Today, lots of people woke up in shock and horror to what happened in Cyprus: a forced capital reallocation mandated by political elites under the guise of an "equity investment" in insolvent banks, which is really code for a "coercive, mandatory wealth tax." If less concerned about political correctness, one could say that what just happened was daylight robbery from savers to banks and the status quo. These same people may be even more shocked to learn that today's Cypriot "resolution" is merely the first of many such coercive interventions into personal wealth, first in Europe, and then everywhere else.
Bank Runs, a scared populace- didn't they fix this?
This will be another disaster for the euro- it needs to die.
For the benefit of those people, we wish to point them to our article from September 2011, "The "Muddle Through" Has Failed: BCG Says "There May Be Only Painful Ways Out Of The Crisis", which predicted and explained all of this and much more. What else did the September BCG study conclude? Simply that such mandatory, coercive wealth tax is merely the beginning for a world in which there was some $21 trillion in excess debt as of 2009, a number which has since ballooned to over $30 trillion. And with inflation woefully late in appearing and "inflating away" said debt overhang, Europe first is finally moving to Plan B, and is using Cyrprus as its Guniea Pig.
Greece Agrees to Give Up All of its Gold to Obtain Latest Bailout
The devil is in the details. In this case, the details require Greece to give up all 111 tonnes of its gold in exchange for the latest bailout. Which means that should Greece ever decide to do what they should have done in May 2010 and default on the banksters, they will now be SOL as far as international trade is concerned.
As far as the banksters are concerned, Greece with its 111 tonnes of gold are merely a practice run for the main event: Portugal with 382.5 tonnes of gold, France with 2,435.4 tonnes of gold and Italy with 2,451.8 tonnes of gold.
But down there in the small print of the Greek deal lies the nasty side for Greece. There lies a heavy penalty clause; Greece’s lenders will have the right to seize the gold reserves in the Bank of Greece under the terms of the new deal. Greece has 111 tonnes of gold. In other words Greece has given up on its “money in extremis”, gold. If they default they will have nowhere else to go.
Its international assets will be seized and it will not be able to trade internationally at all.
Today we are watching both Iran and the Sudan use their gold to buy food for their country as they have nowhere else and nothing else to get it with. Under the terms of this new deal Greece has effectively forfeited that last resort. And if they wanted to pull a last card from the pack by insisting on a Greek jurisdiction for any final arbitration, they have forfeited that too, by agreeing that future bonds issued will be governed by English law and in Luxembourg courts, conditions more favorable to creditors.
The option of leaving the Eurozone and surviving independently has now gone. If they do default [and many think the shrinking economy will force them down that road] they will have to accept whatever terms they can scrape together from the E.U. in order to survive! Greece is now a colony of the E.U. not a member!
The Libertarian circle jerk on this news story will never end.
The reason this has happened is that the EU, unlike the American states, does not require balanced budgets from its members.
Picture what the USA would be like if it had to bail out Texas, Georgia and Florida from multi billion dollar deficits.
Cyprus turned itself into a haven for off-shore deposits from drug dealers, Russian gangsters, and U.S. tax dodgers. When assets of that group of criminals gets threatened, the plan is to take the savings of workers? How does that work?
The EU guarantees deposits. However, these are banks getting hurt when the rich want their money back. The banks call the shots, law be damned. They are too big to fail. There and here.
To change EU policy, Germany calls the shots -- their Bundestag gets a veto on policy. The rest of Europe? There is sovereignty and then there is sovereignty. German and the banks want austerity Europe gets the failed policy of austerity.
Anybody remember the Democratic party hack that came on here a year ago and promised us prosecutions of bankers -- things we didn't know about were getting done, cases being built? Where are the indictments?
The only difference between Cyprus/Greece, and here, our austerity, for the rest of us but not for the rich, gets slipped in gradually. So far that is.
A pension fund going bust here, cuts in education there, attacks on public workers, unions, a sinking standard of living for all but the one percent, and a race to the bottom for wages in state after state.
Protect profits is the byword.
This crisis isn't going away. When the banks have gotten all they can out of Europe, and profits still don't return, they will turn their eyes on us. Then we will get austerity with a vengeance.
If we object, we have seen how our government will deal with that -- the truncheon, pepper spray, rubber bullets and jail for us, bonuses for them.
R4: 100% correct on how the govt would treat us protestors. Occupy was just a taste of it. I never thought I would be dragged down the street by the nypd because I was legally protesting.
