Perspectives on the global economic meltdown- (Nov 28 2010)

RoyG · Post by **RoyG** » 05 Mar 2013 03:30

Greece will probably hand over its gold to Germany and cut public spending drastically. They were supposed to leave the Euro 2 years ago. The Germans are committed to fiscal responsibility and a strong Euro currency. They are also eyeing the Italian gold reserve.

Klaus · Post by **Klaus** » 09 Mar 2013 11:42

Fitch downgrades Italy's sovereign debt rating again.

The agency also forecast Italy's public debt, one of the eurozone's biggest, would peak this year at close to 130 per cent of GDP (gross domestic product), worse than Fitch's previous estimate of 125 per cent.

It said the economy was likely to shrink by 1.8 per cent this year.

Fitch's BBB+ rating nonetheless leaves Italian debt in the investment grade category.

The agency estimated Italy's public debt would fall to around 2.5 per cent of GDP this year.

That would put Rome below the eurozone public deficit ceiling of 3 per cent of GDP.

Neshant · Post by **Neshant** » 10 Mar 2013 09:35

RoyG wrote:Greece will probably hand over its gold to Germany and cut public spending drastically. They were supposed to leave the Euro 2 years ago. The Germans are committed to fiscal responsibility and a strong Euro currency. They are also eyeing the Italian gold reserve.

Interesting that the above european countries, even in their bankruptcy, are never forced to sell their gold to creditors.

Neshant · Post by **Neshant** » 10 Mar 2013 09:41

I've always suspected these so called tax deferred retirement accounts are rackets setup by the banking "industry" to seperate people from their money. Money is easy to put in and never easy to get out. A nice nest egg sits in plain view of vultures ranging from banking crooks to govt.

You just know it will be looted, as it already is with fees and stock market scams, one fine day. Should a major 2008 style crisis erupt in the US, I'm sure bankers will get govt to backstop their enormous losses this time by robbing these retirement accounts now that the national debt has already been piled up high.

Priority #1 for any prudent person is to keep your hard earned wealth out of the view of banking goons & govt which is one and the same these days.

---------

February 22, 2013
The Feds Want Your Retirement Accounts
By John White

Quietly, behind the scenes, the groundwork is being laid for federal government confiscation of tax-deferred retirement accounts such as IRAs. Slowly, the cat is being let out of the bag.

Last January 18th, in a little noticed interview of Richard Cordray, acting head of the Consumer Financial Protection Bureau, Bloomberg reported "[t]he U.S. Consumer Financial Protection Bureau [CFPB] is weighing whether it should take on a role in helping Americans manage the $19.4 trillion they have put into retirement savings, a move that would be the agency's first foray into consumer investments." That thought generates some skepticism, as aptly expressed by the Richard Terrell cartoon published by American Thinker.

On Nov. 20, 2007, Theresa Ghilarducci, professor of economic policy analysis at the New School for Social Research in New York, presented a paper proposing that the feds eliminate the tax deferral for private retirement accounts, confiscate the balance of those accounts, give each worker a $600 annual "contribution," assess a mandatory savings tax on every worker and guarantee a 3 percent rate of return on the newly titled "Guaranteed Retirement Accounts," or GRAs. (the 3% being printed no doubt)

In mid-September 2010 the Departments of Labor and Treasury held hearings on the next step toward achieving Ghilarducci's goals. The stated purpose was to require all private plans to offer retirees an option to elect an annuity. The "behind-the-scenes" purpose for this step was to get people used to the idea that the retirement assets they had accumulated would no longer be part of their estate when they died. Hint : if you want to pass on your hard earned wealth to your children, don't leave it in plain sight of banking & govt

Read it all :
http://www.americanthinker.com/2013/02/ ... ounts.html

RamaY · Post by **RamaY** » 10 Mar 2013 09:55

The other day a very knowledged person was saying that soon Fed is going to links an individual's retirement accounts (401k and Roth etc) in determining the Social Security payouts.

