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Caught In The Cyprus Crossfire: Small Businesses Suddenly With Zero Cash

Tyler Durden's picture





 

One of the prevailing false conventional wisdoms about the Cypriot cash confiscation is that it primarily affected rich, tax-evading individuals of Russian origin. Alas, those same individuals are likely to have been least affected, as subsequent discoveries of capital control breaches by the "richest and best connected" reveal, while increasingly it appears that the uninsured depositors on whose back the nation of Cyprus was bailed out are small and medium corporations, who had been parking cash for net working capital purposes with Cyprus' banks, cash which is now gone forever to feed the creeping insolvent Euro-monster, and which can't be used to fund such day to day business activities as payroll, purchases, and business operations.

Such as this one:

The most of circulating assets on our business Current Account are blocked.

 

Over 700k of expropriated money will be used to repay country's debt. Probably we will get back about 20% of this amount in 6-7 years.

 

I'm not Russian oligarch, but just European medium size IT business. Thousands of other companies around Cyprus have the same situation.

 

The business is definitely ruined, all Cypriot workers to be fired.

 

We are moving to small Caribbean country where authorities have more respect to people's assets. Also we are thinking about using Bitcoin to pay wages and for payments between our partners.

 

Special thanks to:

 

- Jeroen Dijsselbloem
- Angela Merkel
- Manuel Barroso
- the rest of officials of "European Comission"

 

So while Cypriots may have been quite cool and collected during yesterday's bank reopening when the Troika was kind enough to give them access to €300 of their cash per day, one wonders just how cool and collected they will be when the implications of the cash crunch spread through the system, when hundreds of small and medium business are forced to lay everyone off overnight, when paychecks suddenly stop and when not only savings but ongoing cash grinds to a halt.

Because if the locals thought the deposit haircut is the worst of it, just wait until the full brunt of what a -20% depressionary collapse in the economy hits them head on.

h/t Manuel

 


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Fri, 03/29/2013 - 08:12 | Link to Comment firstdivision
firstdivision's picture

At least they doen't have margin calls like those that were long Corn, Wheat, and Soybeans yesterday.

Fri, 03/29/2013 - 08:13 | Link to Comment GetZeeGold
GetZeeGold's picture

 

 

Who needs food?

Fri, 03/29/2013 - 08:17 | Link to Comment dogbreath
dogbreath's picture

whats up with gold??      http://www.kitco.com/charts/livegold.html

Fri, 03/29/2013 - 08:19 | Link to Comment Zer0head
Zer0head's picture

TD check out e-receps comment on Canada bank bail in proposal

http://www.zerohedge.com/news/2013-03-29/senior-sac-trader-arrested-give...

Fri, 03/29/2013 - 08:47 | Link to Comment negative rates
negative rates's picture

Knock knock,...........................................!

Fri, 03/29/2013 - 08:49 | Link to Comment BurningFuld
BurningFuld's picture

Cyprus: This is a test of the emergency confiscation system. This is only a test. If this were an actual confiscation....you would be FUCKED!

Fri, 03/29/2013 - 09:01 | Link to Comment BaBaBouy
BaBaBouy's picture

GOLD ETF ???

FED Vault ???

FT Knox ???

 

What Happens When Everyone Wants Their GOLD In Hand ???

Fri, 03/29/2013 - 09:07 | Link to Comment GetZeeGold
GetZeeGold's picture

 

 

Looks like it's dead.

 

Dammit Jim.....I'm a doctor, not a PM miracle worker.

 

Get it fixed Scotty.....we need to warp out of here mucho pronto.

Fri, 03/29/2013 - 10:16 | Link to Comment Fukushima Sam
Fukushima Sam's picture

I'm sure everything is just fine over at Cyprus.

Fri, 03/29/2013 - 10:22 | Link to Comment CrazyCooter
CrazyCooter's picture

What I learned from this whole thread? According to Wiki, Alaska is a tax haven!

Seriously though, these idiots in Brussels had to know this was going to be the outcome, right? I mean, they can't be that stupid, right?

I still waffle between distilled incompetence and malice. The history books on this episode are going to be fascinating.

Regards,

Cooter

Fri, 03/29/2013 - 10:38 | Link to Comment kaiserhoff
kaiserhoff's picture

We're all crazy now, Cooter, because everything we thought we knew ain't working.

I don't think they are that stupid, but maybe that exhausted and desperate.  No two "bail-outs" are the same.  Not one of them makes any sense, or looks at the underlying problems.

Not sure it matters now whether it's incompetence or conspiracy.  There is clearly plenty of both.  Let's look ahead.

If the bank runs spread -  they surely will...

And/or another country or two has it's citizens savings raped - another sure thing...

The mother of all depressions will hit us hard, as everyone starts to follow the lead of ZH.  Silver uber alles.

Fri, 03/29/2013 - 11:42 | Link to Comment redpill
redpill's picture

Cyprus is a mortally wounded soldier that has been deliberately given an overdose of morphine so he might have a few moments of comfort and lucidity before the inevitable conclusion. As the Cypriot economy implodes, it will become far worse than worries over daily ATM withdrawal limits.

Fri, 03/29/2013 - 10:44 | Link to Comment DeadFred
DeadFred's picture

They're not stupid. The possibilities I see are:

1 They see the inside data and know things are so screwed up that Cyprus is small potatoes compared with that which cometh.

2. Someone (Germany?) has a vested interest in shaking the house. I tend toward number two that Germany is out to reorg the EU and put themselves in as CEO. Don't get your hopes up about the history books though. If they can tame the whole MSM news feed they can control the history books. If the system doesn't break we will keep being fed our steady diet of manure.

Fri, 03/29/2013 - 11:53 | Link to Comment NotApplicable
NotApplicable's picture

As was known long, long ago.

There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved. -- Ludwig von Mises

Fri, 03/29/2013 - 11:16 | Link to Comment flacon
flacon's picture

The victor always gets to write the History book. 

Fri, 03/29/2013 - 11:28 | Link to Comment The Big Ching-aso
The Big Ching-aso's picture

If you want a picture of the future imagine a central banker's boot stamping on a small business owner's face forever.     It's almost Orwellian. 

