Apr 12

- Mario Draghi Orders Cyprus To Sell Gold To Cover Bailout “Shortfall” (ZeroHedge, April 11, 2013):

Update, and sure enough:

  • PANICOS DEMETRIADES SAYS CYPRUS CENTRAL BANK INDEPENDENCE UNDER ATTACK,
  • DEMETRIADES SAYS GOVT WANTS TO SELL GOLD WITHOUT CONSULTATION.
  • CYPRUS CENTRAL BANK GOV DEMETRIADES SAYS HE AND HIS FAMILY RECEIVED DEATH THREATS

As a reminder, Panicos holds the now obsolete position of head of the Cyprus Central Bank.

* * *

As was noted two days ago (so certainly not the news catalyst for today’s gold sell off as some are trying to make it appear) as part of its bailout expansion by 35%, Cyprus announced, then refuted, then re-admitted, it would need to fund a portion of the incremental €7 billion in cash demands by selling €400 million, or nearly all 13.9 tons, of its central bank gold. Today, we learn that this demand came from none other than the head of the ECB Mario Draghi. Bloomberg reports: “European Central Bank President Mario Draghi said the profits of any gold sales by the Cypriot central bank must be used to cover losses it may sustain from emergency loans to Cypriot commercial banks.”

Of course, to make it seem that the Cyprus central bank is “independent”, the “European creditors today left a possible gold sale in the hands of the Cypriot central bank, which manages 13.9 metric tons of the metal, according to the World Gold Council.” Naturally, it would not be very politically correct to give the impression that it is none other than the collateral and asset-starved European central bank that is effectively running local monetary policy of its member states, and certainly would not make Cypriots, already devoid of their uninsured bank deposits, happy that the next demand by the ECB for the privilege of staying in the EUR is for them to hand over the only real asset their country has.

More from Bloomberg:

“The decision is going to be taken by the central bank,” Draghi said after a meeting of euro-area finance officials in Dublin. “What’s important, however, is that what is being transferred to the government budget out of the profits made out of the sales of gold should cover first and foremost any potential loss that the central bank might have from its ELA.”

Continue reading »

Tags: , , , , , , , , , , ,

Apr 12

- Carmen Reinhart: “No Doubt. Our Pensions Are Screwed.” (ZeroHedge, April 11, 2013):

“The crisis isn’t over yet,” warns Carmen Reinhart, “not in the US and not in Europe.” Known for her deep understanding that ‘it’s never different this time’, the Harvard economist drops the truth grenade a number of times in this excellent Der Spiegel interview. Sweeping away the sound and fury of a self-serving Federal Reserve or BoJ, she chides, “no central bank will admit it is keeping rates low to help governments out of their debt crises. But in fact they are bending over backwards to help governments to finance their deficits,” and guess what, “this is nothing new in history.”

After World War II, all countries that had a big debt overhang relied on financial repression to avoid an explicit default. After the war, governments imposed interest rate ceilings for government bonds; but, nowadays, she explains, “monetary policy is doing the job. And with high unemployment and low inflation that doesn’t even look suspicious. Only when inflation picks up, which is ultimately going to happen, will it become obvious that central banks have become subservient to governments.”

Nations “seldom just grow themselves out of debt,” as so many believe is possible, “you need a combination of austerity, so that you don’t add further to the pile of debt, and higher inflation, which is effectively a subtle form of taxation,” with the consequence that people are going to lose their savings. Reinhart succinctly summarizes, “no doubt, our pensions are screwed.”

This will take 3 minutes to read – read it. Understand what she is saying. Continue reading »

Tags: , , , , , , , , , , , , , , , , ,

Apr 10

- The Next Capital Control: Banning The €500 Bill (ZeroHedge, April 9, 2013)

Tags: , , , , , ,

Apr 06

- Bank Of England Admits “Stocks Don’t Reflect Economic Reality” (ZeroHedge, April 5, 2013):

The Bank of England’s Financial Policy Committee (BoEFPC) warns there is “evidence of the re-emergence of… behavior in financial markets not seen since before the financial crisis,” citing the increased issuance of synthetic products and added that banks have “little margin for error against a backdrop of low growth in the advanced economies,” despite what we are told about their ‘fortress balance sheets. Bloomberg Businessweek adds that the BoE were careful not to scare the public, they add, events currently “did not appear indicative of widespread exuberance in markets. But developments would need to be monitored closely.” This following the Fed’s warnings of ‘froth’ in the credit markets suggests central bans are considerably more concerned at blowing bubbles than they want to admit in public. ECB’s Weber recently commented that he feared, “the recent rally in financial markets could be a misleading signal,” which appears confirmed by the BoEFPC noting that equity performance since mid-2012, “in part reflected exceptionally accommodative monetary policies by many central banks… But market sentiment may be taking too rosy a view of the underlying stresses.”

