Tracking the Impact of Cyprus' Wealth Confiscation

Adam Taggart
By Adam Taggart on Mon, Mar 18, 2013 - 12:42am

By now, most are aware of the announcement by Cyprus and the IMF that savers with deposits in Cypriot banks will see up to 9.9% of their savings disappear in the morning as part of a bailout agreement for Cyprus' banking system.

Chris has issued an important Insider report predicting this could very well lead to bank runs (not only in Cyprus but also in the weaker EU countries) and capital controls. This has the potential to be a game-changer to disrupt the relative stability Europe has been able to maintain recently and deserves close watching.

This thread is being opened to keep track of breaking news and observations of the situation in Cyprus and its impacts. Please post any relevant articles in the Comments below.

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45 Comments

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Was this Intentional?

How could managers be so stupid.  5% subprime sunk those leveraged housing CDOs.  This has to be intentional to give Cyprus to Turkey?

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Cyprus Delays Vote on Bailout Plan

From the NYTimes:

NICOSIA, Cyprus — Leaders in Cyprus and Brussels scrambled Monday to contain the fallout from an unprecedented effort to force ordinary bank depositors in this crisis-hit nation to pay for part of an international bailout, as stock markets faltered on concerns about the wider implications for Europe’s long-running debt crisis.

President Nicos Anastasiades was trying to compel policy makers in Brussels to soften demands for a tax to be assessed on Cypriot bank deposits, saying European Union leaders used “blackmail” to get him to agree to those conditions early Saturday in order to receive a bailout package worth 10 billion euros, or $13 billion.
As anger in this country swelled against the measure, Mr. Anastasiades delayed an emergency vote parliamentary vote on the bailout plan until Tuesday, the second step in as many days. Faced with a lack of support from lawmakers, the vote could be delayed until as late as Friday.
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Cyprus

Actually, it gives Cyprus to the Russians, not the Turks.  Russia has maybe 60B invested in companies there, most of whom will be affected by the levy; it has made a direct 2.5B loan to the gov; and it's interested in the natural gas discoveries in C.  If I were Russia, there would be a deal on the table: bank bailouts in return for (1) bank shares, no depositor haircuts; (2) naval facilities for my newly announced permanent fleet presence in the Med; (3) access to the oil fields; and (4) government guarantees on Russia loan priorities, investments, and banking treatment.  So whether you believe that the EU didn't anticipate the depositor contagion problem, or did anticipate these and deliberately pushed ahead to force C out of the EU, it was a monumental blunder in either case...

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Good information here.

http://hat4uk.wordpress.com/

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Nothing to see here... Move along

Confidence or arrogance? You decide...

 

 

Some investors think the Cyprus plan could prompt depositors elsewhere, particularly in Greece, Portugal, Ireland, Italy, Greece and Spain, to withdraw their funds.
 
"The unprecedented move is an extreme measure and in our view, it will spread some panic... we cannot rule out some capital outflows," said Annalisa Piazza of Newedge Strategy.
 
But most investors thought the falls would not last long.
 
Kevin Lilley, European equities fund manager at Old Mutual Asset Management, said he was sitting tight: "I am not doing anything about it. My initial thoughts are that this is a circumstance that is peculiar to Cyprus."
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Wall Street ends lower on angst about Cyprus bailout plan

Really?

62 point fall out of an index at almost 14500? Less than 1/2 of one percent is seen as angst?

that's all the angst the street can muster after the banksters raid depositors accounts?

 

U.S. stocks fell on Monday after a plan to tax bank accounts in Cyprus to help pay for the country's bailout stoked worries that it could threaten the stability of financial institutions in the euro zone

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more developments

The bank holiday in Cyprus is now extended until Thursday. (Gee, I hope Cypriot citizens are prepped: with full petrol tanks, a nice pantry and a few euros to spend since their ATMs are not disgorging any cash.) Angela Merkel made a speech that essentially said to Cyprus, Europe, and the world regarding the theft of deposits as a tax;  she basically said "It’s right that we went down that road." Um, Angela?  I see that the German flag was torn from their Cypriot embassy today. Oh, wait. Furious backpedaling. "This was not our idea."

