Gold Rises, Dollar Rises, Stocks Fall: The Cyprus Disaster Begins

Discussion in 'Financial Cents' started by Quigley_Sharps, Mar 18, 2013.

  1. Quigley_Sharps

    Quigley_Sharps The Badministrator Administrator Founding Member

    Gold rose on the news from Europe. Stock markets plunged around the world. So did the price of oil.
    Over the weekend, Eurozone bureaucrats at a closed meeting came up with a plan. The committee demanded that the government of Cyprus impose a tax of 6.7% on all bank accounts under $130,000, and close to 10% on all accounts over $130,000. If the government refuses, the Eurozone will not provide a $13 billion bailout for the banks of Cyprus.
    The story is all over the European press, for good reason. The Eurocrats had always said that bank accounts would be sacrosanct. This announcement says, “We lied.” But they also assured depositors that this will never happen again. “Trust us.”
    The president of Cyprus on Sunday begged the parliament to impose the tax. He admitted that he had promised depositors that he would never, ever tax their accounts. He had said this at his inauguration speech: “absolutely no reference to a haircut on public debt or deposits will be tolerated.” To make himself perfectly clear, he added: “such an issue isn’t even up for discussion.”
    Let me translate this in three words: You dumb clucks.
    For a month, rumors of this plan had floated around the corridors of the European Union’s headquarters. Depositors could have sent their euros to Germany. They could have withdrawn currency. But the president said he would never do this. So, the masses sat tight.
    Dumb, dumb, dumb.
    The Cypriot parliament was supposed to ram through the tax yesterday, but it postponed the decision until Monday afternoon (their time). The president did not get the votes. If the parliament refuses, then he is the dumb cluck.
    The government has closed the banks. The press still refers to this as a “holiday.”
    It is clear what any rational Cypriot should do if the government delays. He should call his bank and transfer his money (euros) to a German bank as soon as the bank “holiday” ends.
    The government can open the banks but not pass the tax. Wham! The run begins. Or it can keep the banks closed. A depression begins: a frozen economy. Or it can pass the tax bill. Then it can open the banks. There will still be a bank run. “Fool me once, shame on you. Fool me twice, shame on me.”
    The Eurocrats who came up with this plan over the weekend must have known this would trigger bank runs in Cypress. If they did not foresee this, they are economic idiots. Did they think that the sheep will sit still a second time and be sheared? This seems hard to believe.
    They also did not expect the government to postpone the tax for a day.
    I think this policy is deliberate. I think they knew this would happen. They are sending a message to the PIIGS politicians: “Bail out your own banks, or else get ready for a bank run like Cyprus got.” Their goal is to cause a bank run in Cyprus. They want to send a message to any large government that thinks it can sit on the sidelines on the assumption that the Eurozone will bail them out or bail out their banks. It won’t. It can’t. It does not have the money. Its voters will not allow it.
    They chose Cyprus, which is a tiny island nation. If its banks go under, so what? If its politicians pull out of the Eurozone, so what? Its crisis is just what the bankers in northern Europe need: an announcement of a “no tolerance” rule. It will scare Club Med politicians.
    But it’s a risky policy. It may scare depositors even more than it scares politicians. This may trigger banks runs in Spain, Portugal, and Italy. If I had my money in any of these nations’ banks, I would transfer the money to a German bank.
    Mohammed El-Erian, CEO of Pimco, the world’s largest bond fund, said this: “In Europe, it could well undermine the recent tranquil behaviour of depositors and creditors in other vulnerable European economies – in particular Greece, Italy, Portugal and Spain. Despite assurances from European officials that Cyprus is ‘exceptional’ and the measures are ‘unique’, this weekend’s actions have increased the risk premium.”
    This is a desperation move by Eurozone bureaucrats. They risk fomenting a bank run out of Italian and Spanish banks. Depositors who want to avoid becoming like Cypriot depositors have a way out: transfer money to German banks.
    This is a high-risk crap-shoot. Eurozone bureaucrats have to be really desperate to announce a bank account tax policy that cannot be enforced by the Eurozone, only by national governments. If a government looks as if it will comply, the bank runs will begin. If it says it will not comply, bank runs still may begin. The depositors will know that the government may abandon the euro. To make money on this, they must get their euros into German banks.
    This indicates just how desperate the Eurozone leaders are. They pretend that there is calm. They pretend the system is not coming apart. Then they make an announcement that is rational only on the assumption that the euro experiment is coming apart.
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  2. Quigley_Sharps

