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Moody's: Cyprus Euro Exit Risk Substantial

Tyler Durden's picture





 

Though it may seem a little like stating the obvious to many, Moody's comments:

While the risk of a euro exit by Cyprus is substantial... ...following the economic dislocation that will be caused by the restructuring of the island's two largest banks and the imposition of capital controls in the country, it is possible that the risk of euro exit will increase further.

And so while the talking heads discuss Cyprus as a unique situation and too small to care about, it seems the reality of the last two weeks has actually raised their chance of Euro exit as opposed to bailed them into the Euro.

 

Moody's lowers Cyprus's country ceilings to Caa2
 
London, 27 March 2013 -- Moody's Investors Service announced today that it has lowered its assessment of the highest rating that can be assigned to a domestic debt issuer in Cyprus to Caa2, based on the increasing risk of an exit by the country from the euro area. Any rating actions taken as a result of the new country ceiling will be released during the coming week.

 
Cyprus's Caa3 government bond rating, and negative outlook, remains unchanged as it does not lie in the scope of this announcement.
 
RATINGS RATIONALE
 
While the risk of a euro exit by Cyprus is substantial, Moody's does not consider it as its central scenario. Following the economic dislocation that will be caused by the restructuring of the island's two largest banks and the imposition of capital controls in the country, it is possible that the risk of euro exit will increase further. If that were to occur, the maximum rating Moody's would assign to Cypriot securities would fall further.
 
An exit would result in large losses to investors due to the redenomination of government debt and private debt securities issued under Cypriot law. It would also lead to further severe disruption to the country's banking system and additional acute dislocations in the real economy. Such disruption would generally imply additional losses for holders of debt securities issued by Cypriot entities, irrespective of their governing law.
 
Moody's country ceilings capture externalities and event risks that arise unavoidably as a consequence of locating a business in a particular country and that ultimately constrain domestic issuers' ability to service their debt obligations. Country ceilings encapsulate elements of economic, financial, political and legal risks in a country, which include political instability, the risk of government intervention, the risk of systemic economic disruption, severe financial instability risks, currency redenomination and natural disasters, among other factors. These factors need to be incorporated into the ratings of the strongest issuers. The ceiling caps the credit rating of all issuers and transactions with material exposure to those risks. In other words, the ceiling affects all domestic issuers and transactions other than those whose assets and revenues are predominantly sourced from or located outside of the country, or which benefit from an external credit support.
 
...

 


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Wed, 03/27/2013 - 17:17 | Link to Comment espirit
espirit's picture

All your 0's and 1's are belong to us.

Wed, 03/27/2013 - 17:23 | Link to Comment camaro68ss
camaro68ss's picture

eeeaaa just bought more ammo

Wed, 03/27/2013 - 17:28 | Link to Comment King_of_simpletons
King_of_simpletons's picture

Will some EURO zone member just leave without much posturing. Heard a lot of bluster from Greece, Ireland etc. Nothing happened. Atleast Cyprus can show the rest of EU that they have balls albeit a one which has been injured badly.

Wed, 03/27/2013 - 17:35 | Link to Comment redpill
redpill's picture

Who gives a fuck about whether or not they'll be exiting the Euro, it's more like what happens when people are in the street eating each other in a month.

Wed, 03/27/2013 - 17:39 | Link to Comment McMolotov
McMolotov's picture

Maybe The Walking Dead is meant to condition our minds so that we're prepared for the inevitable.

Wed, 03/27/2013 - 17:48 | Link to Comment fonzannoon
fonzannoon's picture

If I may ask a stupid question... If they exited the euro and went to their own currency which was massively devalued....and then it became cheap for Americans like me with my "strong dollar" to go stay at one of their tropical resorts would they not be in better shape than they are now?

Why would they want to stay in the euro? They should be rioting in the streets to get out.

Or do I have it wrong?

Wed, 03/27/2013 - 18:00 | Link to Comment McMolotov
McMolotov's picture

That's my thinking, too, but it's fairly illuminating that they didn't even bother to have a vote on the bail-in. The people won't be allowed to voice their opinion because it would go against "the plan," and that plan is to use the euro as an instrument of financial oppression.