Now that the financialization scheme of the euro has run its course, the European periphery's neocolonial standing is starkly revealed. Also, we can call it neofuedal.

But! It seems the major parties in Cyrus all agree that they will not let their depositors suffer loss . Bear in mind that the folks with under with 100K euro deposits are almost all Cyprus natives, and those with over 100K euro depostis are mostly Russian. You might also want to read: The Worst Case For Big Depositors In Cyprus: 15.26% Haircut. It appears that the worst case for Russians will be 15.26% - this is how much of all Cypriot deposits €100K and higher would be taxed by if there is 0% tax on the small deposits.

I also understand tthat here are some Russian warships on the way to Cyprus, and who knows, maybe a new naval base for them on CYprus is in the works. I'd sure rather not be a European next winter when Russia has the potential to mess with their natural gas heat.

 

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Speculative stuff

Take this with a pinch of salt, 

http://english.ruvr.ru/2013_03_12/Russian-Afghan-drug-police-seize-20-to...

CIA operation foiled by the Russians ? Cyprus tax a smack on the hand for the Russains as a warning ?

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

http://www.fastcompany.com/1713023/leviathan-gas-field-could-bring-catas...

There was talk about selling off future profits from this field as a bail out. However Who actually owns the gas, Israel, Cyprus, Palestine ?

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

http://www.guardian.co.uk/world/video/2013/mar/18/demonstrators-eurozone...

With a population of 1.1 million people, all the protest I saw had an extremly low turnout. This is sending the message to the decision makers, that the trouble makers if the levy goes through will be few in number. Most of the population has been domesticated

 

 

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Bitter Humour

I picked this up over at Zero Hedge.

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Agree

I agree - extremely low turnout. Something isn't quite right - the photos of the "protesters" show 20 or so relatively well-dressed people with well organized signage.

Is this whole story more propaganda than fact? Who would it be serving?

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Question

I'm curious if people think this move could be a tactic used within the US, once the government and/or the banks get desparate enough? Thoughts?

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Bitter Humour

Now that's a laugh you can take to the bank!   I think my tears were of laughter.

Thanks, Arthur.

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Why wouldn't "they"?
Sirocco wrote:

I'm curious if people think this move could be a tactic used within the US, once the government and/or the banks get desparate enough? Thoughts?

Sirocco,

Here is a quote from the article that Westcoastjan posted. (In my opinion, the most prescient paragraph.)

http://opinion.financialpost.com/2013/03/18/terence-corcoran-we-are-all-cypriot-savers/

And why should they? They tax for a living, and when their fiscal backs are against the wall they tax some more. Income is taxed, real estate holdings are taxed, consumption spending is taxed, transportation is taxed. They’d tax carbon if they could. And if they can tax the interest earned on bank deposits, what’s to stop them from taxing deposits themselves? Nothing if they can get away with it.

"They" are used to living large on the backs of those who support them. "They" will maintain this relationship as long as possible, because without it, "they" would be just like the little people. "They" will use whatever tools are available - when "they" get desperate enough.

In fact, it has already happened. Inflation is a monetary phenomenon. The monetary system is controlled by the banksters and the government. The government uses all manner of adjustments to hide the actual inflation rate. The money you have in the bank isn't earning anything close to the inflation rate. The money you extract still has the same nominal value, but some of the purchasing power has been stolen by "them." To add a bit of salt to your gaping wound, they then tax you on the interest you "earned."

Grover

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One grim opinion

http://www.zerohedge.com/contributed/2013-03-19/impact-imminent

Quote:

The "Other" scenario for Cyprus is a shell shocker. Forget the shareholders or the senior bond guys - they will end up with Dick's hat band. Those Russians who were at risk of losing as much as 15% of their deposits - They get zip too. At best, they are getting an IOU. That IOU will have a value of 10 cents on the dollar.