Fri, 03/29/2013 - 13:01 | Link to Comment palmereldritch
palmereldritch's picture

and hold the cheque book

Fri, 03/29/2013 - 11:26 | Link to Comment LostAtSea
LostAtSea's picture

Intentional malice.  Those crazy NWO conspiracies are looking more and more plausible.

Fri, 03/29/2013 - 12:21 | Link to Comment The Big Ching-aso
The Big Ching-aso's picture

I'm starting to see a trend here.   The smaller the country and the greater its resources the more likely it'll be phucked first and phucked hard.      Switzerland however is the exception.    It may be small but they're very rich in lead deposits.

Fri, 03/29/2013 - 13:05 | Link to Comment palmereldritch
palmereldritch's picture

not to mention the headquarters of the BIS...making it the ultimate looter's redoubt

Fri, 03/29/2013 - 12:58 | Link to Comment AGuy
AGuy's picture

" these idiots in Brussels had to know this was going to be the outcome, right? I mean, they can't be that stupid, right?"

LOL! Never underestimate the power of stupidity!

 

 

Fri, 03/29/2013 - 09:06 | Link to Comment natronic
natronic's picture

Mine IS in my hand, others will have pretty pieces of paper

Fri, 03/29/2013 - 11:10 | Link to Comment bank guy in Brussels
bank guy in Brussels's picture

Paper money like this ... A picture of the new, very special Cypriot euro currency note ... The Zero Euro

http://3.bp.blogspot.com/-fJMOrVZR-SY/UVNJFKkdKWI/AAAAAAAAJ-U/Bx_OD_nLDa...

Fri, 03/29/2013 - 12:22 | Link to Comment The Big Ching-aso
The Big Ching-aso's picture

If George Orwell were alive today he'd have the sequel to 1984 already written for him.

Fri, 03/29/2013 - 09:42 | Link to Comment Groundhog Day
Groundhog Day's picture

What happens when everyone wants their gold in hand??

They get Hollow points...all they want

Fri, 03/29/2013 - 10:15 | Link to Comment Karlus
Karlus's picture

So, dumb question here. What if you put some big time money NOW into a Cyprus based bank?

Is it an ongoing haircut? Or did it happen on a date and after its cool? What if you combine some bank accounts and they go over the threshold, do you get funds held?

Or would you be able to snap up assets on the cheap while "saving" a few businesses with your hot capital injection?

Fri, 03/29/2013 - 11:19 | Link to Comment dark pools of soros
dark pools of soros's picture

you'd probably just get shot

Fri, 03/29/2013 - 11:28 | Link to Comment SokPOTUS
SokPOTUS's picture

You'd have to be INSANE to make a deposit now of any amount.

Fri, 03/29/2013 - 13:09 | Link to Comment dogbreath
dogbreath's picture

Weather you were doind a wire transfer of depositing directly with a teller, there would be a spasmodic fit of uncontrolled laughter. The teller might tell you  to your face "are you crazy" 

Fri, 03/29/2013 - 13:25 | Link to Comment Clycntct
Clycntct's picture

Correction "You are Crazy"

Fri, 03/29/2013 - 08:48 | Link to Comment idea_hamster
idea_hamster's picture

I wonder what that "Lower Your Costs" link at the bottom of Laiki's web site leads to -- a passport agency?  Singpore citizenship application?  Suicide advice?

Fri, 03/29/2013 - 09:41 | Link to Comment Opinionated Ass
Opinionated Ass's picture

Yup, this guy fucked up. Forgot to set his "Banking Alerts" to Your money will be stolen in 7 days like the savy Russian oligarchs did.

Fri, 03/29/2013 - 10:55 | Link to Comment kaiserhoff
kaiserhoff's picture

So.....

You steal the working capital from every small business..., on an island for god sake..., and the whole place implodes.

Whocouldanode?

Fri, 03/29/2013 - 11:56 | Link to Comment Matt
Matt's picture

It is amazing that people are still so in the dark over this. He:

1) states that the money was taken to pay off Cyprus (State debt) when it is instead simply an amount that was lost due to the bank making bad investments.

2) he thinks that putting his money in a small caribbean island will somehow make him safe, since they "respect property", not understanding this problem is universal.

Sounds like he is lining himself up to get burnt a second time.

Fri, 03/29/2013 - 08:20 | Link to Comment Going Loco
Going Loco's picture

Must be Kitco. Silver apparently opened in Hong Kong at 03:00 EST, crashed 50c, then closed immediately. Weird, but I doubt it means anything. http://www.kitco.com/charts/livesilver.html

Fri, 03/29/2013 - 08:34 | Link to Comment gimli
Fri, 03/29/2013 - 09:01 | Link to Comment JOYFUL
JOYFUL's picture

My usual price-check site goldprice.org has been showing 'markets closed' for the last twelve hours...first time it's ever been down since I started using it. Coincident with the weird business at Kitco, the SD report and going into a long weekend...this is starting to look very weird....

and quite possibly a sign that they've lost control in the paper markets.

Mass bank holiday preparation for Easter Weekend? Gold over 1900 when\if markets re-open?

Fri, 03/29/2013 - 10:11 | Link to Comment Gief Gold Plox
Gief Gold Plox's picture

Most markets are closed today. EU banks are open but most will not settle transactions till Monday morning.

Fri, 03/29/2013 - 10:13 | Link to Comment Sandmann
Sandmann's picture

Really ? news to me. Most Banks are CLOSED on Good Friday and Monday as in the UK

Fri, 03/29/2013 - 17:13 | Link to Comment Gief Gold Plox
Gief Gold Plox's picture

Damn, pardon me! Tuesday mornin'

Fri, 03/29/2013 - 10:13 | Link to Comment Sandmann
Sandmann's picture

Really ? news to me. Most Banks are CLOSED on Good Friday and Monday as in the UK

Fri, 03/29/2013 - 10:21 | Link to Comment e-recep
e-recep's picture

i have been watching the gold price for some time now and i have never seen such a thing before. it goes flat with lots of random spikes? wtf?