Via Bloomberg BusinessWeek,

The Bank of England said rising equity markets don’t reflect the underlying economic situation and warned that investors may be underestimating risks in the financial system.

Gains by equities since mid-2012 “in part reflected exceptionally accommodative monetary policies by many central banks,” the BOE’s Financial Policy Committee said today in London in the minutes of its March 19 meeting. “It was also consistent with a perception among some contacts that the most significant downside risks had attenuated. But market sentiment may be taking too rosy a view of the underlying stresses.”

Continue reading »

Tags: , , , , , , , , ,

Apr 04

- Mario Draghi Responds To Zero Hedge: “There Is No Plan B” (ZeroHedge, April 4, 2013):

This happened earlier today, at the ECB press conference:Scott Solano, DPA: Mr Draghi, I’ve got a couple of question from the viewers at Zero Hedge, and one of them goes like this: say the situation in Greece or Spain deteriorates even further, and they want to or are forced to step out of the Eurozone, is there a plan in place so that the markets don’t basically collapse? Is there some kind of structural system, structural safety net, especially in the area of derivatives? And the second questions is: you spoke earlier about the Emergency Liquidity Assistance, and what would have happened to the ELA in Cyprus, the approximately €10 billion, if the country had decided to leave the Eurozone?

Mario Draghi, ECB: Well you really are asking questions that are so hypothetical that I don’t have an answer to them. Well, I may have a partial answer. These questions are formulated by people who vastly underestimate what the Euro means for the Europeans, for the Euro area. They vastly underestimate the amount of political capital that has been invested in the Euro. And so they keep on asking questions like: “If the Euro breaks down, and if a country leaves the Euro, it’s not like a sliding door. It’s a very important thing. It’s a project in the European Union. That’s why you have a very hard time asking people like me “what would happened if.” No Plan B.

Secondly, I think the ECB has shown its determination to fight any redenomination risk. And OMT with its precise rules and acting within its mandate, is there to this purpose. So that’s the answer to the first question.

The second question was about the ELA, but again it’s related to “if Cyprus leaves”  and again we don’t have that in mind, so…. No Plan B.

Informative. We do have three follow up questions: Continue reading »

Tags: , , , , , , , ,

Apr 03

- The Big Banks Are Recklessly Gambling With Our Money, And It Will Cause The Global Financial System To Collapse (Economic Collapse, April 2, 2013):

Have you ever wondered how the big banks make such enormous mountains of money?  Well, the truth is that much of it is made by gambling recklessly.  If they win on their bets, they become fabulously wealthy.  If they lose on their bets, they know that the government will come in and arrange for the banks to be bailed out because they are “too big to fail”.  Either they will be bailed out by the government using our tax dollars, or as we just witnessed in Cyprus, they will be allowed to “recapitalize” themselves by stealing money directly from our bank accounts.  So if they win, they win big.  If they lose, someone else will come in and clean up the mess.  This creates a tremendous incentive for the bankers to “go for it”, because there is simply not enough pain in this equation for those that are taking the risks.  If the big Wall Street banks had been allowed to collapse back in 2008, that would have caused a massive change of behavior on Wall Street.  But instead, the big banks are still recklessly gambling with our money as if the last financial crisis never even happened.  In the end, the reckless behavior of these big banks is going to cause the entire global financial system to collapse.

Have you noticed how most news reports about Cyprus don’t even get into the reasons why the big banks in Cyprus collapsed?

Well, the truth is that they collapsed because they were making incredibly reckless bets with the money that had been entrusted to them.  In a recent article, Ron Paul explained how the situation played out once the bets started to go bad… Continue reading »

Tags: , , , , , , , , , , , , , , , , , , ,

Apr 02

- The Great Cyprus Bank Robbery (Ron Paul, April 1, 2013):

The dramatic recent events in Cyprus have highlighted the fundamental weakness in the European banking system and the extreme fragility of fractional reserve banking. Cypriot banks invested heavily in Greek sovereign debt, and last summer’s Greek debt restructuring resulted in losses equivalent to more than 25 percent of Cyprus’ GDP. These banks then took their bad investments to the government, demanding a bailout from an already beleaguered Cypriot treasury. The government of Cyprus then turned to the European Union (EU) for a bailout.

