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  • Stability Of The European Union (17) January 1, 2013 To March 26, 2013 295 comments
    Dec 31, 2012 11:09 PM

    This instablog is designed as an interactive News Concentrator devoted to news and discussions about the debt and associated problems in the EU and its member states.

    The top portion of the instablog contains useful background information/ charts.

    Up-to-date news content is posed in the comments area. So if you are interested in current news, read the comments.


    A picture is often worth a thousand words. Here we have the Percent Economic Growth Rates for three countries: US, Greece, Germany. Note the distinct downturn in the US Economic Growth Rate.

    Here is National debt as a percentage of GDP in 2009 for the Euro Zone. Look at Greece and Italy.

    Here is Government deficit as a percent of GDP for 2009. Look at Greece and Ireland. Look at UK and Spain.

    Here is the all important Jobs Picture as of March 2010. Look at Greece, Spain, Ireland and France.


    What is the EFSF?:

    The European Financial Stability Facility (EFSF) is a special purpose vehicle financed by members of the Eurozone to combat the European sovereign debt crisis. The €110 billion bailout to Greece is not part of the EFSF guarantees, but a separate commitment.

    When you look at the Guarantee commitments by the different euro zone countries [] you will see something interesting. Greece, Ireland, Italy, Portugal, and Spain (i.e., the PIIGS) account for over one-third (36.7%) of EFSF commitments. All by themselves, Italy and Spain have a financial commitment of almost one-third (29.8%) of the total EFSF commitment.

    (October 23, 2011) I added this nice summary graphic of the Dominoes effect associated with the European debt crisis. You can also see the graphic and the accompanying article with the following link:

    (October 23, 2011) Guest Post: The European Financial Crisis In One Graphic: The Dominoes Of Debt. From: Zero Hedge, by: Tyler

    The original copyrighted graphic is from Charles Hugh Smith (" 2011)

    Added February 9, 2012

    Greek General Government Debt Percent GDP

    (March 10, 2012)

    Unemployment for individuals less than 25 rose to 51.1 %, twice as high as three years ago as budget cuts imposed by the European Union and the International Monetary Fund as a condition for dealing with the country's debt problems have caused a wave of corporate closures and bankruptcies.

    Fantasy Greek GDP Growth Rates:

    In the fantasy report "Greece: Preliminary debt Sustainability Analysis" dated February 15, 2012 which I referred to as the "Deus ex machine" report one of the EUs key economic assumptions was that Greek GDP growth in 2012 would be -4.8% and -1% in 2013.

    The Greek economy saw growth rates of:

    -0.2% in 2008,
    -3.3% in 2009,
    -3.4% in 2010,
    -6.9% in 2011
    -7.5% in fourth quarter of 2011.
    (Data from John Mauldin report

    I plotted the Greek GDP data below and projected the GDP values for 2012 and 2013 based on the current data. I also plotted the Greek GDP projections from the Deus ex machine report - blue line.

    There is no Greek stimulus, jobs are in freefall. Which projection do you believe?

    (March 29, 2012) Greek Deposit Run Update: Hopeless And Getting Worse.


    Added April 27, 2012

    Q1 unemployment is now one quarter of the working population or 24.44%, up nearly 2% from the 22.85% as of December 31

    (click to enlarge)

    Global PMI Changes from March to April 2012

    (click to enlarge)

    From: ZeroHedge


    (click to enlarge)

    From: ZeroHedge -

    Ten Year Bond Yield Curves as of 7/20/2012

    From: The Disciplined Investor

    (click to enlarge)

    Here are some interesting charts on Italy sourced from Bloomberg's BRIEF
August 7, 2012, available on "The Big Picture"

    I verified the shadow economy figures in the following sourced article about shadow economies:

    Shadow Economies: Size, Causes, and Consequences by FRIEDRICH SCHNEIDER and DOMINIK H. ENSTE, Journal of Economic Literature
Vol. XXXVIII (March 2000) pp. 77-114

    (click to enlarge)

    (click to enlarge)

    (click to enlarge)

    (click to enlarge)



    (click to enlarge)

    From: Labor Force Survey by the Hellenic Statistical Authority January 10, 2013

    (click to enlarge)

    From: Labor Force Survey by the Hellenic Statistical Authority January 10, 2013

    (click to enlarge)

    This chart is based on the data from the Hellenic Statistical Authorities Labour Force Survey published January 10, 2013.

    This shows the rate of change of unemployment among age groups from 2011 to 2012.

    Yet the Greek government, under the direction of the Trokia, is about to initiate an even more Draconian series of spending cuts and tax increases.

    Remember the IMFs fantasy report? GDP was supposed to start increasing again in 2012. Instead, it continued to fall, and this is one of the reasons why. They are systematically forcing people out of their jobs. No jobs, no income, no income, no spending.

    Yes, the 15-24 age group has unemployment at 56.6%, but as this chart shows, the older age groups are suffering a higher rate of increase of unemployment. So they are rapidly catching up.


    Remember, the top portion of this insta contains some useful historical information. CURRENT NEWS is posted in the comments area.

    WARNING: This is a no Troll Zone. If you are disruptive, your comments will be deleted.

Back To FocalPoint Analytics' Instablog HomePage »

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Comments (295)
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  • all the best to you and all your readers in this new year!


    i am thankful and do appreciate you taking the time and effort to update your european focus blog.


    any predictions on where the european stock markets are heading to in 2013?


    (btw i love the picture you use - mouse and cheese....definitely one of the funniest pictures on this site).
    31 Dec 2012, 11:59 PM Reply Like
  • Author’s reply » Happy New Year to you.


    Several EU countries are in recession, and I believe others will be entering recession during the first half of the year. Automotive sales are down, and if automotive is down a lot of other things will be down as well. As a result, I don't see an overall upward trend for European equities. The question is how long and how deep will the recession be? I would think even if there is a recession, some winners will appear.


    Thanks for the compliment on the avatar... its a picture of Remy the rat from the movie Ratatouille.
    1 Jan 2013, 01:22 AM Reply Like
  • declan I echo your sentiments -- FPA's blog helps us all. BTW -- that picture you like is the reason you will see some readers affectionately call FPA -- "Rattie."


    Many thanks FPA.
    1 Jan 2013, 06:40 AM Reply Like
  • FPA,
    Thanks for the time and effort to maintain this blog. Happy New Year to you and yours, and to the rest of the blogging crew (hmm, just doesn't sound right , but I'll leave it) :-)
    1 Jan 2013, 01:45 AM Reply Like
  • Silent, mostly, but still value this concentrator!


    Hope your new year is full of good health and wealth!


    1 Jan 2013, 09:13 AM Reply Like
  • Some day I'll send my wife, the high school history teacher, to review this concentrator for a summer to explain what happened when this mess becomes history.
    1 Jan 2013, 09:46 AM Reply Like
  • What HTL said.


    Thanks for the diligent work on the concentrator, FPA. I find the combination of references and comments very informative.
    1 Jan 2013, 01:28 PM Reply Like
  • Happy 2013 to the renegades, friends and followers. End of the world did not happen yet, end of the EZ did not happen yet, end of the dollar did not happen yet. Seems we have lots to look forward to. LOL


    Thanks for keeping this blog going Rattie, seemed long ago it would never run this long......but here we are 2013. Now I am wondering just how many miles/years can we kick this can. Long enough to pave some more road I am beginning to think which begs the question how fast can they pave and how slow can we kick.


    Best of luck in the New Year all.
    1 Jan 2013, 05:17 PM Reply Like
  • An observation on power generation.


    It seems to me that the availability of credit for BIG projects, like power plants, will become scarce. Fear of lending money long term will increase as the prospect of serious inflation looms.
    Also, "planning approval" for large power plants, nuclear or otherwise, will become harder with each year of increasing NIMBYism. Ditto for large overhead, high voltage transmission lines.


    So even if the power plants are built, they need to be close to the point of use. Which is near population centers and therefore more vulnerable to NIMBY. Yet, we see planning for more windmills and other "dirty electricity" generation. See multiple articles about highly variable generation.
    Hopefully the fedGov will drastically reduce tax money waste by curbing these "liar" projects. "Feel good about the environment and get cheap electricity at the same time!!"


    But do you really believe the fedGov ( or the states) will wake up and divert defense, welfare and pension money to fixing the electricity distribution infrastructure? Neither do I :-)


    Given that, what do entities do that need local, reliable power at a reasonable price? Micro grids are one promising approach by letting a community of homes or businesses combine generation costs with multi-source generation. Maybe some solar and wind if it makes economic sense.
    Battery backup gives the system flexibility to connect to the larger grid when it makes sense and still maintain reliability. But some form of base generation is needed.


    I propose that micro-generation is the probable result. Of the available options, fuel cells and micro-turbines seem the most obvious when hydro isn't practical. Fuel cells are the more expensive and of somewhat lower reliability. Small gas turbines with multifuel capability seem the most likely baseline generators. Diesel filled tanks are the best alternative I know of for emergency fuel storage.


    Like fuel cells, MCs can use locally available "free" biogas for some of its fuel needs. If the community keeps its sewage and solid waste facilities local to the generation system, both anaerobic sewage digestion and landfill gas will be available. Not to mention the savings in avoided waste transport.
    Moving the MCs closer to the areas they serve and fueling them with small, medium pressure gas lines would further reduce the cost of high voltage electric distribution systems.


    Just my thoughts this new year. I own some Capstone Turbine (CPST) stock and believe their market will only improve. They just have to fix the cash flow problem ;-)




    Oops! This was meant for another blog. Sigh. Old age ;-)


    Then again, it seems to apply to the EZ as well.
    1 Jan 2013, 08:32 PM Reply Like
  • Here is wishing all of you a happy, healthy and prosperous 2013. I wish to echo special thanks to you FPA as the driver behind this and other concentrators that have proven very valuable over time. This morning's Breakfast Club alluded to more contraction in the EZ which doesn't bode well. Meanwhile our CONgress has locked in the current tax rates for those earning less than $400K per annum while kicking the can farther down the road. They also ended up not extending the payroll tax holiday which is effectively a 2% tax hike on everyone with a job. Currency wars are continuing to escalate in multiple locations and for different reasons but I don't doubt that the consequences will be negative. I'm maintaining a negative outlook on debt and don't expect robust GDP growth anywhere. I do expect the Greek tragedy to end sometime this year and I'm not talking about a happy ending either. Once the PTB in the EZ figure out how to unwind the pertinent CDS structures prior to the Greek default that all have denied happened Greece will be summarily cut loose.
    2 Jan 2013, 11:03 AM Reply Like
  • And thanks to you Robert for all of your contributions.


    You are quite right that the currency wars are in full swing and I am sticking in 2013 to my heavy diversification of the USD for strong currencies. Here's the link to my comment on the topic and a good interview on the currency wars:
    2 Jan 2013, 11:15 AM Reply Like
  • Mercy, Jimenez: Greetings and salutations for the new year and thanks for your many contributions and insights. Thanks for the link.
    2 Jan 2013, 02:14 PM Reply Like
  • "Spain has invested 90% of its €65 billion excess pension fund reserves in its own bonds as of the end of 2011, according to the WSJ. Spain appears to have been using the fund as a “buyer-of-last-resort.” The WSJ warns that with the fund reaching full capacity of government debt, Spain could have one less lever to pull to help it finance its deficit. However, the data the paper quotes is dated as of 2011, suggesting that Spain managed 2012 with limited purchasing power. In addition, Spanish debt has rallied significantly in 2012. The WSJ also warns that Spain withdrew €4 billion from the fund in November to help pay pensions. Granted, this fund was created as a ‘rainy-day’ fund to help meet pension obligations in years that social security collections fell short. Spain is looking to issue €207 billion in debt in 2013, up from €186 billion. "
    4 Jan 2013, 10:43 AM Reply Like
  • Author’s reply » IMF Miscalculated Greek Austerity Effect


    The top economist at the International Monetary Fund (IMF) one of Greece’s Troika of lender, has admitted that the agency didn’t calculate how devastating the austerity measures it wanted would be on the Greek economy and those of other struggling European countries.


    His Post explains that if fiscal multipliers are small, countries can cut spending faster or raise more in taxes without much short-term damage. However, if they are large, then the process can become self-defeating, at least in the short run, with each dollar of government spending cuts costing the economy more than a dollar in lost output and, thus, increasing ratios of debt to gross domestic product.


    This is what has been happening in Greece where fund forecasters in 2010 predicted that the nation could cut deeply into government spending and quickly bounce back to economic growth and rising employment. Two years later, the Greek economy is still shrinking, and unemployment is at 25 percent.


    Simply put, Greece was losing revenues almost as fast as it was cutting how much it spent, negating the expected effects of austerity in a vicious self-defeating cycle. More than 68,000 Greek businesses have closed since 2010 and despite the failure of austerity, Prime Minister Antonis Samaras’ uneasy coalition government is about to impose another $17.45 billion in spending cuts and tax hikes that are expected to further worsen a deep recession now in its sixth year.


    “Forecasters significantly underestimated the increase in unemployment and the decline in domestic demand associated with fiscal consolidation,” Blanchard and his co-author, IMF economist Daniel Leigh, wrote in the paper. The Post added that the IMF fund has been accused of intentionally underestimating the effects of austerity in Greece to make its programs acceptable.