Of course, most Americans will listen to their cable news stations, tell us what we want to hear, on instructions on how to act. It allows most Americans to be complacent birches.
This is terrifying and expect it to roll into other countries:
They cannot run deficits. It is in every state constitution of which I am aware. They have to balance their books at the end of each fiscal year.
What that really means is that when they want to do something that requires borrowing, they have to issue bonds at market rates. They have to include in their budgets amounts to pay investors when the bonds are redeemed.
There is a lot of fancy footwork in state budgets to get everything to come out right.
They cannot print money to pay for those projects and/or to redeem the bonds if the economy tanks like the feds can do.
Feel free to correct me if I got that wrong.
They were fixed in the same way my beagle was fixed.
[bold]ABOLISH THE FED!! BUY GOLD!! HYPERINFLATION WILL KILL US ALL!!![/bold]
Thought I'd get the Libertarian talking points out of the way.
LOL OP, I also bet you believe in the administration's "Recovery Summer" a few years ago.
Did you fall for the "unemployment will peak at 8% if we pass the stimulus" pitch?
How about the "unemployment is looking better" when a significant percentage of the "improvement" is simply individuals giving up and leaving the work force?
oh you funny Americans, taking pride in your errors once again.
OP, the EU and the Euro are not one in the same. One is union of nations that includes nations not in the Eurozone. Many of the Member States are quite stable, more than the US.
[R3] being in the Eurozone indeed does require a balanced budget relative to GDP to be part of the Euro.
And your even more ridiculous goof, R3, adding to the OPs, is that the EU doesn't govern Member States national economies. You write as if it could but simply doesn't.
Don't you have the US economy to worry about?
They will cause a global economical apocalypse! What's happening in Cyprus is outrageous. Governments and elites are using their power to simply steal and rob the masses of their savings. I have to wonder how many laws they are braking in the process (laws of ownership and contracts).
The masses should go out and fight in the millions and not agree to this.
A company in Cyprus-
The most of circulating assets on our business Current Account are blocked.
Over 700k of expropriated money will be used to repay country's debt. Probably we will get back about 20% of this amount in 6-7 years.
I'm not Russian oligarch, but just European medium size IT business. Thousands of other companies around Cyprus have the same situation.
The business is definitely ruined, all Cypriot workers to be fired.
We are moving to small Caribbean country where authorities have more respect to people's assets. Also we are thinking about using Bitcoin to pay wages and for payments between our partners.
Special thanks to:
- Jeroen Dijsselbloem
- Angela Merkel
- Manuel Barroso
- the rest of officials of "European Commission"
So while Cypriots may have been quite cool and collected during yesterday's bank reopening when the Troika was kind enough to give them access to €300 of their cash per day, one wonders just how cool and collected they will be when the implications of the cash crunch spread through the system, when hundreds of small and medium business are forced to lay everyone off overnight, when paychecks suddenly stop and when not only savings but ongoing cash grinds to a halt.
Because if the locals thought the deposit haircut is the worst of it, just wait until the full brunt of what a -20% depressionary collapse in the economy hits them head on.
Oh, joy. The Idiot Libertarian Troll(TM) is bumping all his old threads up. Time for the weekend Libertarian Circle Jerk!
OP, Cyprus only has 3 banks and has an economy smaller than Vermont. However, it has hundreds of billions of Euros deposited in those banks, mostly from Russian oligarchs hiding their money.
The banks made a bad investment by buying Greek bonds which are now worth nothing. The banks are essentially broke.
R3, you are incorrect. The EU REQUIRES a balanced budget within 2% of GDP. The problem is that the Greek government committed fraud and lied about their government books to be admitted to the EU.
Don't confuse them with facts.
They will defend the euro until it dies.
Smart people are already making money on the next country that will be "Cyprussinated".
(Hint, it starts with SLOV...)
Europe's ongoing economic crisis and lasting currency woes are beginning to rapidly erode faith among Europeans in the EU project. That is the result of a new survey undertaken by the renowned Pew Research Center in Washington D.C. and released on Monday evening.
The institute polled 8,000 people in eight European Union member states in March and arrived at some disturbing results. In just one year, the share of Europeans who view the European Union project favorably plummeted from 60 percent in 2012 to just 45 percent this year. Furthermore, only in Germany does a majority continue to support granting more power to Brussels in an effort to combat the ongoing crisis.
"The European Union is the new sick man of Europe," read the survey's opening lines. "The effort over the past half century to create a more united Europe is now the principal casualty of the euro crisis. The European project now stands in disrepute across much of Europe."