Continue reading »

Tags: , , , , , , , , , , , , , , , , , ,

Mar 31

Flashback:

- How Iceland Overthrew The Banks: The Only 3 Minutes Of Any Worth From Davos (Video)

- Impossible In America: ‘Executives At Collapsed Iceland Bank Jailed For Fraud’ (Reuters)

- The Icelandic Success Story

- Iceland’s Economy Now Growing Faster Than The U.S. And EU After Arresting The Banksters

- Here Is What Happens If You Do Not Bail Out The Banksters And Avoid Getting Raped By The IMF

- Two Thirds Of Icelanders Oppose EU Membership

- A Lesson For Europe: Why Iceland Won’t Join The Euro (Video)

- Iceland Once Again Tells IMF, UK, Netherlands To ‘Go to Hell’; ‘Ice Torture’ Repayment Scheme Collapses


- Cyprus Parliament President Says “No Future” Under Troika, Calls For “Iceland” Solution (ZeroHedge, March 30, 2013):

Just last week Yiannakis Omirou, Cypriot House of Representatives President, was calling for the nation to accept it is “time for responsibility” as they progressed towards a final solution; and yet today, as Cyprus’ Famagusta reports, he believes the ‘Troika-imposed’ responsibility will, “turn Cyprus into a colony of the worst possible type.” His ‘Icelandic’ solution is to “leave the Troika and EMS behind,” to ensure “national independence, national sovereignty, moral integrity, and economic independence.” He may have a point; judging from the chart below of the Troika’s poster-child Greece, relative to Iceland, things are not going so well. As Omirou ominously concludes, “if we remain bound by the Troika and the memorandum Cyprus’ destiny is already foretold and there will be no future.”

Via Famagusta Gazette,

There is no other alternative but to free Cyprus from the bonds of the troika and the memorandum, House of Representatives President Yiannakis Omirou has said.

Continue reading »

Tags: , , , , , , , , , , , ,

Mar 30

- Betray Your Bank Before Your Bank Betrays You (Bloomberg, March 28, 2013):

What’s a Slovenian with several hundred thousand euros in the bank supposed to do? Spread it out among at least a few different banks, that’s what. Or move the money out of the country, while it’s still possible.

Imagine what must be on the minds of any savvy depositors still left at Nova Kreditna Banka Maribor d.d., now 79 percent- owned by Slovenia’s government. It was one of only four lenders in October that failed the European Banking Authority’s latest capital-adequacy test, a ritual best known for how lax its standards are. One that flunked was Bank of Cyprus Pcl, where uninsured depositors face 40 percent losses as part of the country’s bailout terms. Another was Cyprus Popular Bank Pcl, also known as Laiki Bank, where uninsured deposits will fare far worse and the bank is being shut.

Cypriot banks’ customers were complacent after uninsured deposits went unscathed in Ireland, Greece, Spain and Portugal, the first euro-area countries to seek international rescues. Slovenians won’t have that excuse should their country be next.

Continue reading »

Tags: , , , , , , , , , , , , ,

Mar 29

You can’t make this stuff up!


- ECB Backs Dijsselbloem’s Liquidation Policy “Template” (ZeroHedge, March 29, 2013):

It appears the European Central Bank is having trouble keeping its lies straight. When Jeroen Dijsselbloem (“Diesel-BOOM”, “D-Boom”, or just “Diesel”) made his now infamous “template” comment last week, reality was shattered for many trend-following, momentum-monkey, hope-and-dreamers that actual real monetary pain could exist for a bank that was entirely incompetent (and insolvent). Instantly the rest of Europe stepped up to deny-deny-deny (as did D-Boom himself) explaining this was a ‘unique’ situation with French ECB Director Benoît Coeuré explicitly stating that Cyprus is not a model for future bank rescues.

However, as Reuters reports, it appears fellow-Dutchman and ECB Governing Council member Klaas Knot said last night that there was “little wrong” with J-Boom’s comment and that “the content of his remarks comes down to an approach which has been on the table for a longer time in Europe. This approach will be part of the European liquidation policy. Further confirming D-Boom’s perspective, Knot added that, “there has to be transparency about losses in the banking sector… and banks have to wind down their loss-making operations.”

It seems that in 2012 the ECB split was between the Germans and Draghi on unlimited inflation threats; in 2013 it will be between those who want bail-ins and bail-outs.