    IMF officials said that it was European leaders – especially German Chancellor Angela Merkel – who insisted on keeping Greece’s feet in the fire, a stance many Greeks believe was punitive.
    No analyst worthy of the title would miss the obvious that if you radically cut spending and raise taxes, GDP will drop and unemployment will sharply climb. A more believable explanation lies in the sentence describing that the IMF has been accused of intentionally underestimating the effects of austerity in Greece to make its programs acceptable. The projections were false and the elicited hope was based on lies.
    5 Jan 2013, 03:09 PM Reply Like
  • FPA, I can't help but wonder if "off stage" the Greek 'crats weren't telling the IMF officials that they, the Greeks, could surely meet the lower deficit requirements by cutting gov spending like mad.
    These Greek lies would be in service of getting more MONEY as soon as possible from the troika. The Greeks must know that as the "legal" screws tighten, the shadow economy will increase at a good clip and pick up some of the slack. Any money that the government boys get that can be spent on unemployment benefits and other welfare for those working in the shadow economy is "free" money from the northern Eurocrats to the Greek people.


    Using official numbers for unemployment and GDP they can make a case for the poor, starving people of Greece and "how could you be so cruel?". They need sympathy so they can get more slack on borrowing. We know it's a farce and the money will never be paid back, why wouldn't the Greek gov types also know it?


    I think all the parties privately understand that it is a multi-player game of "kick the can and hope for the best". Maybe all the voters in the EU will give up their democracies in exchange for protection of their social benefits? Who knows? Massive amnesia could occur!
    6 Jan 2013, 01:04 AM Reply Like
  • Greece is an uncompetitive economy. Taxes spending and borrowing just hide that fact. It's like spending all your savings in one weekend to pretend you are rich and then blaming everyone else for not bailing you out.
    6 Jan 2013, 01:42 AM Reply Like
  • Author’s reply » I find it doubtful that the Greeks had anything to do with the IMFs fantasy projections. The IMF as a lender would use its own data and supportive assumptions to construct its models. Here is my chain of reasoning and my conclusion on why the IMFs projections were faked, and what was responsible for those faked projections.


    The Fantasy Projections:
    Go to the chart in the header called "Greek GDP Growth (2012 and 2013 Projected). It's the eleventh graphic from the bottom of the header text in the concentrator. The red squares starting in 2011 show the IMFs now totally discredited predictions. Basically, the IMF predicted that the percent GDP growth would suddenly reverse in 2012 from the established downward trend.


    When those projections were made by the IMF back in February of 2012, I said they were so out of alignment with the data that they were obviously based on fantasy as opposed to any analytical process based on real data. I than provided my own projections of what the Greek GDP was going to do based on existent data. My projections are shown with the dotted line. My projection for 2012 turned out to be far more accurate than the IMFs.


    The Unicorn Paper by Blanchard and Leigh:
    The recent paper by Blanchard and Leigh is an obvious attempt to generate a smoke screen for the IMFs blown forecast by coming up with the explanation that the presence of unknown "fiscal multipliers" were the reason the IMFs projections were wrong.


    I think Blanchard and Leigh's explanation is akin to saying that Unicorns were responsible for the IMFs missed projections. No competent analysts would miss the fact that radically cutting government spending and raising corporate tax rates by 30% would act to sharply increase unemployment and result in lower government revenues. And that those factors would trigger a feedback loop leading to further reductions in Greek GDP and the transfer of economic activity into an alternative non-taxed shadow economy which would in turn trigger the need for yet more bailout funding for Greek banks.


    So Why Were The Projections Faked, And Who Was Responsible?
    I conclude that the IMF faked the projections in order to provide political cover so the EU could continue to lend money to the Greeks to prevent a default. They did this because if the Greeks default, the IMF and the EU central bank would loose their bailout investments. That would put the IMF and particularly the EU politicians that supported the Greek bailout in a bad position with the people that are going to end up paying the bill, the taxpayers.


    If the Greeks did not get the bailout supported by the IMF's fraudulent projections, they would have had to default because they had no funds to service the loans. Basically, the IMF lied, and the Unicorn Paper is just a poor cover story akin to explanations along the lines of 'the dog ate my homework'.


    Protecting the Banks Risk Transfer to Taxpayers Mechanism:
    While EU politicians and their cronies at the IMF would like the taxpayers to believe that a Greeks default would have little effect, I disagree. If the Greeks default, it would have a large negative effect on the balance sheets of many large banks including the European Central Bank. Future funding of other essentially bankrupt countries such as Spain would no longer be politically feasible.


    A Greek default would essentially tie the hands of the ECB with respect to any further loan programs, as the funding countries would face furious opposition from outraged taxpayers who would express their outrage at the polls. Basically, a Greek default would make it impossible for the EU and the IMF to bail out the banks that make high-risk loans to these bankrupt countries. The Risk Transfer to Taxpayers mechanism could no longer be used, which means that countries in trouble would no longer be able to sell their debt. IMF funding is also based on a hidden risk transfer to taxpayer’s mechanism.


    So one consequence of a Greek default would be to threaten the funding source for the IMF. Another consequence of a Greek default is it would threaten the goal of the EU to form a fiscal union. If the EU can't form a fiscal union, than the EU will never become a super state with the power to independently tax the people of its member states.


    Greece is corrupt and avoiding paying taxes is a national pass-time. However, I don't think the Greeks had anything to do with the faked GDP projections. The IMF faked the projections to protect its own interests which happened to be in alignment with the interests of the EU and the big banks. The banks and massively funded hedge funds will do everything they can to protect the risk transfer to taxpayers mechanism as that is the key to their high profits. I think that is the motive force for much of what we are seeing in Europe and the actions of the FED.
    7 Jan 2013, 08:48 AM Reply Like
  • Rattie, this failure now moves to Spain and Italy. Wait till the IMF comes here. Remember the IMF working paper that wants to cut spending and raise taxes here when we begin to fail or default.


    "We find that, under our baseline scenario, a full elimination of the fiscal and generational imbalances would require all taxes to go up and all transfers to be cut immediately and permanently by 35 percent. A delay in the adjustment makes it more costly." (We have had a long delay folks!!)



    I hope you keep this going so folks see the effectiveness of the IMF if or when they come for us.


    Unicorns Indeed!!!
    7 Jan 2013, 10:46 AM Reply Like
  • Author’s reply » Thanks for the link Guns... I think one of the first things we need to do is to cut our spending. One of the first cuts should be to stop funding the IMF.
    7 Jan 2013, 11:41 AM Reply Like
  • Let us not forget about the derivatives that would have been triggered in the event of a Greek default. Those hypopthicated and rehypothicated debt instruments would have collapsed the EZ banking system handily had they allowed the Greek tragedy to be called a default. This would have been a disaster for the global money changers like the IMF and WB.
    7 Jan 2013, 11:53 AM Reply Like
  • Author’s reply » The Insanity Continues ...


    Stournaras Says No More Heating Oil Help
    With temperatures falling and many Greeks unable to afford heating oil because of huge tax increases on the fuel, Finance Minister Stournaras said the government can’t afford to provide more oil subsidies to help the poor and told them to “be patient for another year” and wait out the cold.


    Meanwhile, desperate Greeks have turned to chopping down trees in the forest and city parks for wood. Health officials have warned that there are so many people using wood for heat that the air in Athens has become clouded with pollutants. The night air especially is heavy with the smell of soot and smoke that infiltrates clothes and hair and leaves people smelling as if they’ve been near a fire. In response, the government has told people not to use wood, even if they can’t afford heating oil. Some schools said they will not re-open after the holiday break because they can’t afford oil either.


    So how much did that staller group of individuals that make up the Greek government raise the taxes on heating oil - Forty percent. As a consequence, heating oil usage dropped by 80 percent and many oil distribution companies have closed. Of course, when the legitimate oil distribution companies closed, the taxable income jobs went away as well. Those that can will buy from the black market.


    Of course, a decrease in heating oil sales of 80% will hit the taxable revenues collected. How much of hit? The Greek Fuel Suppliers Association has calculated that the increase in the tax rate translates to a net loss of 400M euros. A net loss as a result of a tax increase.


    The finance minister stressed that it was important for Greece to continue its tight control over public finances as it looks to convince its international lenders to release three more installments over the next three months but still hasn’t formulated a plan to go after tax cheats who owe the country $70 billion.


    “We won’t get the next installment if we let up,” said Stournaras. “If the pullover starts to unravel, we’ll lose the trust we’ve started to rebuild. We have set targets that we have to meet,” he said.


    The disbursal of the next installment, worth 9.2 billion euros is due after the Jan. 21 Eurozone meeting. By then, the Greek Parliament will have to approve a new tax code that increases taxes, primarily on low-and-middle-income workers.
    That of course presumes they will be able to collect the increased taxes. And if they do collect the increased taxes it will mean even less to spend, so businesses will continue to shrink and more jobs will be lost. Continue to do the same thing when its clearly not working... what is that called again???
    7 Jan 2013, 11:26 AM Reply Like
  • "Continue to do the same thing when its clearly not working... what is that called again??? "


    Self proclaimed super intellectuals running everything because clearly they know better, and if it doesn't work, why then its just because they didn't control enough.
    8 Jan 2013, 06:09 AM Reply Like
  • Massive Dilution Coming For National Bank Of Greece Shareholders
    7 Jan 2013, 12:30 PM Reply Like
  • Author’s reply » Well that is just charming. I am sure the people with power got advanced notice and dumped. I wonder what makes them think they will get .30 per share.
    7 Jan 2013, 12:52 PM Reply Like
  • Who would buy the shares when the entire nation is insolvent. They have managed to glue a horn onto a pig and convinced each other that it's really a unicorn. Or perhaps they imported it from North Korea. Either way we are told that life is just a fantasy and we should make the most of our fantasy life by endless borrowing and spending. Next year the unicorns will fly. Just like black swans.
    7 Jan 2013, 01:20 PM Reply Like
  • I have a hard time figuring out how something presently worth NEGATIVE 2.87 BILLION can raise nearly 10 billion in share offerings. Seems I need to go back to school for math or I need to see the doctor........anyone?


    Are there really investors that stupid AND who still have money?
    7 Jan 2013, 07:09 PM Reply Like
  • rbf: It would have to be some back door financial entity of the EU government. The EZ has a bowl full of agency alphabet soup now, so adding one more shouldn't cause much excitement. :-)


    The EZ financial farce is getting very obvious. I wonder how the German voters are going to respond later this year? Should be entertaining for a portion of the political class.


    What astounds me is that the Euro hasn't fallen more. Are ALL the other currencies also as week? Strange. Maybe you CAN fool all of the people, some of the time.
    7 Jan 2013, 08:29 PM Reply Like
  • Author’s reply » What is suspicious to me about the Euro is its stability. It's unnaturally stable and that suggests its being controlled. I can only think of one organization that has that kind of leverage... the FED. Here is an article by Gerald O'Driscoll Jr. in the WSJ that I consider a must read.


    The Federal Reserve's Covert Bailout of Europe:
    When is a loan between central banks not a loan? When it is a dollars-for-euros currency swap.


    From the article, it's clear the FED and ECB are acting together. I think it's a small additional step to suggest that the ECB and the FED have a monetary agreement to fix the ratio of the Euro to the Dollar. The FED likely acting through its minion the Squid. Who is Mr. Driscoll? He is a senior fellow at the Cato Institute, and was vice president at the Federal Reserve Bank of Dallas. So he was plugged in at one time.


    The FED is an important topic in itself and probably rates its own news concentrator.
    8 Jan 2013, 09:33 AM Reply Like
  • Author’s reply » I agree SiliconHillbilly
    The banks are going to need another recapitalization []. Twenty-four percent of Greek loans are non-performing. In addition, the voluntary sale of the banks Greek bonds entailed a loss of interest revenues amounting to 16 billion euros. So the banks need yet another bailout. This is no surprise since we stated they were going to need to be recapitalized at the time of the voluntary sale.


    The National Bank Of Greece is suggesting a massive dilution to raise capital. Such a dilution would cause a massive loss to current bank shareholders. We wondered who would buy the shares? Well, one possibility is the ECB and or its agents.


    I think its politically impossible for the EU to provide yet another Greek bailout. But suppose, suppose the ECB was the buyer of those diluted shares. They would be buying an "asset" as opposed to making a loan. They don't need permission to buy assets. And if the ECB does not have sufficient capital to make the purchase, suppose they got the money from someone with bigger pockets... someone like the FED acting in the background with the Squid doing its bidding.
    8 Jan 2013, 10:08 AM Reply Like
  • Author’s reply » As expected after the sale of the Greek banks bonds, Greece's main banks are considering requesting additional funds [another bailout] for their recapitalization.


    Senior bank officials say that the rapid deterioration in financial conditions has led to a large increase in non-performing loans than originally foreseen. Ernst & Young estimates that non-performing loans in Greece approached 24 percent of all loans at the end of 2012. In addition, the so-called voluntary sale of the banks Greek bonds held in their portfolios entailed a loss of interest revenues amounting to 16 billion euros for the banks.
    Actually, the 'voluntary sale' was a sectioned looting.
    8 Jan 2013, 09:45 AM Reply Like
  • Its darkly amusing (for those who, like me, have a dark sense of humor) when government points a gun at someone, demands money, and calls the transaction "voluntary". I was once working on a "Modern Dictionary of Political Terms" where I was collecting words which were being inverted for political reasons. "Voluntary" included this example...


    This was my last entry on these Concentrators where I mentioned my view that Europe is being propped up by the American Fed:


    "China is so scay to me right now, I could never go there...


    And the rest of Asia is glued to the "Chinese miracle" even harder than Europe is to US Treasury support.