Per this formula, if the expected SS payout for Person A is $2000 per month and s/he has $1200 worth of 401k returns, then he will be given only $800.

That means people who were planning to get SS payouts in addition to their 401k savings would have a big shock when they retire.

Suraj · Post by **Suraj** » 10 Mar 2013 10:16

^^^

Sounds like something tailormade to cause a massive revolt - SS payments are supposed to be funded by SS contributions, regardless of IRA/401K, which are entirely different pools.

SriKumar · Post by **SriKumar** » 10 Mar 2013 10:37

^^^ Agree. If indeed anything like this is publicly declared (as opposed to just being discussed behind closed doors), the first thing a person would ask is: why should I contribute the same amount to social security anymore when my future payouts will be reduced. Any Senator/representative who votes for something like this (i.e. same SS contributions today but reduced payouts for contributor upon retirement) will be voted out in the next term- by the people directly affected. The super-rich wont care either way, but anyone for whom getting $2000 per month makes a difference will care- i.e. about 90%+ of US citizens. Also, if such a plan is implemented (where SS payment will be reduced in proportion to their 401K payments) it would incentivize people to spend more now and not feed their 401K as much. Does the govt. really want this? (the one good news for de gormint would be ... more spending=good phor today's ecanamy) .

pentaiah · Post by **pentaiah** » 10 Mar 2013 19:09

Social security is not a gratis
It's a differed annuity of payments for which individuals have paid through pay roll.

SriKumar · Post by **SriKumar** » 10 Mar 2013 19:52

^^^ Not fully sure what is meant by the above. If it is not gratis, it is all the more reason that people would be justified in not (or reduced) paying into their SS account if their SS checks from govt. are reduced from current, published values. Why would I want to continue paying the same amount if the returns are going to reduce? About deferred payments, from what I understand, it is not merely deferred payments; retirees receive more than what they paid in (due to inflation over decades from the time the worker started to contribute, upto time of retirement). As I understand it, todays' retiree checks are being supplemented by SS contributions from today's workers (in addition to what the retiree paid into S.S., 20 and 30 years ago).

IMHO, it is essentially a pyramid situation where a large number of workers are required at the base to pay in to support the fewer retirees at the top. Now, the base of the pyramid (= number of workers x their SS contrib.) is shrinking relative to the top, which will see a major expansion with the baby boomers really retiring 5-10 years from now (the official retirement date has already started). Dont know how this pyramid situation will be managed without external contribution to the SS money pool.

After 2008, no one is going to trust the bankers on private retirement accounts (per Neshant's post) or 401Ks maintaining their value (which Bush Jr. once touted as something that ought to replace social security, IOW privatize all SS) ...and this brings us back to people relying on social security as it is currently funded and managed (by the gormint). And if the gormint has no extra money- which they dont, they shaft social security somehow....which seems to be what's indicated in RamaY's note. But the backlash will be severe, unless they restrict the shell-game to the top 5% (or 25%!) and reduce the number of backlashers. 25% would catch most of upper middle class and still make it..... yikes!

Christopher Sidor · Post by **Christopher Sidor** » 10 Mar 2013 22:58

Medicine Wears Off: Is the Euro Crisis About to Return?

The above mentioned article is a German view. I hope that none of the horrors pointed out in the article come true.

By announcing that he intended to do everything possible to save the common currency, if necessary, Draghi was merely buying time.

For weeks, his promise felt like a strong cold remedy: It successfully treated the symptoms, but it didn't eliminate the virus causing the cold in the first place. On the surface, the patient seemed to have recovered, but in reality he was as sick as before.

France which is the 2nd largest economy in the euro-zone and europe, as per 2011 figures, is going through stagnation. This has left the burden for euro mostly on german shoulders. Also once the german elections are over then we might see a debt haircut for the Greece, this time impacting the sovereigns which had lent money to Greece. If there is a haircut for Greece after elections and if Angela Merkel is the winner, then her credibility with the German population would be hurt. There might be questions asked whether the austerity is the currect way forward.

