Κύπρος, Κυπριακή Δημοκρατία, Cyprus

What a mess.

And the EU has brought this on itself.

At first, I thought it was just one bad bank. Some small nobody. Then seeing that it was Cyprus wide, thought it some local decision. That the EU had said “You get a bailout, but we want you to come up with some cash” and the locals cooked up this scheme. Digging into it, it looks like the folks on the EU / Brussels side of the table came up with the idea of a “haircut” for bank depositors. Near as I can tell, this fits the usual model of attempting to rope in ever more folks with money from ever further away (as there are large foreign deposits in Cyprus).

What did they do? The EU decided that the depositors in Cyprus banks would have their deposits taken and used as part of the bailout. Not the whole deposit, just a ‘haircut’.

They even structured it such that major depositors, over 100,000 Euros, got hit the worst (at a near 10% rate). Yet that is only about 3% above what the poorest person with just enough to cover next months rent check got clipped.

Why is this a very bad idea? Look at the Great Depression. What was one of THE prime fixes coming out of those bank panics? Bank insurance with an unimpeachable backer. The average citizen could expect to always get 100% of their money back if a bank failed. Only folks who were super-rich would lose money; and then only if the amount in any one bank was too high. (Inflation has since made the effective limit on the insurance lower, but it is still a great deal of money). This was done simply because the average Joe or Jane can not afford to have their money gone, or ‘tied up’, or given a ‘haircut’. The “little guy” has a rent check in the mill and just enough to cover it. Break that trust, the money leaves the bank. (Not to mention the zillion or two checks that will now bounce as the money that was expected to be there is not there. Many poor folks have just enough to cover the bills in the account; the paycheck goes in, checks written, and not much left when they all clear. Chop out 7%, some checks bounce.)

But that will only be the start of the problems.

Any of the folks who got ‘trimmed’ and has ‘auto deposit’ is highly likely to stop it. A physical check from your employer is THEIR obligation (and their future ‘haircut’). It can be posted off to a Dubai or UK bank account for deposit. Anyone with an ATM machine will start removing whatever “left overs” are in their account “for the weekend”. (I know that were I in the EU, and had $1000 in the account as my ‘float’ level, I’d take out $950 “for the mattress”.) Further, folks in other PIIGS countries can expect the same treatment from the EU. Being “not dumb” they will start taking their money out too. “If it can happen there, it can happen here” will be muttered in the streets. Heck, Europeans are much more aware of this kind of thing. (Many a French house had a few gold coins nailed behind a wooden strip of the door jamb as insurance against the banks and governments.)

I would not be surprised at all to see an EU wide run on the banks. (Though I expect it will be mostly limited to the PIIGS).

But it is not going to stop there. If you were a Russian who just had 40,000 Euros lost: Would you send future money to the EU, or to Dubai? IF you were a Chinese company with import funding sitting in a bank that got clipped, will your next round of imports have the payment left in a local EU bank, or immediately moved to a China, Singapore, Hong Kong, or Macau bank? The very large players can easily just shift where their money flows. They will be doing that now. (Look, if you put up 250,000 Euro to buy a load of farm equipment, and found you now needed to wire over another 25,000 as the escrow was now too low, think your next escrow account will be set up there?)

Trust is a very fickle and sensitive thing. Once lost, it may never return. It has now been lost.

I’m sure the Eu Meisters thought Cyprus was small, and folks would not generalize it to the rest of the EU. I’m sure they thought it would “clip” some Russian money and some money laundering from drug runners. But drug runners have long memories and when you short them 10% on the payment, well, “not good” comes to mind. So they will now have some very angry and not very “self limited” folks looking at “who did this” and seeing “EU Meisters” all over it. Blame will attach to the EU, not Cyprus. That’s where the deal was hatched.

So “that money” will likely flee as well. Instantly, new deposits and new accounts will cease. Some accounts will just drain slowly in the normal course of events. Others will be wired out as soon as allowed. CFOs of companies all over the world will be dealing with this. Did they think it would only hit illicit ‘money laundering’? Say a Russian company with a Million Euro outside Russia had it in a Cyprus bank. Had some deal with Samsung to sell phones in various places. So periodically just moved money from the Russian account to the Samsung account in the same bank (making it fast and easy). Think that Samsung CFO will be needing to report a 10% loss on his monthly report? Think he’s not going to require new deals to have a ‘wire transfer to Japan Bank’ even if it might mean more paperwork for crossing national boundaries? Think he’s not going to ask “Might Spain or Italy be next?”.

I can’t say “how big” the drain will be. I can say that the EU has started a run on the banks of the EU. It may be a slow run ( A “walk on the banks”?) but all around the world folks are starting to realize that “You can not trust an EU Bank”. They have set a precedent of “Fleece the Customer”, and the customer can leave. (Or just not show up to begin with). The UK, with its own currency and banking system, will likely do OK. Sweden and Switzerland will gain some. I’d expect some accounts to shift to Dubai / Qatar / that new Arab banking network they are trying to build, and others to go to Turkey and the Caymans. It’s not hard to move one country over. The exit will be largest from the Cyprus banks. As that money is much larger than the locals, the stress on their banking industry will be large. I’d not be surprised to see banks laying off people (after the labor spike needed to do transfers and account closures fades) and perhaps some shutting down all together. I do know that I’d not open an account in an EU bank at this point.

You see, I (and others) will not see this as a “Cyprus Malfeasance” we will see it as an “EU Mandate”.

The “little guy” will see it as theft or fraud or both.

For that matter, looking into it has also shown that the Cyprus banks didn’t really do much wrong. They held a chunk of their assets in “Government Bonds”. Typical mandated ‘safe investment’ practices. “Reserves” requirements. But many of those were “Greek Bonds”. They were forced to take a write down on the value of those Greek bonds, so then were ‘short of capital’. Other than doing what they were told, not much of their responsibility. (Or is the EU saying “Do not buy EU governments bonds!”…) As the French have a load of Greek debt too, one might expect a bit of a run on French banks next week too… There will be computer screens all over the planet looking at “Percent of bonds by country for each bank” in reserves… So is the EU saying that when they are doing a ‘bail out’ of a country and asking that folks support them by buying that country’s bonds, folks instead need to be selling them? They have just hung out a large “Do not carry PIIGS bonds as reserves” sign. So who will buy Greek or Italian bonds if not the banks?

So much mess, with the implications an side effects fanning out over so much of the planet, from such a small place. All because the EU Meisters were stupid in hitting ‘the little guy’ with a ‘haircut’.

Some Links

Cyprus does a lot of business as a money center (some in the EU would say money laundry). Attempting to get some of that money and / or punish the folks of Cyprus for being a laundry will result in a lot less business for companies that set up foreign accounts:


Cyprus Banking – Get your Cyprus bank account within 4 days fully activated and working

A bank account in Cyprus is very easy to open, and it does not cost too much money, either in fees or bank costs. Cyprus banking can offer the businessman all the facilities that he may require. In a Cypriot bank account you may deposit as much or as little money that you may need to. There are no limits of maximum or minimum! The costs of running and maintain a Cyprus bank account are minimal, i.e. They run into a few euro per month. The initial bank costs for opening a bank account in Cyprus are the cost of the digipass machine, or token, and some euro for the courier service; usually they range between 70 to 90 euros.
Cyprus Banking Confidentiality

Your confidentiality is fully guaranteed. No one knows the name and the rest of the personal data of the bank account, but the bank itself. And in Cyprus, the details of the account are not revealed to the tax authorities, or any other authorities, or the government or any third country. The only way a third party such as a third country to get details of a Cyprus bank account, is to get a court order, in the process of investigating a very serious crime.

So in an attempt to cream off some of that “funny money” the EU Commissars are just going to make Panama, Caymans, Switzerland all a bit more happy… They may reduce “such banking” in Cyprus, but at the expense of chasing “such money” out of the EU.

A bunch of related articles:


Gives a sense of the “build” over time of this issue. So for folks in Cyprus and other parts of the EMU zone there’s bit a bit of warning that “something was coming”. Many folks, secure in the knowing that “depositors are always safe” will have left their money in the banks. The EU Meisters have now assured folks will, in future, withdraw money from EU banks on the first news of issues developing. They have broken the trust and it will stay broken, so the only rational response is to ‘respond fast, early, and fully’ to any developing financial problem in any EMU nation.

Greek PM, Cyprus leader discuss debt, energy German Chancellor Angela Merkel, second right, speaks with Cypriot President Nicos Anastasiades, center, during a round table meeting at an EU summit in Brussels on Friday, March 15, 2013. Cypriot President Nicos Anastasiades listens to questions from journalists during a media conference at the European Parliament in Brussels on Thursday, March 14, 2013. European Union heads of state and government will meet for a two-day summit, beginning Thursday, to discuss the current financial crisis.

Eurozone pledges to bail out Cyprus The Meaning Of Cyprus New President-elect of the Eurogroup and Dutch Finance Minister Jeroen Dijsselbloem addresses the media after an Eurogroup finance ministers meeting at the EU Council in Brussels on Monday, Jan. 21, 2013.

People queue to use an ATM machine outside of a Laiki Bank branch in Larnaca, Cyprus, Saturday, March 16, 2013. INSIGHT-Numbers game turns nasty for Greek stats chief IMF says Europe’s banking sector still fragile Cyprus has been a member state of the European Union since 2004. Following clashes between the two communities the Turkish Cypriot seats in the House remain vacant since 1965.

Cyprus sees chances of EU bailout increasing
The Boston Globe2012-06-04

Cyprus sees chances of EU bailout increasing
Seattle Post2012-06-04

Cyprus becomes 5th eurozone state to seek bailout
Philadelphia Daily News2012-06-25

Cyprus banks must ringfence Greek risk: central bank head
Chicago Tribune2012-06-28

Cyprus becomes 5th eurozone state to seek bailout
Seattle Post2012-06-25

Cyprus, Troika Agree Bailout Terms, ECB Demetriades Says

Cyprus sees Greek polls easing bank aid prospects
Deutsche Welle2012-06-19

Now, when ‘bailout’ is in the news “take money from bank” will be what rattles around in folks heads. Again, not just for Cyprus, as this was an EU decision. It is an “EU Thing”.


Cyprus could become the fourth eurozone country to be asking for a bailout. Its Popular Bank needs a huge sum for recapitalization by the end of June, and Nicosia hasn’t said where it will come from.

The Cyprus Popular Bank as the second biggest lender on the island needs another 1.8 billion euros ($2.23 billion) until July to meet new recapitalization requirements, the director of Cyprus’ central bank, Panicos Demetriades, told the Monday edition of the Financial Times.

It’s highly uncertain whether the government in Nicosia will be able to come up with the money. “The closer we get to the deadline, the bigger is the likelihood of Cyprus having to ask Brussels for help,” Demetriades commented.

Cyprus may thus become the fourth eurozone candidate for an international bailout, following in the footsteps of Greece, Portugal and Ireland, and reflecting Spain’s precarious situation at the moment.

Neighboring Greece part of the problem

Cyprus Popular Bank has been the country’s lender most exposed to toxic Greek debt. The cash-strapped government has said it’s willing to give financial support to the bank, but has so far failed to elaborate on what exactly it can do.

In audited results in April, Popular revised its losses upwards to 3.65 billion euros due to a write-down of Greek sovereign bonds.
The economy in Cyprus has been struggling with recession and low domestic demand. Nicosia is expected to announce more austerity measures soon in a bid to keep the public deficit below 2.5 percent this year.

First off, that last line. A public deficit of only 2.5% ? That’s a number the USA can only dream of. We have a 40% deficit. We borrow 40 cents of every dollar the government spends. We are in far worse shape than the government of Cyprus.

Second, their ‘recapitalization’ was not due to bad real estate loans, bad management, poor banking practices, lax laws, etc. It was due to holding Sovereign Debt of an EU country as “reserves” and being forced to take an accounting entry ‘write down’ on their future value. So what will happen to global banks when the $16 Trillion of US Debt in ‘reserves’ requires a ‘write down’? Does anyone really think a country running a $1.6 / year deficit at a 40 % level can find a way to not only get that much more tax revenue, but an added $16 Trillion to pay off those bonds?

Our bonds are, IMHO, not much different from Greek bonds. Only difference is that we can print dollars to pay for the bonds and Greece could not print extra Euros.

It is also interesting that Cyprus got a ‘haircut’ while the other bail out candidates did not. So having now set this precedent, if you have money in a Spanish, Italian, Greek, etc. bank: How safe to you feel? What if there is another ‘bail out request’ needed as more of those Sovereign Bonds drop in value on this news? As folks start selling them to exit Euro denominate assets? As money heads to the Caymans and Switzerland instead?


From 2012. What was the status then?

Cyprus bank bailout grows on largest bank bid

NICOSIA | Wed Jun 27, 2012 8:11am EDT

(Reuters) – The cost of Cyprus’s EU bailout to support a major bank jumped unexpectedly on Wednesday after the island’s largest lender said it too needed state support to meet a regulatory shortfall in capital by June 30.

The tiny Mediterranean island became the fifth euro zone nation on Monday to seek emergency funding from Europe, with a bailout bill that could potentially amount to more than half the size of its economy.

Cyprus already needs 1.8 billion euros ($2.2 billion) to help recapitalize Popular Bank, its second-largest lender.

Bank of Cyprus followed with a call for aid on Wednesday, saying it would need “temporary capital support” from the state to the tune of about 500 million euros – effectively jacking up the nation’s exposure to its banks to 2.3 billion euros.

Cyprus banks have been crushed by a writedown on Greek sovereign bonds negotiated in an attempt to make Greece’s debt mountain more sustainable.
Bank of Cyprus and Popular recorded record losses in 2011, depleting their regulatory capital.

Combined, a 2.3 billion euro figure is a considerable chunk of Cyprus’s 17.3 billion euro economy, and two euro zone sources on Tuesday put a potential bailout amount at up to 10 billion euros.

So “Fixing Greece” has shot Cyprus.

And Greece isn’t really fixed.


Some of the comment thread at that bottom of that one enlightens about ‘folks on the ground’ and what is likely to come. At they had a ‘not that old’ article that had an interesting title, but it came up as ‘archived’, I’m going to copy a fair amount of text here.

Incredulity at decision gives way to fury
By Annika Breidthardt and Robin Emmott and Michele Kambas Published on March 16, 2013

THE EUROZONE struck a deal on Saturday to hand Cyprus a bailout worth 10 billion euros but demanded depositors in its banks forfeit some money to stave off bankruptcy despite the risks of a wider run on savings.

The eastern Mediterranean island becomes the fifth country after Greece, Ireland, Portugal and Spain to turn to the euro zone for financial help during the region’s debt crisis.

So blame is landing directly on The EU. And why were Greece, Ireland, Portugal and Spain not “clipped”? Do you have any faith they will not be ‘clipped’ in any future request for more ‘bailout’? Spanish unemployment is not improving. Greece is not improving. I think another round of ‘bailout’ is likely. Would I leave one Euro in a Greek or Spanish bank? (Italy is not yet too bad, and Ireland has recovered quite a bit. Portugal? Not sure.)

In a radical departure from previous aid packages – and one that gave rise to incredulity and anger across the country – euro zone finance ministers forced Cyprus’ savers to pay up to 10 per cent of their deposits to raise almost 6 billion euros.

Almost half of its depositors are believed to be non-resident Russians
, but most of those queuing on Saturday at automatic teller machines to pull out cash appeared to be Cypriots.

“I wish I was not the minister to do this,” Cypriot Finance Minister Michael Sarris said after 10 hours of late-night talks in Brussels where the package was hammered out.

“Much more money could have been lost in a bankruptcy of the banking system or indeed of the country,” he said, adding that he hoped a levy and bailout would mark a new start for Cyprus.

Without a rescue, Cyprus would default and threaten to unravel investor confidence in the euro zone that has been fostered by the European Central Bank’s promise last year to do whatever it takes to shore up the currency bloc.

So looks to me like a “Fleece The Russians” motivation for being treated differently. Wonder if anyone in the EU will be needing Russian Gas this winter?… And these loons think at 10% ‘haircut’ will NOT “unravel investor confidence”? Well, maybe they are write. You can’t unravel what has just had a double barrel shotgun blast through it…

The bailout was smaller than initially expected and is mainly needed to recapitalise Cypriot banks that were hit by a sovereign debt restructuring in Greece.

The deposit levy – set at 9.9 per cent on bank deposits exceeding 100,000 euros and at 6.7 per cent on anything below that – will take force on Tuesday after a bank holiday on Monday.

To guard against capital flight, Cyprus will take immediate steps to prevent electronic money transfers over the weekend.

In the coastal town of Larnaca, where irate depositors queued early to withdraw money from cash machines, co-op credit societies that are normally open on Saturdays stayed closed.

“I’m extremely angry. I worked years and years to get it together and now I am losing it on the say-so of the Dutch and the Germans,” said British-Cypriot Andy Georgiou, 54, who returned to Cyprus in mid-2012 with his savings.

“They call Sicily the island of the mafia. It’s not Sicily, it’s Cyprus. This is theft, pure and simple,” said a pensioner.

The levy breaks the taboo of hitting bank depositors with losses. But Dutch Finance Minister Jeroen Dijsselbloem said it would otherwise have been impossible to save Cyprus’ financial sector which, compared with national economic output, is more than twice as big as the EU average.

“As it is a contribution to the financial stability of Cyprus, it seems just to ask for a contribution of all deposit holders,” Dijsselbloem, who chaired the meeting in Brussels, told reporters. “We are not penalising Cyprus…, we are dealing with the problems in Cyprus.”

And the problems in Cyprus are mandatory write downs of Greek debt due to the EU process of running things…

The island’s bailout had repeatedly been delayed amid concerns from other EU states that its close business relations with Russia, and a banking system flush with Russian cash, made it a conduit for money-laundering.

Dijsselbloem said that under the rescue, the island’s debt would fall to 100 per cent of economic output by 2020.

In return for emergency loans, Cyprus agreed to increase its corporate tax rate by 2.5 per centage points to 12.5 per cent. This should boost revenues, limiting the size of the loan needed from the euro zone and keep down public debt.

Cypriot President Nicos Anastasiades called a meeting of party leaders for Saturday night to brief them on the bailout.

International Monetary Fund Managing Director Christine Lagarde, who attended the Brussels meeting, said she backed the deal and would ask the IMF board in Washington to contribute.

“We believe the proposal is sustainable for the Cyprus economy,” she said. “The IMF is considering proposing a contribution to the financing of the package … The exact amount is not yet specified.”

I wish they would stop saying “contribute” when they mean “shake down”… but we see the “spread to other peoples money” in full effect here. Not just Russians, but the IMF (and through it to the USA and Japan and others “contributions” to the IMF.)