Those small depositors that were going to get hit for an unfair loss of 6% now face a vacuum. Their bank statements may not reflect a loss of principal, but they won't be able to withdraw a dime from those accounts. The local banks will remain closed, when they do reopen those deposits will be converted to some new currency. It's possible that the new currency will be the Turkish Lira. You thought the poor folks in Cyprus were getting a bad deal on Monday? Wait till Friday before you pass judgement.

What happens if Cyprus does a "drop out" of the EU? That result immediately makes a lie of Mario Draghi's words that the Euro was Uber-Ales. This is precisely what Super Mario said "would never happen".

If Cyprus goes turtle and leaves the Euro, the credit spreads on peripherals will widen. This sets up a market "call" on the ECB. But remember, for Mario Draghi to give the market the "put" that it will demand, the government's of Spain and Italy will be forced to get down on their knees and beg the gods in Brussels and Berlin for a helping hand. To do that means that they would have to have very harsh terms imposed on them. An IMF team would run the finances of the countries involved.

Given that there is zero chance that Italy and Spain will do the necessary begging, the value of the promised Draghi "put" is now zero.

There is a chance that something can be done to stop what looks like a slide into an abyss. Those chance are now well below 50-50. The markets/seers are calling for a soft landing, while at the same time that outcome is looking less and less likely. The markets seem poorly positioned for what could result in a crisis. And this story is running at hyper speed. That' a very bad combo of events. Seat belts on - Impact Imminent!

In light of Chris's latest on the other Cyprus thread, the less than 50-50 odds of a soft landing become even less.  But hardly a mention on the msm.

Doug

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Live In Portugal, Italy, Greece, or Spain? Visit Your Bank Now!

Just a reminder about Fractional Reserve Banking. When someone deposits $100, the bank can lend out more - for example, $900. It only has to keep a fraction of the loaned amount on hand as a reserve in case of losses. But when depositors start a run on the bank, the bank's loan to asset ratio drops into dangerous territory. The bank may not survive.

This is what we may see in Cyprus come Thursday even with the "hair cut" because depositors will no longer trust the banks and they'll want their money OUT. We may see a major banking system collapse in Cyprus anyway. And, this could lead to some panic or stress in Portugal, Italy, Greece, and Spain as depositors realize that the same problem could occur with their bank accounts!

If I were living in Portugal, Italy, Greece, or Spain, I would be at the bank and withdrawing money.

It's up to you how much you want to withdraw - only you know how safe you really are and how much you can risk leaving in a bank or hiding it in a lockbox or safe.

However, all of the following strategies are now worth considering:

1. If you have only one bank account, open a couple more. A few alternative plans being floated about for Cyprus involve zero confiscations for those "poor" people who have only small amounts on deposit.

2. If you can open an account in another non-euro country that is safer (like Switzerland) that may be helpful. If you can truly trust a relative in another non-euro country to hold money for you, that's another thought, too.

3. Keep some money (amount up to you) at home and on hand. In Cyprus, their bank holiday has been extended until Thursday. There is no money in the ATMs, there are no banking transactions that can be done. A lot of people have already run out of cash.

4. Buy some silver coins. I'd say a few hundred to a thousand euros worth (depending on your financial situation). Sure, the value could go down. But these are precious metals and may be helpful in a barter situation.

5. You do already have equipment, food, and other things that will last you at least a week or two in case of an emergency, right? If not, now is a good time to get your money's worth.

6. If you are contemplating some essential barter items that keep for a long, long time, get a few things.

Poet

 

 

 

 

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The next play to watch is...

... when the Cyprus banks open again. IMHO. When will this be, however? The longer it drags on the more worried, ANGRY, frantic and desperate people will become. Living in limbo isn't fun. Asking yourself 'have I lost ALL my savings?' Not being able to sleep well. Life on hold. Realising for the first time that perhaps banks can be open one days, and the next all your life savings are...well...gone.

So what would you do when the banks opened again?

Then you see the lines of desperate, angry, people in lines outside the banks. People just like you. Who had promises of a 'guarantee', just like yours, that their savings would be safe.

