This Is How A Country Ends: Not With A Bang, But A Bailout

Tyler Durden's picture

Curious how in the New Normal a nation is brought to its untimely end without a single shot being fired? Dimos Dimosthenous, who has worked at the Bank of Cyprus for over 30 years, explains:

"That will be the end. Our jobs, our rights, our welfare funds will be lost and Cyprus will be destroyed."

In short: not with a bang, but a bailout.

... But at least it still has the symbol for all that is wrong with the broke(n) status quo: the

First, however, much more pain, because as Cyprus' FinMin Sarris said a short while ago, uninsured depositors in the second largest bank Laiki which is now pending lqiuidation, may lose 80% (read 100%... or more), and wait up to seven years for a payout. Of course, with the majority of the "evil, tax-evading Russians" long gone having used the chaos and assorted loopholes in the past week to get out of Dodge, the only people punished are assorted local hard workers, and domestic businesses, now set to liquidate as soon as they can afford the bankruptcy filing fee.

Finally, speaking of getting out of Dodge, it is surprising that while professing its love for all man-made bubbles and going all in stocks no matter the fundemantls, the firm that is the shadow overlord of Wall Street, BlackRock, is doing just that. From the WSJ:

BlackRock Inc. the world's largest money manager, has cut holdings of Italy and Spain government bonds over the past three months. The firm may shed more if the euro-zone's growth outlook deteriorates.


"We have been less enthusiastic about euro-zone sovereign debt compared to three to six months ago," said Rick Rieder, chief investment officer of fundamental fixed income and co-head of Americas fixed income at BlackRock. "If growth continues to deteriorate in the euro zone, due in large measure to weak private-sector lending from a deleveraging banking sector, we would further reduce our positions in the euro zone, such as in Italy and Spain."


Speaking in a phone interview with The Wall Street Journal on Tuesday, Mr. Rieder said for the moment, BlackRock still holds an overweight position on Italy and Spain, though the position is now more moderate after the recent reduction in the Spanish and Italian holdings.


The company, with more than $3.7 trillion in assets under management, was among global investors scooping up sovereign bonds, especially in Italy, after European Central Bank President Mario Draghi last summer pledged to do "whatever it takes" to preserve the euro.

Wait... did Blackrock just comprehend that contrary to prior lies bank creditors, all bank creditors and not just depositors, are suddenly expendable?

Funny how one's "investment risk tolerance" changes when the local money printer's promises that nobody will ever suffer losses are openly refuted when reality intrudes.

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fonzannoon's picture

who did blackrock sell to?

who bought that shit?

whotookmyalias's picture

I guess if you have an account with them and they call offering to make you rich with Euro soverign bonds you are screwed.

TeamDepends's picture

"You're an errand boy, sent by grocery clerks."

TheGermanGuy's picture

Finally, Colonel Kurtz on Zerohedge! And I´m drunk enough to really enjoy this. Turned out a great day!

DJ Happy Ending's picture

The wealthy get bailed out, the welfare-class gets their gov't benefits and the middle pays for it.

Manthong's picture

“wait up to seven years for a payout”

Hmm.. that makes sense.. it’s about as long as the Fed may or may not take to steal enough gold to replace the German gold it had for safekeeping but sold and only has a paper claim for right now..

Those miners are looking at some good job security right about now.

SWRichmond's picture

It's nothing more than asset-stripping, where entire nations of people are the assets.

disabledvet's picture

The ECB is the buyer. I do find it hard to see where the general population doesn't take the loss.

billhilly's picture

This shit HAS GOT TO END!

Bananamerican's picture

Cyprus has been an international plaything for millenia... some more recent history:

 One of the articles in the constitution was the creation of separate local municipalities so that Greek and Turkish Cypriots could manage their own municipalities in the big towns.