    South America (check recent history in Brazil) is firmly commited to a major currency war with Euro and dollar. They are "all in" and should China (as I suspect) stand firm and then ultimately ratchet down the value of the yuan...


    We could see a 40% correction on the wilder South American bourses.


    Japan is still fooling themselves that they can work the yen back to 90/100 to the $. Truth is they cannot, so long as China doesn't want it that way, but when China DOES decide to cut Japan loose, the BOJ will see the 90/100 flicker by on the way to about 150/$. Since this will occur DESPITE determined money printing and currency destruction here and in Europe...


    China joining the tussling in the currency trenches could make things get very ugly, very quickly.


    The "commodity" countries like Canada and Australia will have their own problems, as their super-strong currencies send their industrial base into a tailspin. Even their commodity producers (mines, farmers) will find themselves in a major squeeze as their costs exceed the world prices.


    Whiplash in commodity prices will be common and severe...


    Etc. The knock-on effects could get wild."
    8 Jan 2013, 09:51 AM Reply Like
  • Today on the Breakfast club it was noted that Germany had anemic growth and the Economic minister lowered expectations for the Q4. The news was greeted with OPTOMISM?
    9 Jan 2013, 03:56 PM Reply Like
  • Optomism must be because it was not a complete blow out?!!???!


    9 Jan 2013, 04:28 PM Reply Like
  • Author’s reply » I posted the latest Greek unemployment figures as of January 10, 2013 at the bottom of the concentrator's header.


    I also generated a Velocity of unemployment chart that shows percent increases by age groups from 2011 to 2012. As can be see, unemployment is rapidly spreading into older age groups as well. In other words, we are witnessing a complete collapse of the Greek economy.


    Meanwhile, the Greek Government, at the direction of the Trokia, is about to implement even more draconian cuts accompanied with yet more large tax increases. After all, prosperity is just around the corner.
    10 Jan 2013, 01:29 PM Reply Like
  • Rattie, as each age group approaches the 100% unemployed rate the rate has to slow down. I think that is why the 55-65 group is accelerating so fast is because they are nearly the only ones left with a job!!!
    11 Jan 2013, 04:10 PM Reply Like
  • Author’s reply » Exactly Guns! The first jobs to go were new hires and inexperienced employees. Now the fastest growing 'getting laid off' categories are the older more experienced employees. Layoffs in these age categories signal that business are capitulating because they are no longer economically viable because of joblessness and draconian business taxes. The longer they delay their default, the greater the number of assets that will be stripped out of their country.
    11 Jan 2013, 06:33 PM Reply Like
  • FPA: Another factor to add in to this mess is that businesses can "lay off" an employee making the government fixed minimum wage and hire a "back door" employee off the books. Pay him in goods or fuel bought wholesale or a place to sleep at night.


    Instant higher unemployment statistic, but might actually improve the business efficiency because of lower overhead. If enough folks are laid off, the off-the-books employee isn't going to say anything bad about his job or employer! No squealing to the "wage police" for him.


    So how many older, more expensive employees are actually losing their jobs? Who knows! The officially reported employment numbers from Greece are now about as accurate as Chinese inflation numbers. Maybe even less so.


    Some enterprising reporter needs to follow some random folks and see if they actually "go to work" in the morning while officially unemployed.
    11 Jan 2013, 07:07 PM Reply Like
  • Author’s reply » I like the way you think Silicon...
    11 Jan 2013, 07:41 PM Reply Like
  • Interesting theory on how European Sovereign debt could be reduced 64%, instantaneously, by using cross cancellation of debt:

    13 Jan 2013, 04:36 PM Reply Like
  • Interesting. People taking self initiative to protest so they shouldn't have to take self initiative.

    14 Jan 2013, 10:38 AM Reply Like
  • Author’s reply » Greek prosecutors recommended Tuesday that charges be brought against the head of the statistics agency and two other employees for allegedly inflating the country's 2009 deficit in order to make the economic situation appear worse than it was.


    The accusation stems from a 2010 revision which showed the deficit at 15.4 percent of the country's annual gross domestic product instead of 13.6 percent. In 2011, a former statistics agency board member alleged the figure had been artificially inflated to justify harsh austerity measures that included tax increases and cuts to salaries and pensions. Officials denied the allegation and said the revisions had been done according to European guidelines.


    Prosecutors recommended that charges of making a false declaration with damage to the state be brought against the statistics chief, the agency's director of national accounts and the head of statistics research. The charge carries a maximum sentence of life in prison. The head of the statistics agency also faces a misdemeanor charge [slap on the hands] of repeated violation of duty.


    Humbug ... The lying was more likely done to provide justification to EU politicians to continue to provide EU bailout funds to the Greek banks so they could use those funds to pay principal and interest back to the EU banks. This is just the risk transfer mechanism in action. The risk for buying the highly profitable, high yield Greek debt is than effectively transferred to the EU's taxpayers. This is the same reason the IMF lied with their fantasy Unicorn report about the sustainability of the Greek economy. That was also done to encourage the EU to continue to provide bailout funds so those funds could be used to pay the interest and principal on IMF Greek loans thereby transferring the risk once again to the EU taxpayers.


    I have zero sympathy for anyone that fakes data. However, the authorities should be looking at who was behind the scenes telling the statisticians or bribing them to fake the data. Those people should also be looking at jail time. But of course, their names will not even be mentioned.
    22 Jan 2013, 12:09 PM Reply Like
  • They also had allot of incentive to continue the money laundering in order to avoid triggering the CDS. Those little or big bomblets may have been largely unwound by now but who knows what pitfalls remain out of sight? The squid, IMF, and the central banks that were all in collusion to pull this off might not even be fully aware of what is out there.
    22 Jan 2013, 05:04 PM Reply Like
  • Author’s reply » January 24, 2013
    Research group Markit said that its preliminary French manufacturing purchasing managers’ index fell to a seasonally adjusted 42.9 in January from a final reading of 44.6 in December. Analysts had expected the index to ease up to 45.1 in January.
    24 Jan 2013, 03:46 AM Reply Like
  • Author’s reply » January 24, 2013
    EU Backs Georgiou On Greek Statistics
    Contradicting Greek prosecutors who want an investigation into whether Greece’s statistics agency ELSTAT manipulated numbers in 2009 to force the country to seek an international bailout, the European Commission said the agency’s head, Andreas Georgiou, gave accurate reports.
    Who is Georgiou? Georgiou is the head of Greece’s statistics agency. He formally worked for nearly two decades at the International Monetary Fund [IMF]... those are the same people that published the Unicorn report.
    24 Jan 2013, 04:20 AM Reply Like
  • In this sort of scenario, coincidences are never just coincidental...
    24 Jan 2013, 08:04 AM Reply Like
  • Author’s reply » Italian PM Under Fire; Italy's 3rd Largest Bank Hid Derivative Losses: ECB Says "Matter for the Italian Authorities"


    When Mario Draghi (now ECB President), had oversight of the Italian bank system as Bank of Italy Governor, the Italian bank Monte dei Paschi di Siena (Italy's third largest bank) hid information on derivative transactions between 2006 and 2009 that may force the 500-year-old bank to restate losses.


    In a statement released late on Wednesday, the central bank said Monte dei Paschi had “hidden” information on the derivatives transactions struck between 2006 and 2009, a period during which Mr Draghi was governor. The Bank of Italy said the “true nature” of some of the deals emerged only recently, “following the discovery of documents kept hidden from the supervisory authority and brought to light by the new management of MPS.”


    Analysts remain concerned that the derivative losses, which are expected to push the bank to a €2bn annual loss for 2012, may increase the risk of the bank being partially nationalised as it will force the state to take an equity stake because the bank will not be able to repay its bail out bonds.


    This information is just now out and shares in Italy’s third-largest bank by assets, which has requested a second state bailout in four years, have fallen more than 22 per cent since the revelation.


    Mario Monti, Italy’s prime minister, was forced to offer to recall parliament on Thursday amid questions about his government’s handling of the financial crisis at Monte dei Paschi di Siena and the role of the central bank. Meanwhile, there is a good chance Italy's third largest bank may be nationalized, and an even larger chance this will affect national elections coming up in February.

    May need to be nationalized? Hidden documents on huge loses? The bank will not be able to repay its bail out bonds? No problem...


    Of course the bill will be given to the taxpayers (nationalized). That is the way of the risk transfer mechanism. You make your high profit potential high-risk bets, and if you loose, your friendly Central Banker looks the other way, regulatory agencies look the other way, and the taxpayers get the bill.


    Of course, the bill will be hidden with lots of unnecessarily complicated mumbo jumbo and outright lying, but in the end, the bill comes out of the taxpayer’s pockets probably through the great equalizer in the form of hidden taxes. This is why Mario Draghi is at the ECB now.
    25 Jan 2013, 01:46 PM Reply Like
  • It continues to amaze me how easy it is to misplace billions of dollars in accounting work.


    I thought it was bad when my first job in an operations department at a bank was to figure out why a money market account was $40,000 off balance. I could see the trail of incompetence that led there, yet found it stunning to believe it was let go that far. Billions. That's a different scale.


    Accounting really is not complicated unless people make it that way to hide stuff. Billions. Again. Unbelievable.
    25 Jan 2013, 01:54 PM Reply Like
  • Its just compromise accounting.
    26 Jan 2013, 12:46 PM Reply Like
  • Jon


    "Accounting really is not complicated unless people make it that way to hide stuff."


    People do make it "that way" find or create any type of "investment" vehicle to make more and more money...greed...compet...
    Regulators get paid well, but pale in what the investment bankers are paid...most of the better talent move to the money not the regulators.
    I don't have answers, but we can start by grading and rating banks traditional methodologies and non traditional...i.e. noting investment to opaque or not understandable to the common man...and either limiting insurance more or eliminate it.


    What really frosts me...
    Pensions Bet Big With Private Equity


    "It is a sign of the times. Numerous pension funds are still struggling to make up investment losses from the financial crisis. Rather than reduce risks in the wake of those declines, many are getting aggressive. They are loading up on private equity and other nontraditional investments that promise high, steady returns in the face of low interest rates and a volatile stock market."


    They already forgot 2008????
    26 Jan 2013, 11:32 AM Reply Like
  • Author’s reply » ** The Risk Transfer Mechanism in Action **


    Italian Central Bank Approves Monte Paschi Bailout Request


    Italy's central bank on Saturday gave its approval to a request by scandal hit bank Monte dei Paschi di Siena for 3.9 billion euros ($5.3 billion) of state loans. The lender's new management, appointed last year to turn it around, said the situation was "completely under control".


    * The bank will pay a 9 percent coupon [!!] on the bonds, which are worth more than its current market capitalization of 3 billion euros.


    * The coupon will increase by 0.5 percentage point every two years up to a maximum of 15 percent.


    * At a volatile meeting at Monte Paschi's Siena headquarters on Friday, shareholders approved two capital increases for 6.5 billion euros [!!!] to be carried out, IF NEEDED, during the next five years, which are a condition of the state bailout.
    So what do we have here?


    We have insufficient collateral to cover the bonds, hence that big interest rate. The longer the bank kicks the can, the higher the coupon rate. How are they going to pay that 9% [and up] coupon? No problem, everything is completely under control. Management will pay the coupon and repay the principal on their just approved offering of up to 6.5 billion euros.


    One wonders why they apparently need to raise 67% more capital than the 3.9 Billion euro loan. What else is hidden in those books?


    Meanwhile, the common stock holders are going to be wiped out. Now what fiscal entity would buy into an offering like that? I argue there is only one, the countries central bank, the good old bank of Italy.


    My guess is this pocket nationalization will be hidden by some backdoor financing scheme where the holders of the banks premium shares, the senior debt holders somehow benefit from what amounts to a total bailout at the tax payers expense. The risk transfer mechanism in action.
    26 Jan 2013, 06:58 PM Reply Like
  • >FPA ... By this time in the game we all know what will happen. The government will fork over 3x the money the bank has squandered, the bankers, bondholders & preferreds will be made whole, no one will be held to blame. Meanwhile as the sovereign debt rises to pay it off, everyone will point to the greedy socialist common folks as the culprits and push for even more austerity to free more public monies to give to the banks.


    26 Jan 2013, 10:56 PM Reply Like
  • "everyone will point to the greedy socialist common folks as the culprits"


    That's the point of a socialist collective. In order to make everybody "share", someone has to be given the monopoly of coercion. The result of this is ALWAYS a ruling elite that act on their human of instinct of survival, and since giving them that monopoly of coercion to make people "share" causes stealing to be very cheap, that's exactly what happens.


    This is why you don't see any true socialists or communists states. People will not work for the benefit of another, so the only way to get them to work is via coercion. As a result everybody winds up hating one another because everybody is trying to live off everybody else and the result is people slowly stop working. As such, in a true socialist state, nobody would work, and even if they did they wouldn't know what to produce or how to produce it. As such, nature doesn't allow any true socialist or communist states because the people that did manage to overcome human nature and practice it anyway would all starve and die out pretty quickly.


    As such, you can only have socialist and communist states in name only, and either the free market goes underground and it is called a black market or contraband, or these societies allow some freedom so they can have enough to survive and then they just don't talk about it.
    27 Jan 2013, 07:06 AM Reply Like
  • >jhooper ... Huh ???????
    27 Jan 2013, 09:12 AM Reply Like
  • Even if you could establish socialism without coercion they would still starve. You can't share your way to prosperity. Tribalism already tried that. You can't share want you don't produce.
    27 Jan 2013, 09:50 AM Reply Like
  • This is from John Mauldin about the Euro debt mess and especially about Greece. I found it interesting.