But almost all experts agree that the financial injections will not solve Greece's problems in the long run. Another debt haircut, this time by public creditors, is seen as unavoidable if Greece is to recover. But that won't happen before Germany's federal election in September.

Finally is the case of Cyprus. It is a tiny country, which has massive rescue demands as a proportion to its GDP size. But it is resisting both the demands put forward by the donors. These demands are
1) Increasing the corporate rate of taxes from 10% to 29%.
2) Investigate the cyprus financial sector for money laundering.

The German government still questions whether the Mediterranean island even needs an aid program. Conversely, EU Economic and Monetary Affairs Commissioner Olli Rehn believes: "Every euro-zone member is systemically relevant." He opposes plans to involve the creditors of Cypriot banks in the costs of the aid program.
....
According to participants, there is no evidence of Franco-German unity in the negotiations. But time is short. Cyprus will run out of money around Easter, which is when the monetary union could begin to totter again. "If Cyprus were to face a disorderly default, there is a high probability that the consequence would be an exit from the euro zone," warns Commissioner Rehn.

If we look at the points raised in the article then not all hope is lost. French economy can be fixed. It is the dangerous exposure that French financial institutions have to southern Europe that is the main concern. And it is entirely possible that CDU might not win, though it is a remote chance. So the new chancellor of germany might make a clean break from the austerity drive of Angela. And that might be good.

But it is the last problem, cyprus, which is the cause of headache. If that is not tackled correctly, then all the hard work that has gone to make the euro more resilient would be for nothing.

ramana · Post by **ramana** » 15 Mar 2013 01:53

Expert says Gold to hit $1000

While many have argued that gold has finally found support at $1500, Don Hays, the founder and president of Hays Advisory in Nashville, is not one of them.

"We think of gold as nothing but a fear index," Hays says in the attached video. "It moves up when people are afraid."

Right now, while he and most other investors share short-term concerns about a toppish stock market, his expectations for gold are for a slight bounce, at best. Even then he foresees a bounce that would produce ''lower highs" before continuing with its downtrend.

"It's hard to imagine, but I can't see gold selling for much more than $1000 an ounce," this one-time NASA engineer predicts. "Not immediately, but in the next two to three years ."

There are a few basic reasons why Hays feels this way. First, he believes the ongoing bull market in stocks will continue to mature, thus draining the proverbial well of some much needed fear and pessimism. Secondly, gold's 12-year uptrend that began after the 9/11 attacks in 2001 has been broken. He wouldn't be surprised to see gold bounce a little from here and then fall again. "The third time it comes down to that support level [~$1500], it actually breaks through," Hays says.

Interestingly, a few weeks ago Hays Advisory also raised its cash allocation to 20% after its indicators suggested investors were getting a bit overconfident about stocks. He calls this a ''short-term defensive move" that's designed to prepare for a better entry point following an expected 5% to 6% slump in the S&P 500.

..

Christopher Sidor · Post by **Christopher Sidor** » 15 Mar 2013 19:18

^^^
Gold, truly the only metal which is dug up from a hole, where nature put it, to be refined and polished so that it can be put in another hole, this time by humans.

akashganga · Post by **akashganga** » 16 Mar 2013 08:07

Christopher Sidor wrote:^^^
Gold, truly the only metal which is dug up from a hole, where nature put it, to be refined and polished so that it can be put in another hole, this time by humans.

Gold has been used as wealth all over the world at least since last 5000 years. Sometime in future all these fiat paper currencies will disappear and gold will still be there and still be trusted by humans as wealth.

Gerard · Post by **Gerard** » 17 Mar 2013 02:36

Cyprus: panic as savings levy is imposed

Cypriots reacted with shock that turned to panic on Saturday after a 10% one-off levy on savings was forced on them as part of an extraordinary 10bn euro (£8.7bn) bailout agreed in Brussels.

vic · Post by **vic** » 17 Mar 2013 11:57

So the banks are confiscating the deposits, cool, we are quickly moving towards bank mafiadom

vishvak · Post by **vishvak** » 17 Mar 2013 13:03

One-off? link

Cypriots with less than €100,000 in their accounts will have to pay a one-off levy of 6.75 percent, Eurozone officials said. Those with more will lose 9.9 percent.