Of particular concern is the situation in France, where fully 91 percent of those surveyed believes that the country's economy is in bad shape, 10 percent more than in 2012. Furthermore, 67 percent believe that President François Hollande is "doing a lousy job handling the challenges posed by the economic crisis" -- a rating that is 24 percentage points worse than received by his predecessor Nicolas Sarkozy. Seventy-seven percent of French respondents believe that European integration has made the country's economic situation worse.
Furthermore, people across the EU have nothing but bad things to say about their political leaders. In Italy, where Prime Minister Mario Monti was recently voted out off office, only 25 percent are satisfied with their government's management of the crisis, fully 23 percentage points lower than last year. Ninety-six percent are dissatisfied with the country's direction, comparable to the 97 percent and 94 percent measured in Greece and Spain respectively.
In addition, German Chancellor Angela Merkel, broadly respected across Europe last year for her handling of the euro crisis, is losing support. Even as majorities in five of the eight countries survey still believe she is doing a good job, support plunged by 24 points in Spain, 19 in Italy and six points at home in Germany over the last 12 months.
Has anyone looked at the pickle Japan is in?
The JGB (JapGovBond) has tripled in the last week, and if it goes higher it will cripple the ability of the gov to pay the interest.
Japan, China, the EU AND the US are all in dire straits, and when (not if) interest rates on gov debt starts to rise, the picture will NOT be pretty.
Looks like Greece needs ANOTHER bailout!
Concurrently it is becoming increasingly clear that Greece will require even more aid, lest it default again:
[quote]“European officials are laying the political groundwork for fresh Greek aid as Chancellor Angela Merkel, who has led bailout-weary Germany throughout the region’s debt crisis, battles to win a third term in office. German Finance Minister Wolfgang Schaeuble said yesterday for the first time that there “will have to be a program for Greece once again,” referring to previous euro-area pledges to provide “further measures and assistance” to ease the country’s debt burden.
[quote]European Union Economic and Monetary Affairs Commissioner Olli Rehn said today that the “possible continuation of Greece’s bailout program and its financing” will be assessed after a review next month by the so-called troika that oversees euro-area bailouts. European Central Bank Executive Board member Joerg Asmussen is in Athens to gauge the government’s progress on economic reforms.
[quote]More than three years after its first 110 billion euro ($147 billion) rescue, question marks remain over Greece’s ability to pay its bills. The country is mired in the sixth year of a recession that has left six in 10 young people without work. The International Monetary Fund predicts the economy will contract 4.2 percent this year before returning to growth in 2014.
This admission by Mr. Schäuble has made the Greek bailout a bone of contention in Germany's election. We were wondering why he made that admission and our conclusion is that it was meant to be a preemptive strike. It probably is supposed to take the wind out of the sails of critics in the event it becomes overly obvious prior to the election that the Greek government will require more aid (moreover, the Bundesbank has already made clear that its assessment of the situation is that the current bailout plan amounts to a mathematical impossibility). Greece's dire employment situation can be seen here:
The problem is the rule. The GDP maximum deficit of 2% of GDP was a stupid and unworkable rule which foresaw no recessions EVER. They were hidebound ideological simpletons to ever make such a stupid rule.
[quote]Picture what the USA would be like if it had to bail out Texas, Georgia and Florida from multi billion dollar deficits
You mean like Detroit? Chicago? LA?
[quote]They cannot run deficits. It is in every state constitution of which I am aware. They have to balance their books at the end of each fiscal year. What that really means is that when they want to do something that requires borrowing, they have to issue bonds at market rates. They have to include in their budgets amounts to pay investors when the bonds are redeemed. There is a lot of fancy footwork in state budgets to get everything to come out right.
Yes, R8- they are required to balance the budget, but they do so by moving money from pension plans and future projects into paying current deficits, and now that there is no more money to steal from the future, they are bankrupt.
I hope you're being facetious.
Real US unemployment is near 20%, and real inflation is over 7%.
Our government is raping the middle class to enrich the top .01%
And yet what they are doing in Greece is even worse.
I really want to know when the EU is fixed.
[quote]Real US unemployment is near 20%, and real inflation is over 7%.
No, actually, it's not, particularly the latter statement, which is manifestly untrue.
[quote]I really want to know when the EU is fixed.
If we adopt your economic proposals, never.
Since they still aren't tackling the root causes, the Eurozone will continue to have problems.
My grandparents live in Spain and they hated it when every one started using the Euro. When they still had the peseta most everyday things were very affordable and food was incredibly cheap. Now everything has become ridiculously expensive.