    27 Jan 2013, 01:43 PM Reply Like
  • Author’s reply » Here is an example of good investigative report by Reuters looking at Italy's Monte dei Paschi bank.
    31 Jan 2013, 05:34 AM Reply Like
  • The Bank of Italy - led until 2011 by Mario Draghi who is now the European Central Bank Chief - has said it realised the "true nature" of the contracts late last year, after Monte dei Paschi's new management discovered the document in the safe.


    Very interesting that the very last line in this story brings up Mario Draghi but this comment just does not seem to have any bearing on the story.....Whats up with that?!
    31 Jan 2013, 08:19 AM Reply Like
  • Author’s reply » The hidden derivatives deals were bad enough. But allowing two members of the banks finance department to collect 5% fees for all the deals they cut irrespective of the quality of those deals or the risks entailed in those deals, and than paying the 5% fee directly into those employees’ Swiss accounts was essentially a license to steal.


    That kind of compensation arrangement encourages participants to make as many deals as they can irrespective of the return to the bank, or the risks entailed by the bank. The bank had a rule that phone deals needed to be recorded by the bank on the banks landlines. The fact that many of those deals were made on the participants non-recorded personal cell phones was a huge red flag that the banks management ignored. That and the ignoring of all the complaints from the banks internal risk control department, and its audit committee are suggestive that kickbacks were being spread around to smooth the waters. It's no wonder the banks new CEO fired the head of the finance department, a member of the so-called 5% gang, for non-performance of the banks investment portfolio. Of course many of the transactions were poor performers. These thieves were not making transactions for the benefit of the bank, they were making the transactions for their own benefit.


    Than we have the interesting point that the bank now has an excessive exposure to Italian government bonds. That is another big red flag with respect to the involvement of Italy's central bank, the Bank of Italy, that was led until 2011 by Mario Draghi who is now the European Central Bank Chief. The question it brings up is was the excess purchasing and subsequent exposure of the bank to high risk Italian government bonds a pay-off to keep Draghi quiet? Those hidden derivative deals involved Deutsche Bank, and JP Morgan. Those are institutions who would have a great deal of clout in getting Draghi appointed as head of the ECB. It makes you think what the hell is Draghi doing now that he is the head of the ECB?


    It's no wonder the whole system is collapsing onto itself and that the collateral that backs many of these high end bank deals is just an illusion - or an even better descriptive - a con. The whole banking system is rotten and it's only a matter of time before it collapses under its own weight of graft and corruption. The shareholders and ultimately, the taxpayers will end up paying the bill. But the bill will be so high that the only way to pay the bill will be to inflate the currency to death. So the bill ends up being paid for by direct and indirect (inflation) taxes. Meanwhile, the participants have probably bought gold or other securities or financial instruments that protect them from the losses of value due to inflation.


    I think the Monte dei Paschi banking scandal is going to end up as a much bigger story because it exposes the con-game that the banks are playing. It also shows the mechanism of the risk transfer game in action. Will anything be done about it? Yes, no doubt of that. The EU is now attempting to pass laws that will effectively gag journalists. Of course that is exactly what would be expected since the politicians are essentially controlled by the banks.
    31 Jan 2013, 12:43 PM Reply Like
  • FPA: the fact that Draghi isn't on the street and unemployable says much about the EU economic mess.
    31 Jan 2013, 01:10 PM Reply Like
  • SHB: Yeah, it says they're a lot more like the U.S. than we want to believe!


    31 Jan 2013, 02:38 PM Reply Like
  • Author’s reply » It really does look like the US with their bonus payments arrangements doesn’t it.


    What the banks do is to allocate their funds by risk buckets. That is supposed to be their guard against putting too many assets into risky investments. They than pay bonuses on the completion of a deal. Note that all that counts is the completion of the deal. I don’t know if risk level affects the bonus payout, but of course it should. However, the salespeople probably argue that the risky investments that work out provide higher profits, and their bonuses should be linked to profits. Of course, they get their bonuses at the end of each year, and most of the deals are multi-year deals. So final profitability is really not linked to the reward.


    On top of this, the system is set up in such a way that it’s to the advantage of the salespeople to try to game the risk system. That is what happened with the US real estate bubble. The senior people in the banks got together with the senior people in the raring agencies and rated CRAP as AAA.


    Everybody involved raked in tons of profits. Of course, the whole thing collapsed. Some of the bonuses were clawed back, and well publicized so people would think the guilty were punished. But than why were the rating agencies not prosecuted for making obviously false claims with respect to the quality of the mortgage loans? Because if you prosecute them, you would have to prosecute the banks, and if the banks go down, than the stinking, thieving politicians that run this country go down as well. It’s not going to happen.


    Meanwhile the banks as companies end up holding trillions of dollars of CRAP that is rated to fantasy prices, not marked to market. As a result, they need capitalization to keep them from failing, and of course, they are too big to allow them to fail. In the end, its the taxpayers that pay for the banks loses via the FEDs actions through direct and hidden (inflation) increases in their taxes.


    It’s not hard to figure out what is going on here, so why are these crooks still in power? Because we have no way of removing them because the political parties are hooked up to the money spout as well.
    31 Jan 2013, 03:25 PM Reply Like
  • Crony capitalist/socialist hybrid governments. Sweeping the planet.




    As meteors and fads go, this one's a planet-killer.
    31 Jan 2013, 03:37 PM Reply Like
  • Rattie I think your on to something concerning Draghi. I think the news article wanted to say something about him with out saying something, or the writers comments got edited right onto the edit room floor. No matter what the comment was just sitting there awkward as hell so it had to mean something.
    31 Jan 2013, 07:27 PM Reply Like
  • Indeed! US debt is more problematical than many realize because it's risk is being masked by FED purchases giving the illusion of limitless demand for US paper. Add to that situation new rules allowing US banks to buy US bonds and not count them as debt investment on their books. Thus assisting the illusion of limitless demand. Look familiar?
    1 Feb 2013, 05:19 PM Reply Like
  • Europe facade crumbling?

    31 Jan 2013, 09:46 AM Reply Like
  • Author’s reply » Here is another report under the byline of Gavin Jones senior correspondent, Rome at Thomson Reuters on Monte Paschi.


    One sentence in the last paragraph provides another insight into the situation...


    "... few [Italian] politicians see any capital in attacking the non-partisan chief of the ECB (Draghi), which has bought Italy's government bonds and helped to save it from bankruptcy."


    The implication being that Draghi's current position protects him from investigation and potential prosecution for looking the other way or actively preventing a formal investigation of Monte Paschi when he was the head of the Bank of Italy, allowing the Monte Paschi swindle to remain hidden for years from the banks shareholders.


    After all, if Draghi is left alone he might buy more high-risk Italian sovereign bonds... So apparently Draghi has a 'get-out-of-jail card'. The implication highlights the tremendous leverage and power of the head of the ECB.


    You need a low cost easy under the table loan to transfer your risky investments to ECB taxpayers, call Draghi...


    This is the same Draghi that recently (5 July) warned that the ECB must work hard to guard its independence and become MORE ACCOUNTABLE as it takes on the role of Eurozone banking supervisor. Draghi, said staving off political interference was of paramount importance.


    So he wants no supervision, while promising to be accountable. How does Draghi's actions with respect to the Monte Paschi swindle measure up to his stated position about Central Banks being more "Accountable"?
    1 Feb 2013, 08:05 AM Reply Like
  • The question is "accountable to who?"


    The presumption is that it means that the central banks should be more accountable to the taxpayers funding them, but there are layers to this onion still to be examined...


    What I see is yet another piece of evidence of the US of E elites setting up the individual national central banks as subordinate to their federalized control... In this case, the ECB.


    The new federal hierarchical structure will redefine the "central" in "central banks".


    What we don't know is how many of the individual states will band together and attempt to secede from the union...


    If I had to pick a location for the US of E's Fort Sumter cause celebre...


    Helsinki. But this time the federales will let the small fish escape.
    1 Feb 2013, 10:41 AM Reply Like
  • Author’s reply » And....


    SNS Nationalized in Netherlands After Real Estate Losses


    The Netherlands moved to take control of SNS Reaal NV after real estate losses brought the fourth- largest Dutch lender to the brink of collapse, the country’s second banking nationalization since 2008.


    The lender has been hurt by losses on real estate loans that have left it struggling to repay a government bailout before next year’s deadline and bolster capital buffers.


    The move will cost taxpayers 3.7 billion euros ($5 billion), the Dutch Finance Ministry said in a statement today.
    1 Feb 2013, 08:42 AM Reply Like
  • FPA: I really appreciate you keeping track of the Euro mess. Your "condensations" of the EU economic news is great.
    1 Feb 2013, 01:38 PM Reply Like
  • SHB: +1 on thanks to FPA. We don't say it enough!


    1 Feb 2013, 01:40 PM Reply Like
  • Indeed! Add me to the list. Thanks FPA. Speaking of the accountability issue keep in mind that several heads of state in the EZ are Goldman Sachs good O'l boys. So the ECB essentially would be accountable to the Squid. After all those heads of state ostensibly represent their nation's tax payers but in reality they are serving the squid. There will be more of this leaking out of cracks and seams across the board as the derivative positions become harder to unwind in a clandestine manner.
    1 Feb 2013, 05:27 PM Reply Like
  • Rattie, Mucho cheese sticks and nachos for you my friend.
    1 Feb 2013, 07:35 PM Reply Like
  • OK Raton (that's Spanish for Rattie) --


    Add me to the list of appreciative fans. Don't always have much to add to your analysis -- but it sure does help me keep a finger on the EU pulse.


    Thanks and have a great weekend.
    1 Feb 2013, 08:09 PM Reply Like
  • Me as well. Probably going to be living there w/i 5 years to be closer to my wife's family (all in Czech Republic)... good to keep up with the muckety muck of the den to which I go.
    2 Feb 2013, 09:49 AM Reply Like
  • Author’s reply » Cyprus troubles the euro zone


    (Reuters) - While the Cypriot economy may be worth only 18 billion euros, making it the third smallest in the euro zone, the problems it poses are quite complex, combining elements of Greece, Spain and Ireland. The latest estimates from analysts are that the country needs 17.5 billion euros to get back on its feet.


    Cyprus asked for assistance in June last year and has spent the past seven months in on-off negotiations with the European Commission, the European Central Bank and the IMF on a package. Cypriot and EU officials indicate that it is likely to require the privatization of state assets - such as the state telecoms firm - major pensions reform, the possibility of a one-off tax on the island's 800,000 citizens and fundamental restructuring of its bloated banking sector.


    The question is how Cyprus could ever afford to pay the money back - the bailout is not sustainable which means more radical steps will be required including the possibility of imposing losses on the Cypriot government's creditors, which EU officials have ruled out, or forcing heavy losses on the country's banking sector. However, a big portion of Cypriot debt is issued under English law, which makes any restructuring extremely difficult.


    That leaves another, more complicated option - imposing losses on Cyprus's banking sector. In a draft memorandum of understanding that outlines the likely terms of aid to Cyprus, the government could be forced to make deep adjustments to its banks, shutting down non-viable operators and potentially imposing losses not just on shareholders but on some bondholders too. Speculation has also covered the possibility of freezing bank deposits over and above 100,000 euros, with that money then held in escrow and used as collateral against debts, but analysts say it would be a risky and wrong-headed approach.


    Cyprus has identified vast reserves of natural gas off its coastline, with estimates of up to 60 trillion cubic feet, with just one block in the Mediterranean basin between Cyprus and Israel estimated to contain gas worth $80 billion. The gas fields are only likely to come on line in 2018 for domestic consumption and 2019-2020 for export, but that does not prevent the future expected income being securitized.
    3 Feb 2013, 11:58 PM Reply Like
  • Cyprus, you'll be happy to know, has become a popular place for hedge funds to base out of in recent years
    4 Feb 2013, 09:49 AM Reply Like
  • Looks like Mario can run but he can no longer hide. Now comments are no longer just a dangling participle at the end of a story....

    4 Feb 2013, 01:09 PM Reply Like
  • Author’s reply » It's a very interesting story Guns. Here is a brief review...


    February 4, 2013 - Wondering what happened in Europe this morning to cause the selloff? Here is part of the story...


    Monte Pasch:
    First, we have more information on the Monte Paschi CON. Originally, the Bank of Italy said that the management of Monte Paschi hid the documents on those irregular derivative transactions.


    But now it turns out that both Monte Paschi AND the Bank of Italy lied. Reuters tells us the Bank of Italy actually knew about those irregular derivative transactions as early as mid-2010. That was back when Draghi, now president of the European Central Bank, was the chief of Italy's central bank.


    So why did the Bank of Italy do nothing? The Bank of Italy [BOI] senior management is now saying that the decision on launching a sanctions procedure, involving publicly blaming and fining bank officials, does not depend on the BOI governor and its five member executive board, but on the bank's inspectors and then a series of lower level committees.


    "The inspectors are the only people responsible for initiating a sanctions procedure so if they don't find anything in the course of their inspection then it's not possible for the top management to start the process," said the source, who asked not to be named.


    In the summer of 2010 BoI inspectors uncovered two opaque derivatives contracts that could cost Monte Paschi shareholders and taxpayers 720 million euros and are now at the center of fraud investigations, yet the BOI did not propose that sanctions be launched. That decision "had nothing to do with the board," the official said, though he added that Draghi was shown the inspectors report.
    So basically the senior management spin is that the BOI governor and its five member executive board take their marching orders from lower level personal that work for them. RUBBISH! Draghi and the executive board saw the report on the irregular derivatives contracts. It was their fiduciary responsibility to take action and protect the shareholders and the taxpayers. Not only should Draghi NOT be running the ECB, he and the five members of the BOI executive board should be thoroughly investigated, and prosecuted if necessary.