Cypriot bank officials said depositors could access all of their money except the amount set by the levy.

The levy itself will not take effect until Tuesday, following a public holiday, but action is being taken to curb electronic money transfers over the weekend.
..
The levy is supposed to function as a caution to bank lenders to avoid depositing funds in overstretched banks.

While Cyprus is the third-smallest of the Eurozone economies, the move could signal repercussions for other much larger economies which have also overstretched themselves, such as Spain and Italy.

Gerard · Post by **Gerard** » 17 Mar 2013 20:10

Cyprus savings levy: UK government to compensate troops and civil servants

The government is to protect the savings of British military personnel and civil servants in Cyprus who were facing the prospect of a levy as part of the €10bn (£8.7bn) eurozone bailout on the Mediterranean island, George Osborne has announced.

Neshant · Post by **Neshant** » 17 Mar 2013 22:28

i wonder if this savings account thievery is a trend that will spread.

with the prevailing interest rate, you're better off keeping your savings in gold or cash stashed at home.

better start withdrawing a good part of your savings from the bank just in case.

I'm amazed anyone keeps money in a bank in those countries.

It's only a matter of time before someone leaves the Euro and then you'll have your Euro balance converted over a weekend or public holiday into a modern day hill of beans with little or no value outside your country.

Suraj · Post by **Suraj** » 17 Mar 2013 23:57

The EU and the Cypriots are playing a very dangerous game here. A run on the banks is not in anyone's interest, short or long term. Paging JEM for inputs.

Neshant · Post by **Neshant** » 18 Mar 2013 00:01

Its a testing ground to see if the same can be implemented throughout europe without much panic & revolt. As I said, get your money outta the bank and keep it in cash. This bullsh&t is going to be rolling through a town near you.

Banking ultimately is a parasitic "industry". It produces little of value and requires massive wealth extraction through inflation, devaluation and now out right thievery from the productive population to keep itself alive.

shyam · Post by **shyam** » 18 Mar 2013 00:12

This looks like a way to engineer a bank crash in Europe. After seeing bank saving loot in Cyprus for a bailout, people in Spain, which is looking for bailout, will start withdrawing their deposit in Spanish banks to avoid such a loss due to bailout. This in turn can create a major bank run and even a bank crash, similar to Lehman.

Normally this kind of cuts should happen to bank investors and holders of bank debts, and not the depositors.

vishvak · Post by **vishvak** » 18 Mar 2013 00:50

From Full statement from President of Cyprus

In the extraordinary meeting of the Eurogroup, we faced decisions that had already been taken and came across faits accomplis .. we would either choose the catastrophic scenario of disorderly bankruptcy or the scenario of a painful but controlled management of the crisis, which would put a definitive end to the uncertainty and restart our economy.
..
A possible choice of the catastrophic scenario option would have the following consequences:

1. On Tuesday, March 19, immediately after the holiday weekend, one of the two banks in crisis would cease to operate, since the European Central Bank, following the decision already taken, would terminate the provision of liquidity. The second bank would suspend its work, and neither could avoid collapse. Such a phenomenon would instantly lead 8.000 families to unemployment.

2. The State would be obliged to compensate depositors in response to the obligation regarding guaranteed deposits. The capital required in such a case would amount to about 30 billion euros, which the State would be unable to pay.

3. A proportionate amount corresponding to the deposits of thousands of depositors for deposits over 100.000 Euro, would be led to a vicious cycle of asset liquidation, and these depositors would suffer losses of over 60%.

4. Such an uncontrolled situation would push the whole banking system into collapse with all the attendant consequences.

5. Thousands of small and medium enterprises, and other businesses would be driven to bankruptcy due to their inability to trade.

As a result of the above, the service sector would be led to a complete collapse with a possible exit from the euro. That, in addition to the national weakening of Cyprus, would lead to devaluation of the currency by at least 40%.