Cyprus, with a gross domestic product of barely 0.2 per cent of the bloc’s overall output, applied for financial aid last June. But negotiations bogged down in the complexity of the deal and reluctance of the island’s previous president to sign.

Moscow, which has close relations with Nicosia, is also likely to help by extending a 2.5 billion euro loan by five years to 2021 and reducing the interest rate.

“My understanding is that the Russian government is ready to make a contribution with an extension of the loan and a reduction of the interest rate,” said the EU’s top economic official, Olli Rehn.

Cypriot finance minister Sarris will travel to Moscow for meetings on Monday to try to pin down the new loan terms.

Cyprus originally estimated that it needed about 17 billion euros – almost the size of its entire annual output – to restore its economy to health.

But because a loan of that magnitude would increase its debt to unsustainably high levels and call into question its ability ever to pay it back, policymakers sought to reduce it by finding more revenue sources in Cyprus itself.

The Greek units of Cypriot banks were excluded from the deposit levy, Greek finance minister Yiannis Stournaras said.

And the collateral damage rolls on. But at least folks will be talking to Moscow. I wonder how many “Party Bosses” had money in banks in Cyprus…

Some selected comments:

Wail Fahmi Bedawi · Khartoum, Sudan
Neo-Liberal Policies live on others’ money via austerity programs. Austerity programs never ends borrowing from others (mainly the rest of the world) as unemployment domestically increases. Corruption, Immigration, and capital outflows are the natural response. Ask the African history with such programs that destroyed people’s life all around. Cyprus you are unlucky. You elected the wrong government for the wrong times.

Pete Adams · St Catherines, Almondsbury
Anyone taking bets on the Russians telling Cyprus to ignore their money or no more loans?

Alun Jones · Bourton Vale
The sad thing is that in Cyprus no one plans ahead more than a few seconds! So they steal money from pension funds, now its blatant robbery from bank accounts, so what happens when that money is squandered away to pay for a bloated and corrupt civil service? What are the long term plans to get out of this mess? Or do we just have crisis management from month to month, obviously one cannot trust banks in Cyprus, a run is the next stage in my opinion.

Alan Graham
Can anyone tell me how much cash you can take out the country per person on a plane ?
Im thinking UK then Guernsey.

Nick Bulut ·
You can take out as much as you like but anything over 10.000 has to be declared at customs.

Divadi Bear · Top Commenter
Russians are excellent economists. I expect Cyprus will have to say goodbye to the Russian deposits of ca., 25 billions here when it is removed to another NON EU foreign bank. It could also mean a RUN on other EU banks to remove Russian money from them !!!
Looking to the immediate future, I feel that the EU, IMF and ECB have laid a “Virus” with the demand of tax on all bank deposits, IN IT’S PRESENT FORM, on Cyprus and will lead to a further World Financial Crisis !!!

Andrew Tolley
Financial repression at its finest. I am very sorry for all Cypriots. To all others who think the governments and banks act in your interest get your money out of the banking system now. Do you think they really have your money with the fractional reserve system? This will be part of the solution to the global banking problem and the solution will be theft from anyone who is silly enough to leave their money to these predators and the global banking cartels.

Kypros Kyprianou · London Metropolitan University
Why did Cypriots take a haircut on Greek Loans and then when depositors have to take a haircut Greeks are exempt.

Costas Karseras ·
Not long ago many were calling for the TROIKA to come and put the Cypriots in order. Some of us have no elusion about the nature of TROIKA or the EU and the IMF, they have replaced the oppressive colonial armies. They kill without using arms. The Cypriot people should resists the neo-colonialism, together with the other EU people including the demonized Germans. The German people are also victims of the same neo-liberal policies and are suffering from unemployment and homelessness whilst the 1% elite is increasing “their” wealth which they never earned.

Gabriele Fiebelkorn
Thank you! You’re absolutely right. The first people who got to taste the “German Medicine” were the Germans themselves and every time I read about the “wonderful German economy” it makes me sick because I observe so much poverty in my country. I wish people abroad would understand that German companies are so successful only because they hire and fire their employees and pay them dumping wages (we are one of the few countries without minimum wages). I sincerely hope that people in our countries will not start to hate eachother but put the blame where it belongs: banks and corrupted politicians!!! We are all suffering of the same “Mafia”….

Nick Bulut ·
This is communistic nonsense. While there is poverty everwhere in the world and always will be, Germany does much better than most other countries. Most industries there have collective agreements between workers and employers that stipulate minimum wages. What unions and unreasonable benefits to government employees can do to a country is clearly to see here in Cyprus, the road to bankrupcty.
To call the helping hand that saves a country through contributions by foreign tax payers ‘neo-colonialsm’ can only stem from an unstable mind.

Jonathan Scott · None
Costas, where ever you are from, what ever country you live in if you are an every day common man/woman you get screwed by governments, lawyers, banks etc when the Cypriots start to realise/understand this and stop blaming others things might start to change for the better….

Andy Gross · Pennsylvania State University
Nazi-like confiscation will end badly.

Alexander Stone
Imagine the worst case scenario… the bailout robbery deal doesn’t pass through parliament (either in Cyprus or in Germany)… what happens next? Not a big deal, BUT – Everyone NOW knows that Cyprus has been raided… psi involvement, haircut, just name it….. then whats next? Definitely run on the banks… then what? Who is safe anymore? The bank deposits are the Holy Grail… the safest place….

Jonathan Scott · None
Alexander, this will start happening through out the EU now, Cyprus just happens to be the first country where it has taken place that’s all …

James MacArthur · Web Developer at Llandric
How daft are they? In this ‘move’ to save the country they have destroyed it. Banks will shortly have no cash left after the Tuesday run on the bank which is now inevitable. They will have to print more notes which will lead to massive inflation. No business will now invest in the island, property will not sell, goods will not sell, poverty and strife will amass. And all so the corrupt government of the last 20 years got to line their pockets. Cyprus its time to WAKE UP! Start dealig properly with your problems, 1st one is deal with your daft government, your daft banks and their prehistoric and illegal borrowing and lending habits, then you can tackle the remainder of things which are now plaguing your country.
This is the first time since I came back to the UK that I am actually glad Im no longer in Cyprus. And I truly loved it there.

Graeme Smith
Next will be Spain, Ireland, Greece and Portugal !!

Kevin Alejandro Diamante · Callcenter agent at Becogent
your forgetting one point, THEY can’t turn on the printing presses only the ECB can. the sad thing would be a bank run as there is no where the money could go unless Cypriots decide to put there money in any country thats not in the Euro and start saving in non euro countries. The Trokia have shot themselves in the foot, this is supposed to stop bankruptcy and save the euro, I see it possibly doing the opposite. Tuesday if a ban run happens in Cyprus on the right scale then the banking system there will go into failure and as soon as this happens anywhere in the eurozone then as the eurozone is one banking system when one part fails the rest fails as the eurozone will have a bank run that will spread like wildfire.

On a positive note if the euro was to fail it would almost definitely be a good thing in the long run. As every country would only get back on there feet once National Central banks take back full control from the ECB and back to the good old days where ” the buck stopped at someones feet”. If the euro does collapse then it will serve as a reminder that currency is something that is sovereign to the nation it serves and that only a sovereign can control the stability of their countries currency, for this a currency can not be shared.

I feel sorry for anyone in a eurozone country as they never voted for it. the people to blame is there former political leaders who robbed them.

Sally Ann Lewis · Paignton Secretarial College
Have just tried to transfer some money between my deposit account to my current account and they have even blocked that, so now have 20 euros to live on till they decide to go back to work!

Alessandro Morelli · Top Commenter
tueasday bank will be closed. bankers too afraid. Lets all meet, hammers, dinamite and take money from atm machines or from saferooms in banks. This shitty small piece of floating land is going to be killed!!!!

Wendy Van Kuijk · Larnaca, Cyprus

Divadi Bear ·
Alessandro Morelli:Watch out !! You are Inciting Criminal Offences !
Many feels the same way as you, but it is the EU, ECB and IMF you should be blaming not Cyprus. Cyprus has been subjected to BLACKMAIL !! NO haircut, then NO bail out !!

Iain Macarthur · Royal Military Academy Sandhurst
Don’t they see the knock on effect. First everyone withdraws whatever they have left so the Cyprus banks have no capital, so they cannot function. Secondly, now the principle is established every other euro bank account can be hit the same way, in every other country. So everyone withdraws all their money and the european banking system has no money left to play with and the whole rotten system collapses. This was demanded by the so called experts!!

Simon Andrew MacArthur · Brooklyn, New York
Brother – the banks brought this on themselves – when we see the banks like HSBC, laundering billions in drug money and walking away with a slap on the wrist my blood just boils – I want to see some banks CEO strung up by his balls in Times Square – then something might change.

Kypros Kyprianou · Top Commenter · London Metropolitan University
You cannot afford to take your money to another Eurozone country Spain and Italy are definitely not safe. Dubai may be the only option

Frank Brown · Top Commenter
Thou shalt not steal, is one of the Ten Commandments and Nicos Anastasiades stole 6 billion Euros from the people. No doubt he will spend quality time in hell when he gets there, it’s not a matter of if, it’s a matter of when.

Johnny Karsas
I think the russians will probably “take care” of him

Frank Brown · Top Commenter
hmmm… I suppose it’s a possibility
Reply ·
· 16 hours ago
Wendy Van Kuijk · Larnaca, Cyprus
He already is in Hell …. :-)

Strahinja Mladenovic · Hotelschool The Hague
The people have finally awoken and I’m sure every subsequent government move will be well scrutinized and questioned. Its down to everybody concerned to educate themselves on the issue and object to future taxation measures. You are the only one who can help yourself and those around you because no authority has your best interests in mind.

Cypriot politicians, they are helpless, controlled by outside powers and only have their own interests in mind. A bailout WAS on Anastasiades’ manifesto so I don’t see why everyone is so surprised. The man is a globalist pure and simple, he believes in a globalist model of Cyprus, so we should all expect further conformism to EU legislation/standards. Whether this is a good or bad thing depends on your personal opinions/circumstances.

The EU, they are only interested in “making an example” of us. A grim warning to other EU states as to what will happen to them if their financial sectors get too greedy with foreign investment. Indeed it may also be a small-scale socio-economic experiment to see how we react to these policies before they are used on larger economies.

Turnkey Casino
I think the situation is different. How you would explain a Dutch, French or German tax-payer that their money is used to bail-out a country which has produced a financial mess. Politicians in many EU countries do not have so much room. Nobody in these countries understands why they have to pay for incompetent bankers and politicians in Cyprus. The current agreement is fair. A 10% hair-cut is nothing compared with what will happen if Cyprus can’t pay the due loans (bonds) in May.

Strahinja Mladenovic · Hotelschool The Hague
The word “fair” should be used loosely. This this was a well devised plan to secure the first 6 billion quickly and without the risk of mass exit. We knew there would be a bailout but we didn’t know that it would happen this way. Anastasiades had no choice but to accept these terms or risk losing favour among his EU colleagues. This is a lose-lose situation, a new paradigm for financial terrorism. I appreciate the point of view of the Dutch, Germans etc…but this punishment is way too severe, not to mention needless and proves that Brussels isn’t interested in the well-being of its citizens or alleviating the recession.

James MacArthur · Web Developer at Llandric
a new paradigm for financial terrorism

Fantastic phrase.I’m so stealing that

Katharine Zachariadou · Works at Happy house wife/mom
It is absolutely appalling that money will be STOLEN from savers who were in no way responsible for the country’s problems. What incentive does this give for anybody to save in any EU country? How on earth can this be consdered acceptable???

Annemieke Lommaert-Blondeel
You actually were responsible: you voted these nitwits into power….

Turnkey Casino
Cypriots elected their politicians and they did not control their managers. Therefore Cypriots are responsible for what happened. The mentality that Cypriots do not feel responsible for the mess is exactly the mind-setting which has caused the mess.

James Sinclair · Went to one
I never voted for him as I am not allowed to vote in Presidential elections in Cyprus, So what right does he have to make me pay for Cypriots who abused and stole from their own people.

My money was earned abroad and brought into this country having been taxed in UK and I intend to get my money out of this country before this fool apologies for another theft.

He has killed the golden goose having had conversations today with expats, and they had once common thread – they are stopping all pensions and foreign currency coming into the country immediately. so another source of bank liquidity will dry up.

This so beautiful island is now so toxic it is untouchable, untrustworthy and now insignificant.

View 2 more
Shahzad Zafar · Works at Pharmacal company cyprus
its better to leave cyprus bcoz now they dont like foreigner and now new thing on people

Nick Athinodorou · London, United Kingdom
And go where exactly?

Frank Brown ·
When the oil and gas start to generate billions in a few years time, would the Cyprus government return the money they robbed from us? Obviously NOT !!!

Moyra Blackie ·
Frank:If and when gas or oil is found, it is already under the eye of the US.

James MacArthur · Web Developer at Llandric
Only have to look at the electricity bills which they inflated to cover the explosion and still have not dropped the price.

Simone Castronovo · Titolare at Studio Tributario castronovo
Cyprus is finish … it is no credible, nobody will invest in a country that in crisis time bring the [m]oney in the deposit and increase the corporate Tax! …….. Cyprus could be a “Switzerland in the Mediterranean”

Frank Brown ·
Nick Anastasiades robbed the people so lets hope he gets a place in hell when his time is up.

Michelle Higgins
He said the second choice was the controlled management of the crisis, through the decisions taken and which can be summarized as follows:
1. Ensuring the liquidity of the banks and the rescue of the banking system through their recapitalization.
2. Rescuing 8.000 jobs in the banking sector and thousands of others which would be lost as a corollary of not maintaining the operations of banks.
3. Total rescuing of deposits, with just the exchange of a small percentage of savings with shares of the two banks. Currently, these shares do not have their full value, but with the economic recovery they will repay most it not all of the amount that will be cut.
4. This option results in a drastic reduction of public debt, makes it manageable and sustainable and relieves future generations from the burden of repayment.
5. It saves provident and pension funds and avoids taking other tough measures such as wage and pension cuts that were put on the negotiations table.
6. It avoids further recession and the risk of the vicious circle of a second memorandum.
“We are not aiming to gloss over the situation. The solution chosen may be painful, but it was the only one that would allow us to continue our lives without adventures. It’s a decision that leads to the historic and permanent rescue our economy.” he said..

James Sinclair · Top Commenter · Went to one
Michelle – You have fallen for the political spin from a class of people worldwide who feel so self important that they show nothing but contempt and disrespect for ordinary people by asking us to believe:

“We are not aiming to gloss over the situation. The solution chosen may be painful, but it was the only one that would allow us to continue our lives without adventures. It’s a decision that leads to the historic and permanent rescue our economy.”

The measures he has brought in is what they tell you what not to do when reading Economics 101. To basically address each of you points.
1. Come Tuesday those who were not forewarned about the haircut will cause a run on the banks as they seek to secure.withdraw savings. Those who were forewarned will never bring the capital back to the island. If the Central Bank puts moratorium on withdrawals investor trust is eroded ever further.
2. It will in effect cause more unemployment. People will send their money offshore, and as many expats are doing in stopping pensions from other EU countries being sent here. With an increase in Capital Gains Tax to 12.5% hedge fund managers will move to countries like Malta and Latvia which offer better returns hence a reduction in the numbers employed in the financial sectors in Cyprus. I will not go on about how this filters through the economy to local business level and its effect on involuntary unemployment and increase in government social spending with reduced tax revenues.
3. Shares in banks are not a sound investment given that the reputations of Cypriot banks are in tatters. With investors protesting outside the Presidential Palace about bad advice given by banks to investors who lost all whilst bankers gained bonuses. Do you expect people to believe the bank and the government will honour its future obligations given this arbitrary act.
4 and 5. So would an increase in Income Tax and public servants contributing to their pension fund and paying for medical treatment like the rest of us. The issue of title deed which would bring in near 2Bn Euros. Income could also be increased if they actually implemented court judgements and collected fines, and operate a Tax Office that actually collects tax.
6. There is a risk of further recession because investment in property is all but dead, the large public service is non-productive – it is a huge drain on the country’s assets. This is a country with a credit rating which is appalling and a strategic fiscal policy based on the hope they have found gas and hope they can keep it. Who in their right mind will ever invest in the infrastructure needed in a country that is in fact one toxic asset.

And Nick The Mail on Sunday (UK) is already on the case don’t think it will make pleasant reading for many in Nicosia.

Divadi Bear · Top Commenter
I have just had a chat with a banker friend in Switzerland: Before I go on, I DO NOT have a Swiss bank account !
OK. it is forbidden for any government of an EU country to deny anyone of removing/withdrawing their money or the government simply taking any amount from your bank account ! The governmet must first pass Legislation setting the maximum amount of money one can withdraw or transfer. The UK did this in the 1960’s !!!
BUT, a very BIG BUT ! If the CY government agree to a haircut with a third party, (the EU,ECB,IMF), on the people’s bank account, as a condition BEFORE a Bail-Out can be paid ??? Then……….? I would like to know though if:
1) Will a normal Giro account with banks be affected ?
2) Is there a “Bottom Line”, (Minimum Amount), before any cuts can be made on any and every money one has in the bank, be it Giro, Savings Accounts, Bonds etc ?
Too few details have been given on this “haircut”.

Dan Tsirikos ·
It has been confirmed, it affects everything from 1 euro upwards in every type of account!

Divadi Bear ·
Dan: In the between time I have learned that the parliments of the other EU countries must vote to agree or dis-agree on this. I don’t think they will agree for fear of the same thing happening to them !!!!!!!

Buisimyok Buisimyok
It looks as if the North part of the island is doing much better ?

Nick Bulut · Top Commenter
Why would that be ridiculous when it’s true?

Nick Bulut · Top Commenter
Simon Taylor , it seems directed at the leadership that is at fault not the victims.

Kypros Kyprianou · Top Commenter · London Metropolitan University
Yes, We should be seeing an influx of Turkish Cypriots buying Cheap land and property in the south, The supermarkets will be full of TC’s buying cheap food and the Hotels filling up with TC’s . GC’s will not be able to afford to go shopping or gambling in the North.
There should also be an influx of GC’s going to north to find work.

John Ozelton · Senior Piping Engineer at International Bechtel
I will be withdrawing most of my money on Tuesday leaving just enough to cover my standing orders and instructing my employer to withold any payments to myself until further notice. Robbin’ Bar-stewards.

John Ogilvie · Ad Dawha, Ad Dawḩah, Qatar
Surely this applies to deposit accounts and not current accounts?