Fri, 03/29/2013 - 10:31 | Link to Comment JOYFUL
JOYFUL's picture

Combine that with the experience of last week (8 days lockdown) and the fix is in e-cep ...

time to pull the cord methinks....we've been warned.

Fri, 03/29/2013 - 10:58 | Link to Comment seek
seek's picture

Goldprice.org is also misreporting the change -- it's saying the price is down $53 in a day, and that's nowhere near the actual (smaller) decline.

Someone upstream on the quotes must be sending out bad data.

Fri, 03/29/2013 - 08:25 | Link to Comment Dooud
Dooud's picture

Nothing to see here, gold is NOT manipulated in any way. Those truncated spikes are a totally random, free market occurrence.

Fri, 03/29/2013 - 10:13 | Link to Comment Chupacabra-322
Chupacabra-322's picture

To Crush small business and secure the worlds resources via a Military Junta/Chicago School of Economics was always the intent among The Global Criminal Cabal (Bankster/Intelligence) Crime Syndicate.

I believe it was Criminal Rockefeller who said and envisioned a type of "Super Capitalism Mixed with Communism."  I'm just Paraphrasing a quote. 

Fri, 03/29/2013 - 11:20 | Link to Comment dark pools of soros
dark pools of soros's picture

bitcoin hitting $100...... 

Fri, 03/29/2013 - 12:46 | Link to Comment seek
seek's picture

And interestingly enough, MtGox faces a massive DDOS as this happens -- there's been rotating DDOS attacks on many bitcoin related sites over the past month, and no one knows who's driving them. My guess is it's some aspect of TPTB building a contingency capability.

There was also an exchange hack in Brazil, but that was probably just hackers looking for easy cash.

(Tip, don't store your coins in exchanges, people!)

Fri, 03/29/2013 - 16:13 | Link to Comment ncdirtdigger
ncdirtdigger's picture

Yes, but you can't eat a bitcoin.......can you?

Mon, 04/01/2013 - 11:18 | Link to Comment Faust82
Faust82's picture

Not more or less so than you can eat a dollar or gold bullion.

You can backup, securely store, freely and anonymously transfer a bitcoin though.

Fri, 03/29/2013 - 11:58 | Link to Comment misitu
misitu's picture

<---- feeds disconnected to hide start of price spike/crash

<---- feeds disconnected in order to "edit" attached descriptive data

M

Fri, 03/29/2013 - 10:46 | Link to Comment Wile-E-Coyote
Wile-E-Coyote's picture

An algo had a nervous breakdown.

Fri, 03/29/2013 - 10:21 | Link to Comment bloostar
bloostar's picture

300 euros won't provide an edible ipad either.

Fri, 03/29/2013 - 10:55 | Link to Comment Ignorance is bliss
Ignorance is bliss's picture

Are these the new hunger games? 

Fri, 03/29/2013 - 09:24 | Link to Comment Glitterbug
Glitterbug's picture

It’s not just in Cyprus; this has been the case in Portugal for two years.  Banks won’t give loans unless you give them your cash (liquid assets) as collateral.

 

Tyler:  Nobody is willing to take on additional loans and obligations!

 

So Tyler and Co, Please show me who is willing to lend to business enterprises. To get a €500,000 redevelopment loan on a property valued by a local bank and by the Tourism Department at more than €1.5Million, we have to put down €300,000 in collateral AND we have to put the property as collateral as well.

 

We have started this project, but the bank rates and the fact that they demand tying up our liquid assets as collateral, are crippling us. In a country that badly needs jobs, we are putting our wealth at risk, with the full support of the local council and both local and national Tourism departments. Hat tips to the Govy!

 

We are building this: http://www.retirodosbispos.com/facilities.html  

We are putting this up as collateral: www.qtfontebispo.com

So, Tyler and Co., please forward me the names of these agencies that have money to lend and help us get this project finished on time. rebasse@aol.com or any suggestions welcome!

 

****

Quotes from this ZeroHedge article reproduced below for reference

 

http://www.zerohedge.com/news/2013-03-28/europes-collapse-confidence-one-chart

 

Those who did pay attention will know that in February M3 grew quite obediently in a Eurozone flush with cash, this time by a respectable €15 billion, or 3.1% y/y, after €37 billion in January (of which, however a whopping €47 billion was M1 so the balance actually declined). Of course, this was the easy part: creating money via various central bank conduits has never been the issue: the concern has always been getting that money into private consumer hands through loan creation.

And it is here that things just keep on getting worse by the day. Because in a continent in which there is no confidence whatsoever: no confidence in the banks, no confidence in the financial system, no confidence in end demand, no confidence in any reported data, no confidence that one's deposits won't be confiscated tomorrow, and last but not least no confidence that a sovereign nation won't just hand over its sovereignty to the Troika tomorrow, nobody is willing to take on additional loans and obligations.

 

Fri, 03/29/2013 - 11:49 | Link to Comment Goner
Goner's picture

So you are risking 1.5M AND 300K for what amounts to a 200K 'loan' to expand your business in times like this? Risky

Fri, 03/29/2013 - 11:57 | Link to Comment Glitterbug
Glitterbug's picture

No Goner, not just my money is in there, there is €2Million grant /low interest loan from Europe in the mix.

There is abosolutely zero risk for me or the bank.

That is the real shame. The bank loan will be less than 20% of the total investment.

Thanks for the response, Rich

Fri, 03/29/2013 - 12:05 | Link to Comment NotApplicable
NotApplicable's picture

Can you think of a better way to murder an incoherent banking system? Certainly not like the banksters are going to accept responsiblity when there's so many other ambiguios, unaccountable political bodies to lay the blame upon.

Fri, 03/29/2013 - 14:37 | Link to Comment css1971
css1971's picture

The bank is using your collateral as reserve which will be used to create your loan.

Fri, 03/29/2013 - 11:34 | Link to Comment Silver Bug
Silver Bug's picture

Wow this really is a tragedy.