Here in the UK, I know our banks would go down were things to go belly up in Europe. We are too tied in, and insolvent. No more taxpayer bale outs left...just depositor theft - opps sorry, 'tax'.

When I see the bank runs starting in Southern Europe, I'll act. It will be a slow trickle at first. Like the leak from a small hole in a dyke designed to keep the floods back. But it will widen soon enough until no one can stop it. Do you remember watching those horrifying pictures from the helicopters as people ran from the Tsunami wave in Japan? Watching people going about their shopping or daily routine but suddenly meet a 30 foot wave, and are swallowed by it? So many are like that now I feel. However, a little knowledge and forewarning can save many lives. Have you heard of 10 year old Tilly Smith from the UK? She recognised the warning signs [of the 2004 Tsunami] and saved hundreds of people from death. On her beach there were NO casualties. [You can read her story here http://en.wikipedia.org/wiki/Tilly_Smith]

The next week will either see this being the first domino that sets the Tsunami of bank runs rolling. OR, TPTB manage once again to contain things. For now.

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A warning for Cyprus from German minster

An excerpt

"Late on Tuesday, Mr Schauble said that he "regretted" the vote.

"The ECB (European Central Bank) has made it clear that without a reform programme for Cyprus the aid can't continue. Someone has to explain this to the Cypriots and I think there's a danger that they won't be able to open the banks again at all," he said."

*bold my emphasis

http://www.bbc.co.uk/news/world-europe-21854353

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five or six days into this

It's Wednesday. The actions in Cyprus happened Friday. BBC News is all over this. Do you know what the major American news media are reporting about the story this morning? Let's start with the traditional "big three" TV news netowrks.

  • ABC News: Top 3 stories: "Arias 'Killing' Ex-Boyfriend Again With Lies: Friend," and "Have the Clinton's and Gay Activists Made Up?," and "Major Computer Crash in SKorea; Hackers Suspected." Near the bottom of the page there is a brief mention of "Cyprus Crisis Pulls Down US Stocks" in the Money section. Below a story that tells us "Twinkies Could be Back by Summer."
  • CBS News: Top 3 Stories: "Obama's Mideast trip: What to expect," and "With assault weapons ban push dropped, gun control backers move on," and "1-in-50 U.S. school kids has autism: Gov't survey." The one mention of Cyprus is interesting - "Cyprus church offers to help bail out government" Basically, the Cyrpus orthodox church is offering to mortgage assets to help secure international bailout amid the debt crisis.
  • NBC News: Top 3 Stories: "Iran's nuclear program, Syria to dominate
    Obama's high-stakes trip to Israel," and "Neither Israelis nor Palestinians optimistic
    about visit," and "South Korea on alert after hackers strike banks, broadcasters." There is one mention of Cyprus. Halfway down the page, in the US & World section, there is "Cyprus lawmakers reject proposed bank tax."

Moving on to the major US newspapers...

Some less tradtional sources:

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Wendy, I live on the

Wendy,

I live on the periphery of Europe. I was stunned by the news out of Cyprus this past weekend, and immediately told my wife. She was floored, and started helping make arrangements to transfer our money out of the country.

We turned on the TV for local news, looking for a local perspective, or comments from politicians. Here were the top three stories:

1 - Death of a local celebrity

2 - European prostitution ring busted

3 - Cutesy story about a local news anchor in the US whose boyfriend proposed to her live on-air.

I am a journalist and I know it's not a conspiracy theory (I contributed to an earlier thread on the subject that I can't find again for the life of me). But it does reflect the incredible dumbing down and blinkering of western society.

In the last few days, I have spoken to friends and distant relatives about the Cypriot situation and the possible implications in this, very similar, country. I received not a minimum of interest, except for one woman who got nervous and told me not to tell her that kind of stuff anymore.

 

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threat to solidarity?

"One reason why the Cypriot bailout debacle matters - perhaps the main reason - is that it shows how far the eurozone is from the kind of solidarity which many believe essential to the currency union's long-term survival."

http://www.bbc.co.uk/news/business-21856016

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NZ taking a page from Cypress

http://www.scoop.co.nz/stories/PA1303/S00306/national-planning-cyprus-st...