Divadi Bear · Top Commenter
John: VERY wise ! I did this when the Pseudo Soviet president was elected and his commie twits took on the governing of Cyprus !!!

Pauline Read ·
Any Bank or indeed any country who thinks it is okay to dip into my savings I have entrusted them with would certainly no longer have one cent of money left with them. They got into this mess and they think it is okay to steal from their depositors to get them out of it. A big vote of NO CONFIDENCE from me.. It is a form of stealing by stealth. I bet those who got their money out in time are very relieved. Is this a violation of Human Rights? In God you can trust, ROC banks, no way.
Are you really so surprised, look what they did to propety purchasers.

Michelle Higgins
When is the protest march?

Frank Brown ·
I hope there is one.

Nick Athinodorou · · London, United Kingdom
Arrange one..

Yvette Graham · Larnaca, Cyprus
Well as long as the Greek units are excluded, that’s ok then! Seeing as exposure to their debt got our banks into this mess in the first place!!

Anna Shakalis · Parrs Wood High School
Just read about that Yvette!! now we know where all the rich people here have there dosh!!

Plazan Skin Care ·
I will be into the bank on tuesday morning to remove all my money , even if they have already taken the levy , I dont trust them anymore ..

Robert Beeks · · Clemson University
I will do the same.

Chris P Bacon
I think thats the best thing to do! its a absolute disgrace of them to do this! investors will not invest over there then people will start keeping money at home so the banks will run out of money and maybe Cyprus will in the end go under? Good luck! i wish you well.

Yvette Graham · Larnaca, Cyprus
Do you seriously think they’ll let you withdraw your cash? I suspect harsh limits will be imposed.

Christakis Tryfonos ·
‘call me Nik’ said “NO DEAL EVER” on individual Bank deposits…
another great read-my-lips moment by a career politician…!

Divadi Bear · Top Commenter
Christakis, Political Blackmail by the Troika !! They probably had Nice Nik by the short-and-culries: ie: NO haircut, then NO Bail-Out !!!

All in all it looks like about an even mix of “Blame Cypriots” and “Blame EU”. Or maybe it’s just “Blame them all”.

In fractional reserve banking systems, about 1/10 to 1/20 of the “money” exists. If even 10% of the people say “give me my money”, it locks up. Looks to me like more than 10% are going to ask for their money.

This was just so stupid.

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About E.M.Smith

A technical managerial sort interested in things from Stonehenge to computer science. My present "hot buttons' are the mythology of Climate Change and ancient metrology; but things change...
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118 Responses to Κύπρος, Κυπριακή Δημοκρατία, Cyprus

  1. adolfogiurfa says:

    With world´s GDP being about 60 trillion dollars and “derivatives” around 720 trillion, something is “fishy” to say the least…..

  2. adolfogiurfa says:

    BTW Cupris=Venus, Ishtar, Esther, Star….Copper, rather symbolic as from there it was obtained the metal for copper coins. Perhaps there has lit the fuse of the global economic conflagration.

  3. Petrossa says:

    The EU implemented in 2009 a directive that gave it the power to control the ATM’s and bankingaccount’s across the Eurozone. It can stop a bankrun dead in it’s tracks by either limiting the withdrawal amount at an ATM to x euro per day/week, closing them all together and preventing banktransfers larger than x Euros or prohibiting all traffic.

    Bankrun is an impossibility. Else they’d never done this. They are way ahead of the game.

  4. tckev says:

    The choice of crooks was always the Euro for some very good reasons, large value denomination EU500, an can be carried (and spent) easily throughout Europe, and even as far as the Azores, French Guiana, Guadeloupe, Madeira, Martinique, Réunion, and the Canary Islands. That did do nicely sir!
    For the crooks what was there not to like. Well what they just did in Cyprus I guess.

  5. Graeme No.3 says:

    Some people in Spain can complain too. When regional banks started to fail, the Government bailed them out, but converted deposits into shares in the bank. Obviously shares in a shaky bank are not quite as easily converted to something useful as cash, but when the banks failed anyway, those depositors were even worse off than the Cypriots.

    The EU may think that they have the power to stop a bank run, but when the currency cannot be used as a “medium for exchange” people will find something else very rapidly. Cigarettes sufficed in post war Germany, or foreign currency if obtainable.

    In either case the Euro is finished. It seems incredible that those involved ever thought that this would work. I suspect that it was the financial experts way of killing off the Euro, and allowing the EU countries to devalue and restart their economies.

  6. DirkH says:

    “All because the EU Meisters were stupid in hitting ‘the little guy’ with a ‘haircut’.”

    Maybe this is a fabricated crisis. The ensuing capital flight will be the pretense necessary to justify printing Euros to save the banking system. You know, we’re in a currency war, and Germans are stubborn, they don’t like printing money. So how do you convince those 80 million boneheads – well, create a little panic, and then tell them, look Germans, what do you want? A collapse of the entire system or a little bit of money printing, now, come, here, easy, see, didn’t hurt at all…

    Petrossa says:
    17 March 2013 at 5:28 pm
    “Bankrun is an impossibility. Else they’d never done this. They are way ahead of the game.”

    Doesn’t help; at a certain point the ATM’s must re-open and the money will be withdrawn, you don’t get interest in the bank anyway so what.
    In 2011 the sum of German deposits surpassed the sum of deposits in the PIIGS, slow capital flight from PIIGS banks has been proceeding for 2 years now. Germany stands at 800 bn, PIIGS maybe at 600 to 700.

    This might just accelerate a little now.

  7. Petrossa says:

    Currency can be used, it’s just not possible to withdraw your funds to a certain maximum. Or transfer funds larger then x amount. No they are hellbent on keeping this sieve afloat. But the first rats are already deserting the ship, Rompuy and Ashton are quitting in 2014. Good riddance, now the rest.

  8. E.M.Smith says:


    I think we are using “bank run” to mean different things…

    Even pre-ATM there were rules preventing withdrawal in a banking emergency. So a “bank run” was often defined by the large crowed of people at the bank being told “No, you can not have your money”.

    So, to my mind, a “bank run” does not mean people are getting their money, only that they are asking for their money.

    It usually results in a ‘bank holiday’ as the bank closes for a few days.

    Now, how does a country operate if the banks close, and stay that way? Or if people can not get money from the bank to spend?

    Yes, the folks with 100,000 euro will be hard pressed to get it all. But the folks with 1000 euro will get some or all of it; otherwise the economy halts.

    So between folks not moving money in, stopping deposits, taking out what they can (even if a ‘daily limit’ each day) etc. etc. you have a bank run. Even if a slow one.

    In short, you can not ever prevent a run on a bank, as that is just the mob demanding their money. You can prevent them from getting their money on demand, but that has always been the case.


    Some years back, when last the $US was weakening and the Euro was strong, it was ‘trendy’ to use the Euro to buy drugs in NY City. Drug dealers were preferring them here, too.

    @Graeme No.3:

    It will be very interesting to see what happens in the European stock markets at the open. I’ll be watching CNBC World in the evening (Pacific time) for the next few days. I think banks will be trading down. ;-)

    Per the wiki, Cyprus joined the EU on 1 May 2004. That means a bit under 10 years ago.

    That makes this about a 1% / year “tax” on all deposits for membership in the EU. (Were they not in the EU, they would be setting their own rules about ‘write downs’ and bank reserves and would have their own currency too, so could simply have ignored the Greek bond weakness and instead of “mark to market” used “mark to maturity” or whatever.

    So it would be a pretty easy case to make to folks in Cyprus to just leave the Euro Zone and keep their money…

  9. Petrossa says:

    Just in: EU ‘President’ Van Rompuy on Flemish TV: ‘Those who deal with Europe cannot afford to take account of views voters’

  10. Petrossa says:

    EM No they couldn’t. Before this law was put in effect each nation had to put a ‘stop’ into effect themselves. Afraid that some nations wouldn’t they made this law giving the EU the power and taking it away from the sovereign nations. So now 1 burocrat can type in the code and ALL atm’s everywhere in the Eurozone go dead.or at a set max.

  11. DirkH says:

    Petrossa says:
    17 March 2013 at 7:41 pm
    “EM No they couldn’t. Before this law was put in effect each nation had to put a ‘stop’ into effect themselves.”

    Well so it would be a German idiot that stops the economy instead of a Belgian or Portuguese one; maybe I should prefer that. I’m not sure though.

  12. E.M.Smith says:


    “No they couldn’t” what? Sorry, not following.

    My point was over our different use of the term ‘bank run’. Me pointing out it means asking for your money, not getting it. So if you are meaning “No, they couldn’t ask for their money”, that is clearly not true on the face of it. People can stand on the corner and shout “Give me my money!”. If you mean “No, they couldn’t get their money”, well, that has always been the case, nothing new really. (ALL banks lent money longer term than they have on deposit, so always have a ‘we can sit on your money’ rule in opening an account.)

    That the ATMs respond to a eurocrat somewhere is not important to what I’m saying.

    Anyone remember when Reagan “Froze Iranian Assets”? That was done by one person flipping some keys on a PDP-11 at The Federal Reserve Bank. Freezing assets via a key flip has been around a long time. There isn’t a big difference between one Eurocrat and 2 dozen of them after a conference call at 2 AM.


    I think I’ve found out what the Troika referenced in some articles might mean:


    Greece’s “troika” of international lenders – the EU, the European Central Bank and the IMF – have left the country amid a dispute over sacking 25,000 civil servants.

    So the Greeks are busy resisting having even one “civil servant” (are they either? ;-) let go, while the EU is saying more needs to be done. Wonder if they will go for a bank haircut instead…

  13. DirkH says:

    Graeme No.3 says:
    17 March 2013 at 7:07 pm
    “Some people in Spain can complain too. When regional banks started to fail, the Government bailed them out, but converted deposits into shares in the bank. Obviously shares in a shaky bank are not quite as easily converted to something useful as cash,”

    I heard about that. Graeme, do you know how fast the price of the newly issued bank stock dropped, or whether there was a block during which the savers couldn’t sell those stocks?

  14. I’d foresee a bank walk on European banks, but then where can you put it and still actually use it? The UK still has the pound sterling, but since I’ve seen various figures that say financial services are 10% (or in other articles up to 40%) of the UK’s income, it seems that the UK is just as at-risk of losing value as Cyprus or a PIGS bank. Iceland had a good thing going with profitable banking a while back, but would anyone trust their money there now?

    At the moment, it seems to me that all the financial systems in the developed world, as well as the countries that go for the socialist shiny thing, is based on inflated values and dodgy accounting practices. Even putting your money into property and other “solid” assets doesn’t get you off the hook, when assets can (and looks like will be) easily taxed as well.

    Seems to me that the best assets are easy to hide and easy to trade. Maybe that reduces to non-perishable food and the knowledge of how to generate enough energy to do what you want. Maybe also how to build a barbeque out of bricks that are lying around, too.

  15. DirkH says:

    E.M.Smith says:
    17 March 2013 at 8:21 pm
    “I think I’ve found out what the Troika referenced in some articles might mean:”

    Yeah I could have explained, the term has been in use since the beginning of the Greek crisis. Troika members are advised to lie about their mission when visiting Greece and being asked by passers by to avoid being attacked. And tend to enter official buildings through back doors. :-)

  16. Adam Gallon says:

    The UK Government’s not happy about this. With quite a few of our armed forces based in Cyprus, with money in local banks, they’ll suffer too!
    Promises to compensate armed forces’ members & civil servants.
    Maybe they’ll withhold the money used from our next contribution to EU funds? No, doubt it!

  17. John Robertson says:

    Scary to see solid proof, that those who seek power and wealth above all, are also crazy.
    This theft is breach of contract so blatant that even the most ardent believer, in the good of government, can be shown the evil.
    E.M you hit it, money and banks are nothing but trust.
    This theft tears the veneer right off of civil society.
    What will be the next medium of exchange?
    What are bitcoins? And do they work?

    Odd that career bureaucrats would think they will survive, such excess.

  18. Speed says:

    Before the Euro, an economy in distress could devalue it’s way out hurting everyone holding the currency or a debt obligation in the currency. This haircut hurts currency holders while sparing debt holders.

  19. DirkH says:

    Speed. that’s exactly the problem. Even if the uncompetitive countries in the South would unanimously agree on reducing their prices and wages by say 30% which would be necessary to compete with Germany, and superficially be equivalent to a devaluation, their debt stays denominated in Euros and grows to an unservicable amount.

    So as long as they stay in a currency union with hyper competitive Germany and keep their debt there is literally no way out for them. Germany OTOH is strictly against unilateral debt repudiation.

    So maybe this Chinese finger trap like construction is on purpose because there are only two ways out; a breakup or a melting into a superstate, the Eurocrats would die for the latter because it would give them absolute power. And remember, they are NOT elected.

    I see a certain conflict potential…

  20. DirkH says:

    John Robertson says:
    17 March 2013 at 9:22 pm
    “Odd that career bureaucrats would think they will survive, such excess.”

    Stalin managed that for quite a while by only drinking from new water bottles.

  21. jim2 says:

    It can happen here – especially with this Constitution-hating bunch of Socialist/Communist idiots – meaning Bozobama and his friends and cronies.

  22. jim2 says:

    Wonder what the price of gold will do shortly?

  23. DirkH says:

    jim2 says:
    17 March 2013 at 10:22 pm
    “Wonder what the price of gold will do shortly?”

    EUR down -1.23 %. Gold up 0.67%.

  24. Speed says:

    There have been complaints from Europeans about how government austerity has been crushing the citizens. Coming up with real numbers to quantify “austerity” is not as easy as it should be. I’ve found the following which some might find useful and interesting although not very user friendly in their current form. I may have time later to put them in nice graphical form or find that someone has already done it.

    Eurostat, Government finance statistics Summary tables — 2/2012

    Click to access KS-EK-12-002-EN.PDF

    Look at Total Expenditures. For the EU for example … (Million Euros)
    1996 — 3.679.460
    2001 — 4.423.602
    2008 — 5.874.997
    2009 — 6.001.264
    2010 — 6.214.705
    2011 — 6.211.002

    Eurostat, Government revenue, expenditure and main aggregates
    Similar to the first but expressed in % GDP
    2002 — 46.7
    2003 — 47.3
    2004 — 46.9
    2005 — 46.9
    2006 — 46.4
    2007 — 45.7
    2008 — 47.2
    2009 — 51.2
    2010 — 50.8
    2011 — 49.3

  25. jim2 says:

    Stock Futures
    Index Future Future Date Last Net Change Open High Low Time
    DJIA INDEX Jun13 14,298.00 -132.00 14,389.00 14,389.00 14,298.00 21:30:23
    S&P 500 Jun13 1,534.30 -19.30 1,545.30 1,545.30 1,534.10 21:31:25
    NASDAQ 100 Jun13 2,756.25 -32.50 2,778.75 2,778.75 2,756.25 21:30:01


  26. Graeme No.3 says:

    DirkH says:
    17 March 2013 at 8:23 pm asks about Spanish conversion.
    This is what is going on in Cyprus too.
    • Depositors with under 100,000 euros deposited must pay 6.75%
    • Those with more than 100,000 in their accounts must pay 9.9%
    • Depositors will be compensated with the equivalent amount in shares in their banks

    Supposedly depositors lose nothing, so will not be compensated. But as depositors they would have been first in line for payment if the bank goes bankrupt, now as shareholders they are last in line. In other words any Government guarantees of deposits (for the converted sum) don’t apply, and they have to line up for their share of what’s left over of the bank’s assets, which will be about 1 drachma between a million ex-depositors.

    If the bank doesn’t go bankrupt, they can sell the shares to whoever wants shares in a “shaky bank”, and bearing in mind all the other depositors will be trying to sell also, the price they get won’t buy two cups of coffee. They will be reassured that all is well, and told to hang onto the shares until “the price recovers”.

    This is what happened in Spain. Sorry, I cannot offer the figures you asked for, as many of the banks were “re-organised” by merger and then further consolidated.

    The banks may not go under, for as far as I can see they were properly run except for buying supposedly safe Greek Government Bonds, and were victims of the “haircut” imposed when the Greeks were bailed out. So the residents of Cyprus are contributing to a bailout they shouldn’t have had, caused by lack of foresight by the EU Financial Officials. To paraphrase Machiavelli – “A bureaucrat never lacks legitimate reasons to break his promise”.

  27. DirkH says:

    Graeme No.3 says:
    18 March 2013 at 1:55 am
    “The banks may not go under, for as far as I can see they were properly run except for buying supposedly safe Greek Government Bonds, and were victims of the “haircut” imposed when the Greeks were bailed out. So the residents of Cyprus are contributing to a bailout they shouldn’t have had”

    Very true; it is the equivalent of the Eurocrats saying “See? You trusted our word; so you must be an idiot; so it is only just that you pay us.” Which is the consequence that I recognized from the beginning of the Euro crisis.

    If these are engineered crises, they are masterfully engineered because they appear so embarassing.

  28. Richard Ilfeld says:

    So, its survival mode time. Of course the govt runs out of money. Of course they raid the banks…”that’s where the money is” didn’t someone say that? :<) Oh yeah, another crook. Sorry I was a bit skeptical of your dutch oven. We may all need to brush up on non-cash survival skills. I don't see this as much different that our elected crooks planning to "help" us with our 401K accounts, we can avoid losses by giving them the money and taking govt. IOUs in return. Now here's another idea for them.

  29. E.M.Smith says:

    @Richard Ilfeld:

    Well, I ‘do the math’ on my St. Patrick’s dinner in the Dutch Oven here:


    and find that even in a giant sized 14 inch D.O. holding an 8 lb ( about 3.6 Kilo) roast ham, at California electric rates (about the same as I’ve heard for parts of the EU and UK) it is now significantly cheaper to use the D.O. with purchased charcoal than to use electricity.

    As the charcoal scales down with smaller sized Dutch Ovens, and this one is gigantic, all other smaller D.O. uses will be even more economical. Stacking two of them (for two part meals) is even more conservative of heat, so even more economical. Using them in a fireplace (so the heat warms the house too…) is a double good.

    And, frankly, I was surprised to find that the food tastes a lot better. ( I speculate as to why in the comment just above that one… more caramelization and more Maillard reaction). So even if it doesn’t save money, I really like what it does for flavors.