 

http://sprottmoneyblog.com/

Fri, 03/29/2013 - 20:51 | Link to Comment Buck Johnson
Buck Johnson's picture

Can you imagine having that money looking you in your face but yet it's not yours anymore except for the 100,000 euros aka 120 thousand and change dollars.  Wait when next week comes around, we will start to hear about layoffs and firings tuning up.  Because for one like that perons company, most of their funds is gone except for the amount I said (for now) and they can only draw out 300 euros a day.  So for one they don't have the money for payroll and other things, and even if they did it won't last long maybe a week or two for a small company.  And how do you pay your workers if the bank won't cash checks, won't allow you to pull out more than said amount of 300 euros a day or transfer funds.  Are they only allowing you as a company to say please transfer said payroll to these bank accounts of these workers, what if the workers don't have bank accounts?  And then add to the fact Cyprus is mostly a service economy to the banks and the tax evasion companies and servicers.  So if it can't be used anymore for that what service can those companies and IT services provide anymore?

The depression is going to destroy that country.

Fri, 03/29/2013 - 08:13 | Link to Comment ShortTheUS
ShortTheUS's picture

Zero Cash: On a long enough timeline, the bank balance for everyone drops to zero.

Fri, 03/29/2013 - 08:33 | Link to Comment machineh
machineh's picture

Has anyone realized yet that CapControls 1.0 are PERMANENT?

------------

 

The Cypriot government has warned that banking curbs to prevent money from leaving the country will apply for longer than expected, in a blow to the island's attempts to revive its paralysed economy.

The country's foreign minister, Ioannis Kasoulides, said the regime, including a limit on cash withdrawals at €300 (£253) per day, would last for "about a month" – just 24 hours after the population was told they would only be in place for a week. The capital controls, the first ever to be imposed on a eurozone member state, have been introduced to prevent a cash exodus that would destroy what is left of the Cypriot banking system.

Kasoulides said: "A number of restrictions will be lifted and gradually, probably over a period of about a month according to the estimates of the central bank, the restrictions will be lifted."

http://www.guardian.co.uk/world/2013/mar/28/cyprus-crisis-limits-bank-wi...

Onward to Bailout II!

 

Fri, 03/29/2013 - 08:50 | Link to Comment AlaricBalth
AlaricBalth's picture

Now that Bank of Cyprus is being recapitalized, I am sure that bank loans can be arranged for small to mid-sized businesses which were adversely affected by the seizure of their funds.

Imagine getting robbed and then having to borrow money to survive from the thieves who took your money.

Fri, 03/29/2013 - 09:43 | Link to Comment rustymason
rustymason's picture

"Imagine getting robbed and then having to borrow money to survive from the thieves who took your money."

That describes our situation for the last one hundred years perfectly. I expect to see you quoted in Bartleby's soon.

Fri, 03/29/2013 - 10:11 | Link to Comment Sandmann
Sandmann's picture

Shareholders of RBS or Lloyds Bank or HBOS are in this position

Fri, 03/29/2013 - 11:36 | Link to Comment cherry picker
cherry picker's picture

Try using moneygram to send $1,000 or more out of the US to another country and see what is required in way of two pieces of picture ID and explanations.

The USA has had capital controls for years.  Whose fucking business is it who or what I send "my" money to?

Criticize the Troika, but don't forget Uncle Sam is the biggest thief there is.

Fri, 03/29/2013 - 08:33 | Link to Comment francis_sawyer
francis_sawyer's picture

Who would possibly need cash when everyone has bitcoin?... THEY ARE LEGION!

Fri, 03/29/2013 - 08:14 | Link to Comment Quinvarius
Quinvarius's picture

I can't figure out if the ECB is stupid or just trying to kill of JPM's competition so they can open banks on the island.  The JPM ponzi has to be desperate for new money.

Fri, 03/29/2013 - 08:22 | Link to Comment fonzannoon
fonzannoon's picture

"Big Depositors Seek a New Safety Net"

"On the first day of the New Year, $1.5 trillion of bank deposits will lose an unlimited government guarantee that was granted during the financial crisis to assure skittish customers that their cash was safe. For a handful of boutique firms that service banks, it’s a boon for business."

The accounts losing the insurance are used by businesses, municipalities and other entities like nonprofits that are willing to forgo any interest in order to have immediate access to their large pools of cash.

These accounts hold about 20 percent of all deposits in United States banks. Starting Jan. 1, only $250,000 in each noninterest bearing account will be backed by the Federal Deposit Insurance Corporation.

Now a scramble is under way to make sure these customers do not withdraw large sums out of banks, particularly community banks that have benefited from the guarantee.

http://www.nytimes.com/2012/12/31/business/a-rush-to-split-up-big-bank-deposits-to-keep-them-safe.html?pagewanted=all

Fri, 03/29/2013 - 08:56 | Link to Comment Acet
Acet's picture

Long King-size matresses!

Fri, 03/29/2013 - 09:24 | Link to Comment Cloud9.5
Cloud9.5's picture

So, you are telling county government accounts are not protected?

Fri, 03/29/2013 - 10:00 | Link to Comment NotApplicable
NotApplicable's picture

Don't worry, they're backed by local taxpayers.

Fri, 03/29/2013 - 09:46 | Link to Comment Son of Loki
Son of Loki's picture

Moar KY on the way ...being air-lifted to the little island as we write...

 

Fri, 03/29/2013 - 08:14 | Link to Comment ArkansasAngie
ArkansasAngie's picture

You take my cash and you put me out of business.  I can't pay my employees or my vendors. And they wonder what the impact on the economy will be.  What a croc of oderiferous material

Fri, 03/29/2013 - 08:20 | Link to Comment ArkansasAngie
ArkansasAngie's picture

Honestly ... I'm thinking of starting a bank.  I've spread my money accross accounts and banks.  How much equity do I need?  I think it would be easy to draw depositors.

Fri, 03/29/2013 - 09:10 | Link to Comment Rip van Wrinkle
Rip van Wrinkle's picture

A guy in the UK tried to start a new bank called Bank of Dave. Paid depositers 5%, leant to local businesses at between 7.5% and 10%.  Regulators shut him down. Reason? He was paying too much interest to depositers!!