    Quigley_Sharps The Badministrator Administrator Founding Member

    If that doesn't convince you it's a setup nothing will.
    VisuTrac and jms21y like this.
  3. Beano

    Beano Monkey

    I think that in addition to a travesty, it is also an experiment. You can bet our gubbermint is carefully observing.
  4. Motomom34

    Motomom34 Monkey+++

    The American markets really didn't plunge. IMO it was a normal trading day, thus it tells me that the DOW's #'s are not real. The rate of increase that we have seen is not realistic. We see normal trends no longer being normal. I think the island of Cyprus was a nice little experiment for those in power. They have stolen the decent citizens money and there is nothing they really can do. jms21y is correct the govt is watching and is quietly talking amongst themselves. Please note Obama has not make a statement regarding that and to me that is a red flag.
  5. Brokor

    Brokor Live Free or Cry Moderator Site Supporter+++ Founding Member

    The fact that some of you are looking at this as an experiment is a good sign. =)
    VisuTrac and jms21y like this.
  6. Motomom34

    Motomom34 Monkey+++

    Here is the thing, everyday I hear the economy is doing great. I hear we are on the road to recovery. Does anyone here ever wonder if they are just being a pessimist and a doomer by not believing these blasted reports? Sometimes I wonder if I am projecting my own world onto the national state of.
  7. VisuTrac

    VisuTrac Ваша мать носит военные ботинки Site Supporter+++

    You are just being a realist. You look at your own world, see that houses that were started years ago are still unfinished. You see that your friends and neighbors are still without jobs. You see that your purchasing power at the grocery store has decreased 30 percent since October.

    No my dear, you are just not into drinking the MSM kool-aid.

    Best part is, you are in good company with the rest of us monkeys.
    bebop and jms21y like this.
  8. Minuteman

    Minuteman Chaplain Moderator Founding Member

    If this was an experiment then it may have had the opposite effect than was intended. It is one of the motivating factors in new reconciliation talks that will lead to greater economic growth on both sides of the island. I think a united Cyprus with the new found natural gas deposits off it's coast could be an economic recovery unparalleled in history. The south is very "gun shy" after the economic chaos of last summer. It appears they learned a lesson about hitching their wagon to another "powerhouse" country. Aligning themselves with Greece and banking on that countries economic security and backing was a fiasco and economic nightmare that shook politicians and the people's entire belief system. They are now much more nationalistic and not wanting to be the puppets or under the protection of any other country, whether Greece or Turkey. People are very optimistic about the new rounds of talks to settle the political differences between the north and south. One thing that struck me was the statement that the new constitution would grant limited powers to the federal government and all others would be reserved to the two states. I hope they word that stronger and more definitively than we did in ours.

    TRNC News Today 19th February 2014
    Foreign Minister Özdil Nami has made the following speech at the European Union Socialist Group meeting in Brussels yesterday (18.2.2014)
    Address to the S&D Group

    It gives me great pleasure to be amongst you today. I will use this opportunity to give you a concise overview of the current state of negotiations to resolve the Cyprus issue which is entering its 50th year at the UN agenda this coming March.

    Dear friends,

    Last time I addressed you I expressed my conviction that soon we will see the resumption of talks in Cyprus between the leaders of the two communities. I underlined that already during the 2008-2010 period negotiations yielded significant agreements and convergences and that once talks start they could be finalized in months and not years.

    Today I have the great pleasure to be able to share with you that although it took longer than I had hoped we finally have the resumption of talks accompanied by a historic joint statement of the two leaders on the island.

    I specifically underlined the historic nature of the joint statement issued for I believe this text paves the way for [​IMG]rapid progress at the negotiating table by addressing some of the critical issues related to governance and power sharing in a federal Cyprus.

    Namely, with their joint statement of last week the two leaders agreed that their goal is to achieve a bi-zonal bi-communal federation with political equality between the two sides.

    That this Federation will have a single sovereignty defined as sovereignty enjoyed by all UN member states under the UN Charter and which emanates equally from Turkish Cypriots and Greek Cypriots.

    The Federation will have single international personality and single citizenship. All citizens of the Federation will also be the citizens of either the Turkish Cypriot constituent state or the Greek Cypriot constituent state.