    That it could also work from fires made by burning bits of the parliament building or bits of limo tires, well, that’s something for the future …
    ;-) I hope…

    @R. de Haan:

    Nice to see that someone “over there” is “getting it”. This is just one of those things that sounds good to folks who are clueless (“nobody loses anything because they get equal equity”) that is just so obviously out of touch with the realty of the average “Paycheck to Paycheck Person”, that it dramatically illustrate where the Elite are out of touch and increasingly off their rockers…


    Well… ripple effect?…

    @Graham No.3 & DirkH:

    That about covers it. Nice to see someone is having a “wet pants moment” and maybe a bit of a re-think… It would be nice of them to exempt folks to whatever is the statutory insurance limit (in the USA it was $250,000 last decade that I noticed it…) but I think that, at this point, the cage is rattled and no amount of “I won’t rattle it again” is going to undo the prior rattling…


    On CNBC world they just had BNP Paribas and Societe General? at down 4.4% and 3.5% or so… Looks like EURO banks tanking hard… IBEX off 2.1% Micex off 2.75%. They have a “board” with a load of stocks on it (hundreds?) with green or red blocks by each stock. Call it 10 high and a two dozen or three wide. There are about 10 green squares (in the upper left) and the rest are red…

    This is going to be interesting…

  30. BobN says:

    At some point, someone that doesn’t like getting haircuts will act. Maybe the Russians or Chinese, but I would think you would start seeing dead bankers there pretty soon, which may well spread to the politicians. People won’t just keep taking it when the people causing the problems never go to jail, they just continue on.
    I noticed the US is busy stress testing again, Hmmmm!

  31. Petrossa says:

    EM the difference is that the Euro is a common currency in many sovereign nations. It’s not a dollar. The difference is that nobody in Brussels cares very much about angry mobs in front of a bank, but a sovereign nation would. So the sheer highway robbery such as proposed now can only be possible BECAUSE the EU pushes the button. Else no sane government would ever propose such a measure.

  32. Ralph B says:

    I just don’t understand why the President of Cyprus doesn’t say “Hell No!”. The depositors are supposed to be last in line to take a hit. The bond holders should be first. Wipe them out and no need to screw the true hand that feeds…I mean isn’t that the whole purpose of a bank to entice people to deposit their money there rather than the mattress? How can he be so stupid? Yes the EU can be as they are not beholden to the Cyprus citizenry. But the prez? Look at Iceland as an example…last time I checked they were doing fine…and pissing off the Eurocrats because of just that.

  33. E.M.Smith says:

    New deal being talked up.

    Under € 100,000 at 3%
    Up to € 500,000 at 10%
    Over € 500,000 at 15%

    From the “what If I only rape you a little bit, would that be better? And I’ll rape the Russians more too!” department…

    Does not one of those people have a functioning brain and a small morsel of clue?

    Banco Popular went by (fast) at over 4% down. Unicredit at 4.75% down…

    You know, the total lost in all this equity plunge and sovereign bond rate rise is going to end up losing more total than it would take to completely cover all depositors in Cyprus.

  34. E.M.Smith says:

    Putin being quoted as saying that if the haircut goes through it would be “unprofessional and dangerous”… One wonders “dangerous to whom and by whom”…

    I suspect some folks might want to invest in some Geiger counters and avoid walking near Bulgarians with funny umbrellas… (Some folks ‘out of favor’ with Russia have had death by radioactive isotope on their cigarette or otherwise delivered, while some have had small pellets of ricin shot into them from special unbrellas… and there are likely other methods in use that we’ve not discovered yet…)

    IMHO, when a Russian says “that would be dangerous” he is not thinking it would be a danger to him… but from him…

  35. DirkH says:

    E.M.Smith says:
    18 March 2013 at 9:11 am
    “IMHO, when a Russian says “that would be dangerous” he is not thinking it would be a danger to him… but from him…”

    At least that would indicate that the EU is not KGB controlled from its inception in 1993. A theory that I haven’t ruled out yet.

  36. jim2 says:

    At some point, the Chinese will invade the US, kick our ass, then impose capitalism and free markets.

  37. adolfogiurfa says:

    @Jim2: The change of the president of the party in China it is just to justify a change in politics…so hold tight on your seats kids: Now the time has arrived for CHECKMATE.

  38. R. de Haan says:

    From Zero Hedge: News Russia May Reconsider Cyprus Bailout Role, Bailout Vote Delay Crushes Overnight Ramp Attempt: http://www.zerohedge.com/news/2013-03-18/overnight-ramp-attempt-fizzles-news-russia-may-reconsider-cyprus-bailout-role-bailou

  39. philjourdan says:

    One typo: “Only folks who where super-rich would loose money; and then only if the amount in any one back was too high.” It should be one bank (4th major paragraph).

    [Reply: Fixed. Thanks. -E.M.]

    The academic distinction between a recession and depression is what the money supply is doing. A recession is a negative growth of the economy, but not of the money supply. A depression is. A depression is when interest rates are negative, because the value of money is increasing. In essence, the EU just shoved Cyprus into a depression. And as you correctly noted, people will not tolerate it. If they have not already, I will be surprised if they only exacerbate the situation as all money flees the country (after all, the negative interest is only in effect on banks within the borders of Cyprus).

    It is supremely stupid. And of course only a liberal could come up with such a stupid idea.

  40. adolfogiurfa says:


  41. philjourdan says:

    The run has started. I wonder how many are truly surprised, versus how many are just feigning surprise?

  42. R. de Haan says:

    The end of systemic trust, the canary just died: http://www.zerohedge.com/news/2013-03-18/end-systemic-trust-canary-just-died I never trusted “the system” and my worst expectations became a realty when the bank bailouts were casted upon the tax payer and the only excuse for this was the “to big to fail” mantra. What happens with Cyprus goes beyond my expectations but it seems people al over Europe are finally waking up.

  43. Petrossa says:

    Well, personally, given the inescapable interconnection of the eurozone if i have to choose between the Cypriots taking the brunt (including the little folk, since they profited also from all the witwashed billions in the banks) or me as Euro citizens coughing up the dough i am perfectly at ease with the measure and sad that it’s not higher in the ESM still doles out 10 billion.

  44. Gail Combs says:

    DirkH says:

    At least that would indicate that the EU is not KGB controlled from its inception in 1993. A theory that I haven’t ruled out yet.
    NAH, The EU was a brain child of the Fabians. Follow the dots.

    From Pascal Lamy, Director General of the WTO.

    Pascal Lamy: Whither Globalization?
    Half a century ago, those who designed the post-war system — the United Nations, the Bretton Woods system, the General Agreement on Tariffs and Trade (GATT) — were deeply influenced by the shared lessons of history. All had lived through the chaos of the 1930s — when turning inwards led to economic depression, nationalism and war. All, including the defeated powers, agreed that the road to peace lay with building a new international order — and an approach to international relations that questioned the Westphalian, sacrosanct principle of sovereignty…

    Global governance requires localising global issues” — Lamy
    Over the past 70 years we have constructed the legal and institutional framework to manage closer economic integration at the regional and global level. And, of course, the WTO is one part of this scheme with responsibility for the governance of international trade relations….

    There is one place where attempts to deal with these challenges have been made and where new forms of governance have been tested for the last 60 years: in Europe. The European construction is the most ambitious experiment in supranational governance ever attempted up to now….

    …on the question of efficiency, Europe scores in my view rather highly. Thanks to the primacy of EU law over national law. Thanks to the work of the European Court of Justice in ensuring enforcement and respect for the rule of law. And thanks to a clear articulation between the Commission, the Parliament, and the European Court of Justice. It also scores highly from the point of view of redistribution policies. The European structural funds and cohesion policies have overall played a key role in the development of European regions and Member States.

    The picture is more nuanced if we look at the issue of leadership. Europe has had a relatively good record in terms of leadership as long as the leadership of the Commission was accepted….
    legitimacy is the area in which, in my view, Europe scores less well. We are witnessing a growing distance between European public opinions and the European project. One could have expected that the European institutional set up, with growing powers entrusted to the European Parliament would have resulted in greater legitimacy. But this is contradicted by the declining numbers participating in elections to the European Parliament….

    The finest minds of Europe’s centre-left gathered in London last Friday (11 March) to devise a vision to help the left regain political ground across the continent.

    The politicians who led the brainstorming session in London hope that a cocktail of New Labour Third Way ideas that break some traditional taboos of the left, elements of the Nordic social democratic model and some continental experience will revive a centre-left vision…

    the Policy Network, the London-based think-tank launched in the 1990s with the support of various heads of government including Bill Clinton, Tony Blair, Giuliano Amato, Gerhard Schröder and Göran Persson, and headed by Peter Mandelson, now European commissioner, gives more than a flavour of Third Way-ism.
    Pascal Lamy, former trade commissioner and now president of the Notre Europe think-tank, notes that the promotion of Third Way ideas “has always been the vocation of the Policy Network”.
    Lamy, who is often involved in the Policy Network’s brainstorming sessions
    and attended the launch of the Progressive Generation, admits that the declaration signed in London would not find many supporters in some continental European countries, including in France….

    The Third Way is the brainchild of Tony Giddens, former director of the London School of Economics. (a quick and dirty on the 3rd way HERE.)

    The London School of Economics was founded by the founders of the Fabian Society. Tony Blair of course is a Fabian.

    In June 2001, at the Federal Government joint standing committee on treaties inquiry into whether Australia should support a statute of the UN International Criminal Court which would affect the “sovereignty” of all Australians, when criticized by an Australian patriotic group, Labour Party Senator Chris Schacht, sarcastically exclaimed he had been a member of the Fabian Society for 20 years and further, said; “You probably were not aware that us Fabians have taken over the CIA, KGB, M15, ASIO (Australian Security Intelligence Organization), IMF, the World Bank and many other organizations.”

    So it looks like you just have not taken the dots back the final step to the Fabians. Their stain glass window recently unearthed makes their plans to SMASH the present civilization and remould it “nearer to the heart’s desire” very clear.

    The Fabians originally were an elite group of intellectuals who formed a semi-secret society for the purpose of bringing socialism to the world. Whereas Communists wanted to establish socialism quickly through violence and revolution, the Fabians preferred to do it slowly through propaganda and legislation. The word socialism was not to be used. Instead, they would speak of benefits for the people such as welfare, medical care, higher wages, and better working conditions. In this way, they planned to accomplish their objective without bloodshed and even without serious opposition. They scorned the Communists, not because they disliked their goals, but because they disagreed with their methods. To emphasize the importance of gradualism, they adopted the turtle as the symbol of their movement. The three most prominent leaders in the early days were Sidney and Beatrice Webb and George Bernard Shaw. [2] A stained-glass window from the Beatrice Webb House in Surrey, England is especially enlightening. Across the top appears the last line from Omar Khayyam:

    Dear love, couldst thou and I with fate conspire
    To grasp this sorry scheme of things entire,
    Would we not shatter it to bits, and then
    Remould it nearer to the heart’s desire!

    Beneath the line Remould it nearer to the heart’s desire, the mural depicts Shaw and Webb striking the earth with hammers. Across the bottom, the masses kneel in worship of a stack of books advocating the theories of socialism. Thumbing his nose at the docile masses is H.G. Wells who, after quitting the Fabians, denounced them as “the new machiavellians.” The most revealing component, however, is the Fabian crest which appears Between Shaw and Webb. It is a wolf in sheep’s clothing!

    See The Real George Bernard Shaw for an eye-opening view into the mind of an founding member of the Fabian Society.

    Copies of that article keep turning up missing. This new ‘sanitized’ version is rather amusing in light of the original linked above. link

  45. DirkH says:

    Well, Petrossa, and I am happy that the Eurocrats drove up the price of Gold, I knew they would, even though I didn’t know exactly how they would do it.

    But that doesn’t change the fact that we are looking at power hungry unpredictable leaders who want only one thing: Save the Eurozone, an impossible goal AS LONG AS they don’t get absolute control over all countries and all money with any means necessary, regardless of the rule of law or their own promises.

    Still “perfectly at ease”?

    The uncompetitive economies stay uncompetitive and bleed money by the day. Every one of these problems gets worse all by itself all the time. The pressure is rising all the time… This was just the beginning of the season for the European Hunger Games Summer 2013.

  46. E.M.Smith says:

    @R. de Haan:

    From that ‘canary’ link:

    It would be hard to over-emphasize how significant the Cyprus situation is. The EU demonstrated under no uncertain circumstances that they will destroy the rule of law to maintain their own power. It was a recognition of tyranny that many of us have always assumed was the case but yesterday became reality.

    The damage done here is not related to the size of the haircut – currently discussed between 3 and 13% – but rather that the legal language which each and every investor on the planet must rely on in order to maintain confidence in the system has been subordinated to the needs of the powerful elite. To the power elite making the major decisions in DC, London, Berlin, France, Brussels, et. al., laws are like ice cream, easily melted.

    That pretty much is the problem.

    We had a Rule Of Law and a hierarchy of risk. Stock holders were first. Only after their equity was wiped out, then the Bond holders were next. Only after BOTH were zeroed, would any risk fall to others. Even then, to insure depositor confidence, governments made laws that swore to insure ALL accounts up to some significant value. € 100,000 in the EU as I understand it. That forms the basis of the contract between banks, the government, and the depositors.

    So this set of laws ALL stood to protect the small depositor. It was not just the “Good Faith and Credit” of the bank owner stock holders, nor that of the bond holders, but also that of the government and often major insurance funds / companies.

    With this (now ‘proposed’) act; ALL of that is chucked out the windows.

    No rule of law. (Prior laws are just bypassed).
    No hierarchy of risk. (Were the stock holders zeroed? Bond holders zeroed? Government?)
    No contract.

    It basically says that the laws are not really what matters. There is no ‘controlling law’. Contracts are not contracts. All that matters is back room deals where you are not at the table. What “sounds good” to a few powerful elite class of folks. And they have demonstrated that they do not respect contracts, the rule of law, nothing. That they are happy to prey on the depositors to save their friends who own the stock and bond positions.

    The idea that since some percentage of the depositors are there due to it being a tax haven, or even “money laundering” or in some way ‘bad’, so it’s OK to hit them, is just so wrong. Loads of just ordinary folks have their money in those banks too. The contract with THEM is also being burnt. Many legitimate offshore bank users will also be in the mix. Then there is just the point that “One of them swore at the King. Line them up and shoot them all!” is a behaviour typically not accepted as “good”. It is typical of what is seen in the worst of Tyrannies.

    Maybe some of those deposits are illegal money laundering; where has the rule of law found them guilty? Where is the ruling of the judge? What evidence and which jury? All that, too, has been pitched on the fire. Now a few folks in a back room become judge, jury, prosecutor and executioner. (No representation from the defense is needed…) This is “law from bias and bigotry” and “execution from pre-judice”. Pre judging.

    Essentially, we have One King deciding on whim who is to be treated as criminal and what the laws will be this morning. It has been several hundred years since that was last true, for most of us. That this King is a committee rather than a single person does not change the nature of the beast.

    Then they are surprised that The Peasants notice this change of relationship and the stripping of the Rule Of Law and sanctity of contracts and hierarchy of risks and the rights to a trial?

    Yes, we notice such things.

  47. Speed says:

    Daniel Hannan in The Telegraph …
    It is irrational to start a bank run, Mervyn King once observed, but rational to join one. It remains to be seen whether the EU has irrationally started one with its expropriations in Cyprus; but there is no question that it is rational for anyone with a bank account in the Mediterranean eurozone states to join in.

    And in the Daily Mail …

    Asked why he stole from banks, the American robber Slick Willie Sutton is supposed to have replied, ‘because that’s where the money is’.

    Eurozone leaders have made the same calculation. Ever since the debt crisis struck, it was clear that, sooner or later, savers would be gouged.


  48. DirkH says:

    Gail, I know about the original plans. But Russians make plans as well. In New Lies For Old, dissident Golitsyn has made about 180 predictions in 1980 of which 95% or so came true. The “collapse” of the USSR was a planned enterprise called “Perestroika”, it seems.

  49. adolfogiurfa says:

    THEY FEEL they are strong enough now to do anything they want. In the US case I would suggest a less conspicuous way: Devaluation (btw: it is happening now. Perhaps you did not notice their hand in your pocket and your wallets but I used to buy One dollar with 3.50 peruvian Sol now I can buy one for just 2.58, so people in Cyprus are about to pay 15% while YOU HAVE ALREADY PAID 26.28% Comprende?

    @DirkH “Glasnost” (transparency) was a term coined by George Soros in his “Open Society”.
    The second stage of the open society was due to Gorbachev’s glasnost and to the development of global television…..

  50. adolfogiurfa says:


  51. E.M.Smith says:


    The difference is that the folks who pay the “inflation tax” are those with large cash holdings or those with fixed dollar denominated obligations payable to them. That is, mostly, the rich. (How many poor people hold a load of Treasuries and have $100,000 in the bank?)

    Yes, “poor folks” get hit for a little while, as their minimum wage doesn’t cover as much imported “stuff” and food and fuel costs rise. Then the politicians “give” them a “raise” back to about parity. (As, if they didn’t, those folks would not be able to buy enough gas to drive over and mow the lawns of the politicians… )

    In the end, it is exactly the banks and bankers that you do not like so much that lose the most, since they have a load of “reserves” in dollar denominated obligations (i.e. bonds) and make loans on contracts in dollar denominated terms (i.e. mortgages). For example, homes in my area sold for about $150,000 when we first moved here. Now it is about $650,000. The value of the homes is about unchanged. So the bank loaned what would now be $650,000 of value then, and is being paid back about $350,000 of value. (average over the years). The person who bought the home got a $650,000 value home, for an obligation of $150,000. That $1/2 Million difference was borrowed out of their homes by many folks and financed their lifestyle during the “housing bubble”. Very few of the people living here now could buy their own homes today. They were largely “gifted” much of that value. (It breaks down, of course, at that stage; since at some point new money can’t come in. Thus the housing bubble bursting and the present attempt to keep it inflated by The Fed.)

    In the end, the home owner gets the house for a promise to pay one large value, then delivering a smaller value over time. The loser is the mortgage holder. (Much of the Housing Bubble came out of the mortgage issuer no longer being the mortgage holder, so a load of mortgages were issued and bundled into ‘securities’ like SIVs and such and sold to other banks around the world.) In essence, the “Banking Collapse” was a result of the banks being losers in the inflation game and holding mortgage backed ‘securities’ in a time of stealth inflation.

    I have trouble feeling all angry at the banks for giving me 1/2 of my house and losing money value and I have trouble feeling fleeced by inflation when it benefits me and hurts the banks.

    I find it easy to feel upset about both the financial malfeasance that led to the banking collapse (fostered by both Democrats and Republicans) and the fact that, though the inflation game is clear, it keeps being played. Distressing many people in the process. Also, that some smart investment operators made $Billions off of playing the “game” better than the banks; and that now the people, through their governments, are asked to ‘fix it’; that does not sit too well either. But there were only modest numbers of such people, and it was not the banks (or they would not be in “deep doo doo” now… )

    IMHO, I think that is a big part of why “the people” don’t complain about a few percentage points of inflation. They never have enough currency or bonds, payable to them, for it to matter much; but they do hold a lot of the obligations to pay, so benefit from the erosion of the debt value.