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.

The second choice is mentioned positively, would the Cyprus parliament accept the same?

An article on doing business in Spain link

Suraj · Post by **Suraj** » 18 Mar 2013 01:07

What purpose would engineering a bank crash serve ? What party gains from that ?

Theo_Fidel · Post by **Theo_Fidel** » 18 Mar 2013 04:29

Wait... ...the 6.5% bank levy raises about $6 Billion.

There is ~$100 Billion in bank deposits in Cyprus? BTW total population ~ 1 Million. What the... ..where is this money coming from.

RamaY · Post by **RamaY** » 18 Mar 2013 05:12

^
Lot of Russian millionnaires put their money there. Cyprus wanted to be a new Switzerland, same as Dubai.

The funny thing is past reports show that Cyprus needed $8b bailout to bring its bank into green.

Now they are talking about $10b in bank account levy plus the $15b (~11b euros) in this round. That means that $8b bailout became $25b overall loss.

Where did the money go? I guarantee that it went in to EU theifs - UK, France, Italy gang.

SriKumar · Post by **SriKumar** » 18 Mar 2013 05:26

The foreign investment into Cyprus was targeted harder, at 10% for accounts over 100,000 Euro. Deposits below that were 'taxed' at 6.75% (must be the local citizens). Here's an article from Economist:

http://www.economist.com/blogs/schumpet ... s-bail-out "Unfair, short-sighted and self-defeating"

Almost €6 billion of the savings for taxpayers in euro-zone countries came from losses imposed on depositors in Cyprus’s outsize banks. A one-off 9.9% levy will be imposed on all deposits over the insurance threshold of €100,000 before banks reopen after a bank holiday on Monday. That idea had been in the air for a while, not least because a lot of those uninsured deposits came from outside Cyprus, and from Russia in particular. The politics of saving wealthy Russians with money loaned by thrifty Germans were always going to be tricky.

What had not been anticipated was a 6.75% loss for savers with deposits in Cypriot banks below the insurance ceiling. Cypriots woke up this morning to find bank branches closed to them. By the time they will be able to get at their money, it will be too late. The offer of equity in banks to replace the value of their savings is meant to be a balm but it’s not a choice they would have made. Why this decision was taken is not yet clear. The most plausible explanation is that the Cypriot government itself preferred to spread the pain rather than wipe out non-resident depositors and jeopardise its long-term prospects as an offshore financial centre for Russian and other money.

RamaY · Post by **RamaY** » 18 Mar 2013 05:45

^ a good lesson for those Russians who became more METE (More European than Europe) instead of investing in their own society (for whatever reasons).

You talk to Russians who are living in the west and they are exactly like our MUtU dhimmis. And the Russians in Russia are overwhelmed by alcoholism and drugs.

The future looks very challenging for Russia.

The need to readjust their moral bearings.

Neshant · Post by **Neshant** » 18 Mar 2013 09:39

The Russians must be pissed with the EU having conspired to extract this tax primarily from their citizens overseas - money laundered though they may be. Perhaps Russia should show up with a fleet of warships on Cypriot shores and demand it be compensated for this loss.

Meanwhile the MSM is doing all it can to keep the sheep calm in the PIGS nations so bank runs do not occur there :

http://www.reuters.com/article/2013/03/ ... B420130316

A person would have to an idiot not to see the writing on the wall. Cyprus is a testing ground for wealth confiscation that will be rolled out across the western world sooner or later. Get your money out of banks while you still can.

shyam · Post by **shyam** » 18 Mar 2013 11:37

This person was talking about a European banking collapse few days back.

Jim Willie: I’d Welcome a Gold Move to $1450 & A Silver Move to $25!(March 11, 2013)

The Golden Jackass Jim Willie sat down with The Doc this weekend for an extraordinary interview regarding gold, silver, and what Willie believes will soon be a massive European banking collapse.