For all the talk of European unity, what I see is the desire to consolidate power within the hands of a technocratic bureaucracy that's as far removed from the people as it can possibly get.

Wed, 03/27/2013 - 18:36 | Link to Comment TheGermanGuy
TheGermanGuy's picture

Risk of an exit? The way I see it is that they are already out.

Wed, 03/27/2013 - 19:02 | Link to Comment disabledvet
disabledvet's picture

You have a risk of an intervention now.

Wed, 03/27/2013 - 21:41 | Link to Comment chindit13
chindit13's picture

Regarding the "bail-in" vote, this is what the ballot would have looked like:

1)  Lose all your money

2)  Lose all your money except for what we can squeeze out of the EU/ECB

When the cupboard is bare, the cupboard is bare.  Democracy doesn't mean the people can make reappear what isn't there.

Generally the EU imposed "solutions" are geared toward making non-Blow Up countries' banks whole.  Not in the instance of Cyprus.  In the instance of Cyprus the EU/ECB merely acted as Coroner, pronouncing the patient DOA.  The EU/ECB sent flowers in the form of its cash contribution.  I suspect the EU would have been perfectly happy if Cyprus walked, reissued the Pound, and printed enough (at the Govt of Cyprus mandated exchange rate) to make Cypriot depositors "whole".  Cypriot officials probably knew that, so they played nice just to get a hand-out.  Something is better than nothing.  The same officials will try for another hand-out within two weeks.  Will the EU open its wallet?  To an island that's a lot closer physically to the Levant or Turkey than even Greece?  We'll see.

Thu, 03/28/2013 - 03:28 | Link to Comment jeff montanye
jeff montanye's picture

"I suspect the EU would have been perfectly happy if Cyprus walked, reissued the Pound, and printed enough (at the Govt of Cyprus mandated exchange rate) to make Cypriot depositors "whole"."

then why no vote if the cypriot legislature would have approved it.  would seem less high-handed, imo.

also would even so small a chink in the armor of the euro (such as it is) not bring irresistible pressure on the yields of spanish, italian, etc. bank and sovereign debt?  there is suspicion that this is not a one-off, it seems.

Wed, 03/27/2013 - 17:58 | Link to Comment Dr. Engali
Dr. Engali's picture

They would be in better shape, but the ECB wouldn't and that can never be allowed.

Wed, 03/27/2013 - 18:24 | Link to Comment smacker
smacker's picture

Cyprus is not a tropical resort island ;-)

Thu, 03/28/2013 - 03:32 | Link to Comment jeff montanye
jeff montanye's picture

not tropical.

http://en.wikipedia.org/wiki/Climate_of_Cyprus

but lots nicer than england or germany.  and most points north and east.

Wed, 03/27/2013 - 17:43 | Link to Comment Temporalist
Temporalist's picture

I never eat people without salt...bath salts that is.

Wed, 03/27/2013 - 17:53 | Link to Comment redpill
redpill's picture

What do you call it when a bath salt cannibal plans for the future?

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Saving face

Wed, 03/27/2013 - 17:53 | Link to Comment Dr. Engali
Dr. Engali's picture

At least they won't have to worry about clogging their arteries with all the gristle we have over here.

Wed, 03/27/2013 - 19:24 | Link to Comment Hohum
Hohum's picture

K of S,

No one's leaving the Euro.  Every country is scared that oil will become unaffordable with the local currency.

Wed, 03/27/2013 - 18:14 | Link to Comment Jake88
Jake88's picture

good luck with that. enjoy.

Wed, 03/27/2013 - 17:45 | Link to Comment negative rates
negative rates's picture

Yea, if you add those zero's up they come to nothin. But put a one in front of them and you have some real cash.

Wed, 03/27/2013 - 17:53 | Link to Comment Sudden Debt
Sudden Debt's picture

So this guy walks into a bar...

and after 5 minutes he says....