    (Few small holders sit on a pile of cash for a few decades… so the inflation in currency does not hit their ‘cash holdings’ if the rate is in the low single digits.)

    The Cyprus ‘deal’ gets them P.O.d because it hits them directly and without such an offsetting thing as an erosion of debt value owed to others.

    In short: People are happy when their mortgage erodes away, not so happy when their (small and shorter term) cash holdings get taken.

    Many folks get really worried and upset when the Rule Of Law is removed and contracts are broken and a powerful few act to the best interests of the “well connected” at the expense of the peasants…

  52. R. de Haan says:

    Must read: Cyprus Bailout, the final kick of the can: http://www.tradingfloor.com/posts/cyprus-bailout-final-kick-1996940686

  53. This interview suggests that it is the LeGarde (IMF and Obama’s Chicago Gang) vs Putin (KGB and KGB’s laundered $$$$). If true, it would raise a lot of questions: Why here? Why now? Don’t they know (like you said earlier) that the Russians play the game by the old rules where all sorts of people assumed room temperature prematurely and painfully. What does LeGarde and the IMF have to gain by trying to fleece the KGB and to do so right here and right now? I would guess a small amount of it would be to set a precedent for future actions, making this a test run of some sort. Buy popcorn. Cheers –


  54. E.M.Smith says:

    News Flow has a potential deal being discussed with Putin and Russia that would have Russia buy the two banks in Cyprus.

    I expect we will see that deal happen.

    Putin gets all the records from the banks, can find who did things in/from Russia that he didn’t like, and will collect more than the cost of the banks from those folks. Then he has control of a major banking center for offshoring, and can get all kinds of useful intelligence… along with a big presence inside the Euro Zone financial system.

    At the same time, he comes off as a hero to all the folks with deposits in Cyprus, including the Russians. Oh, and I’d bet he gets a big warm water port, strategic position in the near Middle East, and some priority access on developing any Cyprus oil and gas leases… Also is “up close” with the other side of Turkey and has reason to position lots of big ships there.

    Were I Putin, I’d be drooling over that…

  55. Gail Combs says:

    E.M.Smith says:
    18 March 2013 at 7:41 pm


    The difference is that the folks who pay the “inflation tax” are those with large cash holdings or those with fixed dollar denominated obligations payable to them. That is, mostly, the rich. (How many poor people hold a load of Treasuries and have $100,000 in the bank?)

    Yes, “poor folks” get hit for a little while, as their minimum wage doesn’t cover as much imported “stuff” and food and fuel costs rise. Then the politicians “give” them a “raise” back to about parity….
    Actually you are incorrect about that, at least for the USA. The poor/middle class are the ones who have been shafted during my lifetime (and yours)

    In 1976 A typical American CEO earned 36 times as much as the average worker. By 2008 the average CEO pay increased to 369 times that of the average worker.

    When the FED doubled the money supply as Obama took office I looked at what had happened to the dollar. (The links are old)

    Date…$ /oz gold.. Money supply….min. wage…..Pay in gold……CEO in gold
    1959 ….$35.25 …….50.1 billion………$1.00……..0.0284 oz.
    1974 …$195.20………101 billion………..$2.00…….0.0102 oz.
    1976 …$124.74 …… $113 billion…….$2.30…….0.0184 oz…………0.663.oz
    1985 …$354.20……..$205 billion……..$3.35……..0.0094 oz.
    1994 ..$409.80……. $ 406 billion…….$4.25……..0.0104.oz.
    2006 ..$636.30 …….$808 billion……..$5.15………0.0081 oz.
    2008 …$880.30……. $831 billion……..$5.85………0.0066 oz………….2.44.oz
    2009.$1,020.28…….$1663 billion……..$6.55……..0.0064.oz.

    If you look at the price of gold, you can see how the value of the dollar has dropped and how the minimum wage no longer has the buying power it had in 1959. Also notice that the CEO’s have not taken the hit to the wallet the ordinary worker has. The second piece of this every one misses is what inflation does to your tax bracket. Although my buying power did not changed with my ‘raises’ through the years my tax rate went from 10% to 28%

    According to an article in The New Republic of Dec. 2, 1991, in 1948, a married couple with median income and two children, paid only 2% in state, federal, and Social Security taxes. In 1999, Social Security was 15.3%, plus 2.9% for Medicare, out of the first $62,700 in wages, or $11,411.40, and then perhaps 30% in federal taxes…[if you were lucky]…. http://www.gold-eagle.com/editorials_01/stott021001.html

    Then there is the fact the ‘fraction’ in the fractional reserve system is de facto ZERO so all that debt -97% of the US ‘money supply’ – link, is created out of nothing pixie-dust money that is now owed to bankers/financiers plus interest. Unfortunately the ordinary citizen must pay that money back not with money he counterfeits but with money earned with his labor.

    Originally, according to the 1913 Federal Reserve Act, banks were supposed hold anywhere between 12 and 18% of their deposits in “reserve”. That is where the words “fractional reserve” comes in. Gradually the Fed has lowered the amount of “reserve” required until now the banks are operating on no reserve. http://www.marketskeptics.com/2009/03/us-banks-operate-without-reserve.html

    Testimony by Mr. Morgan, the bank’s president, First National Bank of Montgomery vs. Daly (1969)

    Plaintiff admitted that it, in combination with the Federal Reserve Bank of Minneapolis, . . . did create the entire $14,000.00 in money and credit upon its own books by bookkeeping entry. That this was the consideration used to support the Note dated May 8, 1964 and the Mortgage of the same date. The money and credit first came into existence when they created it. Mr. Morgan admitted that no United States Law or Statute existed which gave him the right to do this. A lawful consideration must exist and be tendered to support the Note.

    Because money is not capital, that is WEALTH, Mises concluded that an increase of the money supply confers no identifiable social value.

    When new money is created it does not appear magically in equal percentages in all people’s bank accounts or under their mattresses. Therefore money spreads unevenly, and this process has varying effects on individuals, depending on whether they receive early or late access to the new money

    It is these losses of the groups that are the last to be reached by the variation in the value of money which ultimately constitute the source of the profits made by the bankers and the groups most closely connected with them.

    This is the key point of the Fractional Reserve System. When money is devalued the first pigs to the trough steal the wealth of the late comers. Newly printed fiat money does not create new wealth it just transfers it from the poor, who are always the last to the trough, to the rich.

    Sen. Daniel Webster agreed during the debate over the reauthorization of the Second National Bank of the U.S. in 1832.

    “A disordered currency is one of the greatest of evils. It wars against industry, frugality, and economy. And it fosters the evil spirits of extravagance and speculation. Of all the contrivances for cheating the laboring classes of mankind, none has been more effectual than that which deludes them with paper money. This is one of the most effectual of inventions to fertilize the rich man’s field by the sweat of the poor man’s brow. Ordinary tyranny, oppression, excessive taxation: These bear lightly the happiness of the mass of the community, compared with fraudulent currencies and robberies committed with depreciated paper.”

    James Madison, the “Father of the U.S. Constitution” stated:
    History records that the money changers have used every form of abuse, intrigue, deceit, and violent means possible to maintain their control over governments by controlling money and its issuance.”

    It is pretty darn clear the bankers are winning in their attempt to gain control of all governments.

  56. R. de Haan says:

    The banksters and the political establishment are like the two hands on the belly.

  57. adolfogiurfa says:

    @Gail Combs: You are right; I was going to make a reference to metallic gold, that´s where all the 9,000 thousand points of excess in DowJones are going, while the price of Gold is kept low by selling “paper gold”. The next crack has been planned ahead, it will take the majority of assets of the whole world into the hands of the crazy “elite”, changed into gold & lands, while we commoners will suffer the PRIME TIME SHOW OF DISTRACTION: WAR.

  58. adolfogiurfa says:

    Will “little Susie” wake up?

    Wake up, little Susie, wake up
    Wake up, little Susie, wake up
    We’ve both been sound asleep, wake up, little Susie, and weep
    The movie’s over, it’s four o’clock, and we’re in trouble deep
    Wake up little Susie

  59. A wake up call indeed and not just for little Susie.

    I can’t think of a better way to frighten away foreign investors or start a run on Cypriot banks.

  60. agimarc says:

    Other possibilities include the EU / IMF attempting to pressure Russia away from closer ties to Israel. Russia signed a natural gas development deal with Israel for its new offshore gas field. Cable today has reported that Gazprom offered to pay off the entire Cypriot debt in return for exploration rights to natural gas fields around Cyprus in the eastern Med. I find the closer connections between Israel and Russia very interesting, as they have already purchased drone technology from the Israelis. Cheers –

  61. E.M.Smith says:

    @Gail Combs:

    Um, I think your points are “orthogonal” to what I was saying. Also, it would be nice if folks learned not to start things off with “You are wrong”. Most often that isn’t true (even when I say it). Usually there is a difference of assumptions or “cross statements” (orthogonal) points.

    Take, for example, the two “rules” you use to measure things:

    1) Gold prices. Which, despite what people think, is a terrible proxy for stable value.

    2) CEO pay. (Where I already stated in many other places “the very rich get richer”)

    First off, gold. Like most commodities, it has wide swings of price. That is one of the reasons it makes a mediocre currency at best. While the ‘central value’ is fairly stable over very long periods of time, at any given time it can be “crazy wrong”. Just a few years back it was going for about $300 / ounce. (As central banks were sellers). Now it’s “crazy high” and had a bubble up to near $2000. That’s about a 6:1 ratio. In just a decade (or maybe two). Was oil going for $16 / bbl just a bit ago? Um, no.

    Or look back at when we were just coming off the Gold Standard. I memorized a set of prices then, so it’s an easy compare. Gold was $45 / ounce That’s about a 35:1 ratio to now. So lets look at some of the “prices then vs now”.

    Minimum wage. 35 cents $10 (San Jose)
    Postage. 5 cents about to go to 50 cents
    Bread. Dime $2 to $3 (more variation – $2 loaf most like then)
    Gasoline. Quarter $4.10 / gallon
    House. $7000 (Dad just bought it) $86,000 when sold not that long ago
    Car: $1400 About $14,000 to $28,000

    Ratios (rounded to whole digits):

    20:1 to 30:1
    10:1 to 20:1

    So on a ‘typical’ basket of ‘stuff’, wage increase at 28 is way ahead of the largest with the exception of the “better bread” (and, IIRC, the “better bread” then was 15 cents a loaf, but we didn’t buy it, so that, too, would be 20:1) THE worst case, of a better product at the lower price, is a nearly identical ratio to that of wage improvement for the minimum wage rate. Gold, at 35:1, is an “outlier”. (And gold at the ‘just a while ago” price of $900 / ounce is 20:1 and that was only a couple of years back when cars, houses, bread, and fuel were almost identical in price to now. At the couple of years before that, it was $600 so 13:1 and we won’t even talk about all those years it was stuck at about $300 while other prices were rising… 6:1 doesn’t sound so hot…)

    So using gold as a ‘ruler’ has a lot of issues. The standard practice on calculating inflation is the “basket of goods and services” model as it is far more accurate.

    Though even that “has issues”. In the ’50s Dad bought an RCA B/W TV for $500. An incredible luxury. Gold then was $35/ ounce. So that’s 143 ounces of gold, or $228,000 using a ‘gold ruler’. In reality, it was more like $10,000 equivalent. It was the first one in our town, IIRC. He had just sold a farm to somebody or some such and ‘celebrated’ with the commission. I grew up watching it from my highchair as Mum fed me breakfast and watched I Love Lucy. We didn’t get a color TV until many years after they came out as he was just not willing to toss that ‘expensive’ purchase… I think it was about 15 years later… Today I can get a High Def TV for about 10 hours of minimum wage labor. “Things change”. It’s an ongoing problem with calculating inflation rate.

    Look at the graph here:

    In 1999, Gold was about $300, substantially the same is in 1979. Gold says there was zero inflation in those 20 years. Reality said otherwise. Then it rockets up over 4 x in less than a decade. Was inflation 50% / year in those 8 years? It’s just not a very good ruler.

    Or look at the very long term adjusted to 1998 dollars:

    Which of those is the “correct” price?

    Ok, on to CEOs…

    First off, what I said was that BANKS lost value on inflation of mortgages. Not bank employees. The CEO is just an employee. Yes, a very highly paid one, and yes, CEOs have managed to wangle obscene pay packages. But they are NOT the bank. (Heck most “bankers” have a V.P. Title and are on modest wages handing out loans at a desk in the corner…)

    So first we have to decide “who are the bankers” we are talking about. The “wage slave” V.P.s or the Employee CEOs or the Incredibly Rich Connected Board Members or the folks holding the majority shares? IMHO, the ones who “win” are the shareholders (and often those with a special ‘class’ of stock). Though the Executives do tend to vote for themselves a pile of cash and perks, so “win” also. But the BANK, the legal entity that holds that long term mortgage, does not win off of it. That, IMHO, was part of why they got into the “issue repackage and sell” business. Making a lot on fees, turnover, and issuance (and refinance). There is a VERY long history of banks losing, sometimes in huge degree, on just such a long term inflation process, and then a “banking crisis” happens. (The “trick” is for the owners of the bank to suck the value out of the bank prior to the collapse… the latest trick is to do it IN the collapse via the IMF and governments and ‘special bailout deals’.)

    So we had the “S&L Crisis” in the ’70s. Same problem, really. There was a similar “banking crisis” in 33 AD.

    and a huge number of similar ones between then and now. None of this is new.

    So measuring CEO pay as a proxy for “Bank” is not quite right.

    Finally, per “fractional reserve banking”, I’ve known about that since intro to Econ in the early ’70s. It’s a standard topic. I’ve frequently pointed out that currency, which does not act as a ‘store of value’ is not the same as money, which does have a store of value function.

    So banks do not create “money” out of thin air, they create “currency”. As it is a fiat currency and not a store of value, that doesn’t really mean much. The mistake is to think that currency has any intrinsic value. It doesn’t.

    The purpose of fractional reserve, in a currency based system, is simply to allow changes in the size of the money supply without the need to print wagon loads of paper and mint barge loads of coins. Yes, it enables the banks to earn “fees and interest” off of “nothing”. Yet it also enables you to buy a home off of “nothing”. They “create the currency book keeping entry” and assign it to you. You assign it to the home seller. They give it back to the bank, who makes an offsetting entry. (In reality, there may be many banks in the middle each taking and giving entries that came from the others).

    Do realize that “fractional reserve banking” existed long before the USA went off the gold standard. Read that article about the Panic of 33. Money, then, was silver and gold. Banks has ‘loaned long and borrowed short’. (That is, depositors had put in gold and silver, that was then lent out on mortgages for longer terms.) Then the Senate decided to pass some laws that required some amount of a Roman Citizen’s money be invested back in Rome… the resultant ‘accidental run’ as Roman’s asked for their deposits back, that were invested in provinces, resulted in a lot of “bank failure”.

    In short, “Fractional Reserve” banking is more about insuring enough liquidity to cover short term lenders wanting money back when lent long term, than it is about Fiat Currency vs Metal Money.

    Put another way, if our money were made of Gold. I’d take a pound of gold and ‘deposit it’ in the bank. They would lend it out to some person making a new business who spends it on, say, carpentry. The carpenter deposits it in the bank, who lend it out to a person wanting to buy a home, who gives it to the seller, who deposits it in the bank, who lends it out….

    The only thing that prevents that expansion from proceeding to infinity, is the requirement to keep some “fraction” of each deposit in “reserve”, so that when some of the depositors come in and ask for the “10 day savings deposit” back, instead of rolling it over, the bank can give it to them. It works this way with Gold as it does with Paper.

    The only real difference is that with Gold, when a Banking Crisis happens, somebody needs to find a lot of gold, or call in a lot of loans “early” to get the gold, and start unwinding all those loans and deposits. In a paper currency system, a “lender of last resort” can just issue more currency to cover the sudden demand. (Or change the reserve requirement percentage to enable more “leverage” and so more ‘currency creation’ via deeper fractionation.)

    I remember the constant “hustle” to keep your savings account rolling over back in the Gold Standard days, and the emphasis put on the ability of the bank to deny withdrawals if they were short of ready cash in a banking panic. You have not nearly so much of that these days, as they can go to The Fed discount window and pick up any needed currency…

    So it really is an orthogonal question when looking at gold vs currency and Fractional Reserve banking. BOTH gold and paper give the banks the ability to ‘cycle the cash’ several times and ‘create currency’ via that cycling. It is a fundamental property of “paper loans”, really. (That is, if I loan you a pound of gold, and you give it to the carpenter, who uses it to buy a new chariot, and the chariot seller loans it to the horse farmer who… We still only have one pound of gold, but have at least two “loans” of a pound of gold. We have, in essence, “created” two pounds of gold as loans. No bank involved. And a ‘loan crisis’ will happen as soon as I ask for my pound of gold back… the string of ‘serial loans’ needs to be unwound. (Which, btw, is part of why it is called ‘unwinding’ when taking a bank apart in a crisis…)

    So complaints about Fractional Reserve have nothing to do with complaints about inflation rate (that has little to do with gold vs paper currency). Spain had massive inflation when it invaded South America. All that Inca Gold dramatically increased the “money supply” leading to high inflation rates. Gold does not prevent inflation, it only makes it a bit harder and a bit more rare. It also introduces wide ‘value bands’ on the currency (see that long term gold price chart in 1998 dollars…) as metal are volatile in price.

    FWIW, I don’t have much position on metal backed currency vs fiat currency. Both have issues. I lean a little more toward “redeemable in gold” than “gold in circulation” or “paper only” as I grew up with it and it worked OK then. Yet it didn’t stop Johnson from his dollar buggery to fund the Viet Nam War. All that matters, really. is that the supply of money / currency be strictly limited and controlled. Though that looks like the one thing that can not be done. (Even with Gold. The USSR was having an annual gold sale and used it partly to introduce swings in the value of the dollar. As we were gold based. I remember newspaper articles from then complaining about it.)

    I suppose, if pushed, I lean a tiny bit more toward “commodity backed” than fiat, but I’d likely choose some other commodity. ( I’ve talked about my ideas on that in other threads, somewhere. Nothing, today, prevents having a ‘debit card’ where you can specify what ‘commodity’ is holding your value. So you could put it in grain, or pork bellies, or gold, or tin, or … then when you go to buy, say, a Starbucks coffee, you would sell out a portion of your ‘pork bellies’ and pick up a ‘Standard Starbucks Latte’ (or whatever) and hand that over to the Starbucks folks. All automatically and electronically. As the sum total of commodities is more stable than any individual one, the total ‘money supply’ is more stable. To dampen risk of any one commodity shortage or glut, ‘standard baskets’ could also be produced. Even have room for a “standard Iowa Acre” fund ;-)

    That’s the best I’ve been able to come up with.