Via Reuters,

European Central Bank Governing Council member Klaas Knot said on Friday there was “little wrong” with Eurogroup chair Jeroen Dijsselbloem’s recipe for dealing with future euro zone banking crises, a newspaper reported. Continue reading »

Tags: , , , , , , , ,

Mar 27


YouTube Added: 19.03.2013

Tags: , , , , , , , , , , , , , , , , ,

Mar 27

- This Is How A Country Ends: Not With A Bang, But A Bailout (ZeroHedge, March 26, 2013):

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.”

Continue reading »

Tags: , , , , , , ,

Mar 24

- Rampapalooza As Cyprus-Troika Reach Deal (Updates) (ZeroHedge, March 24, 2013):

UPDATE: It appears the ‘deal’ to default/restructure the banks has been designed to bypass the need for parliamentary votes, since it is theoretically not a tax.

While we have little color on what kind of carnage the President of Cyprus had to accept to his fellow countrymen, the news is that :

  • *CYPRUS, TROIKA REACH AGREEMENT IN PRINCIPLE, EU OFFICIAL SAYS
  • *DEAL MADE AT DINNER WITH DRAGHI, LAGARDE, VAN ROMPUY, BARROSO

The terms, unsurprisingly what zee Germans wanted, are:

i) Laiki to be wound down;

ii) Bank of Cyprus to survive but with deposit haircuts, and

iii) deal would see secured deposits in Laiki moved to Bank of Cyprus.

In other words, a deal far worse then the original on proposed by the Eurogroup last week – when the banks still existed. The key appears to be the ‘saving’ of the insured depositors (crucial to avoid a pan-European bank run) and the crushing of the ‘whale’ depositors.

Continue reading »

Tags: , , , , , , , , , , , , ,

Mar 24

- Cyprus Bailout Needs Rise By €2 Billion As Conditions Deteriorate Rapidly (ZeroHedge, March 24, 2013):

A week of closed banks, depositor angst, and economic malaise is creating an increasingly vicious circle for Cyprus (and implicitly the European Union). As Die Welt notes, because the economic data of the tiny ‘irrelevant’ island could be considerably worse than previously thought (or forecast by Troika) thanks to the distortions created this week by bank closings, several people around the Troika said the exact amount of the bailout remains uncertain and could amount to EUR2bn more than expected. With the Troika capping their handout at EUR10bn of the current EUR17bn needed (and the deposit levy reportedly filling EUR6bn of that EUR7bn hole), the need for a bigger bailout – which seems increasingly likely – will fall on Cyprus banks’ depositors (or taxpayers) leading to a hard-to-beat downward spiral. Simply put, the more deposits are pulled, the more deposits need to be confiscated; and with retailer stocks running low (“will last another 2-3 days”) and cash-on-delivery demanded, the real economy will “have a problem if this is not resolved by next week.”

Via The Guardian,

Retailers, facing cash-on-delivery demands from suppliers, warned stocks were running low. “At the moment, supplies will last another two or three days,” said Adamos Hadijadamou, head of Cyprus’s Association of Supermarkets. “We’ll have a problem if this is not resolved by next week.”

Via Die Welt (and Google Translate),

Cyprus needs a lot more money than expected

A few hours before the emergency meeting of the situation seems to capture from bankruptcy Cyprus to deteriorate: From Troika says that money could not exceed the estimated range.

Cyprus needs for information of the “world” more money to bail out its banks and the stabilization of its national budget. Not initially agreed 17 billion euros were enough states in the field of negotiations. The exact amount is not certain. Several people around the troika said the “world” that the increased demand would amount to around two billion euros.

Continue reading »

Tags: , , , , , , , , ,

Mar 24

- With Russia “Demanding Cyprus Out Of The Eurozone” Here Is A List Of Possible Russian Punitive Reprisals (ZeroHedge, March 24, 2013):

As has been made abundantly clear on these pages since the breakout of the latest Cyprus crisis, the Russian policy vis-a-vis its now former Mediterranean offshore deposit haven-cum-soon to be naval base, has been a simple one: let the country implode on the heels of the Eurozone’s latest humiliating policy faux pas, so that Putin can swoop in, pick up assets (including those of a gaseous nature, much to Turkey’s chagrin) for free, while being welcome like the victorious Russian red army saving Cyprus from its slavedriving European overlords (a strategy whose culmination Merkel has very generously assisted with).

Curiously there had been some confusion about Russia’s “noble” motives in Cyprus (seemingly forgetting that in Realpolitik, as in love and war, all is fair). We hope all such confusion can now be put to rest following the clarification by Jorgo Hatzimarkakis, the German Euro deputy of Greek origin, who told Skai television on Sunday morning that Russia did not want Cyprus to stay in the eurozone.