"I'M FROM CYPRUS"

And the barman looks to him and says: CASH ONLY FUCKFACE!!!

Whoeoeoeoeoeoeoe....

Wed, 03/27/2013 - 18:26 | Link to Comment negative rates
negative rates's picture

Unless you need some weed, we don't take credit around here.

Wed, 03/27/2013 - 17:17 | Link to Comment NoWayJose
NoWayJose's picture

An exit would result in large losses to investors due to the redenomination of government debt and private debt securities issued under Cypriot law.

Laws?  We don't need no stinking laws.... we have the Troika...

Wed, 03/27/2013 - 17:33 | Link to Comment Groundhog Day
Groundhog Day's picture

The politicians are bought and paid for...laws are meaningless.  Cyprus will never leave the Euro, they can't. Germany will not allow it.  Germany will torture the citizens until they off a few bankers and politicians and force a return to the Cyprus pound

Wed, 03/27/2013 - 17:17 | Link to Comment Charles Wilson
Charles Wilson's picture

None Dare call it Frisson

Wed, 03/27/2013 - 17:17 | Link to Comment bidaskspread
bidaskspread's picture

US DOJ approves this message.

Wed, 03/27/2013 - 17:18 | Link to Comment jal
jal's picture

 

What is happening has been planned.

 

Its a troika experiment.

 

Now we get to see what happens when the central banks do the right thing and don't start up the printing press.

 

The objective is to get a default and gather the data from the resulting chaos.

 

All doomers should pay attention.

 

Coming To a Town Near You


 

Wed, 03/27/2013 - 17:28 | Link to Comment Manthong
Manthong's picture


Boy, that is just so insidious it could be right.

The problem is that the game players at the top do not feel in jeopardy.

 
Maybe if there was personal peril the game would change.

Wed, 03/27/2013 - 19:06 | Link to Comment disabledvet
disabledvet's picture

The official statement was that this was a "template." go ahead...spin that one Moody's.

Thu, 03/28/2013 - 03:42 | Link to Comment jeff montanye
jeff montanye's picture

there may have been some russian or other mafiosi that didn't get the memo and remove all funds via london, etc. branches.  as the haircuts for any large depositors left in laiki bank would do the sioux proud, and revenge is a dish best served cold, there may be some personal peril yet to manifest itself.

Wed, 03/27/2013 - 17:48 | Link to Comment chump666
chump666's picture

Don't give too much credit to those fools over there.  The ECB is doing everything it can to keep Cyprus in the Euro.  Why?  For one, the ECB is a huge behemoth of toxic waste.  It can print to cover unrealized losses, but if Cyprus goes, so will Italy, Spain, Portugal, Ireland and of course Greece.  It will devastate holders of PIIGS debt, anything backed by PIIGS collateral will evaporate to 0%.  Which means the ECB could take a huge hit, plus credit/liquidity markets will collapse in minutes.

They don't like chaos, they cant handle chaos, they live in a perpetrated money printing idealism to cover the inevitable. And the sound of inevitability is getting closer

This is nature.  They can't freeze time or stop forces that are far more powerful then academia arrogance. 

Wed, 03/27/2013 - 17:51 | Link to Comment fonzannoon
fonzannoon's picture

So chump you are saying if Cyprus goes, and ends up being in not so bad shape because they immediately become an inexpensive tropical tourist destination...Italy etc. will say screw this, we are out..

Is it that simple?

Wed, 03/27/2013 - 19:10 | Link to Comment chump666
chump666's picture

Fonzannoon,

Yeah, why not.  See, it's like everyone knows, that the Cypriots control their destiny, same with the Greeks.  All that fuss, protests, whatever and they vote their leaders (Greeks) bank in!!!  The markets are brutal, you can't have it both ways.  So far the captains with their rudderless titanic, think they can delver a deterministic system.  Bailouts, bail-ins, money print and we all sleep well.   The Cypriots need to exit the EU, they will get a hellish beat-down when they do, devaluation, depression.  But at least the slate is cleaned.  Start again.  Become a tourist mecca (not a tax haven), you'll get the Russians and rich Norwegians, other Europeans. 

