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Daily Digest 3/27 - Cyprus Banks Stay Shut Until Thursday, Spain Bank Offers Grim Forecast

Wednesday, March 27, 2013, 9:55 AM

Economy

Cyprus bail-out: savers will be raided to save euro in future crises, says eurozone chief

Savings accounts in Spain, Italy and other European countries will be raided if needed to preserve Europe's single currency by propping up failing banks, a senior eurozone official has announced.

Spain's central bank offers grim economic forecast

Spain's central bank is predicting a continuing recession and mounting unemployment for the rest of 2013 as the country struggles to free itself from a broad European slowdown and repair its finances. The Bank of Spain said Tuesday it expects the country's economy to shrink 1.5 percent this year, compared with 1.4 percent in 2012, and only return to growth in late 2014.

It forecast the jobless rate will rise to 27.1 percent this year, up from 26 percent last year.

Mr Yen cautions on Japan's 'unsafe' debt trajectory

Japan's public debt has reached worrying levels and could lead to a bond buyers' strike unless the government brings the budget deficit under control, the country's top currency official has warned.

House To Propose College Tuition Increase (Florida)

During this legislative session, the House is expected to propose a six percent tuition increase for students in state universities and colleges in its budge, according The Ledger in Lakeland.

California State Treasurer emphasizes shrinking retirement savings

Two reports – by the Employee Benefit Research Institute (ERBI) and Society of Actuaries – combine to document America’s worsening retirement security problem. They show how U.S. workers are failing to save adequately for retirement

Portugal to contract 2.3% in 2013: central bank

The Portuguese economy is set to contract by 2.3 percent this year due to a sharp fall in domestic demand and disappointing export growth, the Bank of Portugal said on Tuesday.

With the new forecast, which predicts a deeper contraction than an earlier estimate of 1.9 percent, Portugal is now in line with estimations made by Lisbon's creditors, the European Union (EU) and the International Monetary Fund (IMF).

Bernanke rejects competitive devaluation worries

Moreover, he said, because the main economies are all pumping up their money supplies — effectively pushing down the value of their currencies — the net change between their currencies is not very significant.

Do the strongly stimulative economic policies of countries like the United States, Britain, Japan and elsewhere “constitute competitive devaluations?,” Bernanke asked rhetorically.

Cyprus bailout: Banks to stay shut until Thursday

Cypriot banks will remain closed until Thursday, the central bank now says, and temporary measures will be placed on transactions when they reopen despite an EU/IMF bailout deal.

Recession keeps Italy's banks at risk: IMF

It said the recession is exacerbating the rise in bad loans held by the banks and is cutting into their profitability -- leading banks to provision less. In addition, banks with large holdings in Italian government bonds remain at risk if the yield on government debt rises.

"While Italian sovereign yields have declined from their peaks, the crisis in Europe has not ended," the IMF said.

Gold & Silver

Click to read the Gold & Silver Digest: 3/26/13

Provided daily by the Peak Prosperity Gold & Silver Group

Article suggestions for the Daily Digest can be sent to [email protected]. All suggestions are filtered by the Daily Digest team and preference is given to those that are in alignment with the message of the Crash Course and the "3 Es."

12 Comments

saxplayer00o1's picture
saxplayer00o1
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saxplayer00o1's picture
saxplayer00o1
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Posts: 4066
Moody's cuts country ceilings on Cyprus

"Moody's Investors Service late Wednesday cut its assessment of the highest rating it can assign to a domestic debt issuer in Cyprus to Caa2, saying the move stems from increased risk the financially troubled country will exit as a member of the euro zone. Moody's said any rating actions taken as a result of the new country ceiling will be released during the coming week. Also, Cyprus's Caa3 government bond rating and negative outlook are unchanged as they don't lie in the scope of the announcement, it said. An exit from the euro by Cyprus "would result in large losses to investors due to the redenomination of government debt and private debt securities issued under Cypriot law," said Moody's in a statement. "It would also lead to further severe disruption to the country's banking system and additional acute dislocations in the real economy." "

Time2help's picture
Time2help
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This whole thing...

...feels like it's going to all go at once.

Time2help's picture
Time2help
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Canadian Economic Action Plan

Canadian Economic "Bail In" Plan

Can someone who speaks economics interpret pages 144-145 of this document? (note: 144-145 as labeled at the bottom of each page, not 144-145 per the PDF page count)  This reads right out of the Cyprus playbook to me...

saxplayer00o1's picture
saxplayer00o1
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Posts: 4066
China Local Government Debt to Reach 16.3 trillion Yuan in 2013

China Local Government Debt to Reach 16.3 trillion Yuan in 2013

"As China’s local governments cash in on real estate development, they’re amassing a lot of debt at the same time.

Huatai Securities, a major Chinese securities broker says local government debt could reach 16.3 trillion yuan this year.  That’s around $2.5 trillion US dollars, and almost 30% of China’s GDP."

"The threat of a banking collapse is very real concern for the world’s second largest economy. Hong Kong economist Larry Lang said earlier this month that it’s already started to happen, triggered by debt defaults from local governments."