From Kathimerini:

Continue reading »

Tags: , , , , , , , , , , ,

Mar 24

- Why Cyprus 2013 is worse than the KreditAnstalt (1931) and Argentina 2001 crises (A View from the Trenches, March 24, 2013):

The Cyprus 2013, like any other event, can be thought in political and economic terms.

Political analysis: Two dimensions

Politically, I can see two dimensions. The first dimension belongs to the geopolitical history of the region, with the addition of the recently discovered natural gas reserves. The historical relevance goes as far back as 1853, the year the Crimean War began. The Crimean War took place in the adjacent Black Sea, but the political interest was the same: To avoid the expansion of Russia into the Mediterranean. The relevance of this episode was the break-up of the balance of power established after the Napoleonic Wars, with the Congress of Vienna, in 1815. From then on, a whole new series of unexpected events would lead to a weaker France, a stronger Prussia, new alliances and a final resolution sixty years later: World War I.  It is within this same framework that I see Cyprus 2013 as a very relevant political event: Should Russia eventually obtain a bailout of Cyprus (as I write, this does not seem likely) against a pledge on the natural gas reserves or a naval base, a new balance of power will have been drafted in the region, with Israel as the biggest loser.

The second political dimension refers to a point I made exactly a year ago, precisely inspired in the KreditAnstalt event of 1931. In an article titled: “On gold, stocks, financial repression and the KreditAnstalt of 1931” I wrote: Continue reading »

Tags: , , , , , , , , , , , , ,

Mar 23

- Why Cyprus Matters (And The ECB Knows It) (ZeroHedge, March 23, 2013):

WHEN THE RED QUEEN IS AFTER YOUR HEAD

When Zig turns to Zag and the Red Queen is after your head then extraordinary care is necessitated. To quote Holmes, “The game is afoot” on the Continent.

I have been asked, with some frequency, why the bondholders have not been tagged in the Cyprus fiasco. That answer is simple. Most of Cyprus’s bonds are pledged as collateral at the ECB or in the Target2 financing program. Then one may also ask why the bonds of the two large Cypriot banks are not being hit. The answer is the same; most are held as collateral at the ECB or Target2. In both cases, remember uncounted liabilities, the government of Cyprus has guaranteed the debt. Consequently if the two Cyprus banks default it is of small matter as the sovereign has guaranteed the debt. However if the country defaults and leaves the European Union then it will matter and matter significantly as the tiny country of Cyprus would wipe out the entire equity capital of the European Central Bank. While it is not a matter of public record it is estimated that Cyprus has guaranteed about $11.6 billion of collateral at the ECB.

Continue reading »

Tags: , , , , , , , , , , , ,

Mar 23

- Former Cyprus Central Bank Head And Senior Fed Economist: “The European Project Is Crashing To Earth” (ZeroHedge, March 22, 2013):

Back in August 2011, one of the most prescient European (ex) central bankers, Cyprus’ very own Athanasios Orphanides was optimistic, but with a caveat: “I am optimistic that with the right actions and effort by all we will pull through this,” Orphanides told reporters after a meeting with Finance Minister Kikis Kazamias. They were Orphanides’ first public comments since warning authorities in a July 18, 2011 letter that Cyprus ran the risk of requiring an EU bailout unless urgent action was taken to shore up its finances.”

Two years later, following endless dithering and pretense that just because the ECB has stabilized the markets, all is well, and “action was being taken” when none was (because in the New Normal the lack of market collapse is somehow supposed to represent structural changes are taking place, which never actually happen), Cyprus is beyond the bailout stage – it is now quite literally on the verge of total collapse. This is also why Orphanides, who recently (and perhaps prudently) quit as Central Banker of Cyprus following a clash with the new communist government (and was replaced by a guy named Panicos), no longer is optimistic. “The European project is crashing to earth,” Athanasios Orphanides told the Financial Times in an interview. “This is a fundamental change in the dynamics of Europe towards disintegration and I don’t see how this can be reversed.

It can’t. Which is what we have been saying all along. But it apparently takes a former Federal Reserve senior economist to say the perfectly obvious, and for reality to finally hit front and center.

More from the FT’s interview with Orphanides:

This week’s events had made “a mockery” of EU treaties, he added. “It suggests that in Europe not all people are equal under the law.”

“We have seen other eurozone countries, the Netherlands, for instance, put national interests ahead of the European interest by trying to bring down the economic model of countries such as Cyprus or Luxembourg.”