That's why moronic tools like R31 piss me off- they have no concept of how BAD---really, REALLY bad- things are "on the ground" in Bilbao, or Bern or Bremen or Bratislava or Barcelona or Belgrade- the unemployment rate is nearly 50% due to the legislation from Bruxelles and the massive debts the governments of these countries took on to "reward" their politicians and "public workers".
No one is hiring- the government makes it impossible to fire someone unless they murder a co-worker, or speak ill of the government. The latter is a capital offence!
That doesn't count the trillions the EU "leaders" stole from their incompetent government overseers that they funneled into Russian and Bremuda based "private account boxes".
The EU (as an autocratic evil ruling body) needs to die. It is evil, un-reformable, and detrimental to the average European. The €uro needs to die too. It just gives more power to the government, and allows them to print trillions (like the Greece, Cyprus, Ireland, Italy, France, Portugal and Spain ---- the FPIGGS+C) anyone has ever seen.
It sucks that people who claim to be "liberal" still support a government that can steal trillions from the "little guys" with zero consequence.
[quote]That's why moronic tools like [R31] piss me off-
Now you, on the other hand, I find funny as hell.
[quote]they have no concept of how BAD---really, REALLY bad- things are "on the ground" in Bilbao, or Bern or Bremen or Bratislava or Barcelona or Belgrade
Of course, since I haven't posted anything about Bilbao, Bern, Bremen, Bratislava, Barcelona, or Belgrade, I'm afraid that, as usual, you're making shit up and don't have a point. What I did post about, of course, was the U.S. and since I basically pointed out that you're full of shit and demonstrated why, and since you have no response, I'm afraid that once again I have to declare victory. Can you at least *try* to put up a fight?
[quote]the unemployment rate is nearly 50% due to the legislation from Bruxelles and the massive debts the governments of these countries took on to "reward" their politicians and "public workers".
Actually, the unemployment rate is up precisely because they followed your favorite economic policy, austerity, which has failed everywhere in the real world it's been tried. Funny how massively cutting government spending results in greater economic downturns and massive job loss while at the same time doing little to nothing about debt. But hey, I know the answer: more austerity!
[quote]That doesn't count the trillions the EU "leaders" stole from their incompetent government overseers that they funneled into Russian and Bremuda based "private account boxes".
Sigh... And now you're making shit up again.
[quote]It sucks that people who claim to be "liberal" still support a government that can steal trillions from the "little guys" with zero consequence.
And which government would that be and who are these "liberals" you refer to?
[quote]It sucks that people who claim to be "liberal" still support a government that can steal trillions from the "little guys" with zero consequence.
It also sucks that idiots like you can flood a discussion board with brainless libertarian spam. Can't do much about that either, can we?
[quote]Actually, the unemployment rate is up precisely because they followed your favorite economic policy, austerity,
This is why you are so ignorant. I've never supported "austerity" because it is bullshit smoke and mirrors. It is a promise to cut spending and reduce beauracacy while raising taxes, but only does the latter.
Youth unemployment (18-30) in Spain, Greece, Portugal and Italy is between 25-45% due to the fact that anyone they hire cannot be fired outside major criminal actions, the exorbitant social benefits the government steals to give to "the poor", the "red tape" any new business is subject of, the beauracratic nightmare of starting a new business, the taxes for anyone that does start a company--- no wonder the EU is fucked!
[quote]which has failed everywhere in the real world it's been tried.
If they made it easy to start a job or open a new company then "austerity" would be zero.
[quote]Funny how massively cutting government spending results in greater economic downturns
You have no proof. Every dollar or euro or yen spent by a government beauracrat is a dollar or euro stolen from the average working person.
If the government spends, then the taxpayer is on the hook for the debt.
[quote]and massive job loss while at the same time doing little to nothing about debt.
Until the government STOPS bailing out the banks, the auto industry, the big agricultural companies, etc. then we will be fucked.
[quote]But hey, I know the answer: more austerity
If the government quit giving money to the big corporations and banks we would be better off.
I wish you were smart enough to see through the bullshit Bernanke, Obama, Reid, Graham, etc. spew and realize that the government is the enemy, and is killing the economy while giving trillions to their buddies in the big biz world.
Once again Greece is thisclose to default.
Wonder if the SNB actions will hurt?
I had forgotten how wrong Krugman was.
The Grexit Cometh.
Such wit, R43.
And once again, the weakness shows.
Will Austria unleash the next wave?