Internal conflicts turned into full-fledged armed fighting between the two communities on the island which prompted the United Nations to send peacekeeping forces in 1964; these forces are still in place today. In 1974 Greek Cypriots performed a military coup with the support of military junta in Greece. Turkey used the coup as a pretext to invade the northern portion of the island. Turkish forces remained after a cease-fire, resulting in the partition of the island; an objective of Turkey since 1955.[8] The intercommunal violence and subsequent Turkish invasion led to the displacement of hundreds of thousands of Cypriots.[9][10]

The de facto state of Northern Cyprus was proclaimed in 1975 under the name "Turkish Federated State of Northern Cyprus". The name was changed to its present form on 15 November 1983. The only country to formally recognise The "Turkish Republic of Northern Cyprus" is Turkey. Hundreds of thousands of Turkish settlers have been granted right to illegally reside in the 'TRNC' and allowed to reside on Greek Cypriot land and property in order to change the island's demographic in favour of the Turkish Cypriots. The international community considers the North as occupied territory of the Republic of Cyprus and Turkey has repeatedly violated numerous UN Resolutions calling on it to withdraw its occupation.[11]

In 2002 UN Secretary General Kofi Annan started a new round of negotiations for the unification of the island. In 2004 after long negotiations between both sides a plan for unification of the island emerged. The resulting plan was supported by UN, EU and the US. The nationalists in both sides campaigned for the rejection of the plan but Turkish side accepted the plan while Greek side rejected it.

After Cyprus became a member of the European Union in 2004, it adopted the Euro as its currency on January 1, 2008, replacing the previously used Cypriot Pound; whilst the illegally occupied areas continued to use the Turkish Lira and on January 1, 2008 the New Turkish Lira.

HulkHogan's picture

I downed you for not including footnotes. Plagiarism bitchez!

redpill's picture

I watched a snail crawl along the edge of a straight razor. That's my dream; that's my nightmare. Crawling, slithering, along the edge of a straight razor... and surviving.

putaipan's picture

still woulda been a better movie if he'd bothered to read the book....

fourchan's picture

zee jews have a new place for settlements now, and impoverished servants. nicely played

Bananamerican's picture

sorry Sherlock

i thought it was an obvious wiki cut and paste

putaipan's picture

did the 'real' paul krugman just come in here and call me a "tax base" ?

blindman's picture

but a lesson is learned sezz the new normal in Europe.
lesson? your deposits are now an asset destined to
support the systemically essential and virtual balance,
of committee determined relevance and temporally fluctuating
concerns, and therefore, we are forced into the unenviable
position of having to make up precedent, standards, rules,
laws ..etc .., in a moments notice(delays to be expected due
to unforeseen conditions*, conditions being ..
1.) weather
2.) default on security
3.) general default
4.) insufficient ....( including all a-y described in doc. fjg7661 )
5.) instability in ..( ..ofb65%%$ ..)
6.) see you tube link "you get nothing"
nite nite
inflation? that other ongoing problem .....

Cheesy Bastard's picture

So a Russian whos money is in Cyprus goes to his bank branch in Britian to avoid a Brazilan (wax)?

Cdad's picture

Walter E Kurtz...reads it like it is.  A lovely entry, Tyler, on the too long timeline.  Here in the great fading of Democracy, and for the whims of ruthless and despotic bankers, making it up day by day, of course owing to their divine vision of the world, and without the consent of the world.  How utterly appropriate.

Between the desire

And the spasm

Between the potency

And the existence

Between the essence

And the descent

Falls the Shadow

                                For Thine is the Kingdom

Dr Paul Krugman's picture

Cyprus must leave the Euro.


They have two economies:  banking and tourism - these are now defunct.  In order to get them back they must increase their exports by decreasing the value of their currency.

They must abandon the Euro, or else they face a long and stark depression.

lolmao500's picture

Gee this is opposite day or what... Krugman making sense...

Dr Paul Krugman's picture

This blog - in general terms - and I agree on most issues.  Thus why I read it; yet you people don't read my blog and assume you disagree with me because I am a well known figure and you all are anti-establishment doomers.

rich_wicks's picture

If you really are the real Dr. Paul Krugman, I want to take this opportunity to call you a fucking idiot and scumbag.  Go fuck yourself, you useless cunt, and I wish you many aneurysms and a slow painful death akin to Ariel Sharon.

But, sadly I doubt you're the real Dr. Paul Krugman...

Dr Paul Krugman's picture

Think what you want.

From the correspondence I get outside of comments, and other feedback like Twitter subscribers etc. I can tell you that a fair numbers of ZH readers work in finance. That is their day job, and they want to read what is being said. ZH is a go-to place for news these days.

Journalists (and wannabe journalists like me) read ZH. Paul Krugman reads ZH (that's why I did this).