Willie states that a Big European Bust is Coming- evidenced by the fact that European banks received $1.2 trillion from the NY Fed in January alone!

Willie states that the coming European bust will ignite a global Gold rush, a massive short covering rally, and will result in a powerful 30% to 50% rise in the gold price!

Christopher Sidor · Post by **Christopher Sidor** » 18 Mar 2013 13:38

The Russians put their money in Cyprus because at the end of the day their wealth was ill-gotten. Obtained from corruption, thuggery, intimidation or worse murder. Off course this happened with the active collaboration of the Russian ruling class and bureaucrats. And if they got their money from fraudulent means and then kept their money in Russia it is possible for it to be taken away in the same way as it was obtained in the first place. Never ever underestimate the avarice of the ruling establishment. This has to be remembered even in the case of India too.

Cyprus banks took Russian money due to cultural reasons and greed. And now the common man in Cyprus is bearing the cost of Cypriot banks mistakes. So it seems unfair. Well not exactly. When the music was playing and wine was flowing none of the citizens of Cyprus raised a hue and cry about this ill-gotten wealth that was flowing into their country.

The PSI(Private Sector Initiative) which was implemented in Greece, where the private bond holders of Greek debt took a haircut, was not implemented in Cyprus. Euro-zone countries could not invoke PSI in Cyprus, because PSI was supposed to be one-off case, never to be repeated. If they had broken that understanding and demanded a PSI for Cyprus then all the other PIIGS countries would demand the same. Worse the demand would be made that the public creditors of Greece ought to have their own PSI, this time instead of private a Public Sector Initiative.

All this brings about lack of a fiscal union in Euro-zone back to the fore. Now since EU itself is not united on the Euro, just look at the countries which have not taken part in Euro, the euro-zone countries cannot set up a parallel euro-zone fiscal union. The EU Parliament, the European commission, etc are for all of Europe and not just for euro-zone countries. So having a fiscal union of more than 5 currencies, is just not feasible. What EU needs a Euro which is like a dollar or rupee, accepted as a currency by all of the constituents that make up US or India respectively.

vera_k · Post by **vera_k** » 18 Mar 2013 20:34

Comes down to the lack of shared identity in Europe, which makes it acceptable for Euro to feed on Euro. Cyprus parliament should vote to join Turkey to force a reality check.

Suraj · Post by **Suraj** » 18 Mar 2013 21:15

The Russians in Cyprus are not going to get much help from Moscow, especially not with Putin back in the Kremlin now. That money is dirty, and they keep it in Cyprus just in case they end up behind bars like Khodorkovsky and other lower profile oligarchs.

However, the whole idea of confiscating deposits is beyond absurd. I cannot believe the ECB compelled the Cypriots to do that. Surely Merkel and co were aware of these moves. Have they lost their minds ? A punitive tax on income and revenues is one thing, but on deposit base ? Especially when Germany is involved, with all its institutionalized memory of post-WW1 and WW2 banking collapse.

RamaY · Post by **RamaY** » 18 Mar 2013 21:18

Neshant wrote:The Russians must be pissed with the EU having conspired to extract this tax primarily from their citizens overseas - money laundered though they may be. Perhaps Russia should show up with a fleet of warships on Cypriot shores and demand it be compensated for this loss.

Meanwhile the MSM is doing all it can to keep the sheep calm in the PIGS nations so bank runs do not occur there :

http://www.reuters.com/article/2013/03/ ... B420130316

A person would have to an idiot not to see the writing on the wall. Cyprus is a testing ground for wealth confiscation that will be rolled out across the western world sooner or later. Get your money out of banks while you still can.

It would be fun if Putin asks Cyprus to become part of Russia as an autonomous region for the $10b payment.

The russians are losing $10b anyways and have another $70-100b there. So isn't it a good idea for Cyprus to become part of Russia and get out of EU?