    Oh, and circulating gold and silver coins have relatively high wear rates. Your money supply has slow leakage over time into individual atoms diffused over the surface of the planet. Look at some really old circulated coins. Several (many?) percent loss in one generation. Can’t do that for 1000 years and have it work…

    Well, this is getting long… but, to summarize:

    Fractional Reserve Banking happens under ANY monetary system Even one without banks as folks can do ‘chain loans’ to each other with ‘zero reserves’. It is orthogonal to type of money or currency.

    Gold vs Fiat money is orthogonal to other questions, and gold does not prevent inflation at all times, nor provide a stable monetary value. (It is a little prone to deflation as money wears away and as economic growth justifies a larger money supply, but one does not exist… It is also harder to deal with the inevitable banking crisis from ‘borrowing short to lend long’.)

    Inflation in non-gold terms has wages for minimum wage earners keeping up with typical prices over long periods of time.

    The Very Wealthy stay ahead in the game, and get further ahead, be they bankers, or not.

    The CEO is not the BANK is not the Bank OWNER.

    Most of your points are orthogonal to what I was saying, being gold based or looking at CEO employee pay.

  62. adolfogiurfa says:

    @E.M.: Which of those is the “correct” price?

    You know, far better than us, the answer: ANY OF THEM , it is a CONSTANT of VALUE, a reference. So, the question to formulate is the inverse: How many ounces of gold a certain currency buys…

  63. John Robertson says:

    Strikes me that monetary units have only local value or even meaning, without rule of law.
    When contracts are ripped apart as is happening in Cyprus, local networks, long lived foods and weaponry start to be more important than units of exchange.
    Trade needs trust.
    This theft is a direct attack on civilization as we knew it.
    Its insanity, even if planned, as once the mob is loose, all bets are off.

  64. Petrossa says:

    I am a pragmatic. The EU snowball is rolling and no one the world can control it anymore. It’s become an entity with it’s own dynamic and all they can do is run after it and pick up the pieces. As such i am still at ease, since i know whatever happens it was inevitable.

    The Huxley-Orwell transition https://dl.dropbox.com/u/1828618/An_Orwellian_America.pdf is imo a perfectly clear description of where we are (going).

    The Euro and the EU never should have been brought to life, i voted NO like the majority who was asked did, but it’s there anyway. So no i just hope it’ll hold up long enough till i die. Which isn’t that far off so i still a good chance to enjoy my life.

  65. Steve C says:

    Yes, it’s fraud. And theft. And breach of trust. (Ha! “Trust” Them?). And no doubt a lot more undesirable activities. But it seems to me that what they’re planning in Cyprus is only a slightly more honest and transparent version of what they do everyday anyway. Consider:

    1. I put my money in a Cypriot bank. The Cyprus gov’t steals x% off the top. Result: The money I have in the bank is worth less than what I put in.

    2. I put my money in a UK bank. The interest on offer is y% below the rate of inflation. Result, after a few years, the money I have in the bank is worth less than what I put in.

    The only practical difference is that the Cypriot plan is out in the open and plainly visible, while the inadequate interest rates can be covered by all manner of bland assurances that “of course, we always maximise the rates of interest paid to our customers”. The fact that your cash is going to meet the Financial Boojum and “softly and silently vanish away” is kept in very soft focus indeed.

    When I hear of a banking contract which places the same requirements of honourableness, honesty and accountability on the bank as on the little customer, I’ll maybe start to believe that things are changing for the better. I’m not holding my breath.

  66. adolfogiurfa says:

    Currencies are really backed by the production of goods not of evil.

  67. E.M.Smith says:

    CNBC reporting that Cyprus parliament has rejected the deal / tax / fee / bail-in on depositors.

    Now what?…

  68. Petrossa says:

    Lot’s of head scratching. Something will come about.
    Russia offers to buy Cyprus http://hotair.com/archives/2013/03/19/russia-offers-to-bail-out-cyprus-for-a-price/ I say let them have it.

    Btw a week ago most political leaders had withdrawn their money: http://deutsche-wirtschafts-nachrichten.de/2013/03/19/in-letzter-minute-zypern-politiker-pluenderten-ihre-bank-konten/

    It goes to show, tax havens are by definition corrupt, so no one should be surprised to get taken to the cleaners one day or another.

  69. DirkH says:

    E.M.Smith says:
    19 March 2013 at 6:20 pm
    “CNBC reporting that Cyprus parliament has rejected the deal / tax / fee / bail-in on depositors.
    Now what?…”

    Uncertainty. VIX through the roof. Panic buying of Gold. Flight into safety of HIGHLY LEVERAGED huge players.

    Likes that.

  70. E.M.Smith says:


    Amazing, but not surprising. My German is “rusty to say the least”, but if I’ve got it right:

    In der Woche vor der Entscheidung der EU für eine Zwangsabgabe in Zypern, sollen fast 4,5 Milliarden Euro das Land verlassen haben. Vor allem von Regierungsmitgliedern und Personen aus dem Umfeld der Regierung ist die Rede.

    In the week before the decision of the EU for a compulsory levy in Cyprus, almost 4.5 billion euros have left the country. It is especially members of the government and people close to the government that we are talking about.

    Der Chef der zypriotischen Zentralbank schätzt, dass in den ersten Tagen nach der Einführung der Zwangsabgabe etwa 10 Prozent der Einlagen auf Banken in Zypern das Land verlassen werden (hier). Doch wie die italienische Nachrichtenagentur Ansamed mit Verweis auf lokale Medien berichtet, hat die Kapitalflucht schon längst große Ausmaße erreicht. So sollen allein in der Woche, bevor am Wochenende die Entscheidung über die Zwangsabgabe fiel, hunderte von Bankkunden Kapital in Höhe von fast 4,5 Milliarden Euro ins Ausland gebracht haben. 4,5 Milliarden Euro innerhalb von nur einer Woche.

    Einige der ungenannten Quellen gehen davon aus, dass die Kapitalflüchtlinge vor der Steuer auf Einlagen gewarnt worden seien. So hätten nämlich vor allem Regierungsmitglieder und Personen aus dem Umfeld der Regierung ihr Kapital ins Ausland gebracht. Insgesamt flossen seit Anfang des Jahres bereits 20 Milliarden Euro ins Ausland.

    The head of the Cypriot Central Bank estimates that in the first days after the proposed introduction of a compulsory levy of about 10 percent of deposits in banks in Cyprus deposits started to leave the country (here). But as the Italian news agency Ansamed reported with reference to local media, the flight of capital has long since reached large proportions. Just in the week before the weekend when they decided on the compulsory levy, hundreds of bank customers moved a capital amount of nearly 4.5 billion euros abroad. EUR 4.5 billion in just one week.

    Some unnamed sources suggest that the capital refugees had been warned of the tax on deposits. Thus it is mainly government officials and people close to the government which have moved their capital abroad. Overall, since the beginning of the year, 20 billion euros were invested abroad.

    Just Amazing…

    I guess “It’s good to be a friend of the Kings”…

    Some of that will simply be folks realizing that Cyprus has a problem and bugging out. But some more will also be “friends of ‘officials’…”

  71. Graeme says:


    I suspect the strong hand of the Russian “mafia” here

  72. John Robertson says:

    Love the exposure of the politicians and bureaucrats moving their wealth out ahead of time, if they get held to account I will gloat over their rationalizing; Cypriots we are here working selflessly for your best interests.

  73. p.g.sharrow says:

    Somehow exposure seems inadequate to me. Forfeiture and prison would be more in order. pg

  74. E.M.Smith says:


    That article has one comment that suggest one of the M.P.s expects a new Cypriot Pound…

    As a “Wild and crazy idea”… How about Cyprus just move to the Ruble Zone? Let Russia buy the banks, and redenominate everything in Russian Rubles… Makes all that “offshoring” so much eaier… :-)

  75. Petrossa says:

    At this time if Cyprus leaves the Euro it’ll have a debt 10x times the GDP and a worthless currency, so that’s not very likely. imo now they are playing the Russians against the EU in the hope of getting a better deal from the EU. Preferably they want EU money, since otherwise they lose their gas reserves to Gazprom. But the EU is playing hard to get, since they can’t sell buying out Russian black money to the electorate. My bet is on Cyprus going with EU in the end, but who knows.

  76. Petrossa says:

    Guess i am a visionary:

    Cyprus does not appear to be interested in the offer, however:

    The proposal states that Gazprom will fund the restructuring of the country’s crippled financial institutions in exchange for substantial control over the country’s gas resources while Cyprus won’t need to take the harsh bailout package offered by the EU.

    EU offered a 10 billion euros rescue package to Cyprus with the condition of raising 5.8 billion euros ($7.5 billion) by taking a piece of every bank account in Cyprus. The originally proposed levies on deposits are 9.9 percent for acounts exceeding 100,000 euros and 6.7 percent on anything below that.

    Cypriot President Nicos Anstasiades is not willing to discuss the Russian’s offer according toNewsit who cited an anonymous source close to the President.

    “The president is not going to discuss this plan because he wants a solution that will come from the EU,” said the anonymous source.http://www.weeklystandard.com/blogs/report-russian-company-offers-bailout-cyprus-exchange-gas-exploration-rights_707768.html

  77. punmaster says:

    What was the line from the Vietnam war? ” We had to burn the village in order to save it.”
    There will be some bumps on the road to Euro Utopia, but the Masters will get it right. Besides, I’m in the US. It can’t happen here. ;)

  78. Gail Combs says:

    E.M.Smith says:
    19 March 2013 at 1:15 am

    @Gail Combs:

    Um, I think your points are “orthogonal” to what I was saying…..

    I was probably not clear. I also think you can not look at situations like this in isolation, you need context.

    So a few definitions:
    First I used gold because that is what the international banks have used traditionally in trading among themselves. Except for times when gold is obtained by raiding, the crusades and Spain’s stripping of the America’s come to mind, the amount of gold does not normally increase rapidly. Even with the gold rush times in the USA the increase in gold was accompanied by an increase in territory opened up to farming. The value of gold fluctuates with the trust in government fiat currency as the present rush to buy gold shows.

    I agree that the correct method is to tie ‘Money’ to ‘Wealth’ and when I say wealth I mean mining, manufacturing, agriculture and forestry. Those are the four activities that actually produce wealth. I do not like tying currency to GDP

    Definition of ‘Gross Domestic Product – GDP’
    The monetary value of all the finished goods and services produced within a country’s borders in a specific time period, though GDP is usually calculated on an annual basis. It includes all of private and public consumption, government outlays, investments and exports less imports that occur within a defined territory.

    In MHO GDP is a measure of how often money changes hands and not a measure of wealth, especially when it includes government as a creator of ‘wealth’ and not a consumer of wealth.

    This graph shows the GDP of the USA has increased greatly since the 1960’s yet the number of people engaged in primary wealth building, farming and manufacturing has declined drastically.
    In 1960 farmers made up 8.3% of labor force by 1990 it was down to 2.6% of labor force. In 1970 24% of the labor force was engaged in manufacturing now it is less than 9% and falling. This fall off in wealth creation is seen in the cash flow from the USA to China you showed in another thread and in our negative trade balance, see graph: the U.S. trade deficit / surplus as a percent of GDP since 1960 through Q3 2008. from this link here. That graph shows why GDP is a really rotten measure of wealth.

    BANKERS – When I say bankers I mean the great banking families who pull the strings not the local small bank who is their target.

    Somewhere in the trillionaires room of Heaven three old codgers are sitting around a table smoking cigars and chuckling over the J. P Morgan Chase & Company buyout of Bear Stearns for a paltry $2.00 a share. Not so much because the price had been over $130 a share a few weeks earlier but because the Federal Reserve Board put up $30 billion of the government’s money to guarantee the sale.

    Yes, Mayer Amschel Rothschild, J. P. Morgan and John D. Rockefeller, patriarchs of three of the most powerful family fortunes in history have waited nearly two centuries to see their dreams fulfilled. Perhaps such patience is why their families have remained successful by steadfastly maintaining the rules of the game as set down by their founders.

    It was 248 years ago, in 1760 that Mayer Amschel Rothschild created the House of Rothschild that was to pave the way for international banking and control of the world’s resources on a scale unparalleled and somewhat mysterious to this date….

    From oil (Shell) to diamonds (DeBeers) to gold (from 1919 until 2004 a Rothschild was permanent Chairman of the London Gold Fixing committee which met twice a day in the Rothschild offices in London) the Rothschild’s quietly accumulated a foothold in critical industries and commodities throughout the world.

    A master at building impenetrable walls around his family assets the current value of the Rothschild holdings are estimated to be between $100 and $300 trillion, yes that is trillion dollars! Now for a point of reference the current United States National Debt is $9.4 trillion….

    Yeah, THOSE bankers.

    Again it is a follow the dots situation. Nathan Rothschild set up the Rhodes Scholarship scheme. Clinton was a Rhodes Scholar. Clinton pushed NAFTA, WTO and signed into law the five banking bills that destroyed the protections set in place after the Great Depression to prevent a banking crisis. Clinton is also pushing the London School of Economics Third Way scheme.

    Clinton showed his contempt for the ordinary American and the US Constitution when he said
    “We can’t be so fixated on our desire to preserve the rights of ordinary Americans.”
    – Bill Clinton, USA Today on 3/11/93, page 2a

    That goes right along with Pascal Lamy’s rhetoric on wiping out national sovereignty doesn’t it?

    This is a quick and dirty on those Clinton laws. (It is interesting that the link I used for the information, http://www.fdic.gov/regulations/laws/important/index.html has been disabled.)

    The McFadden Act of 1927 or Amendment to the National Banking Laws and the Federal Reserve Act (P.L. 69-639, 44 STAT. 1224): Prohibited interstate banking.

    Law: Negating above:
    Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 (P.L. 103-328, 108 STAT. 2338). (Clinton signed)
    Permits bank holding companies to acquire banks in any state one year Beginning June 1, 1997, allows interstate mergers.

    The Glass-Steagall Act or Banking Act of 1933 (P.L. 73-66, 48 STAT. 162): Separated commercial banking from investment banking, establishing them as separate lines of commerce.

    Bank Holding Company Act of 1956 (P.L. 84-511, 70 STAT. 133): Prohibited bank holding companies headquartered in one state from acquiring a bank in another state.

    Law: Negating both of the above laws:
    Gramm-Leach-Bliley Act of 1999 (P.L. 106-102, 113 STAT 1338) (Clinton Signed)
    Repeals last vestiges of the Glass Steagall Act of 1933. Modifies portions of the Bank Holding Company Act to allow affiliations between banks and insurance underwriters. Law creates a new financial holding company authorized to engage in: underwriting and selling insurance and securities, conducting both commercial and merchant banking, investing in and developing real estate and other “complimentary activities.”

    Federal Deposit Insurance Corporation Improvement Act of 1991 (P.L. 102-242, 105 STAT. 2236).
    Also known as FDICIA. FDICIA greatly increased the powers and authority of the FDIC. Major provisions recapitalized the Bank Insurance Fund and allowed the FDIC to strengthen the fund by borrowing from the Treasury.

    Housing and Community Development Act of 1992 (P.L. 102-550, 106 STAT. 3672).

    RTC Completion Act (P.L. 103-204, 107 STAT. 2369):
    implement provisions designed to improve the agency’s record in providing business opportunities to minorities and women.. Expands the existing affordable housing programs of the RTC and the FDIC by broadening the potential affordable housing stock of the two agencies.
    Increases the statute of limitations on RTC civil lawsuits. In cases in which the statute of limitations has expired, claims can be revived for fraud and intentional misconduct resulting in unjust enrichment or substantial loss to the thrift.

    Commodity Futures Modernization Act of 2000. .CDSs, credit default swaps were exempted from regulation.

  79. E.M.Smith says:


    It’s certainly looking that way…

    @Gail Combs:

    OK, “THOSE” bankers, I agree… but they are largely now not running banks. They’ve moved on to being puppeteers… And broadened out into multi-layerd multinationals and NGOs.

    Pretty much all the rest of what you just said, I agree with. The only place I’d not agree is on the use of gold as a monetary standard. The size of the market is small enough that prices can be jerked around by not all that much buying / selling. It acts much more like “volatile commodity” than “standard of price”, so for things like measuring “price inflation over time”, it’s pretty lousy. Over century time scales, it is pretty good (for example one ounce has bought “A mans suit of fine cloths” for many centuries) but has “excursions” even inside that…

    I’ve generally found that “complex yet standard” manufactures are a pretty good standard. So “loaf of bread” has a fairly broad mix of energy, agriculture, labor, etc. embodied in it. It is also a very widely traded object and has reasonable size markets along with reasonable (but not ruinous) competition. Similarly, “gallon o gas at the pump” has a volatile raw material in it, so bounces some, but also embodies capital stock in the refinery, labor, delivery, etc. So while it has a 25%-/+ ‘ripple’ the long term tends to track. (Interesting to note that “food and fuel” are in the groups left out of the official calculation today…) A house or car is similarly complex and uses a broad swath of inputs to make. Make a ‘basket’ of several of that kind of thing, it does a darned good job of ‘tracking what is happening’.

  80. Gail Combs says:

    A bit more context on banking, inflation and shearing the sheeple.
    The Rockefellers were very much involved in the modernization of US Agriculture and get heaps of praise for it. Here is the down side of that picture.

    the Federal Farm Loan Act of 1916…

    To provide capital for agricultural investment, to create standard forms of investment based upon farm mortgage, to equalize rates of interest on farm loans, to furnish a market for United States bonds…It shall be the duty of the Farm Loan Board to prepare from time to time bulletins setting forth the… advantages of amortizing farm loans…. advising investors of advantages of farm loan bonds…

    Much of the money was deposited in small country banks in the Middle West and West which had refused to have any part of the Federal Reserve System, the farmers and ranchers of those regions seeing no good reason why they should give a group of international financiers control of their money. The main job of the Federal Reserve System was to break these small country banks and get back the money which had been paid out to the farmers during the war, in effect, ruin them, and this it proceeded to do.

    First of all, a Federal Farm Loan Board was set up which encouraged the farmers to invest their accrued money in land on long term loans, which the farmers were eager to do. Then inflation was allowed to take its course in this country and in Europe in 1919 and 1920. The purpose of the inflation in Europe was to cancel out a large portion of the war debts owed by the Allies to the American people, and its purpose in this country was to draw in the excess moneys which had been distributed to the working people in the form of higher wages and bonuses for production.