Fri, 03/29/2013 - 10:46 | Link to Comment kaiserhoff
kaiserhoff's picture

Haven't seen you in a while Angie.  

Might look into a credit union.  My Dad helped form one years ago.  Seemed like a rational process back then, but sabe dios.  Please let us know whatever you do.  Most of us have the same issues.

Fri, 03/29/2013 - 08:34 | Link to Comment BurningFuld
BurningFuld's picture

How typical. I'm sure all the new "Bank Rules" were set up by a bunch of Government Bureaucrats that have never worked a day in their lives and have no clue how an actual business works. If you run a retail business most of the money in your operating account is not yours anyhow...it's a money in money out account to service inventory turn over. This will destroy the retailers...losing money that is not even theirs. Fucking morons.

Fri, 03/29/2013 - 09:23 | Link to Comment NoDebt
NoDebt's picture

No, "bank rules" are written by the banks themselves.  Hopefully that clears things up.

Fri, 03/29/2013 - 09:57 | Link to Comment disabledvet
disabledvet's picture

this is what i don't understand in all this. from outward appearances it seems like the Eurogroup is actually targeting the banks and all businesses on the island by seizing up credit "intentionally." i really find this impossible to explain in a rational way. it does shed light on the discussions at Treasury in 2008 in my view...and makes their path (direct injections of money into the financial system, a series of massive Federal programs...many but not all of which have been wound down, QE, continued spending by Congress, etc...etc...) a lot more understandable. I certainly understand the fear expressed in these here parts that "their savings is next"...but with interest rates this low and taxes soaring on all us working types and small business owners it's really hard to imagine what simply "seizing savings accounts" would do other than wipe the whole series of plans off the map. God forbid if Europe is "locked in to this template." all small and mid sized business Over There would be under direct threat if that was the case.

Fri, 03/29/2013 - 10:07 | Link to Comment Sandmann
Sandmann's picture

Why do you say seizing "savings accounts" ? They are seizing DEPOSITS which means ALL balances including working capital for businesses. Since Russia has a Double-Taxation Agreement with Cyprus it is hardly a tax-haven - more likely it is a country where Holding Companies can be structured under a legal code that has some meaning and Russians can conduct business in Russia within a legal framework of commercial law.

The simple fact is that The State has the power to seize whatever private property it chooses and backs it up with a) its own legal system  b) guns.

If Americans really think Obama could not order the closure of US banks for a week and have accounts frozen ........well.......

 

 

 

Fri, 03/29/2013 - 11:40 | Link to Comment SokPOTUS
SokPOTUS's picture

Most likely the accounts are 'business sweep accounts' - the accounts are demand deposits during the business day and are 'swept' to 'savings' deposits in off hours.  If the bank is 'holidayed' off-hours; the funds are frozen in their swept savings state; hence the confiscation of savings crushes the businesses with such accounts.  In the U.S.; it's virtually all business depository accounts that operate this way.

Fri, 03/29/2013 - 12:16 | Link to Comment defencev
defencev's picture

Since Russia has a Double-Taxation Agreement with Cyprus it is hardly a tax-haven - more likely it is a country where Holding Companies can be structured under a legal code that has some meaning and Russians can conduct business in Russia within a legal framework of commercial law.

 

This is a total bullshit. It may help some ligitimate Russian companies to conduct an international business but for that they do not need to keep millions in Cypriot banks (or even have a banking account in Cyprus at all). Do not shed your crocodile tears about "legitimate" Russian businesses on Cyprus.

Fri, 03/29/2013 - 10:37 | Link to Comment pashley1411
pashley1411's picture

Understood perfectly well if you realize that Cypress is simply a proxy, and shot-across-the-bow, towards Spain and Italy.   

The German sense of humor has run out (yes, just joking). No one messes with the Fourth Reich  

Fri, 03/29/2013 - 10:28 | Link to Comment Whoa Dammit
Whoa Dammit's picture

Walmart, McDonald's and similar multinationals will move in and save the day. Who knows, maybe even JC Penney will be able to revive itself with new stores there.

It seem the plan for the future is to have no more small businesses anywhere.

Fri, 03/29/2013 - 13:46 | Link to Comment theprofromdover
theprofromdover's picture

"It seem the plan for the future is to have no more small businesses anywhere"

Truer than you know.

-And also to remove all cash from the system.

Fri, 03/29/2013 - 17:32 | Link to Comment OpenThePodBayDoorHAL
OpenThePodBayDoorHAL's picture

I think a whole lot of SP500 treasurers are having some serious heartburn these days, thinking about their deposits in EUR-zone banks. Ha ha maybe they'll have to repatriate and pay taxes lol

Fri, 03/29/2013 - 08:15 | Link to Comment Super Broccoli
Super Broccoli's picture

hope those 720K€ were not to-be-paid-VAT ;-)

Fri, 03/29/2013 - 08:41 | Link to Comment Winston Churchill
Winston Churchill's picture

Of course they were, plus witholding taxes for the last month.

What a clusterfuck.This is what happens when politicos and banks do something.

Both have no real world business experience.

Euro wide panic to follow shortly as the full implications sink in.

Fri, 03/29/2013 - 08:17 | Link to Comment laomei
laomei's picture

Hmmm, what happens when you nuke a company account which relies on those funds to pay wages, pay invoices and stay solvent?  Well, obviously, the company dies.  OOPS.

Fri, 03/29/2013 - 10:01 | Link to Comment VisualCSharp
VisualCSharp's picture

This is the intention. It's intended that citizens and businesses be raped to pay bankster vig. You think the EU technocrats care whether Cypriots are unemployed and starving? Hah.

Fri, 03/29/2013 - 12:45 | Link to Comment laomei
laomei's picture

In a sane world, the EU would have just given them their greece money, said "whoops, sorry, we didn't realize our haircut would do this to you.  how about lowering those interest rates a tad bit till your banks are more stable?" and all would be just fine.

 

But that would have been far too easy to do and not nearly destructive enough.