And Cyprus has maritime borders with Syria

vishvak · Post by **vishvak** » 18 Mar 2013 21:19

So steps taken in Cyprus are not considered as 'standard' model for wealth confiscation (considering huge blackmoney w.r.t. savings/population), if such a problem occurs in la la land of Swiss bankers, will Swiss eat into black monies from India too? Meaning first allowing loot stores & black money stores as some kind of first world right and therefore sucking up from hard earned monies looted from the whole world using secrecy rules?

Would not bond market help first wold Europeans?

pankajs · Post by **pankajs** » 18 Mar 2013 21:26

Euro zone crisis Live - Reuters

pankajs · Post by **pankajs** » 18 Mar 2013 21:32

Putin hits out at "dangerous" Cyprus bank deposit levy

(Reuters) - Russian President Vladimir Putin criticised on Monday a levy imposed by the European Union on bank deposits in Cyprus as unfair and setting a dangerous precedent.

"While assessing the proposed additional levy on bank accounts in Cyprus, Putin said that such a decision, should it be made, would be unfair, unprofessional and dangerous," Kremlin spokesman Dmitry Peskov told journalists.

Russian citizens account for the majority of the billions of euros held in Cypriot banks by foreign depositors, and Russian banks are heavily exposed to the island as a favoured offshore centre for big business.

There are almost 70 billion euros in deposits held in Cyprus. A little less than half that is held by non-residents, most believed to be Russian.

At the end of last year, Russian banks had around $12 billion on deposits with Cypriot banks and corporate deposits accounted for another $19 billion, according to Moody's credit-rating agency.

pankajs · Post by **pankajs** » 18 Mar 2013 22:00

The Cyprus precedent

Don’t for a minute believe that this decision is part of some deeply-considered long-term strategy which was worked out in constructive consultations between the EU, the IMF, and the new Cypriot government. Instead, it’s a last-resort desperation move, born of an unholy combination of procrastination, blackmail, and sleep-deprived gamesmanship.

The last thing that Cyprus or any other country needs is a bank run, which will leave the national balance sheet in the classic pinch where “on the left, nothing’s right, and on the right, nothing’s left”. What’s more, in many ways the precedent of forcing depositors to take a haircut would be even more damaging than the precedent of imposing a haircut on Greek bondholders: at that point there would be really no reason at all to have deposits in any Mediterranean country.

Cyprus’s president, Nicos Anastasiades, said today that he was forced to choose this path because the only alternative was the collapse of Cyprus’s two major banks, with “catastrophic” consequences. What he didn’t say is that those banks aren’t remotely safe yet — not with the prospect of a massive bank run hanging over their heads.

And of course it’s not only Cyprus where a bank run is a very real fear. If bank deposits can be seized in Cyprus, they can be seized in other EU countries as well. Ed Conway has a fantastic post explaining exactly why this is a horrible idea:
Given that this policy was not merely rubber-stamped but engineered by Eurozone finance ministers and the IMF (indeed, the IMF wanted an even deeper cut of deposits), it sends a disquieting message to anyone with deposits in a euro area bank. Although the ministers were quick to insist that this is a one-off and is “exceptional”, anyone even vaguely acquainted with the initial Greek bail-outs will remember precisely how long such exceptions last.
“The best the rest of the world can hope for,” says Neil Irwin, “is that Cyprus’s case is sufficiently unique that it won’t spark panic in Athens and Madrid (or in Lisbon, Dublin and Rome).” But his post is headlined “Why today’s Cyprus bailout could be the start of the next financial crisis”, which gives a reasonably good idea of how optimistic he is that any bank run in Cyprus will be contained.

And Europe won’t be home dry even if depositors in Portugal do decide to keep their money in their home country on Monday morning. That might make this bailout look like a brilliant wheeze. But the consequences of this choice are permanent: countries like Ireland and Portugal might not be at risk of a deposit tax right now, but they’re still getting bailed out on a continuous basis, and the more fraught the bailout negotiations become, the more likely it is that the EU will insist on bailing in depositors. It’s an option on the table, now, and as a result a deposit run is surely more likely to happen whenever a Eurozone country finds itself in need of a bailout. Which, of course, is always the worst possible time for a bank run.