I saw something about this earlier today and was able to find the article.  Looks like TPTB are trying to make this look like its a normal thing to do.  Cypress spreading...

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Cyprus banks to remain closed through end of week

Maybe to next Tuesday.  Hard to stay focused with all that's going on.

http://www.zerohedge.com/news/2013-03-20/cyprus-banks-reopen-next-tuesda...

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Found it MacKay
Mackay wrote:

I am a journalist and I know it's not a conspiracy theory (I contributed to an earlier thread on the subject that I can't find again for the life of me). But it does reflect the incredible dumbing down and blinkering of western society.

MacKay

Post 15 was your first in a series in this thread.  I highly recommened that everyone read them.

Travlin

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WSJ on Cyprus

Is The Euro a Currency or a Prison?

As in a debtor's prison.

 

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ECB Re-Bluffs To Cyprus Bluff, Is "Prepared To Let Cyprus Go"

ECB Re-Bluffs To Cyprus Bluff, Is "Prepared To Let Cyprus Go"

What a mess!

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a profile of Cyprus for those who don't know much about it

http://www.bbc.co.uk/news/world-europe-17217956

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news flash re Bitcoin

Zowee!!!

Check out zerohedge: article says US to start regulating Bitcoin

http://www.zerohedge.com/news/2013-03-21/us-begins-regulating-bitcoin-wi...

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The ZH article on Bitcoin regulation is somewhat hysterical

The major boon from the document for Bitcoin is this: users get off lightly. In fact, FINCEN does not intend to touch mere users of virtual currency at all; the document states, “a user who obtains convertible virtual currency and uses it to purchase real or virtual goods or services is not an MSB under FinCEN’s regulations. Such activity, in and of itself, does not fit within the definition of “money transmission services” and therefore is not subject to FinCEN’s registration, reporting, and recordkeeping regulations for MSBs.” The document also offers protection from “prepaid access” laws that regulate gift cards and the like, saying that “a person’s acceptance and/or transmission of convertible virtual currency cannot be characterized as providing or selling prepaid access because prepaid access is limited to real currencies.” Finally, even exchanges are safe from “foreign exchange” regulation, the set of rules governing businesses that offer exchange between two or more national currencies.

http://bitcoinmagazine.com/fincen-bitcoin-users-not-regulated-exchanges-...

More analysis here;

http://www.freebanking.org/2013/03/19/us-treasury-updates-bitcoin-regula...

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Thanks Travlin, Now I can go

Thanks Travlin,

Now I can go back and finish posting.

Cheers,

 

Travlin wrote:
Mackay wrote:

I am a journalist and I know it's not a conspiracy theory (I contributed to an earlier thread on the subject that I can't find again for the life of me). But it does reflect the incredible dumbing down and blinkering of western society.

MacKay

Post 15 was your first in a series in this thread.  I highly recommened that everyone read them.

Travlin

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Cyprus crisis: @ ten days - media reactions

It's Sunday. The banking crisis in Cyprus started a week ago, Friday. Again, BBC News is all over this. (I'd especially suggest you read their "Cyprus bank crisis: defiance and fear in Nicosia" for BBC's Sheeple-eye view.) But have you been following what the major American news media are reporting about the story today? Again, let's start with the traditional "big three" American TV news netowrks, and pay attention to the folks at NBC news - they have an actual reporter who gets it and brought what we are concerend about into the mainstream.