Continue reading »

Tags: , , , , , , , , , ,

Mar 23

- Cyprus Deposit Levy Vote Delayed, Will Go “Down To The Wire” As Up To 70% Deposit Tax Contemplated For Some (ZeroHedge, March 22, 2013):

While GETCO’s algos were poised to set off a buying tsunami yesterday the millisecond a flashing red headline hit Bloomberg with even the hint or suggestion that Cyprus is fixed, we said to sit back and relax because Cyprus “will get no resolution today, or tomorrow, and may at best be resolved on Sunday night following yet another coordinated global bailout, (although our money is on a last, last minute resolution some time on Monday when Cyprus is closed but the European markets are widely open).”As it turns out, we were right, following reports by major newswires that the vote on the deposit levy will only take place (if at all) on Sunday night, after the Eurozone finance ministers’ meeting on Sunday.

As it also turns out, and as noted previously, the votes taken yesterday were the easy ones – obviously Cyprus will now need capital controls in perpetuity to slow down the terminal unwind of its banking system which is now, for all intents and purposes, over and will only exist, if at all, entirely though ECB liquidity injections, but the difficult decision – to complete U-Turn on the Tuesday vote just saying no to deposit tax levy – has been delayed.

The reason for the delay? Deciding how to best bring the news to Russian, and other wealthy depositors, that not only will they not have access to their funds for a long, long time, the ultimate haircut on what they thought was safe, easily accessible cash as recently as a week ago, may be a stunning 70%!

From Xinhua:

Continue reading »

Tags: , , , , , , , , ,

Mar 23

- JPMorgan On The Inevitability Of Europe-Wide Capital Controls (ZeroHedge, March 22, 2013):

With the Cypriot government still ‘undecided’ about what to ‘take’ and the European leaders very much ‘decided’ about what to ‘give’, the fact of the matter is, as JPMorgan explains in this excellent summary of the state of affairs in Europe, that because ELA funding facility is limited by the availability of collateral (and the haircuts applied to those by the central bank), and cutting the Cypriot banking system completely from ELA access is equivalent to cutting it from the Eurosystem making an exit from the euro a matter of time. This makes it inevitable that capital controls and a capital freeze will be imposed, in their view, but it is not only bank deposits that are at risk. A broader retrenchment in funding markets is possible given the confusion and inconsistency last weekend’s decision created for investors relative to previous policy decisions. Add to this the move by Spain, which announced this week a tax or bank levy (probably 0.2%) to be imposed on bank deposits, without details on which deposits will be affected or timing, and the chance of sparking much broader deposit outflows across the union are rising quickly.

Via JPMorgan,

Capital Control Risks

What was widely viewed as an ill-conceived Cyprus deal last weekend renewed fears of a re-escalation of the euro debt crisis. The original proposal to hit insured depositors below €100k caused a bank run and set a new precedent in the course of the Euro area debt crisis, with potential negative consequences for bank deposits not only in Cyprus but also in other peripheral countries. Once again, as it happened with the Greek crisis last May, the Cyprus crisis exposes the fragmentation of the deposit guarantee schemes in the Euro area and its inconsistency with a monetary union.

Continue reading »

Tags: , , , , , , , , , , ,

Mar 23

- Troika Hikes Cyprus Bailout Demands, Says “Conditions Worsened” (ZeroHedge, March 22, 2013):

Just when you thought you knew the rules, the Troika has changed them… (via MNI)

  • TROIKA SAID CONDITIONS WORSENED, WANTS BILL TO REFLECT
  • TROIKA HIKED CYPRUS CONTRIBUTION TO E6.7 BN VS E5.8 BN:
    SOURCE
Moar Bigger Haircuts for the rich please – and following Schaeuble’s veiled threat (leave – we can handle it)…
  • *SCHAEUBLE: MARKET SEES EURO-ZONE BETTER PREPARED FOR TURBULENCE

Tags: , , , , , , , , , , , ,

Mar 22

From the article:

The WSJ reports that, “the U.S. is applying money-laundering rules to “virtual currencies,” amid growing concern that new forms of cash bought on the Internet are being used to fund illicit activities. The move means that firms that issue or exchange the increasingly popular online cash will now be regulated in a similar manner as traditional money-order providers such as Western Union Co. They would have new bookkeeping requirements and mandatory reporting for transactions of more than $10,000. Moreover, firms that receive legal tender in exchange for online currencies or anyone conducting a transaction on someone else’s behalf would be subject to new scrutiny, said proponents of Internet currencies.