    Than we have SPAIN and the kickback scandal.


    El Pais reports, the ruling Popular Party [PP] leaders were paid regular sums of money aside from their official salaries, via donations from companies (especially construction firms). Prime Minister Mariano Rajoy is at the top of the secret files list (KEPT BY FORMER PP TREASURER Barcenas] having started to receive these extra 'kickbacks' in 1997.


    In the link, El Pais summarizes the payments and who got them in this kickback scandal that threatens to take down everyone in the Spanish ruling PP from PM Rajoy (€300,000 over the years) and on to the lowest rungs of political corruption. The release of the information appears to be payback by the former PP Treasurer who was 'busted' earlier in the year (by Rajoy) for keeping millions of Euros in a Swiss bank account.
    4 Feb 2013, 03:43 PM Reply Like
  • Gosh, no honor amongst Spanish thieves, either :-)
    4 Feb 2013, 04:12 PM Reply Like
  • Author’s reply » February 5, 2013
    Rajoy, the Spanish PM, is quoted by El Pais responding to the corruption charges against him and the entire Spanish government...


    "It’s All Untrue, Except Some of It."
    5 Feb 2013, 07:26 AM Reply Like
  • Thanks FPA -- surely he didn't mean that -- maybe the message was lost in translation from Spanish to English! LOL
    5 Feb 2013, 07:29 AM Reply Like
  • Author’s reply » It's such a great line Mercy... That line will become famous. So where did it come from?


    The statement appears to be a summary of a statement made during a question-and-answer session Rajoy held alongside German Chancellor Angela Merkel following their meeting to discuss Spain’s economy and the reforms being carried out by his government.


    This appears to be a longer version of his statement - “I repeat what I said Saturday: everything that has been said about me and my colleagues in the party is untrue, except for some things that have been published by some media outlets”.


    Clearly someone summarized his statement into that memorable version. My guess is that Rajoy wanted to say that everything published about him and his party by certain media outlets were lies.


    Meanwhile, a PP official has come forward to acknowledge and verify the information contained in Bárcenas’ bookkeeping report concerning his receit of funds.


    Santiago Abascal, a former PP member of the provincial parliament in Álava, whose name appears as receiving two million pesetas [about 12,000 euros] in 1999, said he asked the party for the money after his business was attacked by terrorists. “I told the party that I couldn’t make ends meet and they gave me two million pesetas,” he said.


    A gift? The PP makes gifts? He could not make ends meet, and he got a gift with no strings attached? A gift to a member of the provincial parliament...


    How did all this come to the front? About four years ago a crusading Judge named Baltasar Garzon conducted an investigation involving alleged bribery, influence-peddling and money laundering implicating top PP officials. As a result, Barcenas (the guy with the payments records) resigned as the PP’s treasurer in April 2010.


    But last February, Spain’s Supreme Court convicted Judge Garzon of illegally ordering wiretaps to monitor conversations between several defendants in the case and their attorneys and barred him [Judge Garzon] from the judiciary for 11 years.


    Talk and you get silenced. " Speaking the Truth in times of universal deceit is a revolutionary act. "
    5 Feb 2013, 08:53 AM Reply Like
  • FPA: Greetings. LMAO! You're right that one is priceless.
    5 Feb 2013, 09:51 AM Reply Like
  • Author’s reply » February 6, 2013 Monte Paschi
    Yet another hidden derivative as surfaced, this time with JPM, that reveals that the Monte Paschi bank had lied yet again, and also that the previous loss estimates for Monte Paschi were optimistic as the final loss may be up to (or over) €1 billion.
    Of course this was telegraphed by the size of the Monte Paschi offering approval that was recently rammed through at their stockholders meeting. It was twice the size of the than revealed hidden derivative losses.


    At this point the only unknown is how many other banks will be dragged down once Silvio Berlusconi (bunga bunga), in an attempt to discredit the Democratic party and gain more popularity, reveals all the dirty laundry that only he knows as he was the Prime Minister until November 2011 when Goldman's new head of the ECB, Mario Draghi forced him to resign by sending Italian bonds plunging.


    This of course was part of the Italian Financial Coup D’Etat engineered by bankers and the European Union where Mario Monti rose to power in Italy last November. He was NOT elected but stepped in after Prime Minister Silvio Berlusconi resigned under duress in November of 2011. A major portion of that pressure to resign was manufactured by Mario Draghi the than Governor of the Bank of Italy who resigned that post in October 2011 and became President of the European Central Bank on 1 November 2011. [Interesting coincidence in the timing there.


    Who is Mario Monti?
    Mario Monti aka Super Mario is an “international advisor” to Goldman Sachs, one of the most powerful financial firms in the world. He also happens to be a leader in the Bilderberg Group and the Trilateral Commission. In an article in The New American, Alex Newman calls these clandestine groups “two of the most influential cabals in existence today.” Monti is listed as a member of the steering committee on the official Bilderberg website and as the European Group chairman on the Trilateral Commission website.
    6 Feb 2013, 04:46 PM Reply Like
  • Sounds like he is only recently moved from behind to one step forward of the curtain.
    6 Feb 2013, 06:06 PM Reply Like
  • Author’s reply » Old story with a new piece of information...


    Tax Hikes Backfire, Greece’s Revenues Plummet
    Despite big tax hikes demanded by international lenders, tax revenues fell precipitously in January, with the Greek Finance Ministry reporting a 16 percent decrease in revenues from a year earlier.


    Finance Ministry officials attributed the decline in tax revenues to the drop in consumption, as revenues from Value Added Tax (VAT) shrank by 15 percent, while those from the special consumption taxes were also lower. As a result of tax increases, pay and pension cuts, Greeks have reduced spending. Even supermarket sales have dropped by 500 million euros in 2012.


    And now, this little gem has surfaced...
    When Greece fails to meet revenue targets it triggers a "correction clause" at the end of each quarter initiating more automatic spending cuts except for pensions and salaries. [A more appropriate name for the "correction clause" is an
    "auto destruct mechanism."]


    The Greek government tried to offset the bad news with a report that thanks to their successful austerity measures, the country’s deficit had fallen from 9.4 percent in 2011 to 6.5 percent last year.
    Greece has 26.8% unemployment. This is an increase of 163% over the past two years.
    7 Feb 2013, 06:17 AM Reply Like
  • France collapsing, Germans running scared.

    7 Feb 2013, 10:27 AM Reply Like
  • Author’s reply » February 8, 2013 - Austerity Cuts Greek Household Income an average of 38%


    The severity of Greece’s economic crisis and austerity measures demanded by international lenders has drastically cut the incomes of more than 90 percent of Greek households, with an average drop of 38 percent.


    Clothing, eating at restaurants and gifts are the categories in which most households say they have cut spending “significantly,” followed by heating, travel and recreational activities such as going to cafes, bars and the cinema. The survey of 1,207 households was conducted between Dec. 10 and Dec. 19.
    Of course, that drop includes all the people that now have zero income because they lost their jobs.
    8 Feb 2013, 01:27 PM Reply Like
  • Author’s reply » February 14, 2013 (Reuters) - Italian police arrested on Thursday the former head of Monte dei Paschi's finance department (Gianluca Baldassarri), who is at the center of a probe into alleged fraud and bribery at Italy's third largest bank.


    Prosecutors seized some 40 million euros ($54 million) last week as part of their investigation. The prosecution seizure order, seen by Reuters, said the funds belonged to Baldassarri and four other people suspected of criminal conspiracy to commit fraud.


    Prosecutors said Baldassarri was accused of helping mislead regulators over the true nature of a secret derivative contract that was found in a safe by the bank's new management in October 2012. Prosecutors are also investigating accusations of corruption in Monte dei Paschi's acquisition of smaller rival Antonveneta in 2007, as well as a series of loss-making derivative and structured finance trades dating back to 2006-09, which the bank says it discovered only last October.
    14 Feb 2013, 10:18 AM Reply Like
  • Wonder when the bread crumbs lead back to Super Mario?
    14 Feb 2013, 10:58 AM Reply Like
  • Author’s reply » A few sacrificial goats to give the impression that justice prevails as the wanton thieves rapaciously steal from a powerless and deluded public. Ignorance is bliss until the wolves show up as you cash your paycheck and pay your ‘fair share’ of taxes needed to support the totally corrupt state and its thieving politicians.


    The net bill for the fraud will, of course, still be presented to the taxpayers. The “recovered’ 40M euros will most assuredly not be applied against the current approved bailout of Monte dei Paschi. The alleged perpetrators will have their hands slapped and receive fines and light jail sentences accompanied with golden parachutes for keeping their mouths shut.
    14 Feb 2013, 11:34 AM Reply Like
  • We may see more demand for dollar assets soon. Like LTRO. Equities up and treas yields down.

    14 Feb 2013, 11:45 AM Reply Like
  • I note that the G-20 group has "pledged" to not have a "competitive currency devaluation" cluster fubar.


    As we know, when any bureaucratic organization publicly pledges amongst members NOT to do something, it means that "something" is already a painful reality.


    My favorite? "we will not lie to the people!" Right. Goes right along with: "when things get bad, you lie". One of my favorites.
    14 Feb 2013, 01:00 PM Reply Like
  • Author’s reply » Cool aid for the masses. We are already in a currency war. Look at Japan. Venezuela recently devalued its currency – that’s equivalent to a nuclear bomb in a currency war.


    What I don’t understand is why is the EU not responding? One thought is that if they do attempt to decrease the relative value of the Euro, it will hurt their banks. Alternatively, they may be getting compensated to not respond. There is only one institution that could do that... the FED. Is the FED supporting the EU banking system and as part of that arrangement, has the ECB agreed to not meddle with the EU exchange rate? This would of course hurt EU countries exports. But the EU priority seems to be more about protecting the banks than protecting the citizens jobs. How does China fit into this?
    14 Feb 2013, 01:49 PM Reply Like
  • FPA,
    I am assuming most of your questions are rhetorical. After all the hidden loans and currency swaps the FED made to the EU during the banking crisis? The FED must keep the Euro strong enough to keep the dollar from standing alone as the emperor with no clothes. A naked person is normal in a nudist colony.;-)
    14 Feb 2013, 02:07 PM Reply Like
  • Author’s reply » Happy Valentine’s Day


    Greek Youth Unemployment Tops 60%
    Spain reaching new highs at 55.6%


    And for a completely different perspective on Greece, we have this Seeking Alpha “top article” about Greece with a mighty 23 comments published yesterday.


    “After Clearing A Major Hurdle, Greece's Outlook Brightens”


    It even provides some helpful investing tips, one of which includes a Greek bank...
    14 Feb 2013, 01:07 PM Reply Like
  • Thanks for that second link, FPA. The article was so-so but the comments were very informative.


    Like a long term alcoholic developing stomach problems and liver disease, Greece will need to face the truth before recovery will begin. The EU enabler isn't helping them. Breaking free of the EU seems a harsh but shorter path to change and recovery. Good luck to them.
    14 Feb 2013, 03:54 PM Reply Like
  • Author’s reply » Puma Joins Exodus From Greece
    Puma is leaving Greece, joining companies such as Coca-Cola – the country’s biggest – and the giant dairy Fage in fleeing the fiscal crisis and high taxes. Hundreds of other smaller businesses have also abandoned Greece.


    In announcing its balance sheets for 2012, Puma said it would restructure and close down 90 non-profitable stores. Puma announced liabilities of 42.6 million euros for the fourth quarter of 2012 compared to a profit of 33.1 million euros in the same period a year before.
    33M positive to 43M negative, a change of 76M in the old balance sheet going from green to red..
    15 Feb 2013, 05:45 AM Reply Like
  • Author’s reply » From: ZeroHedge Germany, Spain Set To Pull Plug On Green Energy


    Over ten years ago, Europe decided to actively promote the pursuit and development of renewable energy through countless government subsidies. As a result, Germany and Spain became the undisputed leaders in the race for a green future, and both created similar laws to encourage the development of renewable energy. There were two problems:


    1) Green energy is about the worst idea possible when it comes to profitability and requires ongoing governmental subsidies.


    2) It was the consumers who ended up paying for the government's decision in the form of a surcharge on electric bills. In Germany, for example, as the industry grew (in size, and thus in losses) demand for the subsidy increased, driving the surcharge higher. In January, the surcharge nearly doubled to 5.28 euro cents per kilowatt hour.


    And here is where a third problem comes into play. While German and Spanish consumers accepted paying a surcharge in the past, Europe now faces reduced economies. In short: the German and Spanish consumers will no longer tolerate funding surcharges on electric bills when cash flow is scarce and getting worse.


    Those government subsidies are now a political issue in both Spain and Germany. As a result "with Spain in the grips of recession, the government wants to lower consumers' light bills. On Thursday Merkel's government proposed putting a cap on the green-energy surcharge until the end of 2014 and then restricting any rise in the surcharge after that to no more than 2.5% a year. The government also plans to tighten exemptions, which would force more companies to pay, and achieve a cut in green subsidies of €1.8 billion ($2.42 billion). The plan is a quick fix pending comprehensive reform AFTER the election, government officials said."


    [Right... a quick fix until AFTER the election - when the government will fix everything... It will be interesting to see what the Greens in Germany have to say about this - it could become a hot potato.]


