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Buchheit On Cyprus: "The Situation Is Spiralling Down", And Why A Second Bailout May Be Needed
When the world's leading expert on Sovereign debt restructurings believes that the endgame for Cyprus might be another round of restructuring, adding that "I'm not sure this is over," it is important to listen. With the calmness in Cyprus today more reflective of paralysis than confidence, Lee Buchheit senses that the parameters of how much money will be needed to recapitalize the banks have changed. He tells Bloomberg TV's Lee Pacchia in this brief clip, "the situation is spiraling down... they'll need more money because the economy is worse, tax collections less, deposits will flow out when they can flow out." As for which European nation will be next in need of assistance with its sovereign debt burdens? Buchheit agrees with us that while many are looking to Slovenia, he sees real economic and political problems in both Italy and Spain remaining especially since the EU "have certainly changed the rules of the game."
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Kinda like Diesel-BOOM.
Great watch. Probably could figure out the ship was sinking from just his body language.
They will need a second bailout for the simple reason that the deposit base numbers used to set the terms of the current bailout are greatly overstated.
The overstatement arose from the belief that once the branches in Cyprus were closed, the deposit base could not change much.
Since large withdrawals could take place via open affiliates outside Cyprus, that belief was faulty.
You forgot the Russians Watson? Wasn't that the whole purpose of this quagmire? Bleed the Russian Mob of their I'll gained extortions?
Buchheits love bail outs!!!!
but ... but debt does not matter ;)
don't worry - be happy, im sure this is just an isolated issue as were the Greek, Italian, Portugese, Slovakian, Irish, Spanish and US...and....n debt dramas (that are all now fully resolved).
Cyprus may simply need a bailout or two and then happy days for all
I call buchheit!
To impose a loss on senoir bondholders would impair the system? Steal some deposits - voila - system fixed. hahahahhahaa!
By fiat, inverting the order of liability and then raping depositors will do two things:
1) everyone will pull out their money of the banks
2) the banks will fold like wet paper
So, there must be controls on capital flight which last forever.
People will starve the banks by not putting any money into them other than to pay bills.
Essentially they are dooming the current financial system. Once this catchs fire in the popular mindset its going to go up like a pile of brush drenched in gasoline.
Hope & Change = Clowen Pivard = Marxism=Totalitarianism.
At a certain point the masses will recognize that they have the power to simply not go along with or be involved with these idiots any longer. At which point its going to be very lonely in RichyRich-ville when the servants no longer deliver food, fuel, etc and do no work for them. The managerial level and above are absolutely dependent on a compliant and willing workforce. Once the contract is broken, the workers will start just working for themselves and will shun the people who used to ride on their backs.
I suppose cold and hunger might be soothed a bit by counting one's worthless bank notes, but probably not by much.
I have trouble with this whole "systemically important" bullshit. We have seen it proven again and again that it would be better if a business was closed down and bankruptcy proceedings started straightaway. The whole "London Whale" Senate hearing was about the moral hazard of giving an illusion of unlimited backstops to traders who are gambling and taking on too much leveraged risk. This is several years after the investment banks in New York screwed the pooch with mortgage backed securities and CDO's,much of which is toxic debt now clogging up the Eurozone. Very few bankers imprisoned of fined. The bad debts have to be written down. The large banks will soon face a choice: begin behaving responsibly,or be closed forever,as the public decide they are a threat to human civilization.War has almost always followed economic dislocation.
Savers and takers. This will be the next struggle in Cyprus, Spain, Slovenia and soon to be much of the rest of Europe. At this point, the poor folks in Cyprus probably still have no idea what a mess they are in and either a Euro Exit or another bailout will be the result. The new struggle over the next few years will be between the savers and the takers. The government, the Banks and supra-national organizations are creating new policies that say they can take your savings and the Cyprus example does seem to be the template. http://tinyurl.com/d9d74qf
Many expressed surprise that the Cypriots did not riot. That is the usual response in Europe, but it only works to get the local govt. to back down. This was imposed from outside the country and it is a measure of their rationality that they did not engage in pointless demonstrations. Often when demonstrations force the govt. to back track , the result is just can kicking because the problem is not dealt with, like raising the retirement age in France. Cyprus is not fixed in any case, total failure must be part of a real solution. The real problem is the whole euro idea.