    The Agricultural Depression
    In 1914, Federal Reserve Bank rates had dropped from six percent to four percent, had gone to a further low of three percent in 1916, and had stayed at that level until 1920. The reason for the low interest rate was the necessity for floating the billion dollar Liberty Loans. At the beginning of each Liberty Loan Drive, the Federal Reserve Board put a hundred million dollars into the New York money market through its open market operations, in order to provide a cash impetus for the drive. The most important role of the Liberty Bonds was to soak up the increase in circulation of the medium of exchange (integer of account) brought about by the large amount of currency and credit put out during the war. Laborers were paid high wages, and farmers received the highest prices for their produce they had ever known. These two groups accumulated millions of dollars in cash which they did not put into Liberty Bonds. That money was effectively out of the hands of the Wall Street group which controlled the money and credit of the United States. They wanted it back, and that is why we had the Agricultural Depression of 1920-21.….

    Senator Robert L. Owen, Chairman of the Senate Banking and Currency Committee, testified at the Senate Silver Hearings in 1939 that:

    “In the early part of 1920, the farmers were exceedingly prosperous. They were paying off the mortgages and buying a lot of new land, at the instance of the Government–had borrowed money to do it–and then they were bankrupted by a sudden contraction of credit and currency which took place in 1920. What took place in 1920 was just the reverse of what should have been taking place. Instead of liquidating the excess of credits created by the war through a period of years, the Federal Reserve Board met in a meeting which was not disclosed to the public. They met on the 8th of May, 1920, and it was a secret meeting. They spent all day conferring; the minutes made sixty printed pages, and they appear in Senate Document 310 of February 19, 1923. The Class A Directors, the Federal Reserve Advisory Council, were present, but the Class B Directors, who represented business, commerce, and agriculture, were not present. The Class C Directors, representing the people of the United States, were not present and were not invited to be present.

    Only the big bankers were there, and their work of that day resulted in a contraction of credit which had the effect the next year of reducing the national income fifteen billion dollars, throwing millions of people out of employment, and reducing the value of lands and ranches by twenty billion dollars.”


    Given The CEO of General Electric is now one of Obama’s Pet Czar’s this is another interesting point connecting to Pascal Lamy’s statement that an agreement was made in 1930.

    1931 “Meanwhile, strange collectivist plans for ending the depression were brewing in the business world. In September, Gerard Swope, head of General Electric,..presented the Swope Plan to a convention of the National Electrical Manufacturers Association. The Plan, which garnered a great deal of publicity, amounted to a call for compulsory cartellization of American business—an imitation of fascism…”We have left the period of extreme individualism. . . . Business prosperity and employment will be best maintained by an intelligently planned business structure.” With business organized through trade associations and headed by a National Economic Council, any dissenting businessmen would be “treated like any maverick. . . . They’ll be roped, and branded, and made to run with the herd.”….One of the most important supporters of the cartellization idea was Bernard M. Baruch, Wall Street financier. Baruch was influential not only in the Democratic Party, but in the Republican as well,…. Meanwhile, the states moved in to compel cartellization and virtual socialization of the crude oil industry. The oil-producing states enacted laws to enable governmental commissions to fix the maximum amount of oil produced, and this system is basically still in effect. The state laws were enacted under the public guise of “conservation,” which is a pat excuse for any compulsory monopoly or cartel in a natural resource….

  81. DirkH says:

    ChiefIO, which begs the question: Is there a computed index or a finance product that contains a mix similar to the one you describe? Would make a great benchmark.

  82. Gail Combs says:

    My SWAG is that the International Movers & Shakers setup both the Soviet Union (see link 1 and link 2 ) and the EU. As Pascal Lamy stated they were ‘Experiments’ They pulled the plug on the Soviet experiment and I think they are, with this move, planing on pulling the plug on the EU as they move to the newest iteration, the World Trade Organization and the Third Way.

    It should be pretty darn obvious that the collapsing of the USA, EU and the rest of the West has been intentional. Lamy’s articles give some of the information another source is doing a search on “Al Gore” and “interdependence” See the Interdependence Project and Interdependence Day Placed in the Congressional Record Also see:

    Beyond Interdependence: The Meshing of the World’s Economy and the Earth’s Ecology
    Jim MacNeill
    Pieter Winsemius
    Taizo Yakushiji
    Foreword by David Rockefeller
    Introduction by Maurice Strong

    I can not find my references, but several years ago I ran across a quote from Gore stating that the aim was for the world to be broken up into different groups. For example the USA would be providing “Know how” China and India manufacturing, South America and Africa food.

    The US Civil War showed us just how well that idea works and I doubt China has any real intention of going along although Al has been very evident in his presence in China as has ‘World Bank Advisor’ Maurice Strong.

  83. Gail Combs says:

    DirkH says:
    20 March 2013 at 12:02 pm

    ChiefIO, which begs the question: Is there a computed index or a finance product that contains a mix similar to the one you describe? Would make a great benchmark.
    The US Government has/had a “Basket of Goods” they used for determining inflation but like everything else it was subject to manipulation. Steak was changed to hamburger for instance. (Sorry I do not have the link ready to hand)

    I found it! At Shadow Statistics of course.

    …Although the ensuing political furor killed consideration of Congressionally mandated changes in the CPI, the BLS quietly stepped forward and began changing the system, anyway, early in the Clinton Administration.
    Up until the Boskin/Greenspan agendum surfaced, the CPI was measured using the costs of a fixed basket of goods, a fairly simple and straightforward concept. The identical basket of goods would be priced at prevailing market costs for each period, and the period-to-period change in the cost of that market basket represented the rate of inflation in terms of maintaining a constant standard of living.

    The Boskin/Greenspan argument was that when steak got too expensive, the consumer would substitute hamburger for the steak, and that the inflation measure should reflect the costs tied to buying hamburger versus steak, instead of steak versus steak. Of course, replacing hamburger for steak in the calculations would reduce the inflation rate, but it represented the rate of inflation in terms of maintaining a declining standard of living. Cost of living was being replaced by the cost of survival. The old system told you how much you had to increase your income in order to keep buying steak. The new system promised you hamburger, and then dog food, perhaps, after that.

    The Boskin/Greenspan concept violated the intent and common usage of the inflation index. The CPI was considered sacrosanct within the Department of Labor, given the number of contractual relationships that were anchored to it. The CPI was one number that never was to be revised, given its widespread usage.

    Shortly after Clinton took control of the White House, however, attitudes changed. The BLS initially did not institute a new CPI measurement using a variable-basket of goods that allowed substitution of hamburger for steak, but rather tried to approximate the effect by changing the weighting of goods in the CPI fixed basket. Over a period of several years, straight arithmetic weighting of the CPI components was shifted to a geometric weighting. The Boskin/Greenspan benefit of a geometric weighting was that it automatically gave a lower weighting to CPI components that were rising in price, and a higher weighting to those items dropping in price…

    And Yes there is good old Bill Clinton screwing the American public again.

  84. adolfogiurfa says:

    In a few words: You have lost your country. It cannot recover as it does not produce real goods anymore.
    What is the hidden desire of those “puppeteers” who robbed you your country?

  85. E.M.Smith says:


    It’s the standard way of doing the computation, but most inflation statistics use a wider basket of goods and services (even things with high rates of change like electronics / TVs and things with fewer input types like wheat).

    Shadowstats (ref.above) has kept the old USA one ‘running’ while the USA has buggered the official one. Watch out for “weighting games”… I figure each thing ought to get the same weight since you are computing a ‘delta’ on that thing and all those ‘deltas’ averaged is the average of inflation. Often, though, things will be weighted according to percentage consumed, so more weight to bread, less to escargot… Then the fun begins. How much ‘average house’ do you consume? Oh, and labor costs are also used. Then you get problems like “Your bread cost is going up but your wages are going down, so on average, there is no inflation.”… For that reason, I would keep wages and earnings in a bucket outside of ‘costs of stuff’.

  86. Gail Combs says:

    E.M.Smith says:
    20 March 2013 at 11:37 am
    OK, “THOSE” bankers, I agree… but they are largely now not running banks. They’ve moved on to being puppeteers… And broadened out into multi-layerd multinationals and NGOs.

    Pretty much all the rest of what you just said, I agree with. The only place I’d not agree is on the use of gold as a monetary standard…..
    Yes I will agree that gold can be manipulated if it is used as the monetary standard. If I had gold right now I would be looking for a good place to move my wealth to as I moved out of gold.

    China has been going into gold in a big way even encouraging ownership of Silver and Gold by its citizens. so I would not put it past the master puppeteers to have a nasty surprise up their sleeves in relation to gold pricing. As you said gold is just a commodity like any other. The IMF is already making a move.

    The International Monetary Fund will begin reporting central bank holdings of Australian and Canadian dollars this year, underlining their growing importance to the world economy.

    The IMF currently reports the global reserve holdings of the U.S. dollar, euro, sterling, yen and Swiss franc on a quarterly basis. It holds the figures in a database known as the Composition of Foreign Exchange Reserves, or COFER.

    An IMF spokeswoman confirmed to The Wall Street Journal on Wednesday that the Canadian dollar and so-called Aussie would join the club and appear on its reserve-currency list within as little as three months….

    Australia and Canada both have resources-focused economies that have benefited from booming demand for raw materials from Asia and elsewhere over the past decade. Global investor appetite for their currencies has risen since the countries emerged from the global financial crisis in much better shape than either the U.S. or Europe.

    The IMF decision comes after sovereign wealth funds and central banks–including those in Switzerland and Russia–began diversifying their reserve-currency holdings into high-yielding Australian securities as an alternative to the low rates being offered in other developed countries….

    Thanks to the WTO China’s economy is now nicely tied to that of the USA, Canada, Australia and the EU. Raise food and fuel prices sky high and you suck up all that cash flow going to China from the EU and the USA. The WTO agreement on Agriculture => US Food safety Modernization Act is guaranteed to raise food prices due to fines and compliance costs leading to the mass exit of most US farmers from farming. We should see that hitting in the next couple of years. If you think biofuel was a nasty bump in food prices just wait and see what happens when the new regs give farmers an additional reason to get out of food and into biofuels.

    FDA proposes new food safety standards
    The FDA is proposing two new safety rules which may kill off small farms and farmers markets. These rules are very similar to what was done to butchers in the late 1990’s which resulted in the loss of approximately 10,000 small butchers nationwide and caused the current bottleneck in meat processing such that small farmers have a very hard time getting their livestock slaughtered, cut and smoked for consumers.

    WTO Traceability for Livestock Moving is back in the Federal Register AGAIN.

    CAGW => skyrocketing fuel/electric prices as Obama and the EPA close down the US coal plants. The UK shows what is in store with 65 deaths per day this winter due to fuel poverty and over 25% ‘fuel poor’ that is spending over 10% of their income on fuel.

    If the countries China gets its raw materials from and the countries China sells to ignore gold as a currency it does not matter how much of the metal they hold. The international bankers are the ones who hold the whip hand when it comes to what the international currencies are and not any one country.

    As the Chinese curse says, “May you live in interesting times” so pull up a chair and the popcorn and watch while the puppeteers crash our civilization and “REMOULD IT NEARER TO THE HEART’S DESIRE”

  87. adolfogiurfa says:

    @Gail Combs: La vida te da sorpresas…, (life gives you surprises) as the song reads. Of course, we are really living “interesting times”, but times to see their “New World Order” collapsing…..so, pull up a chair and the popcorn…

  88. adolfogiurfa says:

    It is not too difficult to describe what we are in need of: The “Fall of Rome” and all its institutions. A revival of humanity and the END of infinite regulations, only intended to increase the power of the few. We are living a LITERAL APOCALYPSE:
    An apocalypse (Ancient Greek: ἀποκάλυψις apocálypsis, from ἀπό and καλύπτω meaning ‘un-covering’), translated literally from Greek, is a disclosure of knowledge, hidden from humanity in an era dominated by falsehood and misconception, i.e., a lifting of the veil or revelation

  89. Gail Combs says:

    Oh and it seems New Zealand is going to follow the Cyprus lead.

    Tuesday, 19 March, 2013 – 11:27

    The National Government are pushing a Cyprus-style solution to bank failure in New Zealand which will see small depositors lose some of their savings to fund big bank bailouts, the Green Party said today.

    Open Bank Resolution (OBR) is Finance Minister Bill English’s favoured option dealing with a major bank failure. If a bank fails under OBR, all depositors will have their savings reduced overnight to fund the bank’s bail out….

  90. adolfogiurfa says:

    I think the key issue it is NOT BELIEVING ANYMORE and NOT OBEYING REGULATIONS.

  91. adolfogiurfa says:

    Here we can find the explanation to many things are happening:

  92. DirkH says:

    Gail Combs says:
    20 March 2013 at 3:32 pm
    Oh and it seems New Zealand is going to follow the Cyprus lead.
    “Open Bank Resolution (OBR) is Finance Minister Bill English’s favoured option dealing with a major bank failure. If a bank fails under OBR, all depositors will have their savings reduced overnight to fund the bank’s bail out…. ”

    Nice, so they even make it a law that forces the small saver to constantly check the health of his bank… to be the first in the Bank Run queue on bad news.

    Institutionalized Positive Panic Feedback!

  93. p.g.sharrow says:

    Save the owners and screw the depositors! What kind of a banking system is this. The Bank of Mafia.
    These Bureaucrats/Politicians need to be institutionalized for the criminally insane. pg

  94. Gail Combs says:

    DirkH says:
    20 March 2013 at 6:33 pm

    ….Institutionalized Positive Panic Feedback!
    Yes, it is already having an effect. The blog I found that info on has several people in the USA already planning on getting their money out and advising others to do the same. There is one really big glitch in that plan. Only 3% of the US money supply is in actual physical printed dollar bills, the rest is electronic ‘money’ so if a bunch of worrywarts start hoarding $$$ or as one person put it stashing it under the mattress there is going to be a bit of a currency crunch.

    Another interesting comment (about NZ) was the depositors in banks are unsecured creditors and are actually the last in line so “… the money in your account will become the property of the secured creditors…” Isn’t that nice to know when your paycheck or government checks are never handed to you in cash but always deposited in a bank. In one case a company I worked for actually opened an account in my name without my permission since one of the board members of the company was also a board member of that bank. It was an illegal practice but the state official I went to shrugged it off with a so just go to the bank and withdraw the money. Note I got stuck with banking fees I never signed up for and the bank got to use my deposit as part of the fraction in the fractional reserve system.

  95. E.M.Smith says:

    Well that’s a fine How Do You Do….

    I’d thought the Kiwi’s were smarter than that…

    Per “cash”… an awful lot of the “money supply” is credit cards. Yes, it is one of the “M”s of money supply. So YOU don’t really need to withdraw your credit card debt…

    Beyond that, you can exchange one currency for another. So one could withdraw their $NZ and turn it into Yuan or Rubles… (Any airport of size can do this. “Cash” in my trading account can go to another currency in one click via buying an ETF. Insurance via SDIC, and if you think banks taking money would cause things to go ballistic, having trading accounts ‘raided’ would be worse…)

    What would I buy / do with my “cash”? Well, I’d just spend it… but that’s just me ;-)

    Not having much at any one time, it just isn’t all that much of an issue for me. Have your “deposit” happen and “same day” do a home mortgage payment, not a lot of time for losing.

    Frankly, if things are getting that dodgy, just keep your gas tank full, and buy food and ‘trade goods’ as soon as the ‘paycheck’ hits the account. Since “Paypal” lets you hold many currencies, one could also just have an ‘auto transfer’ to PayPal then swap to Swiss Francs… (though one would need to find out what “bank” applies to Paypal balances…)

    I know one thing: Tell me that my deposit can be creamed off in a ‘bank crisis’, I’m going to hustle my money out of any bank around as close to “same minute” as possible; every single deposit.

    Somebody has their head on seriously backwards if they think taking deposits will work. We’ve “been there / done that” and it took a generation to get folks to put money and trust back in banks again. The US Savings Rate is already so close to zero it’s hard to find. Most folks live “paycheck to paycheck”, so not even 2 paychecks in the bank at the same time.

    Finally, if folks start to take cash out of the banks, the banks put in an order for more currency. If that “ramp” happens slowly enough, there will just be more currency created to meet the demand.

    In essence: There are a bunch of “standard bills”, you arrange for them to be paid “same or next day” from any ‘direct deposit account”. The odds of being “hit” in those few hours is small, even if something happens. Any excess is withdrawn “same day” as cash, or spent “same day” on negotiable goods. (Buy a “Gift Card” to a store, for example… It’s not “cash” and not “in your bank”…) Even canned goods work. (Locally, canned peas are $2 / can. So “two cases of peas is a tank of gas”… You live as though you were in hyperinflation.

    Yes, someone will get “clipped” when a SHTF moment happens. But your individual odds are between about 15:1 and 30:1 of it happening to you.

    I expect if even 25% of “The Folks” start doing this, the “policy” would be rapidly reversed.

  96. Gail Combs says:

    There is another side to this idiocy. I run a small business. We used to take checks. With this development added to the few problems we had with checks last year, we are going to a cash only business.

    Remember one of the little I GOTTCHA’s in the obamacare law was the requirement that a 1099 had to be filed for every vendor you did cash business with if it was over $500/yr. Luckily that got killed before it made it out of the starting gate. This business with the banks is going to mean more small businesses are going to go to straight cash, credit/debit cards or paypal as the trust in banks goes through the floor.

    Given the general disgust with the government thieves and the general falling off of business revenue what do you think is going to happen to the tax revenue? What do you think is going to happen to any plans for new hires or expansion? In January 82% of Small Business Executives Think The U.S. Economy Is On The Wrong Track

    News like this is not going to inspire confidence in the formal economy and as this graph from Edgar Feige, a widely cited Professor Emeritus of Economics at University of Wisconsin-Madison shows the underground economy is alive and well and growing. (from this article )

    These quotes from the Edgar Feige paper are interesting given the subject under discussion.

    One of the most reliable economic statistics is the amount of U.S. currency in circulation held outside of depository intuitions by the public. By the end of 2010, U.S. currency in circulation with the public had risen to $920 billion dollars, amounting to $2950 for every man, woman and child in the country. Over the past decades we have witnessed a host of cash-saving financial innovations, leading to widespread predictions of the advent of a “cashless society”. But contrary to these expectations, the demand for U.S. dollars continues to rise and we remain awash in cash. Over the last twenty years, real per capita currency holdings increased by 79 percent and currency as a fraction of the M1 money supply rose from 30 percent to 49 percent.