    The Spanish parliament took a similar step on Thursday, passing a law that aims to curb rising household electricity costs by cutting aid to the renewable-energy industry. Renewable-energy producers "are going to receive less revenue said Energy Minister José Manuel Soria. Among the changes in the Spanish system, the new law indexes certain subsidies and compensation to an inflation estimate that strips out the effects of energy, food commodities, and tax changes.


    [right... change the way inflation is measured - this is the same way the US controls inflation, it changes the measuring stick. So pensions that are inflation adjusted will receive smaller compensating increases... They save you five cents with one hand while robbing you of 20 cents with the other.]


    Naturally the response from the subsidized industries has been swift and damning: Renewable-energy companies said that the government was backing away from previous promises that it would ensure them a reasonable return on their investments.


    So the "deals" the renewable energy companies paid the politicians for are being temporarily put on hold because the highly unpopular fraudulent politicians need to pay for votes to try to get reelected... after that it goes back to business as usual (bribery, extortion, cronyism, nepotism, patronage, graft, embezzlement.
    15 Feb 2013, 07:02 AM Reply Like
  • Merkel's coalition will (IMHO) lose the next election to the very group who will instantly move to increase altenergy funding. The Greens will be a large part of the new ruling government.


    The funding changes in Spain (which are yet very mild, taking the situation as a whole) occurred after Spain dumped their leftwing government and installed a centrist leadership. In this case, Spain and Germany are moving in opposite directions, at least for the midterm, BUT...


    I expect both countries to move toward stronger price controls for energy while adding lower income electricity customers to the dole.


    We are seeing this topic (altenergy as government policy) sweeping the West. It is a race to the bottom of the funding barrel, as corrupt crony capitalist/socialist operators rapidly erode the stockpiled wealth accumulated over centuries.


    This will be a key factor in the process of beggaring the West.
    15 Feb 2013, 09:53 AM Reply Like
  • Anyone call Washington, maybe give them a heads up?
    15 Feb 2013, 12:32 PM Reply Like
  • I made some comments a while back about micro-grids and local generation as a way to divorce the higher net worth folks from the decreasing reliability and increasing cost (renewable subsidies) of the USA national grid system.


    Backing away from large, centralized generation just makes sense when the national government becomes a net force for higher costs and lower efficiency. Especially by subsidizing dirty electricity from highly variable wind and solar, requiring fast response (lower efficiency) gas turbine backup generation.


    So I look for a similar response from the EU countries. Fracking for shale gas/coal seam gas may become far more common as the cost of dependence on the corrupt national governments for electricity becomes higher. Anything that does NOT depend on the Brussels Bureaucrats.


    An integrated system for converting a town or city waste stream, solid and liquid, into biogas and liquid fuel seems an obvious approach. The waste has to be disposed of anyway, usually at substantial cost. Given that the EU dwellers pay more for fuel, might not this be an economic possibility today?


    The more folks reduce dependence on the EU electricity grid, the less money will be available to support and expand it.


    Micro-generation would seem to have a big future.
    15 Feb 2013, 01:13 PM Reply Like
  • European Bank CEO Admits: "The Whole Thing Is Doomed"

    18 Feb 2013, 12:49 PM Reply Like
  • He's a US of E elite. Fiscal Union is the next step toward Federalizing Europe under a single government.


    Any patriotic Spaniard (Frenchman, German, Italian, Dutchie, etc, etc) would disagree with him. Their point of view would sound similar only to the extent that they would see the Euro as deserving to be doomed - and the EZ with it.


    I wonder sometimes how deeply folks parse these proclamations, testing them for self-interested agendas...
    18 Feb 2013, 01:42 PM Reply Like
  • Another "problem" developing in EZ richer country's.To much house hold debt.

    18 Feb 2013, 01:18 PM Reply Like
  • I know a number of fairly wealthy Swedish investors who make a habit of withdrawing funds from the home "bank" at the wildly government subsidized low, low, low interest rates, then plunk them into investments paying 2 or 10 times the returns. I would suspect that were the author of the article (and his enablers in the Swedish bureaucracy, who of course detest capitalism) to complete their thesis by also comparing the higher gross debt with the net WORTH numbers, their arguments would look foolish.


    Of course, the problem (if it is one, and I am not trusting them to tell the truth) would quickly come back into balance were the bureaucrats to simply step away from their word processors and allow banks to determine interest rates and loan worthiness based upon some real-world logic rather than government's blindly ideological regulations.


    The last thing Sweden (or any nation, for that matter) needs is more layers of bureaucracy to tell them what to do with their own money.
    18 Feb 2013, 01:52 PM Reply Like
  • Big drop in auto sales in the EU
    Germany no refuge

    19 Feb 2013, 01:34 PM Reply Like
  • I wonder what the correlation is with auto insurance from this. I am sure less is paid for car insurance on a 8-10 yr old car compared to new cars. Wonder how much impact that has on those business'. I think auto repairs and parts sales does a lot better but I would assume there is not a great trade opportunity there. Just ramblings in my head.
    19 Feb 2013, 01:47 PM Reply Like
  • Author’s reply » News to the effect that all is well with Germanys economy are PR efforts associated with the upcoming election. New car sales are the canary in the coal mine. If they are down, many factors of their economy will be going down. Couple that with a strong Euro, and what is happening in France, and a more realistic picture emerges.
    19 Feb 2013, 01:59 PM Reply Like
  • FPA: Falling auto sales and falling/stagnant "hard" commodities (metals, mostly) prices are important indicators. Both hard to manipulate by the political/bureaucratic interests.
    19 Feb 2013, 02:33 PM Reply Like
  • Author’s reply » Intesa CEO: 20% of Italy's Firms 'Won’t Make It’


    Twenty percent of Italian companies are set to fail as the recession bites, Intesa Sanpaolo Chief Executive Enrico Cucchiani, told CNBC on Wednesday.


    "The top 20 percent of Italian companies in the past three years have seen the top line grow between 35 and 50 percent… unfortunately, the bottom 20 percent has seen top line shrinking 35 to 45 percent, so it's clear that these companies won't make it," Cucchiani, the CEO of Italy's second-largest bank, said in an interview in Milan.


    He said a wave of corporate collapses will impact negatively on Italy's banking sector.
    I wonder how many employees work at the 20% of the companies that will not make it.


    How much in Sovereign bonds does the ECB Hold?


    According to the ECB, Italian government bonds account for nearly half of its total holdings under a now discontinued bond-buying program launched in 2010 to ease the eurozone's debt crisis.


    The ECB holds bonds with a face value of (EURO) 218 billion ($292 billion) - (EURO) 102.8 billion of them from Italy.


    Spain accounted for the second-biggest holding, with bonds nominally worth (EURO) 44.3 billion.


    The ECB also holds Greek bonds with a face value of (EURO) 33.9 billion.


    Portuguese bonds worth (EURO) 22.8 billion.


    Irish bonds to the tune of (EURO) 14.2 billion.
    21 Feb 2013, 11:48 AM Reply Like
  • I will be surprised if the current crony capitalist/socialist system will ALLOW 20% of the Italian corporations to fail, although the crony component would doubtless benefit hugely from the process. This is where the hybridization with the socialist side, and the corrupt policy to shift corporate risk onto the taxpayers, takes precedence...


    But I could be wrong. All such morally corrupt systems operate on a sliding scale that does more sliding than weighing.


    The banks will be nationalized, I should think.


    The existance of the strongly concentrated bonds will be a driving motivation to erect barriers to protect them from any sort of bankruptcy fallout, again reinforcing my belief that nationalization (and other forms of bailouts) will be the plan.
    21 Feb 2013, 11:54 AM Reply Like
  • Also:


    Look for banks with large percentages of their stock held by non-Italians to be nationalized first, and bailed out last...
    21 Feb 2013, 11:56 AM Reply Like
  • LOL, its possible to link this conversation with the events in Cyprus...


    Note the targeting of "furriners".
    20 Mar 2013, 11:28 AM Reply Like
  • Author’s reply » February 25, 2013
    Looks like Bersani and Monti's joint coalition government is unlikely to have the 158 seats needed in the Senate to avoid elections in a few months as Bunga Bunga comes back, and the Technocratic get the boot from their previous coup d'état.


    Watch Italian Government Bonds [BTP] drop as the Technocrats and their high priest Goldman throw a tantrum as the people tell them
    ¡vete al diablo
    25 Feb 2013, 03:10 PM Reply Like


    I know that Argentina is not part of the EU, but the serial defaulter and its current passion play is worth notice, and comparison to what the future may hold for the PIIGS...


    I remember when I was much younger getting to know some Argentines, and I remember encountering an odd saying which was once common in South America:


    "Rich as an Argentine".


    50 years of government mismanagement has added a final (heavy) coat of irony to that old sentiment.
    28 Feb 2013, 11:24 AM Reply Like
  • And to think folks think Americans are Rich. Hmmm wonder if that will be funny 50yrs from now.
    28 Feb 2013, 06:48 PM Reply Like
  • We are MUCH more competent at incompetence that the Argentines ever were...


    DG, I bet we manage it in just 10 years, 15 years max.
    28 Feb 2013, 08:06 PM Reply Like
  • Yep but in 10-15 yrs we will be entering the denial stage with credit cards in hand. What....we are. Oops seems we are there now. LOL
    7 Mar 2013, 06:18 PM Reply Like
  • Unemployment in France hits 14 year high.

    7 Mar 2013, 10:00 AM Reply Like
  • Author’s reply » (March 12, 2013) Things are heating up again...


    Reuters: Greece confident aid tranche to be paid, denies talks deadlocked By Lefteris Papadimas March 6, 2013


    Greece is confident of getting an aid tranche due this month, dismissing speculation that talks with foreign lenders on cutting its public sector were deadlocked.


    The EU, ECB, and IMF agreed in December to give 49.1 billion euros in aid to Greece, easing fears of a Greek bankruptcy and euro zone exit. Most of that was paid out immediately, but Athens is waiting on 2.8 billion euros of aid for March. The country has been struggling to implement reforms it signed up for where it MUST reduce the high cost of medicines and complete a plan to cut the size of its civil service to unlock that tranche.


    [I will post on the high cost of medicines issue right after this one]


    Greece's bailout agreement requires it to transfer 25,000 employees by the end of the year to a so-called labor reserve pool where they will earn 75% pay for a year [kicking the can] and may [will most assuredly] be fired if alternative jobs cannot be found for them.


    To secure the March tranche, Athens needs to present a detailed staffing plan spelling out which ministries the workers will come from and how many of those will be laid off. [The Troika is actually demanding the names of those to be fired ]


    However, public sector layoffs are a sensitive issue in Greece where THEIR CONSTITUTION BARS THEM FROM BEING LAID OFF. Asked if the issue had led to a stalemate in talks with the troika, Stournaras said: "No. There is no deadlock."


    A senior government official, who declined to be named, told Reuters Greece would meet the year-end target to put 25,000 in the labor reserve pool and it would include those suspected of violating the law, those close to retirement and those who could be transferred to other public sector jobs. "The government is now concluding the staffing plan and will meet its targets within the deadline," the official said.


    So basically, no deadlock... but than we have this published a few days latter..


    March 10, 2013 Greece, Troika Talks In Stand-Off by Andy Dabilis The Greek Reporter


    Discussions between Greek officials and envoys of international lenders bogged down after the government was reluctant to press for public sector layoffs and over differences in a debt-relief plan for Greeks who can’t pay their bills because of harsh austerity measures. Greek media and the Wall Street Journal also reported that there were setbacks over "technical issues" concerning unpaid government bills, delaying Prime Minister Antonis Samaras’ hopes for a swift settlement so that a 2.8 billion euros loan installment due this month could be released.


    The Troika is pressing for the first firings of 25,000 public workers. The government is reluctant to fire public workers, fearing it could cause more social unrest [no kidding]. Public sector restructuring is part of a broader commitment by Greece to reduce its public work force by at least 150,000 workers by the end 2015. Greece is "on track" to meet that target through attrition but, in a country where the security of a government job has long been considered sacred, the government has yet to actively sack anyone while austerity has created 26.4 percent unemployment in the private sector.


    [So basically, the Troika demands 25,000 be fired in 2013. Fired means no pay, so the notion of moving 25,000 into a 75% pay reserve pool appears to be unacceptable unless the Troika accepts movement into a partial pay pool as equivalent to firing. In addition, the Greeks have to fire an additional 125,000 workers by the end of 2015. I doubt the average natural attrition rate is suddenly going to increase from 25K to 62.5k in one year.]


    A previous labor-reserve plan in 2011 largely failed; this time around, the government missed its end-of-February target to present a detailed staffing plan to the Troika and Finance Minister Stournaras said he doesn’t want anyone to be fired. The issue has caused dissension in the coalition government headed by Samaras with his partners (PASOK, and DIMAR) who are uneasy over firing workers who are their core constituency.


    With respect to the Troika's demands on public sector layoffs, the Greek Constitution actually bars layoffs of public employees! That Greek Constitutional law certainly says a lot about the Greeks. However, the Troika's demands to ignore Greek constitutional law say a lot about the Troika. If the Greek government obeys the Troika, what other laws will the Greek government ignore? If a Greek government ignores the Greek peoples constitution ...
    12 Mar 2013, 11:23 AM Reply Like
  • Author’s reply » On that Greeks struggling to implement reforms it signed up for statement where it must reduce the high cost of medicines to unlock that tranche:


    Background on Greek Medicine Prices:
    Actually, Greece has the lowest medicine prices in Europe says Professor Yannis Tountas, president of the Greek National Organization for Medicines. One reason the pharmaceutical multinationals have halted shipments to the country is because of concerns that the drugs will than be exported by wholesaler middlemen to other EU countries where the prices are much higher (20%).