  • ABC News: Top 3 stories: "Winning $338M Powerball Ticket Sold in NJ," and "New Pope Opens Holy Week at Vatican on Palm Sunday," and "Why is Your Dog Laughing?" Two articles near the bottom of the page, in their "Money" section: Crisis in Cyprus: From the Banks to the Barricades and Cyprus Crisis Boosts Bitcoins. At leat this time Cyprus is the lead "Money" section story.
  • CBS News: Top 3 Stories: "Pope Francis opens Catholics' Holy Week," and "John Kerry warns Iraq over Iran-Syria flights," and "Musharraf attempting a dangerous political comeback." The one mention of Cyprus is at the top of their "Moneywatch" section:  "Cyprus talks to continue; no deal yet" It's an AP story, with links to two other, related AP stories.
  • NBC News: Top 3 Stories: "Bloomberg, NRA steel for springtime battle over gun control," and "The drones are coming, but our laws aren't ready," and "Winning ticket for $338M Powerball prize sold in NJ." This time, in the Business section, the lead story is, "Sprawling and struggling: Poverty hits the suburbs." Also in the Business section, there are four articles about Cyprus:  "Europe, Cyprus locked in multi-billion-dollar game of chicken (RECOMMENDED)," a copy-and-paste Reuters story "Cyprus deal could spur stocks to new high," and Cyprus now looks to take 25 percent from bank accounts of wealthy" by two Reuters reporters, and--leftover from Saturday-- CNBC's  "Stocks end higher amid Cyprus deal."

Moving on to the major US newspapers' coverage of the crisis, the NY Times wins today with four articles.

Some less traditional sources: Fox News has a great article and Huffington Post a phenomenal blog post by Mohamed A. El-Erian.

  • Fox News: Top 3 stories: "NRA: Bloomberg 'Can't Buy America'," and "RAND GOP'S MAN? Kentucky Senator Hints at 2016 White House Run," and "MIDEAST VIOLENCE: Israel Responds to Gunfire, Launches Missile Into Syria." But there's some real reporting in their "Fox Business" section, "Big Russian money out of Cyprus; crisis endangers flows." 
  • Huffington Post:Top 3 stories: "DECADE OF LOVE: How Millions Of Americans Flipped Positions On Gay Rights" (all-caps portion in a HUGE, pink font), and "MOURNING IN AMERICA: Thousands Killed Since Newtown," and--after a featured blog post and "most popular" a third group headline: "NRA Chief: Bloomberg 'Insane'." But there's much more on Cyprus than last time, including a fantastic blog post by Mohamed A. El-Erian, CEO and co-CIO, PIMCO--"Don't Forget the Geopolitics of Cyprus" (RECOMMENDED) and a news story, "Officials: Cyprus In Danger Of Default" (different title after the jump)
  • RT News: Top 3 stories: "Russia's self-exiled tycoon Boris Berezovsky dies at 67," and "Israel to 'immediately' respond to all Syrian cross-border shooting," and "Saudi Arabia ‘threatens to ban’ Skype, WhatsApp, other instant messaging apps." They have one Cypus story, "Cyprus, Troika agree to 20% tax on deposits over 100,000 euros at Bank of Cyprus."

 

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Cypriot pres warned friends to move money out

Cypriot president 'warned his friends  to move money abroad' before financial crisis hit: Leader under fire as he faces just FOUR DAYS to save country from collapse

http://www.dailymail.co.uk/news/article-2297383/Cyprus-bailout-President...

So this throws yet another big wrench in the works... I'm curious if this will force the president and the parliament (many who are probably guilty of the same) to some extreme of action.  Either pull a quick 180 and demand a lot more from the EU in a desperate bid to save themselves politically, or go full speed ahead and sell their country out completely for some last minute lining of the pockets (knowing they're finished politically anyhow).  Given it's a smaller country where politicians don't have as much 'distance from the public' as the US and other large countries, I'm leaning towards the first.  But I guess we'll find out...

- Nick

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Cyprus report
Like I implied when I first posted "Cyprus - A Test Run" on 3/16/13.about this situation, the contagion will spread.  I spent what little free time I have during the day today arranging to close various retirement accounts.
 
I just finished speaking to my daughter in France.  She confirmed the accuracy of everything I've been telling her about France heading downhill in 2013.  It is happening and people are beginning to become more aware, whereas last spring when we were there, they were largely oblivious.  Also, she spoke to a Cypriot friend today.  It is bad there.  Her parents are both teachers.  They have been hit with a 20% pay cut but they are the lucky ones.  They still have jobs.  They have lost their retirements though ... gone ... completely.  They are afraid of the potential of a war breaking out what with the financial turmoil, the gas fields, the pissed off Russians, the past history of conflict there, the geopolitical significance of being an area where 3 continents meet, etc.
 