======================================================================

Just a reminder about the Chinese real estate market:

 

===================================================================

Rumours of debt downgrade continue amid uncertainty (Italy)

Marc Faber, aka Dr. Doom, says there’s nowhere to hide from Bubblegeddon, not even gold

Detroit Emergency Manager Says He’ll Haggle With Bondholders

westcoastjan's picture
westcoastjan
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you are right to be concerned, I am too after reading this

@ Time2Help - great pick up on this. We all know that virtually no one reads these documents (I didn't!) and I truly have to wonder if the govt is counting on no one paying attention to slip this in under the radar screen.

Taken at face value, the paragraph shown below, as taken from the Canadian governments 2013 Job Action Plan states that the Canadian govt may essentially do what they just did in Cyprus.

Is anyone else seeing this as we are?!? I see no mention of protecting depositors... is the govt sneakily setting themselves/us up for a smash and grab?!? I really have to wonder seriously now. This definitely has my attention.

This is the paragraph as referenced by Time2Help that is giving me the heebie jeebies:

"The Government proposes to implement a bail-in regime for systemically important banks. This regime will be designed to ensure that,in the unlikely event that a systemically important bank depletes its capital, the bank can be recapitalized and returned to viability through the very rapid conversion of certain bank liabilities into regulatory capital. This will reduce risks for taxpayers. The Government will consult stakeholders on how to best to implement a bail-in regime in Canada. Implementation timelines will allow for a smooth transition for affected institutions, investors and other market participants."

Jan

John Lemieux's picture
John Lemieux
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Posts: 228
My Thanks As Well

Time2Help,

This concerned Canadian thanks you as well for bringing this buget issue to our attention. J.

Time2help's picture
Time2help
Status: Diamond Member (Offline)
Joined: Jun 9 2011
Posts: 2769
Preppers writ large...

I'm beginning to suspect that TPTB have been buying time to prep all along (sound familiar?) and then just ride it out, there may be no "Plan B".  My gut says this isn't going to be a slow decay where the EU goes, then Japan, then the US.  It's going to go down all at once.  The global economy is tightly interwoven and under incredible pressure.

It would explain a great many behaviors and actions.

Time2help's picture
Time2help
Status: Diamond Member (Offline)
Joined: Jun 9 2011
Posts: 2769
westcoastjan wrote: @
westcoastjan wrote:

@ Time2Help - great pick up on this. We all know that virtually no one reads these documents (I didn't!) and I truly have to wonder if the govt is counting on no one paying attention to slip this in under the radar screen.

Taken at face value, the paragraph shown below, as taken from the Canadian governments 2013 Job Action Plan states that the Canadian govt may essentially do what they just did in Cyprus.

Is anyone else seeing this as we are?!? I see no mention of protecting depositors... is the govt sneakily setting themselves/us up for a smash and grab?!? I really have to wonder seriously now. This definitely has my attention.

This is the paragraph as referenced by Time2Help that is giving me the heebie jeebies:

"The Government proposes to implement a bail-in regime for systemically important banks. This regime will be designed to ensure that,in the unlikely event that a systemically important bank depletes its capital, the bank can be recapitalized and returned to viability through the very rapid conversion of certain bank liabilities into regulatory capital. This will reduce risks for taxpayers. The Government will consult stakeholders on how to best to implement a bail-in regime in Canada. Implementation timelines will allow for a smooth transition for affected institutions, investors and other market participants."

Jan

"certain bank liabilities" = "average joe's deposits"

saxplayer00o1's picture
saxplayer00o1
Status: Diamond Member (Offline)
Joined: Jul 30 2009
Posts: 4066
Surge in Britons mulling euro transfer, says firm

"Independent financial advisory company deVere Group on Tuesday reported a “surge” in the number of British expats seeking advice about moving funds out of some of the eurozone’s most troubled economies following the Cyprus bailout deal.
According to deVere Group chief executive Nigel Green, “more and more expats in Spain, Italy, Portugal and Greece are now not unreasonably worried for their deposits in these countries.”
He added: “Over the last week, since the messy deal to bailout Cypriot banks began, our financial advisers in these areas have reported a significant surge in enquiries from expats who are looking to safeguard their funds in other jurisdictions which are perceived to be safer.
“Whether the institutions like it and accept it or not, there is a real risk of a major deposit flight from these countries as people feel their accounts could be plundered next.”"

saxplayer00o1's picture
saxplayer00o1
Status: Diamond Member (Offline)
Joined: Jul 30 2009
Posts: 4066
Ambrose Evans-Pritchard's must read on the Euro

Cyprus has finally killed myth that EMU is benign

Nervous Nelly's picture
Nervous Nelly
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Joined: Nov 23 2011
Posts: 209
Bail In Plan

I threw this at my boyfriend and this is how he interprets it but he'll pass it around.

 

 

While I'm not sure what "bail-in" really entails the whole section goes on about:
 
- more supervision of "systematically important banks" (e.g.: the big 6 or so).
 
- increased capital reserve requirements
 
- that bank assets/liabilities would be used (converted) in the case of a failure to reduce (not eliminate however) taxpayer exposure.
 
and a paragraph that is nicely written:
 
"This risk management framework will limit the unfair advantage that could 
be gained by Canada’s systemically important banks through the mistaken 
belief by investors and other market participants that these institutions
are "" too big to fail "" "
 
 
 
As to the "bail-in" I would hope that the government would transparently say "depositors" if that is what they meant by " affected 
institutions, investors and other market participants."
 
I'll pass it on to a reporter or two...
 
Sonya

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