    The Federation will be composed of two constituent states of equal status. Neither side will claim authority or jurisdiction over the other.

    Powers listed in the constitution will be exercised by the Federal Government; the rest i.e. residual powers will be exercised by the constituent states.

    Principles upon which the European Union is founded as well as the bi-zonal bi-communal nature of the federation will be safeguarded.

    The Leaders also agreed that they will concentrate on the remaining core issues indicating that already achieved convergences in previous rounds of talks will be respected unless there is a suggestion which improves on them in a mutually agreeable manner.

    Today on both sides of the island there is a sense of increased optimism due to this long awaited progress. There is also a sense of confidence that this time we will be able to resolve the issue.

    You may ask what has changed and made this positive development possible. And why should this development yield anything different than the past statements previously agreed by the Cypriot leaders!

    There are indeed various factors which contributed to this positive development and I still hope that we may this time be successful in uniting Cyprus. There are various factors at play of course but some of the main ones in my view are:

    Economic challenges faced on both sides of the island is making more and more people aware that there is a need for a radical change in economic factors if we are to achieve economic growth beyond the normal rates.

    Discovery of natural resources is another recent development that forces Cypriots to settle their issue if we are to benefit from these riches in a cost effective, speedy and stable manner.

    Politicians who said “Yes” to the UN Comprehensive Settlement plan of 2004 are in power on both sides of the island.

    Renewed interest in enhancing Turkey-EU relations as well as the strong support given by Turkey for rapid progress in the talks.

    Dear friends,

    We are entering into a critical period. During this time the European Union may also play an important role in helping the two sides. In particular there is a need to step up efforts to help prepare the future Turkish Cypriot constituent state for the full adoption and implementation of the aquis so that after unification we will be able to remove its suspended status in a speedy manner. This necessitates intensification of co-operation between us as well as furthering of technical and financial assistance for the Turkish Cypriot community. The new pro-EU Government has expatiated the EU harmonization process and adopted 70 different laws and regulations that will enable smooth unification of the island.
  9. Kingfish

    Kingfish Self Reliant

    I no longer have any money in any bank to lose. My wealth is concentrated in my own property, in my own business and I borrow nothing from anyone. This way if it tanks, implodes , explodes, fizzles out, is replaced, or ceases to work I still have everything I have today. I know this sounds crazy but I don't trust anyone else to handle my wealth. Not Banks, credit unions, and certainly not Government. No matter what type of currency we have Ill invest nothing in it. Ill use it to buy things that will serve me and my family. I put most of our wealth into product that I sell. This way I am in control of how much I make off every dollar or what ever we end up using as currency. I cant see any other way forward. KF
  10. BTPost

    BTPost Stumpy Old Fart,Deadman Walking, Snow Monkey Moderator

    I keep just enough in the bank, to cover my monthly expenditures..... I use the Trading Post's "Line of Credit" which is substantial, to pay off the monthly Bills, (and collect Points) and then twice a month, Pay back the "Line of Credit" and zero out the balance, so I do NOT incur any Interest Payments. I like using the Banks MONEY for FREE, and it is convenient, in keeping track of my Accountings locally, and doing all my Banking OnLine. My Company 401K, which they Match, monthly, builds for a year, and then I pull out the majority of it, and buy Physical PMs (Gold) and stick it in my RBoC Box, (Canada) which is only 2 hours away, by Bush Plane. My System... YMMV.....
    Kingfish, Cruisin Sloth and Minuteman like this.
  11. Cruisin Sloth

    Cruisin Sloth Special & Slow

    Physical PMs (Gold) as in Maple Leaf ? cheap from a few Usa dealers I have found .
  12. VHestin

    VHestin Farm Chick

    History repeats itself because the 'dumb clucks' refuse to learn. What's mine is mine, that's all I need to know.
  13. BTPost

    BTPost Stumpy Old Fart,Deadman Walking, Snow Monkey Moderator

    Yep, Canadian Gold is as good as any other Gold, in my Book.....

    I haven't seen ANY major rise in Gold Prices in the recent Past.... In fact it has
    dropped significantly in the last two years..... That is why any extra, of my Personal
    funds, are going into physical PMs... the rest of my Prep's have long since been dealt
    with. Although I just bought a very nice Ruger 45/22 Bull Barrel with Adjustable Sights
    last week, because I didn't have a .22LR Pistol in the Gun Locker.
    Last edited: Feb 21, 2014
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