Fri, 03/29/2013 - 17:34 | Link to Comment OpenThePodBayDoorHAL
OpenThePodBayDoorHAL's picture

These accounts were paying amost 10% interest. In a sane world they would have just told people there was a 1-year moratorium on interest. Would have been some capital flight but nothing like what's been happening.

Sat, 03/30/2013 - 01:59 | Link to Comment laomei
laomei's picture

Wouldn't even have to slash interest to 0%.  Just cut it down to something like 3% for non-residents.  Retired residents or whatever, leave it at 6%.  Problem would have fixed itself in 2~3 years.

Fri, 03/29/2013 - 08:18 | Link to Comment Going Loco
Going Loco's picture

I asked about this when the SHTF. The assumption seemed to be that rich people had their money in bank accounts so it was OK to take that money. But rich people usually don't have money in bank accounts unless they are engaged in a transaction. They keep short term funds in very short term government debt, and other stuff, not in a current or deposit account. Aklso rich people have contacts and know when things are going wrong and take immediate action. The people whose money was taken will have been ordinary people, businesses, people who have just sold one home and need the money to complete on another, people who have had an inheritance and are deciding what to do next, and so on. It's utterly ghastly and it does mean that thjose of us who do have any money in the banking system MUST get it out NOW, especially in overbanked countries

http://www.marketoracle.co.uk/Article39630.html

http://www.marketoracle.co.uk/Article39662.html AMAZING MUST READ

 

Fri, 03/29/2013 - 08:52 | Link to Comment Winston Churchill
Winston Churchill's picture

What a co incidence.They will be able to blame those DNS attacks a few months ago.

So the Spanish banks have de facto capital controls thru' 'maitenance' of

the online accesss.No wonder we haven't seen the bank runs yet.

Expect formal capital controls over the long holiday  weekend.

If you have not moved money out of the periphery yet,you are so fucked.

Fri, 03/29/2013 - 09:56 | Link to Comment Son of Loki
Son of Loki's picture

people cannot pay the soaring property taxes so property confiscation may be the next move....I wonder...pension plans....real esate...easy pickings....

Fri, 03/29/2013 - 10:01 | Link to Comment SmallerGovNow2
SmallerGovNow2's picture

Fucking AWESOME!!!  thanks for the links...

Fri, 03/29/2013 - 08:20 | Link to Comment DavidJ
DavidJ's picture

These bankers gambled with people's hard earned money.   :-(

 

 

Take your money and put it in a safer bank.  

Fri, 03/29/2013 - 09:35 | Link to Comment SmallerGovNow2
SmallerGovNow2's picture

Me bank of matress?

Fri, 03/29/2013 - 08:20 | Link to Comment Dooud
Dooud's picture

I have no visible means of support , but I always have $30.22 in my checking account, always ....Man.

Fri, 03/29/2013 - 10:42 | Link to Comment Meat Hammer
Meat Hammer's picture

Haha!  Do you write checks for $0.69, too?

Fri, 03/29/2013 - 08:20 | Link to Comment Cdad
Cdad's picture

FUTURE FLASH:  Today, the global banking industry has announced that all employees in Cyprus will, instead of being paid in cash, receive shares of bank of Laikia and BoC.  The range of payment will be 100-200 shares of BoC per hour, or 1000-2000 shares of Laikia per hour.  

The global banking industry has also announced that shares in either bank will not be redeemable at any bank in Cyprus.

Forward then...and into the Brave New world.  Brought to you by the Troika. 

Fri, 03/29/2013 - 08:23 | Link to Comment Sudden Debt
Sudden Debt's picture

AND WHAT ABOUT STATE RUN CORPORATIONS?!

THEY ALL HAVE ACCOUNTS TO!! HAVE THOSE BEEN RAIDED?!!!!!

I DON'T THINK SO!!!

AND WHAT ABOUT THE POLITICIANS?!!! WE WANT ACCOUNT INFORMATION ASAP!!

Fri, 03/29/2013 - 08:26 | Link to Comment hooligan2009
hooligan2009's picture

what about tax payments to the government? does this get a haircut too? what about deposits that were held to pay taxes (income, corporation and VAT)?

Fri, 03/29/2013 - 08:30 | Link to Comment Cdad
Cdad's picture

Come on, buddy.  We're making this stuff up one day at a time.  Don't be getting out ahead of things like that.  We assure you that we'll do a good job, one day at a time.  

Fri, 03/29/2013 - 09:14 | Link to Comment laomei
laomei's picture

Hah, no.  This is being treated as a forced equity purchase.  Not a "tax".  You're just being forced to purchase bank shares which you are not allowed to do anything with and will become worthless.  You gave the bank your money and they made stupid investments and now that is returned back to you as your own stupid investments.  Tada.

Fri, 03/29/2013 - 10:17 | Link to Comment hooligan2009
hooligan2009's picture

so you cant even pay taxes with bank shares? doesnt seem fair.. why cant bank shares be the new currency? yanno you can write " i promise to pay the bearer on demand the sum of x euros" - and on the rear you could put "well at some point in time in the future if this receipt for stolen goods is ever worth anything"

Fri, 03/29/2013 - 08:25 | Link to Comment fonzannoon
fonzannoon's picture

I like how this guy is running for the Caribbean.

Out of the frying pan into the fire.

Fri, 03/29/2013 - 08:45 | Link to Comment yrbmegr
yrbmegr's picture

It is probably now safer to hide from taxes under U.S. hegemony, rather than European hegemony.

Fri, 03/29/2013 - 10:17 | Link to Comment disabledvet
disabledvet's picture

that's possible too. we've never been in such a low interest rate environment before (not even in the Great Depression were they this low) if people are discovering the "value" of "hiding their assets in the islands" or Panama i think they might be in for a rude awakening. i'm still confused as to why Cyprus would ever join the "euro bloc" to begin with given their already very successful financial endeavors of the past two decades. "back in the day" (the 50's) this stuff would have been done in Beirut ("the Paris of the Middle East.")