Politicians read ZH. Not just in the USA. All over. The Fed, Treasury, CBO, OMB,CRE etc. all read ZH. The foreign central banks monitor what is up here. The White House and the CIA follow this site. (The fact that I mention CIA makes it sure they are reading) There is valuable intelligence here. Alternate views of the status quo, and yes, some of the comments.

- Bruce Krasting

From a contributor, no less.  So who should we believe?  You?  Or someone who writes for this blog?


disabledvet's picture

I think I'll stick with believing in God and go from there.

TPTB_r_TBTF's picture



you are going to be disappointed!

Your jewish God will fail you.

Schmuck Raker's picture

"Paul Krugman reads ZH "

Well, sure, even he isn't stupid enough to completely ignore the obvious intelligence here.

Doesn't mean he comments here.

Doesn't mean you are he, or he are you...

captain_menace's picture

Dear Dr., I'm interested in borrowing money to help stimulate the economy.  May I please borrow some money from you?  I'm good for it.

All Risk No Reward's picture

Hi Paul,

You might have missed this question the last 4 times I asked it, so here we go for try number 5 (and yes, I will continue to increment the numbers until you answer the question):

If growth is defined in monetary terms and money is debt (interest bearing), please explain how exponential growth of debt is sustainable into eternity.

If money (debt) exponential growth is not sustainable into eternity, then WHAT HAPPENS WHEN THE EXPONENTIAL MONEY (DEBT) GROWTH FAILS?


PS - Whomever this guy is, and it just might be the real thing, he apparently knows enough not to go near this Kryptonite question.  If he is the real deal, I expect more ignoring and, if he must respond, some type of logical fallacy...  probably ad hominem of some type.

Mentaliusanything's picture

If he was the real deal he would fully understand this..... FV=PV+I...... therefore "I" (interest) needs to be brought into existance(by printing or expanding money). This is where a bailout(loan) @anything less than zero rate harms those who have reached the limits of their ability to pay "I"


Exponential growth in a finite and closed system leads to extinction

so in conclusion if that little island has only two industries... and the only way out is to leave the Euro and deflate whatever currency. Please explain what they are going to export? 

No dear Dr what is needed is that the banks are to be closed and nationalised, the depositors be made whole, those that gambled with savings and lost be charged prosecuted and jailed, Bond holders(leaches on productivity) and stockholders eat their loss 100%. A gold standard be implemented to prevent printing to pay for largess and easy credit and current Economic system be thrown out along with yourself.  "broken windows"..... pleeese. broken model more like it

All Risk No Reward's picture

Debt Money Tyranny needs to be eliminated - that's first and foremost.  Nationalized Debt Money Tyranny wouldn't change much at all.

The graphical illustration of the of the Debt Money Art of War can be found here:

Debt Money Tyranny

His style is consistent with the real Paul Krugman.

He's not stupid, he's evil.

He's a wolf in sheep's clothing - a point man to deceive the professional classes of society.  His "Nobel Prize," which doesn't exist, in Economics was given to him simply because it plays into appeal to authority logical fallacy.

The London School of Economics was founded by Fabian Socialists...  is that you Paul?

BTW, search Fabian Socialist images and your get a wolf in sheep's cloithing...  that's what they chose to represent themselves.

Right Paul?

rich_wicks's picture

Who are the contributors?  Tyler Durden?  A fictional character from a film in which the plot is to destroy the financial system?

I simply don't believe you're Krugman.

Krugman is basically a shill for the people who run this country.  He's not so stupid as to believe the propaganda he is paid to produce.  He makes money however repeating it, that's where he gets his comissions.  His job, is to convince the average ordinary American that everything is OK, and the financial system is stable, and there's no reason to panic.  This serves the dual purpose of keeping the system stable for a bit longer and ultimately impoverishing the typical person who pays absolutely no attention to what is going on.

There's only one thing that matters, it's the federal income to federal debt ratio.  It sits at about 15% right now, with no possibility of improving with taxes at about 50% for anybody that is professionally employed.  This ratio was at 8.86% in 1933 and that was when we were on a gold standard, and also during a time when the federal tax rate was what... 10% maximum?  Also the expenditures of the government weren't burderened by any welfare of any sort at all.