An exit will also ensure that the markets don't get away with it either, Wall Street is so leveraged with this current rally it's eye-bleeding.  Europe the same, ECB/Draghi needs a severe beat-down, IMF, EU, all would get huge slaps to the face.

 

 

Wed, 03/27/2013 - 20:52 | Link to Comment Umh
Umh's picture

Bureaucrats always go with a deterministic system. It's like a religion to them. The idea that people might make some good decisions without rules never occurs to them.

Wed, 03/27/2013 - 21:20 | Link to Comment chump666
chump666's picture

I hate goverments.

Wed, 03/27/2013 - 17:20 | Link to Comment fourchan
fourchan's picture

do the banks have the peoples money or not? just kidding, i know the answer. just give the chumps more paper.

Wed, 03/27/2013 - 18:40 | Link to Comment Sudden Debt
Sudden Debt's picture

.

Wed, 03/27/2013 - 21:14 | Link to Comment jon dough
jon dough's picture

Waaaait a minute...what's ur point?

Thu, 03/28/2013 - 03:49 | Link to Comment Sudden Debt
Sudden Debt's picture

didn't I just made it?

Wed, 03/27/2013 - 17:21 | Link to Comment espirit
espirit's picture

Better luck next time capturing that flighty capital.

Chess Masters think many moves ahead.

Wed, 03/27/2013 - 17:21 | Link to Comment fonzannoon
fonzannoon's picture

This type of event could cause a major US bank stock to drop 50 or 75 cents, at which point an excellent entry point would be presented.

Wed, 03/27/2013 - 17:26 | Link to Comment camaro68ss
camaro68ss's picture

I think you ment 50 to 75 POINTS, only to rebound in the last hour of trading to new highs

Wed, 03/27/2013 - 18:22 | Link to Comment IridiumRebel
IridiumRebel's picture

AMZN goes that low and I'm all in!

Wed, 03/27/2013 - 17:21 | Link to Comment Scalaris
Scalaris's picture

 

 

Sure, not a central scenario at this exact moment; at least not until a new right-wing party manifests itself out of thin air with the speed of light.

So probably around Christmas.

Wed, 03/27/2013 - 17:22 | Link to Comment Roandavid
Roandavid's picture

You just can't put one over with Moody's on patrol.

Wed, 03/27/2013 - 17:22 | Link to Comment Iocosus
Iocosus's picture

No one gets out of the Euro alive.

Wed, 03/27/2013 - 17:30 | Link to Comment Sudden Debt
Sudden Debt's picture

You don't exit the Euro... the Euro exits you...

Wed, 03/27/2013 - 18:13 | Link to Comment machineh
machineh's picture

... leaving a nasty exit wound.

Wed, 03/27/2013 - 17:23 | Link to Comment bagehot99
bagehot99's picture

Losses? Those are for the little people.

Wed, 03/27/2013 - 17:25 | Link to Comment Temporalist
Temporalist's picture

First off Krugman says deficits don't matter so why all this fuss about Cyprus if deficits and debt don't matter?  Must just be an anomaly.

Also, they should take the bailout and then leave the EZ.  Free money bitchez!

Wed, 03/27/2013 - 17:28 | Link to Comment camaro68ss
camaro68ss's picture

They must have not broke enough windows....

Wed, 03/27/2013 - 17:26 | Link to Comment morning
morning's picture

Long shrink clinics in Club Med.

Wed, 03/27/2013 - 17:26 | Link to Comment OutLookingIn
OutLookingIn's picture

CANADIANS - YOU ARE NEXT

THIS BECOMES LAW IN JUNE

"Economic Action Plan Bail-In"

Pages #144 & #145

http://www.budget.gc.ca/2013/doc/plan/budget2013-eng.pdf

Wed, 03/27/2013 - 17:47 | Link to Comment IPA
IPA's picture

Your crazy, page 145 says nothing about creating a "bail-in" regime...  or the very rapid conversion of bank liabilities into regulatory capital... what ever that means

Wed, 03/27/2013 - 18:18 | Link to Comment asteroids
asteroids's picture

HA HA. It does. Now for our American friends. If Canada is contemplating "bail-in", then most certainly YOU are too.