Fri, 03/29/2013 - 08:26 | Link to Comment hooligan2009
hooligan2009's picture

 cyrpus = failed nation state

greek debt write-offs are the reason..this is being rolled out across Greece as we speak..for 11 million greeks who (one way or another) are paying for the sins of their fathers..i mean corrupt businesmen and government officials.

this will add to fuel to the fire that says "the economy can only grow at the rate of increase of some multiple of government debt increase (socialism)"

government debt gets a 90% (final, all up) haircut..the economy takes a 90% hit

when banks are TBTF and are guaranteed by the "State" the government det = bank debt = bank deposits

just by the way, I have no problem with bank deposits taking haircuts, this is as it should be. if you have a problem with bank risk, hold goverment debt; if you have a problem with one governments debt, hold another; if a problem with all government debt, buy gold..

Fri, 03/29/2013 - 08:34 | Link to Comment Cdad
Cdad's picture

"if you have a problem with bank risk, hold goverment debt; if you have a problem with one governments debt, hold another; if a problem with all government debt, buy gold.."

This plan is unacceptable.  Free markets are too unpredictable.  As well, it's nearly impossible to front run a free market, and thus a free market puts too much pressure on the global banking system's attempts to extract its pound of flesh, and thus fund TBTF banks.  What...do you want TBTF banks filled with talking monkeys to be failing everywhere?  Sheesh, buddy. 

Get real.  

Fri, 03/29/2013 - 09:33 | Link to Comment SmallerGovNow2
SmallerGovNow2's picture

What...do you want TBTF banks filled with talking monkeys to be failing everywhere?

YES, let the muther fuckers crash and burn.  Let small local/regional banks emerge from the ashes. 

Fri, 03/29/2013 - 08:29 | Link to Comment shinobi-7
shinobi-7's picture

The damage the EC is doing is unconscionable. They are ready to burn everything to save what they believe is the essential without realizing that when everything is gone, the core is not worth keeping! They would make the staunchest ideologues of North Korea proud.

Fri, 03/29/2013 - 09:30 | Link to Comment SmallerGovNow2
SmallerGovNow2's picture

Exactly!  and the feds will do the same and end up crashing and burning fifty states here if we let them continue their incompetent management and "power grab"....

Fri, 03/29/2013 - 10:38 | Link to Comment hooligan2009
hooligan2009's picture

european version = virtual destruction of money..does remind you of this crap

http://revcom.us/a/027/vietnam-destroy-village.htm

Fri, 03/29/2013 - 09:03 | Link to Comment Mototard at Large
Mototard at Large's picture

Solyent Green! 

Fri, 03/29/2013 - 08:27 | Link to Comment ziggy59
ziggy59's picture

The Cyprus Experiment .. Continues...a Cypriot Horse??

Fri, 03/29/2013 - 08:32 | Link to Comment Urban Redneck
Urban Redneck's picture

The clowns in Brussels and Berlin PAID EUR 10 billion of taxpayer money, to intentionally destroy the economy in Cyprus.  They actually could have bailed out the banks for less than EUR 10 billion.  Unless, of course, these "esteemed clowns" really know NOTHING about either banking or the real economy, in which case why have they been entrusted to the positions they hold- when one could simply pull any above-average kleptocrat banker from the ranks of the licensed institutions of theft in the Eurozone and do a better job of maintaining their insane ponzi scheme and perverted social order?    

Fri, 03/29/2013 - 09:17 | Link to Comment SmallerGovNow2
SmallerGovNow2's picture

Your second point hits it, they are ignorant clowns who couldn't run a lemonade stand...

Fri, 03/29/2013 - 09:35 | Link to Comment Black Markets
Black Markets's picture

Trust me. It's the second option.

They really are that incompetent.

It comes from the fact there is no international financial centre in the eurozone. The all rely on London.

Fri, 03/29/2013 - 10:06 | Link to Comment css1971
css1971's picture

Frankfurt.

HTH.

Fri, 03/29/2013 - 11:15 | Link to Comment mendigo
mendigo's picture

I think they shot themselves in the testicles as a matter of priciple.
They realize that the bailout senario is a black hole.
What does not make sense is how the leader of Cypros could accept this.

Fri, 03/29/2013 - 17:48 | Link to Comment OpenThePodBayDoorHAL
OpenThePodBayDoorHAL's picture

People in here always ascribe these actions to a giant plot or worldwide banker cabal conspiracy. More likely it's just a bunch of fucking fool bumbling bureaucrats who have never had a real job in their lives, have always failed upwards, live in a Brussels/NYC/London/Frankfurt bubble, don't pay taxes themselves, never had to run a business, and have no fucking clue what the consequences of their actions will be.

Kinda like this:

https://www.youtube.com/watch?v=50augCjGerQ

Fri, 03/29/2013 - 08:34 | Link to Comment 10044
10044's picture

On a long enough timeline, the cash balance of everyone drops to zero

Fri, 03/29/2013 - 08:40 | Link to Comment farco
farco's picture

Financial slavery now shows its face in daylight.

Fri, 03/29/2013 - 08:43 | Link to Comment yrbmegr
yrbmegr's picture

They can move to Greece, where the economy is now growing!

Fri, 03/29/2013 - 08:44 | Link to Comment NoWayJose
NoWayJose's picture

But, at least the Cypriot workers who are fired will get their unemployment cheques in Euros... Or maybe they will go straight to disability cheques for their bad backs so that they bypass both unemployment and extended unemployment.

Fri, 03/29/2013 - 08:52 | Link to Comment insidious
insidious's picture

Do they (did they) have retirement type accounts in the banks in Cyprus? Were those accounts hit the same as checking and savings accounts? Here people might have CD's in their IRAs held at banks.

Fri, 03/29/2013 - 08:57 | Link to Comment Bruce Krasting
Bruce Krasting's picture

Last transaction date = March 6th.

I do feel for this company, and its workers, but why did they have so much cash in the bank? They paid no bills since 3/6??

 

A mid sized European IT firm risks its future with its nut in a Cyprus bank. Was this a huge mistake? I mean, what were the finance guys at this IT Co thinking?

 

That depositors got clipped for 80% is a huge surprise. But it was no surprise that Laikie was a disaster in the making. I don't get it. Was there a loan, secured by this deposit??? If so, where did the loan proceeds end up?