    Meanwhile, the Swiss Red Cross has slashed its supply of donor blood to Greece because Greece has not paid its bills on time. In addition Greece's social insurance funds and hospitals owe pharmaceutical companies about 1.9B Euros, a debt going back to 2011, with companies expecting payments of 500M Euros in February 2013. As a result, the people have seen their medicine supplies reduced by 90%


    That mention of wholesaler middlemen re-exporting the medicines made me curious so I looked around on bit on Google asking the obvious question, and found this:


    January 13, 2013 - In a meeting with National Organization for Medicines Alternate Health Minister Marios Salmas, he stated that pharmacies’ transactions in 2012 will “go under the microscope” in response to allegations that certain of them illegally participate in the buying and selling of medicines in collaboration with legal or illegal [black-market] medicine wholesalers, thus engaging in export activities, a practice which is unacceptable. [It's also very likely a violation of EU laws and covenants.]


    The alternate health minister tells us that parallel exports by wholesalers of pharmaceuticals that the National Organization for Medicines deems to be in shortage will be banned for at least three months.


    A whole three-month ban on illegal activities. In addition, he tells us they will be focusing only on medicines deemed to be in shortage. Why that limitation when the activity is illegal irrespective of whether the medicine is in shortage or not?


    So it appears the high cost of medicines in Greece refers to the high cost of medicines to the Greek people. This is happening because the distribution system has apparently been taken over by black marketers in conjunction with a total failure of the concerned regulatory agencies. I assume the Troika's concern is not about the high cost of medicine to the Greek people, but rather with the exporting of cheap medicine to other EU countries, therefore reducing the profits of the large pharmaceutical multinationals. This in turn sheds more light on what the EU really is.
    12 Mar 2013, 11:45 AM Reply Like
  • FPA,
    I see a potential backlash against the pharmaceutical companies.
    Once people realize that they do just as well without all the drugs and go back to the old remedies (there are many that are viable). The medicinal drug use may tank.
    12 Mar 2013, 02:10 PM Reply Like
  • Author’s reply » I think you are right... there are a lot of people that could get hurt here as this becomes more generally known.
    12 Mar 2013, 03:15 PM Reply Like
  • This is my library for just such an occasion. Maybe someone in Greece will see this and order some books to help themselves.


    Ammazon links to the books in my library.


    Herbal Antibiotics: Natural Alternatives for Treating Drug-Resistant Bacteria


    National Geographic Guide to Medicinal Herbs: The World's Most Effective Healing Plants


    Desk reference to natural medicines


    Encyclopedia of Herbal Medicine


    The Herbal Medicine-Maker's Handbook: A Home Manual
    13 Mar 2013, 01:48 PM Reply Like
  • Author’s reply » In Italy, 1000 Companies Go "Belly Up" Each Day
    From: ZeroHedge


    In Italy, businesses of all sizes have been going belly up at the rate of 1,000 a DAY, especially among small and midsize companies that represent the backbone of Italy's shrinking economy. Italy’s problems have grown worse in the last year as tax increases and spending cuts pressed by Mr. Monti were put into place. Mr Monti was the unelected technocrat that was appointed after the EU induced economic Coup d'état and who was recently voted out of power by Beppe Grillo's protest Five Star Movement.


    Mr. Monti's austerity program was intended to reduce the risk of a debt crisis and ensure the backing of the European Central Bank, but instead it left the country with no growth. And without growth, Italy will have a harder time paying down its 2 trillion euros ($2.6 trillion) in debt, one of the largest debt burdens in the euro zone.
    That austerity program was put in place to reduce the risk to the ECB where nearly half of their sovereign bond holdings are from Italy.


    Expect the ECB to continue to apply pressure on Italy by manipulating the yield on new issues of their sovereign debt. Of course if they overplay their hand, the Italians might just say Basta!
    12 Mar 2013, 12:56 PM Reply Like
  • Ahhhhh yes.....But the banks are far.


    We see which businesses are...well, necessary according to Monti.


    As Beppe Grillo put it concerning Monti, "He is a bankruptcy trustee on behalf of the banks."


    I would assume they are foreclosing on all those bankrupt businesses and selling the assets off as fast as possible and bailing out the banks with the proceeds.
    13 Mar 2013, 01:55 PM Reply Like
  • Imagine if some odd flu strain suddenly swept through Europe, and leaders everywhere woke up with dreams of "growth".


    Not new plans to delay and extend the long term mallaise, no, but ACTUAL growth.


    New business creating new jobs in response to actual demand from living humans.


    I know, if the flu didn't kill them the shock of suddenly communicating brain cells would probably fry their heads like veal on a hot outdoor Tuscan griddle...


    The current process most closely resembles the progrnosis for someone suffering from a flesh-eating bacterial infection. Its a race between lopping off limbs to extend a gradually declining quality of life in the face of certain death.
    12 Mar 2013, 04:00 PM Reply Like
  • >tripleblack ... There will be no "growth" until something is allowed to fail.
    12 Mar 2013, 04:14 PM Reply Like
  • "veal on a hot outdoor Tuscan griddle"


    That sounds delicious until you put the heads in there.
    13 Mar 2013, 01:58 PM Reply Like
  • Thanks FPA! Good info. I have wondered how the US markets seem to have forgotten that the EU is very much "broken". The answer is that "loan payments are on schedule and everyone is happy with the Greek gov performance". Except that they aren't. On schedule or happy.




    Now that I understand, I am more concerned then before.


    So when do the US markets start to worry? Don't we need a reason for a 6-10% market pullback about now?
    12 Mar 2013, 05:12 PM Reply Like
  • Author’s reply » Nigel Farage...
    13 Mar 2013, 03:29 PM Reply Like
  • 'Its getting hard to tell who the real comedians are.....'


    Classical Farage. I love it.
    13 Mar 2013, 03:36 PM Reply Like
  • Think we can borrow Nigel for a couple of months to talk to congress?
    13 Mar 2013, 04:17 PM Reply Like
  • Talk hell, REPLACE them with Nigel.
    13 Mar 2013, 04:35 PM Reply Like
  • Could be the begining war drums against the euro currency.

    13 Mar 2013, 03:52 PM Reply Like
  • Reminds me of the Tea Party movement here. They will find support among the Bavarian conservatives (nominally Merkel's allies in the current, doomed, government), but little else, and in the end just damage the faint chance for Merkel's alliance to hold. The Tea Party can get no traction with the ruling Democrats in the US, and these splinter groups in Germany will have less luck with the Green/Left alliance which will probably oust Merkel in September.


    Italy has always been a wild political mess, and if any large country in Europe would tend to kick down their own economic props, it would be them. I would think that a vision of self-interested support from the rest of Europe in paying their debts will rule in the end, as it has in the past, and keep them in the EZ, but it MIGHT not, in which case it could all come tumbling down... NOT over Greece, which is to the EU what Detroit is to the US (a minor but persistant annoyance). Ironic if their failure to sufficiently support the Roman dole ends the dreams of federalization which constant support for the larger herd of PIIGS could not.
    13 Mar 2013, 05:04 PM Reply Like
  • My guess is that the derivatives have been unwound at this point so Greece has lost what leverage it had. Now Greece can be disposed of in any fashion the ruling elites in the EZ and at the squid see fit. It will go out with a whimper. No public conflagration or economic chaos will ensue. Greece has become irrelevant!
    13 Mar 2013, 05:44 PM Reply Like
  • A claim that was validated: 26% of Germans would consider voting for a party that would steer the country out of the monetary union. They came from all political directions: on the right, 17% of CDU voters and almost a third of FDP voters; on the left, 15% of SPD voters, 27% of Green voters, and 57% of Left voters.


    This is coming from all partys in Germany.
    13 Mar 2013, 05:45 PM Reply Like
  • Author’s reply » As suspected...


    March 13, 2013 Greek Reporter: Greece, Troika Talks Break Down, Loan Put Off. by Andy Dabilis


    Envoys from Greece’s international lenders will leave Athens on March 14 after talks with the government failed to reach agreement on their demands for public sector layoffs and structural reforms.
    13 Mar 2013, 08:58 PM Reply Like
  • Author’s reply » Economic Tyranny Is The Same As Any Other Form of Tyranny


    (March 16, 2013) Outlines of Cyprus' bailout by the euro zone
    From: Reuters by Robin Emmott


    Euro zone ministers strike a deal to hand Cyprus a 'bailout' worth 10 billion euros to stave off bankruptcy.


    The Terms:
    * A 9.9 percent one-off levy [larceny] on deposits above 100,000 euros in Cypriot banks and a one-off levy of 6.75 percent on smaller deposits from March 19. The levy will generate 5.8 billion euros.


    [So the EU will provide 42% of the bailout while depositors are forced to supply the remaining 58% of the 'bailout' funds.]


    [Breaking info: Funds to pay the levy were frozen in accounts immediately. The levy will be assessed before Cypriot banks reopen on March 19 after a March 18 national holiday. Electronic transfers will also be limited until then. ]


    * The depositors will be 'compensated' by equity in the banks.


    [Of course, by the time the depositors can sell that stock guess what it will be worth.]


    * As part of the 'bailout', Cyprus agreed to increase its nominal corporate tax rate by 2.5 percentage points to 12.5 percent [a 25% increase!!!], which according to the EU COULD bring in up to 200 million euros a year.


    [Than again, as we have seen in Greece, increasing business taxes causes layoffs, and as in Greece, many businesses will likely leave. It is my contention that the EU knows this is not going to increase tax revenues, it will decrease revenues and greatly increase unemployment, further driving the country into EU control.]


    * The International Monetary Fund is expected to contribute to the rescue package, but the amount is still to be determined. [Interesting how the IMF is often involved in these bailouts that amount to the application of economic tyranny.]


    * Russia will likely help finance the program by extending a 2.5 billion euro loan already made to Cyprus by five years to 2021 and reducing the interest rate, which is now at 4.5 percent. [This is actually helpful, but than Russia is not in the EU. But I can see strategic ramifications of this.]


    * Cyprus may be required to privatize the Cypriot telecoms company, the electricity company and the ports authority.


    [Demands similar to Greece. Communications, Power, and Ports
    will be open for acquisition by EU banks or their vassals.]


    * Cyprus will have to downsize its banking sector, reducing it to the EU average by 2018. The size of the banking sector in Cyprus is more than eight times the size of the economy, compared to around 3.5 times in the EU.


    [Downsize the Cyprus banking sector means to reduce its competative leverage relative to EU banks. One of the reasons the Cyprus banking sector was larger was because it offered better financial deals to its customers.]


    You can see by the terms that the 'bailout' imposes conditions that appear to be designed to make depositors flee the banks, businesses abandon the country, and increase unemployment while encouraging a takeover (privatization) of key assets of the island's economy under favorable terms to EU banks and their corporate vassals. I see this is a blatant example of the use of Economic Tyranny.


    I am not alone in my criticism of this so called 'bailout ... Here is an article from Joe Weisenthal, Business Insider that gives an overview of an article appearing in the Economist.


    ECONOMIST: The Cyprus Bailout Is An 'Unfair' Short-Sighted Failure, And Makes No Strategic Sense By Joe Weisenthal, Business Insider.


    The Economists's "Schumpeter" blog [ ] has a big takedown of the surprise bailout of Cyprus, which involves bank depositors being subject to an instant levy on all of their savings to raise money.


    Their title: The Cyprus Bail-out: Unfair, short-sighted and self-defeating.


    The post calls the bailout a "failure" for imposing a 10% deposit tax on those with over 100K euros in the bank and a 6.75% tax on those below that threshold.


    They cite three big reasons why this is a bad move.


    1) This reintroduces contagion risk. Will depositors in other peripheral banks worry about the same type of haircut in the future?


    2) Fairness. Why do Cypriot widowers have to take a hit?


    3) Strategic. Europe has been doing well calming down the crisis thanks to the ECB's largess. This has just been undermined.


    A lot of people will be wondering about the first point, the idea of contagion: Will depositors in another country worry about something similar happening?


    The last point about strategy is interesting. Things had been going pretty calmly in Europe for several months based on ECB free money backstop. Now we're getting back to loss-taking, which may be necessary at times, but certainly disrupts the flow.
    16 Mar 2013, 01:01 PM Reply Like
  • I guess we should see in-flows to U.S. banking institutions? Or maybe to U.S. treasuries and/or bonds? I suspect capital controls won't be long in coming for the Cypriots. And that will probably have contagion attached to it as well.


    16 Mar 2013, 01:52 PM Reply Like
  • Author’s reply » They're Reneging On Government Deposit Insurance Too...


    Under the system [] until yesterday all depositors in Cypriot banks were insured up to the value of €100,000 with any one bank. Today that governmental promise has been demonstrated to be worthless. There is no appeal possible to the EU or the ECB since those are the institutions that are insisting that Cyprus authorities breach their deposit insurance provision.


    I believe this blatant theft of depositors money also breaches, in principal, the EUs single market rules. Those rules are supposed to mean that rules apply in all markets. If deposit guarantee promises by government are not going to be honored in Cyprus, than they may not be honored anywhere in the EU.


    The EU can claim "special circumstances" all they want, but in effect, all of the troubled countries have suffered under "special circumstances: Iceland, Ireland, Greece, Cyprus, Spain, Italy...