But there’s something sacred about bank deposits, and especially about insured bank deposits. The one part of this scheme that no one is defending is the 6.75% tax on deposits less than €100,000 — the level to which Cyprus guarantees all deposits. As Nick Malkoutzis puts it,
Anastasiades also has to explain to Cypriots why small-time depositors have to pay a similar levy to the one some eurozone countries supposedly demanded so alleged Russian oligarchs would be forced to pay for bailing out the island’s banking system. Furthermore, he has to inform them why the Cypriot government’s pledge to guarantee deposits up to 100,000 euros – supposedly even in the most extreme circumstances – is not even worth the paper it was written on.
What we’re seeing here is the Cypriot government being forced to break one of its most important promises — the promise that if you put your money in the bank, and your deposits total less than €100,000, then they will be safe.

Given the balance of power in the Eurozone, it comes as no surprise that in this battle, Germany won and Cyprus lost.

They won dirty, too: by forcing a tough all-night negotiating session in which Anastasiades was given what you might call an offer he couldn’t refuse. Either confiscate deposits wholesale, or see those deposits rendered even more worthless when the ECB cuts off its funding to Cypriot banks, a decision which would — through devaluation and insolvency — lead to depositors losing as much as 60% of their money.

The big winner here is the ECB, which has extended a lot of credit to dubiously-solvent Cypriot banks and which is taking no losses at all. And although they might wake up bruised, the big Russian depositors are probably winners too, given that they risked losing everything and will end up losing just 10%. Finally, of course, there are all the hedge funds who have been betting that the Cypriot government won’t default: they’re all popping Champagne right now.

The big loser are working-class Cypriots, whose elected government has proved powerless in the face of decisions driven by Germany, and who are now edging towards fury.

This decision is important not only because of the precedent it sets with regard to bank depositors, but also because of the way in which it points up just how powerless all the Mediterranean countries (plus Ireland) have become. More than ever before, it’s Germany’s Europe. That’s bad for Cyprus — and it’s not even particularly good for Germany.

Neshant · Post by **Neshant** » 19 Mar 2013 06:17

Something tells me this was done as a test run for something to be implemented on a larger scale.

He who panics first, panics best...

A taste of what is to come:

WASHINGTON|Sat April 15, 2017

(REUTERS) The United States Treasury in concert with the Federal Reserve, The President and congress has announced that all paper and coin money would be required to be turned in to the Treasury by the end of April. On May 1, all transactions will be required to be via electronic means. On May 30, 2017 cash will be considered worthless. The Treasury urges citizens to contact their local bank to make sure all their paper and coin money is remitted in an orderly manner. Additionally, there will be a one time 20% tax on this form of currency. Joe Statist, a senior treasury department official said "We all know that the only people who use cash are doing so in a nefarious manner. This action will ensure the safety and soundness of the dollar and currency transactions." Questions regarding this action will be addressed by the President in a noon press conference. The Treasury has already distributed enough copies of a fact book for everyone in United States. (Writen by Robert Sheeple, additional reporting by O'brien).

shyam · Post by **shyam** » 19 Mar 2013 11:05

How would Russian mafia react when they realize that their money is being targeted?

- They might try to attack the political leaders responsible for this decision
- Withdraw money en mass from Cyprus banks causing even worse financial problem for Cyprus.
- Just drink more vodka, after realizing that they don't have any real friend.

TSJones · Post by **TSJones** » 19 Mar 2013 13:27

I guessed that the Euros would muck it up with all that austerity nonsense and sure enough it may happen yet. The Germans believe in the Austrian school of economics because Erhard saved them. What they forget is that the US Army was there with its safety net which made it possible for Erhard to do what he did. Bernanke, a republican, responded in the Keynesian manner and so far, has won the day. Gold is back above 1600 and the russians are furious. The struggle continues.

Addendum:Bernanke ain't backin' off until he sees the unemployment rate drop to 6.5%. You think the dollar is going to collapse in 2017? Grin. Somehow, I don't think so.