Fri, 03/29/2013 - 09:14 | Link to Comment SmallerGovNow2
SmallerGovNow2's picture

Good questions all.  But this is one account.  How many others are there with 250k in them that was operating capital?  The point being, the stupid politicians NEVER think of all the unintended consequences of their ignorant actions with a one size fits all "solution"...

Fri, 03/29/2013 - 09:39 | Link to Comment Miss Expectations
Miss Expectations's picture

At some point you'll realize that they don't care and further along on the learning curve you'll suspect that it's intentional.

Fri, 03/29/2013 - 09:41 | Link to Comment ekm
ekm's picture

Anything that looks too, too, too, too stupid, is always and anytime intentional.

Fri, 03/29/2013 - 11:49 | Link to Comment Bingfa
Bingfa's picture

The problem isn't evil bankers...It's stupid people

People have a choice, they always have a choice.

                 Avoid the game.

Fri, 03/29/2013 - 11:52 | Link to Comment ekm
ekm's picture

Not in Europe.

You don't have a choice.

Majority imposes on the minority. Europian countries are democracies, not republic.

 

USA used to be a republic where the minority woult NOT be obligated to follow the majority after the elections, hence individual rights, but unfortunately it's going Europe's way.

Fri, 03/29/2013 - 11:53 | Link to Comment Bingfa
Bingfa's picture

They don't have a choice to keep their money in a bank?

Fri, 03/29/2013 - 11:57 | Link to Comment ekm
ekm's picture

Oh, I was talking in principle.

What do you mean by "avoid the game" then?

Fri, 03/29/2013 - 12:04 | Link to Comment Bingfa
Bingfa's picture

Avoid any financial instrument period...

Any small reward is definitely not worth the risk

                      I don't worry about what Machiavellian plot they have underway

                      I don't play, so they don't win

Fri, 03/29/2013 - 09:45 | Link to Comment Bruce Krasting
Bruce Krasting's picture

We will get answers to this one day. I think a part of the big deposits was related to getting resident status. This is a back-door way to get EU status. An important thing to have for some. Cyprus "sold" resident status to individuals. The cost was a deposit in a local bank. The rules:

 

Immigration to the Republic of Cyprus

Foreigners may make an application to obtain an Immigration Permit on
the basis of one of the Categories referred to in Regulation 5 of the
Aliens and Immigration Regulations. An Immigration Permit will not be
granted to anybody unless the Immigration Control Board recommends to
the Minister of Interior that such person belongs to one of the
following Categories:

Category A: Persons who intend to work as self
employed in agriculture, cattle breeding, bird breeding or fish culture
in the Republic, provided that they have in their possession adequate
land or a permit to acquire same, they have fully and freely at their
disposal capital of approximately EUR 430,000 and such an employment
should not negatively affect the general economy of the Republic.

Category B: Persons who intend to work as self
employed in mining enterprises in the Republic, provided that they have
in their possession a relative permit, they have fully and freely at
their disposal capital of approximately EUR 350,000 and such an
employment should not negatively affect the general economy of the
Republic.

Category C: Persons who intend to work as self
employed in a trade or profession in the Republic, provided that they
have in their possession a relative permit, they have fully and freely
at their disposal capital of approximately EUR 260,000 and such an
employment should not affect negatively the general economy of the
Republic.

Fri, 03/29/2013 - 10:22 | Link to Comment disabledvet
disabledvet's picture

so the point of wiping out the depositors again was?

Fri, 03/29/2013 - 11:40 | Link to Comment Bruce Krasting
Bruce Krasting's picture

When Brussels said, "No" to anything over E10b, it meant that the shit had to flow elsewhere. So it landed on the +100k depositors. This is what happens when governments say "no" to bailouts.

A very high % of readers at ZH are "Anti Bailout". I'm one of them. But if you say "No", things like haircuts on depositors (and other forms of wealth theft) will have to happen.

 

Cyprus may be the first EU country to steal deposits, it won't be the last. I guess that is the "point" of what has happened.

Fri, 03/29/2013 - 11:54 | Link to Comment malek
malek's picture

Bruce, you are really starting to sound more and more like PK.

Half-truths such as
"But if you say "No", things like haircuts on depositors (and other forms of wealth theft) will have to happen."
which should have read
"But if you say "No", things like haircuts on depositors (and other forms of wealth theft) might have to happen after all bond and equity holders got wiped out first."

- they just help you lose the last respect of the more understanding readership here.

Fri, 03/29/2013 - 12:17 | Link to Comment mendigo
mendigo's picture

The decision to tap depositors funds seems a bit arbitrary and intended to circumvent the law - as in legal liquidation of the banks, its a preemtive selective quasiliquidation given assets which have no value.
Is there no prospect for legal action?
Does this not seem incredibly underhanded?
It would appear that the president delayed the action to buy time for those connected to escape.
Please explain: How is this different and better for Cyprus than default.

Fri, 03/29/2013 - 12:50 | Link to Comment surfer433
surfer433's picture

One word: Merkzined

 

 

 

Fri, 03/29/2013 - 12:30 | Link to Comment Bruce Krasting
Bruce Krasting's picture

You're right. Bond and equity holders have to go first into a wipeout. I should have said that.

I made a comment on another post up at ZH re the question of sub debt. I think my feelings on what should happen to this class of creditors is clear, no?

 

It had been thought that sub debt creditors were protected. There is precedent for this.

When Fannie and Freddie went toast, the common and preferred stock
collapsed, but the Sub Debt soared. All of the F/F sub debt was bought
by Treasury. They paid a premium to par.

Same thing happened to Bear Sterns - Sub Debt was money good.This is
what happened with all the Irish, Dutch and Belgium banks that have gone
turtle the last 4 years. Protecting the sub debt is part of the "plan"
for the Spanish bank bailout.

 

Early on, Sub Debt for banks was protected. The belief was that if
the sub debt was a question mark, then banks would never be able to
raise tier 1 capital again.

 

That is now 'old school' thinking. Next time around the sub debt will get splattered.

 

Better?

bk

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