Knowing how KGB, GRU, and  and Spetsnaz work, I would expect the Cypriot officials behind this move to have their testicles physically (but not surgically) removed in the not too distant future.  They are playing with dynamite. 
pinecarr's picture
pinecarr
Status: Diamond Member (Offline)
Joined: Apr 13 2008
Posts: 2237
Russian money already out of Cyprus?

ZH has an update on the Cyprus situation that, if true, could rattle things still further: 

http://www.zerohedge.com/news/2013-03-25/have-russians-already-quietly-w...

Quote:

As it turns out, these same oligrachs may have used the one week hiatus period of total chaos in the banking system to transfer the bulk of the cash they had deposited with one of the two main Cypriot banks, in the process making the whole punitive point of collapsing the Cyprus financial system entirely moot.

From Reuters:

 
 

While ordinary Cypriots queued at ATM machines to withdraw a few hundred euros as credit card transactions stopped, other depositors used an array of techniques to access their money.

 

No one knows exactly how much money has left Cyprus' banks, or where it has gone. The two banks at the centre of the crisis - Cyprus Popular Bank, also known as Laiki, and Bank of Cyprus - have units in London which remained open throughout the week and placed no limits on withdrawalsBank of Cyprus also owns 80 percent of Russia's Uniastrum Bank, which put no restrictions on withdrawals in Russia. Russians were among Cypriot banks' largest depositors.

So while one could not withdraw from Bank of Cyprus or Laiki, one could withdraw without limitations from subsidiary and OpCo banks, and other affiliates?

Just brilliant.

The potential consequence, if true?

Quote:

The stealth withdrawals by Russians of course means that the two megabanks are now utterly drained of capital, and that the haircuts on those who still have unsecured deposits with the two banks will be so big it will likely mean a complete wipeout of all deposits. As in 0% recovery on your deposits!

...

If we were Cypriots at this point we would be angry. Very, very angry.

If there's any substance to this, this should notch things up...

 

Adam Taggart's picture
Adam Taggart
Status: Peak Prosperity Co-founder (Offline)
Joined: May 26 2009
Posts: 2934
EU bumbling = count on more

The scramble to address and then communicate a Cyprus "solution" has resulted in a snarled, confusing, ineffective mess.

First, the markets were shocked by the initial announcements that insured depositors would be punished with a haircut on their savings:

Then the date by which a resolution would be in place kept getting pushed back

Same for the date by which the banks will re-open

Finally, this weekend an announcement was made that largely puts the losses on the large Russian depositors...

...until we learned that these Russian accounts were already de-funded over the previous week, through branches based in London. Leaving the Cypriot depositors and/or taxpayers now responsible for eating all the losses

Meanwhile, the head of the EU struck fear in the hearts of all European depositors by stating that Cyprus has now provided the Troika with a template for handling large bank defaults...

...until hours later he recanted his statement...

... which hours later the Portuguese Finance Minister contradicted, assuring Cyprus has indeed provided a template that will be applied to banks in the future

This shows us that confusion is what you get when you combine a dangerously over-leveraged banking system, too many cooks in the kitchen (the EU, the IMF, the ECB), and an economy held together by a common currency but no political union (i.e. each country is looking out for its own best interests).

The poor decision-making and contradictory communications coming from Europe over the past two weeks make the Keystone Cops look like Seal Team Six.

This is exactly the kind of unproductive and dangerous thrashing you would expect from leadership that doesn't have (actually, never had) an understanding of the underlying complexity of the system it created. As the laws of mathematics and science build momentum to overpower the manipulation that has obscured them to-date, we can expect ever-greater panic and consternation from those captaining the ship.

For the record, I'm not picking on just Europe here. The same observation applies to the US and elsewhere.

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