- US Begins Regulating BitCoin, Will Apply “Money Laundering” Rules To Virtual Transactions (ZeroHedge, March 21, 2013):

Last November, in an act of sheer monetary desperation, the ECB issued an exhaustive, and quite ridiculous, pamphlet titled “Virtual Currency Schemes” in which it mocked and warned about the “ponziness” of such electronic currencies as BitCoin. Why a central bank would stoop so “low” to even acknowledge what no “self-respecting” (sic) PhD-clad economist would even discuss, drunk and slurring, at cocktail parties, remains a mystery to this day. However, that it did so over fears the official artificial currency of the insolvent continent, the EUR, may be becoming even more “ponzi” than the BitCoins the ECB was warning about, was clear to everyone involved who saw right through the cheap propaganda attempt. Feel free to ask any Cypriot if they would now rather have their money in locked up Euros, or in “ponzi” yet freely transferable, unregulated BitCoins.For the answer, we present the chart showing the price of BitCoin in EUR terms since the issuance of the ECB’s paper: Continue reading »

Tags: , , , , , , , , , , , , , , , , ,

Mar 22

Related info:

- ECB Issues Ultimatum To Cyprus: Come Up With €5.8 Billion By Monday Or Face Collapse Of Banking System And Get Kicked Out Of The Eurozone


- Europe, Russia Reject Latest Cyprus Bailout Plan Before It Is Even Voted By Parliament (ZeroHedge, March 22, 2013):

Yesterday, when we described the latest Cyprus bailout proposal being (belatedly) debated by the Cyprus parliament and soon to be voted, we wondered how long before the Troika rejects it outright.  After all the “Solidarity Bailout” Plan C (or whatever it is) did not do what Germany more than anything wanted to accomplish – punish Russian depositors as this entire farce has been nothing but a political gambit dictated by Germany from the onset. And so while GETCO’s entire army of algos awaits the flashing red headline with a touch of optimism to unleash robotic buying of ES and EURUSD, we fast forward to the inevitable denouement, which is, not surprisingly, bad news for Cyprus, because as the FT reports, confirming our initial skepticism, “European officials rejected Cyprus’ plans for an alternative package to save its banking sector and remain in the euro, starting a fresh round of talks with the island nation’s government on Friday.”

Full details:

The latest plan involved winding up Laiki, the island’s second-largest lender, and split it into a “good” and “bad” bank, with larger deposits over €100,000 folded into the latter. Deposits up to €100,000 would be guaranteed and bank jobs were to be safeguarded.

But several of its elements – such as raising €2bn by nationalising the state pension fund and issuing bonds based on future revenues from offshore gas deposits – continued to be seen as non-starters by Brussels and Berlin.

Continue reading »

Tags: , , , , , , , , ,

Mar 22

- Cyprus Shifts To Plan ‘DD’ (Douple-Dip The Large Depositors) (ZeroHedge, March 22, 2013):

It seems that the Cypriot government is going full circle on its plans to save its nation and its people. As UK Think Tank Open Europe notes, “it now seems we have come all the way back round to the deposit levy as a solution in Cyprus. Overnight, the EU/IMF/ECB Troika rejected the plans for a Cypriot solidarity fund, particularly one based on pension assets and gas reserve revenues (which German Chancellor Angela Merkel specifically spoke out against).” The new – Plan ‘D’ – (Plan A – Haircuts; Plan B – Beg Russia for Bailout; Plan C – Solidarity Fund) appears to be moar haircuts and double-dip on the large depositors (seemingly what Brussels wants anyway). Plan ‘D’ – a restructuring and bigger deposit levy(a 12.2% tax on deposits above €500,000 or a 9.46% deposit on deposits above €100,000 would yield the necessary €3.5bn)“may amount to trying to burn the larger depositors twice,” as the plan to shift bad assets to a bad bank (along with the large uninsured depositors) and wound down (meaning 20-40% losses) and still face the initial large-deposit-tax - leaving the Russians large depositors with 50%-plus losses.

Via Open Europe,

Full circle in Cyprus

Thinking about the plan in more detail, it occurred to us that this may amount to trying to burn the larger depositors twice. As we noted in today’s press summary, the plan essentially is to move all the bad assets to a bad bank, along with the large uninsured depositors (€100,000+). These assets would then be wound down or sold off at a large discount with the depositors footing the bill (and taking losses of 20% – 40%). This, along with the merging of Bank of Cyprus and the good bank, is how the recapitalisation costs will be reduced by €2.3bn. Continue reading »

Tags: , , , , , , , , , , ,

Mar 22

- The Joke’s On Cyprus After All (ZeroHedge, March 21, 2013):

Oh the irony:

18/01/2008, Trichet: “For a small, open economy like Cyprus, Euro adoption provides protection from international financial turmoil.”