Wed, 03/27/2013 - 18:56 | Link to Comment bidaskspread
bidaskspread's picture

It's already happened, it's in the Dodd-Frank Bill called "orderly-liquidation authority". Remember the bill was not to have anymore tax payer bailouts. Like most things, Europe and Canada are behind.

Wed, 03/27/2013 - 22:30 | Link to Comment TNTARG
TNTARG's picture

Don't you love the way they (always) call it "Jobs Growth Long Therm Prosperity", sort of?

Aren't they lovely?

Wed, 03/27/2013 - 22:45 | Link to Comment OddFieldIsStrong
OddFieldIsStrong's picture

New Zealand Reserve Bank has been working on Open Bank Resolution for a while, which is an official depositor-bail-in policy.

http://www.rbnz.govt.nz/finstab/banking/4430900.html

I wasn't aware that Canadian reserve bank was planning the same. Given Cyprus, Canada and New Zealand's effort in disparate geographical domains, it should leave little doubts that there had been a secret agreement between CBs, and this is coming to many more countries soon.

Plan accordingly.

Wed, 03/27/2013 - 17:45 | Link to Comment Sudden Debt
Sudden Debt's picture

THESE ROMAN WALLS HAVE NEVER BEEN BROKEN!

EVEN GOD CAN'T SINK THIS SHIP!

LOOK THEY LEFT A WOODEN HORSE OUTSIDE OUR GATES TO HONOR US!! LET'S BRING IT IN AND PARTY LIKE IT'S 900 B.C.!!!

I'VE GOT 99 PROBLEMS BUT CYPRUS AIN'T ONE!!

Wed, 03/27/2013 - 17:30 | Link to Comment kito
kito's picture

oh please, if there were ever a reason to believe that cyprus will remain in the euro so that Pig Merkel can continue to feed from its trough, its moodys stating otherwise..............

Wed, 03/27/2013 - 17:44 | Link to Comment NoWayJose
NoWayJose's picture

The risk of a Euro exit is substantial - maybe to the EU - but for Cyprus the bigger risk is to STAY in the Euro...

Wed, 03/27/2013 - 17:46 | Link to Comment Dr. Engali
Dr. Engali's picture

In other words since uncle Warren (a major shareholder in Moody's )just secured himself a position as one of the largest shareholders in Squiddy, this must mean Squiddy will be buying the debt up on the cheap to sell it to the ECB at par. It must be nice to have tentacles and cronies everywhere.

Wed, 03/27/2013 - 17:49 | Link to Comment WallowaMountainMan
WallowaMountainMan's picture

sorry guys...way o/t

just curious...bloomberg tv talking on in the backgound...talking about web security issues... i glance over...screen flashes a picture of building in a landscape, text saying something about 'freedom'...back to the talkers...the screen then flashes a pic of julian assange...text says 'its a matter of perspective'....

i don't know, cause i wasn't payin attention to the show... but what??? searched "bloomberg tv julian assange" at yahoo.

page came up sorry temporary problem.

attacked my guess

Wed, 03/27/2013 - 18:09 | Link to Comment WallowaMountainMan
WallowaMountainMan's picture

i need a vacation....

 

Wed, 03/27/2013 - 17:49 | Link to Comment bnbdnb
bnbdnb's picture

In six months, I'm buying Cyprus...you know...the island.

Wed, 03/27/2013 - 17:57 | Link to Comment All is chosen
All is chosen's picture

Have you informed the Royal Navy? It would be courteous to do so.

Wed, 03/27/2013 - 18:17 | Link to Comment Rat Patrol
Rat Patrol's picture

I have a speed boat with a .50 cal mounted. I'll have them outgunned.

Wed, 03/27/2013 - 17:55 | Link to Comment poor fella
poor fella's picture

Surprised they lasted five years.