The Federal debt has grown exponentially at 9.4% a year since 1971 and will grow at the same rate until the dollar collapses.  It will be at 23 trillion by the end of Obama's term, it will be 32 trillion by 2020.  It will be 40 trillion before 2025.  It doubles about every 8 years, on average.  It's done that for 40 years, it's not going to be stopped by any person or any government.

Is Krugman so stupid as to not be aware of this?  I suppose it's possible, after all what did the Nobel laureates of LTCM know?  Maybe they just knew they were too big to fail and as a result, couldn't fail.

Krugman's job is to prevent a panic, because a panic will sink the ship now.  His job is to make certain all the rats can get off the ship first - so why would he bother actually commenting on any financial blog at all, especially this one?  Guilt?  He has no incentive to do it, and based on the fact that you said nother more than "I'm Krugman" in your post, why should anybody believe you?

Give an analysis.  Krugman I expect knows some math, produce some.  Say something intelligent.  After all it doesn't matter who says it, all it matters is what is said - hence it's always Tyler Durden.

MrNude's picture

Paul, I do now fully believe it is really you and you've confirmed:

No Stocks

No Gold

So where is the rub or the ace in the hole?

You have already been debunked on the housing bubble.

You either know something we don't or you have complete blind faith in the FED as the solution to the point of being duped yourself.

The alternative is basically this:

I am not posting that to be derogatory, listen to the words, you have surpassed and become indifferent to the mayhem you have helped cause. 

But I think you come here because deep down you still have a soul and even find yourself having doubt as you watch the chaos unfold. 

Lebensphilosoph's picture


So who should we believe?  You?  Or someone who writes for this blog?


It's "whom", not "who", oh Nobel laureate with a look-at-me stamp before his name.

McMolotov's picture

I read your blog on occasion. To summarize for those who have better things to do:

Paul writes a pithy article for the NY Times espousing the glories of a centrally-planned economy, and then he works in some one-liners at the end to cheerlead Democrats and excoriate anyone who disagrees with his conclusions as some kind of inbred mountain person.

Then the horror show begins: a veritable parade of hipster metrosexuals, bitter librarians, and dirty local PBS station hosts line up to praise him like he's baby Jesus farting rainbows.

Be honest, Paul — do you write the blog just so you can have an army of sycophants give you a cyber-suck every day?

Pareto's picture

+100 for hipster metrosexuals, bitter librarians, and dirty local PBS station hosts line up to praise him like he's baby Jesus farting rainbows.  beautiful.  I  love ZH

Rogue Trooper's picture

I get home, fire up ZH to catch up with the latest and go through the comments... and tada! This thread of pure genius!

So I second your motion Pareto +100 MOAR - I also love ZH!

I find myself smiling to myself, laughing out loud, etc. The only issue I have is I'm in a completley different timezone and I miss out on some of the breaking stories.  I find the comment pages just has satisfying has the articles.

My wife thinks I am completely insane :P

Dr. Richard Head's picture

I sincerely want to give you kudos for such eloquence accompanied by a wonderful pictorial.

TheVirginian-HGWT's picture

I logged in just to upvote you. Bravo, good sir! Well played indeed...

Kprime's picture

It's a pain in the __ and I hate logging in.  Lurking (or stalking) is more my style. However, I too logged in just to give you kudos.


Sooo, thumbs up and ...kudos.  You wordsmithing is quite artistic.

Rogue Trooper's picture

Good for you Kprime. I lurked in the earliy days for some time and now I do not give a F_ck and the CIA/NSA/FBI/DHS axis of bureaucratic evil and go to hell and drone me.  They can track everyone anyway so go down with pride if that is what some folks are concerned about.

As they say here "On a long enough timeline the survival rate of everyone drops to zero".

My ten cents worth :/

Terminus C's picture

Your "solution" is for them to leave, devalue and... increase their exports...  Of what.  What does Cyprus export?  You said yourself they have two economies... banking and tourism.  They will export those indeed (as you said) and then what?  These people are fucked because people like "you" (aka the real PK) called for the infinite bailout system that we have in place today.  The moral hazard created by that "economic" decision allowed for banks to take on even more risky "assets" and led us to this place along the path.  We stand at the precipice of total economic ruin... on "your" advice.  Don't ever think that "you" aren't "on the list".

To suggest that "you" have a solution is ludicrous in the extreme.