    To put these figures in perspective, they imply that the average American’s bulging wallet holds 91 pieces of U.S. paper currency, consisting of: 31 one dollar bills; 7 fives; 5 tens; 21 twenties; 4 fifties and 23 one hundred dollar bills. Few of us will recognize ourselves as “average” citizens. Clearly, these amounts of currency are not normally necessary for those of us simply wishing to make payments when neither credit/debit cards nor checks are accepted or convenient to use.

    Federal Reserve surveys (Avery et al. 1986, 1987) of household currency usage found that U.S. residents admitted to holding less than 10 percent of the nation’s currency supply. Businesses (Anderson, 1977; Sumner, 1990) admitted to holding 5 percent. It seems that the whereabouts of roughly 85 percent of the nation’s currency supply is unknown. This anomalous finding suggests that the “currency enigma” (Feige 1989, 1994) and the problem of “missing currency” (Sprenkel, 1993) is still very much with us.

    The currency enigma has both a stock and a flow dimension. First we must determine who holds the outstanding stock of U.S. cash. Specifically, how much of this currency is abroad, (the dollarization hypothesis) and how much is held domestically (the underground economy hypothesis) by citizens reluctant to admit to their true cash holdings? The flow issue concerns the amount of cash payments sustained by that missing currency. If half of the missing currency is hoarded and the other half is used as a medium of exchange, turning over at an average velocity of between 30 and 50 transactions per year, (Feige, 1989a) the missing circulating currency stock would give rise to a flow of “missing payments” of an order of magnitude comparable to the entire GNP of the United States.

    Either the USA has a heck of a drug problem or my fellow citizens are less trustful of the US government than I thought.

  97. E.M.Smith says:

    @Gail Combs:

    Also, don’t forget, the tendency for ever more “Agencies” to just dip into your checking account via levy or ‘whatever’. Folks with no job and blown credit, or an alimony decree or various “settlements” and “revenue levies” and…. when they DO get a job, then often need to just “cash the check” instead of deposit it.

    Odd thought, that. The ones in the “worst” shape financially and “least” trustworthy / legal in what they are doing may be the ones best positioned for economic survival and safety….

    One of the “issues” of U.S. Currency, is that several nations use it as their national currencies. Ecuador and Liberia IIRC are two. There are more. Don’t know how much is there, but it will be significant since they don’t do a lot of banking / checking / credit in some of the 3rd world places where it is used. Then when a place like Zimbabwe starts to have “currency woes” folks will rush to “foreign currency” to park their stash. Once the New Currency comes out, a lot of the “stash” stays in that box for a few years. $US is more widely washing over the planet than most other currencies, and has less political “whim” attached to the value of it (or has historically).

    It is also a “Reserve Currency”, so some other nations hold bales of it as “Reserves” mandated by law. When the USA “Froze Iranian Assets” via a key flip (and I think they did the same, or threatened to during the ’70s oil embargo) some countries decided depending on “bits” at a NYC bank or The Fed was not the best way to hold their “Reserves”… So a chunk of this could easily be in a bank vault in Saudi… Given several years of Euro questions, I could also see banks all over the world, with “foreign exchange” to send off for “clearance” choosing to send it in Euro and leave the $US in “reserves”…

    Personally, I find it a feature that “cash” is not going away. Gives me some faith that “the other guy” maybe ‘gets it’ a little bit…

  98. p.g.sharrow says:

    As government agencies work harder to control the movement of funds within the banking system, more and more people are forced into the “non bank” arena. When I was young anyone could walk into a bank and open an account with the money in their hand. Now proof of residence, income source and identification is required. Small wonder the bottom half of society lives a cash existence and that is growing with every new banking regulation. Small wonder that some police consider possession of more then $500 cash proof of criminal activity. $500 cash will only buy a months food for a family of 4 these days.When I was a kid that would have been enough for half a year for 6 and people often had a $1000 in cash on them. Too many laws and regulation results in too little “lawful” activity. Or as our DA said “Everyone is guilty of criminal activity”. pg

  99. E.M.Smith says:


    In about 1956? 57? my Dad sold a Very Large Ranch. I think it was a $1,000,000 price tag. He got written up in United Farm Realty magazine (on the cover IIRC). Part of the “making of the deal” was him taking a cut on the commission. Then, again IIRC, the typical commission was 6%, which would be 60,000. Instead, it went for 2% (and his ‘cut’ with the brockerage was 1/2).

    The night that escrow closed, He called us all into the kitchen and counted out $10,000 in $100 bills… Roughly $100,000 in the currency of today. In the next day or two, he bought a new car (and IIRC) it was about $1400 and he paid cash. There was no tax on cars then. Sticker was what you paid. So $14,000 in current terms. He had more like $2000 in his pocket while shopping. (So like $20,000 today).

    About 15 years back, a very very wealthy Japanese Doctor that I’d met in Tokyo, came to the bay area to visit. This was the opportunity for me, and the guy who had traveled with me as translator (who knew him), to “pay back” the Dr. for his hospitality. (We had a very very nice dinner at a Swiss Restaurant). But that’s not the story.

    This guy owned a hospital in Tokyo. Something like 30 stories (as a guess – it was tall) that took up an entire BLOCK of downtown. On the very top he had a complete Japanese Tea Room and a traditional Samurai Hut built in his penthouse office. All private. His wife performed the Tea Ceremony for the 3 of us guys. Got the picture? “Millions” likely covered the first couple of floors…

    So he gets off the plane in San Francisco. He’s about 75? Ends up being badgered by “security” because he had $10,000 cash on him. “WHY so MUCH Money?!?!?” they interrogated? Several times… His answer? “I might want to buy something.” Genuinely confused by the question. (Eventually they called someone who explained that, for him, $10,000 was “lunch money”…) As an example: He wanted to see Yosemite. He asked a cab driver in San Franciso to take him there. Yes, he hired a cab for about 18 hours and several hundred miles. Bought the guy meals and gave him a big tip, too.

    But he shared, over dinner, that he was very annoyed at us Americans and how he had been treated at the airport… Saying he would not be back. (Though I suspect his age and health prevented it anyway).

    Saw on the Biz News that something like 50% of executives / business travelers from Europe responded that they were not going to any meetings in America due to the “difficulty of travel into and from the country”. I.E. the PITA it has become and way things like “Lunch Money” are criminalized.

    Oh Well…

    If I wanted to get a load of value out of a country, I could do it trivially. Have a watch band made from platinum with a semi dull finish. Put it on a crappy cheap watch. For the spouse, get a load of diamonds and make them into a “cheap looking” pair of rhinestone shoes… Just walk through with anything from $20,000 to $2,000,000 depending on what all you have made.

    Heck, make a ‘battery pack’ for your laptop. Wrap platinum shells around AAA size cores and apply labels. It will now power your laptop (for a while) and they have to destructively disassemble the battery to figure it out. And so many more things that can be done.

    Bothering people for moving money around is just stupid. (Heck, make a ‘hip flask’ of thick platinum. Pack it, empty. Feel free to demonstrate there is no liquid in it… it will look like Stainless Steel. And that isn’t even getting into the ‘exotic materials’ who’s value exceeds that of Gold. Pack a Rare Book. A rare Chinese bowl (one from a yard sale bought for $3 or so just sold at auction for $2.2 Million… somebody was stupid, and someone else smart. It looks like a white cheap bowl. It’s 1000 years old..) wrapped with a modern cheap tea pot and some tea cups so you can say it is the finger bowl… At one time, I managed a line of semiconductor fab that made parts that were about $80,000 each. (Some mil spec super duper thing). Put one on the circuit board (in a dead space) of a cheap radio in your suitcase. Pack an alarm clock with real bells on it. Make them of gold, chrome plated. Striker too. Heck, just put a metal “arch support” in the sole of your shoe made from platinum. Shape it like one, glue it into the shoe. How about the kids retainer? Make it platinum (my aunt had one once from some dental work in New Zealand… State paid medical was new then and they didn’t think much about costs – the Dr. thought platinum worked better…) Heck, put platinum zippers in some Levis and matching jacket…

    The idea that “Serious Criminals” haven’t though of those and a few dozen more is what’s silly. At one time, I saw a story about someone who had found a way to make a plastic out of cocaine polymer. Then depolymerize it at the other end. They were driving it through customs in tail light covers (red dyed) and more. If folks are doing that kind of stuff, having set of golf clubs in checked baggage with platinum heads on the “irons” is not hard at all… (Though I’d want to check what they look like on the X-ray ;-)

    Sorry to rant so much about it, but “stupid” forced down my throat from “Authority” just offends,

  100. Pingback: Fixing Cyprus – A modest suggestion | Musings from the Chiefio

  101. As an alternative point to smuggling money, I saw a while back that someone had devised a way of using something like C4 plastic explosive as a laptop case. The higher the barriers are made, the better people jump when it’s needed.

    “In God we trust – all others pay cash”….

    With the increase in automation, and robots doing a lot of the work that people used to earn their living at, how are people going to be able to earn a living in the future? This is not a trivial question, and when the politicians have finished kicking those cans down the road it will have to be faced or there will be a vast underclass of unemployable people with no income and a lot of anger.

    What is the real income/expenditure balance-sheet for Cyprus? It looks to me that the real income is in catering for tourists and the banking services. Tourism is somewhat reduced at the moment because few people have the disposable incomes that they had maybe 10 years ago, and the banking income appears to have been based on the reputation for lax banking laws (thus – money laundering) and higher interest accounts because the bets were riskier. Cyprus, therefore, has no hope of paying back any loans because there’s no real income to pay it. A loan would thus be good money after bad, and kick the can a bit further before the debt is repudiated one way or another.

  102. philjourdan says:

    @Gail Combs – it is both.

  103. Paul Hanlon says:

    Two excellent points, Simon.

    What are we going to do with all our “spare” time, and what is the real “product” of a country.

    I know most of us work. But how much of this is make-work. Government brings out a new regulation, so now people have to be hired to administer and enforce it. Then more people on the other side have to be hired to fill out the forms and ensure they are compliant. Lots of work being done, but not a penny of value being added.

    Or a house is built. It takes ten people three months from start to finish, but that house could be giving people shelter for 200 years. What’s to be done the rest of the time?

    If there is a major re-balancing, then a lot of this work will necessarily have to go. What is to be done will all these new “workers”. They have an education, they’re not work shy. Somehow, we’re going to have to go to a 3-4 day working week and retire people earlier, AND stay competitive. That is the real challenge, IMV.

    Ireland’s GNP, which is probably a better reflection of the state of things here (We have a low corporate tax rate, so companies apply “production” in Ireland which doesn’t really exist, making GDP useless) is about EUR120bn. Government expenditure is 69bn. A lot of that is wasted, yet still gets included in the figures, so what is the actual “product” of the country? There must be a better measure for this.

    Re: inflation. Another way I heard that they dicky about with the figures is to apply a “technology premium”. This years computer is bigger and faster than last years, so they say the true price of it should be higher. The actual price is lower than this true price ( a totally made up number), so it “disinflates” the figures. If you then apply a higher weighting to computers, it has an even bigger effect.

  104. Gail Combs says:

    Paul Hanlon says:
    21 March 2013 at 12:54 pm
    ….. how much of this is make-work. Government brings out a new regulation, so now people have to be hired to administer and enforce it. Then more people on the other side have to be hired to fill out the forms and ensure they are compliant. Lots of work being done, but not a penny of value being added…..
    That is one of my major complaints with governments in general and socials/progressives who always want MORE laws/regs.

    Here is a major reason US labor is no longer competitive:

    July 25, 2011 Red Tape Rising: A 2011 Mid-Year Report
    Following a record year of rulemaking, the Obama Administration is continuing to unleash more costly red tape. In the first six months of the 2011 fiscal year, 15 major regulations were issued, with annual costs exceeding $5.8 billion and one-time implementation costs approaching $6.5 billion. No major rulemaking actions were taken to reduce regulatory burdens during this period. Overall, the Obama Administration imposed 75 new major regulations from January 2009 to mid-FY 2011, with annual costs of $38 billion. …This flood of red tape will undoubtedly persist, as hundreds of new regulations stemming from the vast Dodd–Frank financial regulation law, Obamacare, and the EPA’s global warming crusade advance through the regulatory pipeline—all of which further weakens an anemic economy and job creation, while undermining Americans’ fundamental freedoms. Action by Congress as well as the President to stem this regulatory surge is essential.

    ….There is no official accounting of total regulatory costs, and estimates vary. Unlike the budgetary accounting of direct tax revenues, Washington does not track the total burdens imposed by its expansive rulemaking. An oft-quoted estimate of $1.75 trillion[1] annually represents nearly twice the amount of individual income taxes collected last year.[2]

    Regulation, bureaucrats and bureaucracy once past the basic crimes such as murder, theft, assault, battery, fraud, honoring of contracts, monopoly, monopsony and trespass and basic services such as military, roads, mail, coin and borrow money, adds no real value to the economy. Instead in most cases they impede freedom and the economy.

    You hear a country only lasts about 200 years before the ordinary people hit the restart button. I always figured that was about the amount of time it took for the government parasites to overburden the peasants with bureaucrats and bureaucracy to the point they finally revolted. Too bad none of the politicians ever figure that lesson out.

    On the carrying of excess money. The money, not you can normally be proven to have been used in drug deals and confiscated.

    Incredible as it sounds, civil asset forfeiture laws allow the government to seize property without charging anyone with a crime. Until FEAR achieved the nation’s first major federal forfeiture law reform at the turn of the millenium, the government was allowed to keep whatever property it seized without ever having to prove a case. Seized property was presumed guilty and could be forfeited based upon mere hearsay—even a tip supplied by by an informant who stood to gain up to 25% of the forfeited assets. Owners were forced into the untenable situation of trying to prove a negative—that something never happened, even though no proof of any illegal act had been offered at trial.

    Newspapers and television stories across the nation documented hundreds of cases of innocent citizens wrongfully deprived of their homes, businesses and livlihoods. Eighty percent of property forfeited to the US during the previous decade was seized from owners who were never even charged with a crime! Over $7 billion has been forfeited to the federal government since 1985….

    Under civil asset forfeiture laws, the simple possession of cash, with no drugs or other contraband, can be considered evidence of criminal activity.….

  105. E.M.Smith says:

    Oh God, the ‘we have to work less due to productivity’ idea running around again…

    NO! We all get more stuff… Avoid the French Solution, please!

    Granddad made nails. One at a time by hand. (Dad taught me how to do it, BTW). So automation makes automated nail making machines. Instead of high priced nails worth saving when taking a building apart and “remaking” them (my job at 8 years when we rebuilt a garage) we have folks who do machine maintenance and computer programming. Some on machines that make screws, bolts, and eventually even whole toasters and shoes.

    We can all be “Imelda Marcos” with 200 pairs of shoes or Jay Lenno with a garage of a dozen great cars. We don’t need to work just 2 days and have flip flops and a Yugo…

    But we do end up doing machine maintenance instead of fabrication.

    Those with the skill do more ‘fine arts work’ for others. If I’m up to my eyeballs in shoes and cars like everyone else, I can start wanting things like Faberge Eggs. I can pay an artisan to work for months on one little treasure. More jewelers and fewer nail makers.

    It’s increasing prosperity for everyone. As long as you avoid the French Disease of thinking we need to all work less to have more too; or the America Disease of thinking the government needs to make wasteful programs as “jobs programs”…

    In short, instead of ‘digging holes to fill them in’ we spend more time ‘digging holes to build a Disneyworld’ (much of which is underground…) Look at the labor that goes into making Disneyworld (and maintenance of it). That labor is available because those folks are not making nails by hand…

  106. DirkH says:

    E.M.Smith says:
    21 March 2013 at 4:09 pm
    “We can all be “Imelda Marcos” with 200 pairs of shoes or Jay Lenno with a garage of a dozen great cars. We don’t need to work just 2 days and have flip flops and a Yugo… ”

    …says the guy who doesn’t work at all, insists on baking his own bread and saving pennies on preparing his food… :-)
    (My plan is to imitate you, ChiefIO, BTW…)

  107. Petrossa says:

    Yikes. The panic spreads. Dutch bank today changes withdrawal conditions savingsaccount, underlined line says: It’s no longer possible to withdraw money instantly

  108. DirkH says:

    Petrossa says:
    21 March 2013 at 5:54 pm
    “Yikes. The panic spreads.”

    I love it when a plan comes together.

  109. E.M.Smith says:


    Oh, I wasn’t prescribing that for ME, I was prescribing that for THEM. (I’m working on my Socialist Evil Bastard skill set of prescribing things for others ;-)

    Seriously, though: I’m doing “coping behaviours” to deal with the stupidity that results from The French Solution. I’d rather be hauling down $200,000 / yr as project manager for a robotics assembly company and having a robot bake my bread…


    Wonder what bank has a load of Greek and Cypriot Bonds in their “Reserves”?

    Well, it’s nice to see more banks contributing to lighting a fire under the “Run On The Bank” contagion. If I had any money in a bank, I’d be worried. One of the features of a “vow of poverty” is that you don’t have money sitting in banks…

    Thinking about it, I’m actually pretty well positioned that way. Much more “credit card” balance available than “cash in bank”, so worst case, if the bank won’t let me have my cash, I go charge a load of “stuff” then tell them to pay my charge card with my deposits… If they won’t, then they can to go court to argue with themselves about why they didn’t pay them. (I’ll be in the back with the copy of my “Please Pay from FOO account” letter… )

    Hmmmm…. Interesting strategy. If you have deposits at ANY bank, pick up a credit card from that bank which is rarely used. In case of “no withdrawals for you” – go shopping for “trade goods”…

    Wonder if there is any report anywhere of just who all is holding Greek, Spanish, and Cypriot paper…

  110. Paul Hanlon says:

    @Gail Combs
    Wow, $1.75trillion, let’s be charitable and say 10% of the economy. That would buy a lot of shoes :-)).

    Another cost is the things they don’t do. As a trivial example (and this probably wouldn’t apply so much in America), traffic light sequencing. There isn’t one traffic light in Ireland sequenced with the prior or next one (not deliberately, anyway). This is something that is entirely in the purview of Government, yet they can’t be bothered to just sit down and work it out. So, you have “road rage” and bad behaviour, more petrol use, more accidents, longer journeys, missed appointments and extra costs as a result.

    It used to drive me batty, thankfully I work from home a lot more now.

  111. Petrossa says:

    EM Arabs hold a lot there, ‘palestinians’ store their skimmed foreign aid there. I always tell my wife: never hold money in a bank, always be in debt. That way they have a problem not me. Just a checking account which is mostly borderline overdrawn.

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