The troika's new capital controls on deposit withdrawals should slow bank runs:

http://www.youtube.com/watch?feature=player_detailpage&v=167IhlXnN2Y#t=80s

 

 

Wed, 03/27/2013 - 17:57 | Link to Comment Z_End
Z_End's picture

So if Cyprus drops out of EU, does that mean the Russians swoop to their rescue? Some recapitalisation and hand holding, in return for Oil/Gas rights and such? 

Wed, 03/27/2013 - 17:57 | Link to Comment Plumplechook
Plumplechook's picture

"Cyprus should leave the euro. Now. The reason is straightforward: staying in the euro means an incredibly severe depression, which will last for many years while Cyprus tries to build a new export sector. Leaving the euro, and letting the new currency fall sharply, would greatly accelerate that rebuilding.

If you look at Cyprus’s trade profile, you see just how much damage the country is about to sustain. This is a highly open economy with just two major exports, banking services and tourism — and one of them just disappeared. This would lead to a severe slump on its own. On top of that, the troika is demanding major new austerity, even though the country supposedly has rough primary (non-interest) budget balance. I wouldn’t be surprised to see a 20 percent fall in real GDP.

What’s the path forward? Cyprus needs to have a tourist boom, plus a rapid growth of other exports.  The obvious way to get there is through a large devaluation; yes, in the end this probably does come down to cheap deals that attract lots of British package tours. Getting to the same point by cutting nominal wages would take much longer and inflict much more human and economic damage.

But is it even possible to leave the euro? The Eichengreen point — that even a hint of exit would cause panicked capital flight and bank runs — is now moot: the banks are closed, and capital is controlled. So if I were dictator, I’d just extend the bank holiday long enough to prepare for the new currency.

OK, what about the bank notes? I’m no kind of expert in such matters, but I’ve heard suggestions to the effect that it might be possible to rush debit cards into circulation, so that business could resume without having to wait for someone to run the printing presses. The government might also be able to issue temporary scrip, IOUs that don’t look like proper bank notes, as a transitional measure. Yes, it all sounds kind of desperate and improvised. But desperation is appropriate! Otherwise, we’re talking about Greek-level austerity or worse in an economy whose fundamentals, thanks to the implosion of offshore banking, are much worse than Greece’s ever were.

My guess is that none of this will happen, at least not right away, that the country’s leadership will fear the leap into the unknown that would come from euro exit despite the obvious horror of trying to stay in. But as I said, I think euro exit is now the right thing to do."

Question for your readers: who said the above?

Wed, 03/27/2013 - 18:12 | Link to Comment smacker
smacker's picture

 

Dunno who said it, but it's virtually the same solution as what's been suggested for Greece and Spain, without success.

Regarding their bank notes, I can see no problem with simply over-printing the existing Euro notes with "Cyprus Pound" in the short term.

 

I feel sure that this continual can-kicking that's going on in the EZ will make the eventual collapse of the Euro even more explosive.

Thu, 03/28/2013 - 06:30 | Link to Comment Oldrepublic
Oldrepublic's picture

re:overprinting

I understand that the US did that on US dollars in Hawaii in 1942

individuals could only have $200 worth $3000 in 2013

 

Wed, 03/27/2013 - 18:17 | Link to Comment machineh
machineh's picture

'Rush debit cards into circulation, so that business could resume without having to wait for someone to run the printing presses.'

e-Redenomination: the modern paperless way.

Better patent the concept. It's gonna be a mega-growth industry.

Wed, 03/27/2013 - 18:46 | Link to Comment Joe moneybags
Joe moneybags's picture

I think it was Dr. Paul Krugman who was quoted  above.

Wed, 03/27/2013 - 21:59 | Link to Comment Plumplechook
Plumplechook's picture

We have a winner.

Wed, 03/27/2013 - 19:37 | Link to Comment Frank N. Beans
Frank N. Beans's picture

Alex, "who is not merkel?"

 

Wed, 03/27/2013 - 20:05 | Link to Comment Pareto
Pareto's picture

Kyle Bass?