Tags: , , , , , , , , , ,

Mar 22

Update:

- Troika Hikes Cyprus Bailout Demands From €5.8 Billion To €6.7 Billion, Says ‘Conditions Worsened’

Related info:

- Former Cyprus Central Bank Head Anthanasios Orphanides: ‘EU Is Blackmailing Cyprus Government’ (Bloomberg Video)

- Daniel Hannan Urges Cyprus To ‘Default, Devalue, And Decouple’ Itself Back To Growth

- Nigel Farage: EU Wants To Steal Money From Cypriots Bank Accounts – Don’t Invest In The Eurozone! (Video)


- European Central Bank issues ultimatum to Cyprus (France 24, March 21, 2013):

The European Central Bank warned Cyprus Thursday that it has four days to raise €5.6 billion to avoid bankruptcy – or risk losing bailout funds. The government ruled out the unpopular levy on bank funds during Thursday’s Plan B talks.

Cyprus has four days to agree on a new plan to raise funds to avoid bankruptcy, with the European Central Bank warning Thursday it will pull the plug on the country’s banks at the start of next week if no solution is found.

Facing the ultimatum, the Cypriot government was racing to cement a new package that will please both Parliament and the country’s potential international creditors.

Party leaders met with the president to consider a range of measures that could raise the 5.8 billion euros ($7.5 billion) needed to qualify for 10 billion euros ($12.9 billion) in rescue loans from the eurozone partners and the International Monetary Fund.

- Cyprus risks euro exit after EU bailout ultimatum (Reuters, March 21, 2013):

The European Union gave Cyprus till Monday to raise the billions of euros it needs to secure an international bailout or face a collapse of its financial system that could push it out of the euro currency zone.

In a sign it was at least preparing for the worst, the Cypriot government sought powers on Thursday to impose capital controls to stem a flood of funds leaving the island if there is no deal before banks reopen following this week’s shutdown.

Parliament will reconvene later on Friday to debate a raft of government crisis measures after lawmakers adjourned a late-Thursday sitting saying they needed more time for consultation.

Even those measures looked likely to fall short of a promised “Plan B” to raise the 5.8 billion euros demanded by the EU in return for a 10 billion euro lifeline from the EU and IMF.

The European Central Bank said it would cut off liquidity to Cypriot banks without a deal, and a senior EU official told Reuters the bloc was ready to see the island banished from the euro to contain damage to the wider European economy.

Angry Cypriot lawmakers on Tuesday threw out a tax on deposits, calling the EU-backed proposal “bank robbery”.

After more talks on Thursday, the currency union’s finance ministers urged Cyprus to table a new proposal.

Trying to placate its lenders, the government proposed to parliament a “solidarity fund” that would bundle state assets, including future gas revenues, as the basis for an emergency bond issue, likened by JP Morgan to “a national fire sale”.

It also sought the power to impose capital controls on banks, a type of measure unseen since before the country joined the single currency bloc five years ago.

ECB PATIENCE FLAGS

The European Central Bank, which has kept Cyprus’s banks operating with a liquidity lifeline, said the government had until Monday to get a deal in place, or funds would be cut off.

Continue reading »

Tags: , , , , , , , , , , , , ,

Mar 21


YouTube Added: 21.03.2013

Tags: , , , , , , , , , , , , , , , , , , , , , , , , , , ,

Mar 21

- Its Time to Collapse the System (Gordon Gekko’s Blog, March 20, 2013)

Tags: , , , , , , , , , , , , , , , ,

Mar 20

- Euro: Currency Or Prison? (ZeroHedge, March 20, 2013):

The following Wall Street Journal article deserves to be read in its entirety…

Authored by Vincent Cignarella, originally posted at WSJ Market Beat,

Is The Euro a Currency or a Prison?

Wearing the disguise of austerity, the euro has emerged as the gatekeeper of what is fast becoming a debtors’ prison.

The Troika of the ECB, IMF and European Commission acting in concert have become more like another Troika–of judge, jury and executioner–for any nation within the euro zone that dares not follow the letter of budgetary imposition.

The latest country bound by these handcuffs: Cyprus.

Continue reading »

Tags: , , , , , , , , , , ,

Mar 17


YouTube Added: 17.03.2013

Description:

The artist taxi driver

Tags: , , , , , , , , , , , ,