play thereupon.

Pushed under train the place? This commenter's split is pure rhetorics of cheap propaganda. Let us see if he plays the usual cards.

At this stage of the 'american' game, the 'american' elite, in order to preserve their master, the 'american' middle class, have figured no other solution but to sacrifice part of the middle class so that the other might endure.

And now, this guy plays the same card: a deep crisis requiring to blaming placement of cause on 'americans'.

It is an 'american' world and it is global. You wont find much 'american' middle class in Somalia.

Ah ah, so an 'american' world is global, but it is not worldwide. So propaganda is nice and fair but provide good propaganda. And not wishful thinking.

Middle class'americans' in Europe should not worry though: as they are pushed under the train to save the middle class elsewhere, this will speed up the blobbing up of 'americans', also labelled as Europeanization.

Again, this drivel on blobbing up. Hey, buddy, this was debunked one hundred years ago so why not update?

And dont come with the blame game drivel. That is the game most often played by those seeking to cloak their own guilt. Somehow this guy believes his Chinese citizenism eternal nature incapacity to self indict yields a license for unlimited duplicity.

Wed, 03/27/2013 - 11:21 | 3381399 earleflorida
earleflorida's picture

luv your critiques... superb!

;-)>

Wed, 03/27/2013 - 09:53 | 3380975 Mototard at Large
Mototard at Large's picture

This is not a real surprise but there are predatory eyes on your savings. Following events in Cyprus and Spain, it is emerging that the UK, the EU and the USA areall  looking at new ways of taking your savings.   

http://tinyurl.com/c2e8zs5

 

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