Wed, 03/27/2013 - 20:24 | Link to Comment tom a taxpayer
tom a taxpayer's picture

Adam Smith?

Wed, 03/27/2013 - 18:05 | Link to Comment teolawki
teolawki's picture

I'm pleased to see Moody's has substantially upped their game. They're only 2-3 weeks late in stating the painfully obvious on the Cyprus situation vs. 2-3 years late on the U.S. subprimes.

Wed, 03/27/2013 - 18:05 | Link to Comment Yen Cross
Yen Cross's picture

    Cyprus should just become part of Greece. That way they can 'collectively bargain' for a bigger bailout later this year.;-)

Wed, 03/27/2013 - 18:08 | Link to Comment Rat Patrol
Rat Patrol's picture

Having one currency and one monetary policy for many nations always seemed like a dumbass idea to me.

Wed, 03/27/2013 - 18:18 | Link to Comment Jake88
Jake88's picture

How could leaving the Euro be any worse for Cyprus. At least with leaving they would have a chance at a future. I suspect that the people are about to figure that out.

Wed, 03/27/2013 - 18:23 | Link to Comment Miss Expectations
Miss Expectations's picture

I can not look at this map and not think that Israel would have an interest....especially since Syria is being systematically destroyed, too.

http://www.bing.com/images/search?q=Middle+East+Map&FORM=RESTAB#view=det...

Wed, 03/27/2013 - 18:50 | Link to Comment g speed
g speed's picture

leave euro and eu----peg their new currency to dollar like the dominican republic did--(another big haven for russian cash/land) seems pretty simple to me

Wed, 03/27/2013 - 19:25 | Link to Comment ApollyonDestroy
ApollyonDestroy's picture

So what are the odds here that a Cyprus exit/country default lights the fuse of the so patiently waited global derivatives crisis? I would expect a Cyprus default would be a MAJOR catalyst in finally hammering home banks in Japan, Italy, Spain, Greece, etc. etc. uber dramatic grand finale in the US. Sooner or later, we're fucked

Wed, 03/27/2013 - 19:44 | Link to Comment mendigo
mendigo's picture

Suspect Cypriot bankers took good care of Ruskies because they will be back to pick-up the peices after the ewhh give up. Which will get dicey because while were happy to accept thier money t.hey won't be welcomed. Should prove interesting. Suspect ewhh is already laying claim to energy rights maybe Cyprus will need a big brother to keep an eye on the bully to north. US to become deeply involved.

Wed, 03/27/2013 - 20:07 | Link to Comment Bangin7GramRocks
Bangin7GramRocks's picture

Has anyone considered that a country will not be allowed to leave? Will the troika hold their ears and say la la la la la la la la.... I can't hear you!

Wed, 03/27/2013 - 20:30 | Link to Comment Mototard at Large
Mototard at Large's picture

Slightly off topic, but as it turns out, even  Canada is planning its own Cyprus style bailout plan for its too-big-to-fail banks. Good planning eh? http://tinyurl.com/cvcf9v9 or see pages 144 and 145 of the budget.

Wed, 03/27/2013 - 20:42 | Link to Comment nathan1234
nathan1234's picture

Wonder how many hedge funds lost their money in Cyprus. Any information on this?

And was just thinking - If one's money is not safe in banks what would be the safety of one's money in hedge funds !!!!!

To summarize , IMHO, one should keep in neither of these.

Bank run, Hedge run !

No need to run  anywhere when the money is with you ( as Gold and Silver too)

 

 

Wed, 03/27/2013 - 21:30 | Link to Comment Dewey Cheatum Howe
Dewey Cheatum Howe's picture

Speaking of Cyprus, my jaw almost dropped when I read this coming out of Krugman's mouth.

http://krugman.blogs.nytimes.com/2013/03/26/cyprus-seriously/

A correspondent whom I respect has (gently) challenged me to say plainly what I think Cyprus should do — leaving aside all questions about political realism. And he’s right: while I think it’s OK to spend most of my time on this blog working within the limits of the politically possible, and relying on a combination of reason and ridicule to push out those limits over time, once in a while I should just flatly state what I would do if given a chance.

So here it is: yes, Cyprus should leave the euro. Now.

The reason is straightforward: staying in the euro means an incredibly severe depression, which will last for many years while Cyprus tries to build a new export sector. Leaving the euro, and letting the new currency fall sharply, would greatly accelerate that rebuilding.

 

 

Wed, 03/27/2013 - 22:17 | Link to Comment Plumplechook
Plumplechook's picture

Why a surprise?  Krugman has been an outspoken critic of the Euro since its inception on the grounds that having one currency for disparate economies is a recipe for the very sort of crises now unfolding in Cyprus, Greece, Spain etc. 

At least when a country has its own currency it can automatically adjust to a crises by allowing its currency to depreciate thereby leading to an export-led recovery - see Iceland.   The Euro is a straight-jacket which is condemning these countries to years of depresion and misery while at the same time handing over political and economic control of the country to a bunch of unelected thieving Eurocrats.

 

Thu, 03/28/2013 - 03:45 | Link to Comment Ghordius
Ghordius's picture

interesting how most commenters on ZH hate Krugman's advice for the US - while loving his advice for foreign countries

Thu, 03/28/2013 - 08:58 | Link to Comment Dewey Cheatum Howe
Dewey Cheatum Howe's picture

I agree only to the extent that being in the Euro you essentially have given up your sovereignty when you allow someone else to dictate to you how you do your business. It doesn't respect sovereign or property rights. See my other comment I am a fan of single currencies that can hold multiple valuations at the same time since it does respect sovereignty and property rights but at the same time builds on the good parts of having a single currency. Centralization is a bad thing even when done in a democratic manner. It always ends bad and destroys basic freedoms that people should have. Plus centralization always in the end attracts the biggest sociopaths and eventually becomes a closed loop only breeding worse ones as time goes on. It becomes a vicious feedback loop.

Thu, 03/28/2013 - 08:50 | Link to Comment Dewey Cheatum Howe
Dewey Cheatum Howe's picture

And that is why I am a fan of crypto-currencies in the following construction. You could when the algorithms are improved on have multiple valuations at the same time for global, sovereign even regional and local as long as it is debt free and the coin ids are backed by hard assets. It works on simple math set theory built using the same laws and axioms as a natural number system. Currency valuation is based on the associative property. Each coins id is based on that association with the total coins value based on the universal set. The value is dependent on assets back the coins in each group (association) i.e. local, regional, sovereign etc.. The valuation used is based which groups are interacting to exchange currencies among each other. It is a single and multiple currency all at the same time. And can be used across all borders. And it can be scaled up or down at any time with a simple iterative process which means it can be initially implemented on any level. It respects rights on all levels, decentralizes money creation, allows people keep their savings out of a bank since they in essence become their own savings/checking accounts. With a controlled growth rate on currency creation that can't be gamed inflation stays tamed. Value can be adjusted based on assets backing the currency at any time. It puts control back where it belongs and that is in the economy itself since it is a supply/demand based on production style monetary system. Right now we are being controlled by a perpetual debt creation system with no escape as it conumes every last asset down that stocastic matrix equivalent of a black hole in the matrix unless the thing collapses first before all assets can be consumed. The same small group that wishes to control us is ultimately going to destroy all us through this monetary debt slavery control system and the whole system in the process.

Thu, 03/28/2013 - 06:11 | Link to Comment Mototard at Large
Mototard at Large's picture

The FDIC was planning for US bail-ins back in December of 2012 in a joint paper they wrote with the Bank of Engald.    Meanwhile, it turns out that even Canada is making plans for bail-ins for its six TBTF banks.  If there was ever any doubts about how viable our banks are....

UK and USA at http://tiny.cc/z4jcuw - includes link to joint FDIC and BOE paper

 

Canada at http://tinyurl.com/cvcf9v9 or see pages 144 and 145 of the 21 March 2013 budget as tabled in the Paliament.

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