    It's one thing to give bank shareholders and bond holders a haircut. They entered the investment knowing the risk. But depositors getting a haircut, but NOT the shareholders or Senior bond holders??? That is totally wrong.
    16 Mar 2013, 03:12 PM Reply Like
  • "Those rules are supposed to mean that rules apply in all markets."


    We are always told that people are safer in Social Security than in having their own investments, because you can trust the gov to deliver.


    What has been described here is evidence of how big the lie is of gov security. The only real security is in private markets because that's where the real production is. Gov is just a consumer of wealth, and its incentives drive it to consume to where the populace just can't pay for it anymore. At that point, like what we are currently seeing is where the truth about gov security finally reveals itself. It will screw you faster than a power drill, and leave you bleeding in the street with you wondering what happened to all the promises about security.
    16 Mar 2013, 06:48 PM Reply Like
  • Hoop-


    Just imagine that you are the director of finance of one of the PIIGs right now and the head of state has just said that you are wanted immediately for discussions about deficits.


    16 Mar 2013, 08:08 PM Reply Like
  • Author’s reply » Premise:
    I think the Euro will drop relative to the dollar on Monday because of the Cyprus affair. If the Dollar rises, US markets should drop because the dollar is inversely related to the S&P.


    Using the dollar ETF UUP as a surrogate for the dollar, I looked at the association of UUP with the S&P using daily data over the past seven years. The average correlation is -.54.


    Using a simple regression model for data over the past year, I found that for every one percent increase in UUP (.224 cents), the S&P drops by 19.25, or about 192 Dow points.


    I than looked at the seven-year distribution of changes in UUP prices and found
    that large daily moves in UUP are usually bound by plus or minus 2% (.50 cents). There are a few larger shifts, but you can see those are clearly outliers when you look at the chart.


    If confidence in the Euro drops because of the Cyprus affair, and the dollar increases by an average large increase of two percent, the maximum predicted size of the associated S&P reaction would be a drop of about 38.5 S&P points or 385 Dow points.


    Of course, nothing may happen with the Euro Vs. the Dollar, or the FED may intervene with the Plunge Protection Team. But the key takeaway is that if confidence in the Euro is reduced relative to the dollar, I expect the dollar to rise relative to the Euro which should be related to a drop in US markets. I think the analysis does identify the size of a maximum expected effect. There also could be a pop in Gold and Silver... I did not work out the size of that effect, but it is easy enough to do.


    Of course, the FED would hate the dollar rising, so it would respond with continual pumping. So I expect the drop to be temporary, which means we may have a buying opportunity early in the coming week.
    16 Mar 2013, 09:01 PM Reply Like
  • FPA many thanks to you et al. for all of the updates above on this Cyprus development. It certainly does appear to have the potential for panic contagion across the EU and beyond. I do think the powers that be will play fast and loose to camouflage the rising smoke, so we may not see the USD pop, Euro dip, market drop, PM rise -- very quickly. Lots of Central Bank muscle IMO will do everything possible to work the smoke and mirrors.


    Here are more perspectives on the matter being shared with the BBC from Cypriot residents:


    And additional analysis from the BBC:


    It will also be interesting to see whether "smart Cypriot money" like John Fredriksen's of Seadrill SDRL fame will magically have removed $$ well before this latest bank move. After being named the wealthiest Cypriot resident -- I suspect he would not welcome a 10% tax on his cash in exchange for Cypriot bank equity. The small retail depositor (any surprise?) is the one who will likely suffer most with the 7% tax. I think the many calls for plowing your cash $$ into "real" assets (PMs, real estate, income producing resources, etc.) are getting louder and louder right about now. Any bets on what happens to US "low" interest rates if the USD safe haven play attracts more players??
    17 Mar 2013, 08:31 AM Reply Like
  • Mercy-


    Thanks for the links on the BBC. I find that we Americans can often get much more accurate information from foreign sources. I guess we are being protected from our selves, or is it protected from the truth?


    You are right on point about the smoke & mirrors cover-up that seems to be the order of the day in continuing to manipulate markets in wholesale fashion.


    I liken it to the California brush fire protocol of not letting small fires burn to reduce major fire potential, rather they allow the brush to continue to grow until a major fire becomes a conflagration.


    Today's calmed economic event becomes tomorrow's world horror story. Politicians will always take the "not on my watch" route rather than face reality as it occurs. They seem to be in constant denial.


    17 Mar 2013, 09:31 AM Reply Like
  • Author’s reply » Cyprus Bank Holiday Extended Through Tuesday.
    The Cypriot cabinet has declared Tuesday a bank holiday, for fear of capital flight, and this may even be stretched to Wednesday, as depositors are certain to withdraw huge sums from the Cypriot banks after the haircut imposed.


    Meanwhile, the Cyprus Parliament will delay the "Rescue" vote due to lack of support, despite ECB pressure for pre-trade open decision.


    The ECB is insisting on a rapid voting [i.e., rubber stamp] because there are already signs a domino effect will follow across European lenders and markets from Monday. There is genuine fear of market unrest on Monday morning when stocks may crumble in the EU and bank accounts in other southern European bank may suffer [i.e., bank runs] .
    17 Mar 2013, 10:24 AM Reply Like
  • Here is another link to the story. The cat is out of the bag, it does not matter how cyprus parliament votes on the bailout, the fact that government insured bank deposits can be "taxed" and that the possibility of doing it is on the tip of the tongue of the IMF and ECB is collateral damage that I do not think can be reversed.



    Huge thanks for maintaining this blog FPA and keeping us up-to-date on what is going on.
    17 Mar 2013, 10:37 AM Reply Like
  • Irony abounds.


    It appears that the EU kleptocrats' real target is the Russian Gangstas who park their "ill gotten gains" in Cypriot banks.



    <<Because of the Russian money angle, the step to seize deposits might be glossed over. On the other hand, there is a great risk that what has happened is a turning point in modern finance. I’m not aware of any precedent for what has occurred. I say again, if this had happened in any other country in Europe – the monetary union would be dead within months. That possibility still exists, even though it was just crooked Russian money that was stolen. We shall see the market’s reaction in a matter of hours – I can’t wait.>>
    17 Mar 2013, 11:02 AM Reply Like
  • Ohhh, now it makes sense. A financial gang war. The EU gang doesn't like the competition. Yep, could happen here as the US Gov doesn't like competition either. The little guys being taxed on savings? Just collateral damage (yeah, right).
    17 Mar 2013, 11:17 AM Reply Like
  • Smaturin,
    I had the same thoughts but if thats the case they should have kept the tax on only depositors of over 100k or maybe even 50k hitting mainly the big russian hot-money instead of all depositors. Maybe, that will be a point of negotiation as this continues to play out. The markets reaction will be interesting as well as how the media continues to report it/play it down.
    17 Mar 2013, 12:34 PM Reply Like
  • If we get a macro reaction it is most likely to be a general bank run across Europe. Any aftershocks in equity markets would begin with the banks...


    This is an astoundingly stupid way to do this, of course. This could go down in history alongside Lehman...
    18 Mar 2013, 07:33 AM Reply Like
  • Trip: I don't think (yet) that the Cypress situation is a financial "butterfly effect."


    However, if the lack of, or bending of the rule of law spills inland to Italy, Spain, France, if it becomes avant-garde to put a levy on the commoners' savings, then we're going to have a big problem.


    Doubt this will occur, and I view this as a buying opportunity.
    18 Mar 2013, 07:48 AM Reply Like
  • The little folk savers are the ones that got the truly raw deal.


    The Russians had been fronting money to Cypress for quite a spell. Doesn't make a lot of sense to me that they would be the target for the banking lock-up.


    Well, there is a lot I just don't understand- guess it makes sense to some people.


    17 Mar 2013, 04:16 PM Reply Like
  • Author’s reply » The likelihood of a Monetary Union in Europe Just Died.


    I don't agree that the action was aimed at Russian gangsters. That's the kind of nonsensical excuse the IMF would likely provide. The IMF, the people that generated the Unicorn report about how tax revenues were going to climb after taxes were raised to a degree that killed the businesses in Greece. They just raised the business tax rate 25% in Cyprus and claim that revenues MAY increase by 200M. I predict Cyprus tax revenues will decrease this year and unemployment will increase as a consequence of this sharp increase in business taxes.


    Cyprus and their EU masters have violated the people's trust. It takes a long time to earn peoples trust, but it can be destroyed in an instant. Even if Cyprus and their EU masters back-pedal it's too late - the damage is done.


    The EU has demonstrated that deposit guaranties offered by banks affiliated with the EU are worthless. If depositors money can be confiscated in Cyprus, it can be confiscated anywhere in the EU. Excuses that it's for the 'common good' are not going to fly when people see their funds stolen by the banks to bail them out from their high-risk bad investments. Cyprus banks lost a lot of money in Sovereign bonds... guess who's sovereign bonds they bought... That's right, Greece debt. Now the EU wants the depositors to pay that bill! Not the senior bondholders, the depositors... Anyone want to bet WHO the senior bondholders are?


    The notion that the robbed depositors will be justly compensated with shares in their bankrupt bank is nonsense, as is the claim that the deal MAY be sweetened with some kind of ownership in natural gas wells that have not been drilled, and who's locations could cause conflicts with Turkey. How much will those bank shares be worth next month? How much will they be worth if the bank goes bankrupt? The depositors have been put in a position of having a portion of their wealth forcibly taken from them and "invested" in a super high risk Cyprus bank investment. That is decidedly NOT fair and equitable. That is outright theft. Oh, and by the way, those shares are likely to be highly diluted.


    Cyprus businesses keep their cash in Cyprus banks. My guess is a lot of those over 100k accounts are business accounts. What about Cyprus brokerage accounts? They also kept money in those banks. I would think this would be a deathblow for Cyprus based brokers without bank accounts outside Cyprus. Who in their right mind is going to wire money to a Cyprus bank now or in the future?


    What about widows and pensioners? The litany of excuses to justify the thief of their funds is pure BS. The EU just reveled to everyone exactly what they are. And these are the same people that want a monetary union in Europe?


    I say mark the date of March 16, 2013. This is the day the EU self inflicted a mortal wound on its grand scheme of a unified Europe under a monetary union. It may not die immediately, but their high mark has passed.
    17 Mar 2013, 05:36 PM Reply Like
  • FPA, I agree with all of the above.


    This is the first step in what will likely spiral into chaos in Europe.



    Whether the Russian money laundering is the primary reason for the kleptocrats' unprecedented move, it has already been set up for a couple of months with the MSM as the excuse to appease the serfs:
    17 Mar 2013, 06:34 PM Reply Like
  • Cypriot Parliament delays vote on bank bailout levy.



    17 Mar 2013, 07:18 PM Reply Like
  • Fantastic job following this, FPA.


    You're right, Nikkie already down 1.6%.
    17 Mar 2013, 08:51 PM Reply Like
  • The $usd had been rising sharply against the yen....last i looked it was .95. I think that's up from the .80's. Some have cried for a strong dollar, now we may get it. What out what u ask for.... Now look for the euro to follow. Over on the QC, we talked all last summer about a big drop in the euro.


    I do believe this was aimed at the Russian mob. Germans & French were in no way going to bail Cyprus out and them benefit. Thus, we get this. It is unfair to small citizens.


    As to corp tax rates....I'm telling you, they been getting off with zero now for years, no matter what the rate is. That's why it hasn't been lower the next 20 years, this will be the next war. All this parking money overseas free of taxes will end. Corps are gonna pay 20-25%. And it will end badly for some.
    Billionaires went global long before anyone else, now millionaires are doing it. Corp's have $2 T plus whatever they have hidden, Cyprus is just a drop in the ocean. This stupid $10B bailout may cost the global wealth to drop $1T.
    Of course, don't forget, Germany just sent a message to the entire euro zone that they are not financing 100% of anymore bailouts. The people will share in the cost. I guess this is one way to force political change.
    18 Mar 2013, 04:48 AM Reply Like
  • LT,
    RE: "some have cried for a stronger dollar" -- yes I am in that choir BUT have been demanding it be brought on by more responsible fiscal US policies. Instead now we may get a stronger USD as the flavor of the month safe haven -- until our reckless deficit spending catches up with us (again) relative to the rest of the world. There is little satisfaction for me in seeing a stronger USD -- simply because we are the least dirty shirt in the hamper. IMO the deficit stench will return in due course for the USD -- but in the short term it will be a great time for me to load back up on currencies like the NOK (Norwegian Kroner.)


    RE: "this was aimed at the Russian mob" -- all I can say is they have a funny way of solving "the problem" when they add a 7% penalty to small retail depositors. Surely there is something I am missing.
    18 Mar 2013, 07:06 AM Reply Like
  • Mercy: Latest pending deal is that the small Cypriat investor is only going to be taxed at 3%.


    I can't imagine what recoil would happen if Uncle Sam said to the US middle class, "We're taking 3% of your savings."
    18 Mar 2013, 07:14 AM Reply Like
  • Maya thanks for that deal update. If the small saver gets taxed 0% -- then I may start believing this was all about the Russian mob. BTW -- it boggles the mind to think of little Cyprus as equivalent to 45 TBTF. Good perspective.
    18 Mar 2013, 07:19 AM Reply Like
  • Maya: Sorta like when they took our gold? And then ...


    18 Mar 2013, 07:23 AM Reply Like
  • Mercy: I think the really important thing is that it indicates that bank deposit insurance is worthless over there and the EU/ECB will *not* protect small depositors.


    Money will fly IMO.


    18 Mar 2013, 07:25 AM Reply Like
  • Squawk Box: Little itty bitty Cypress' banking system is equal in size to over forty JPMs.
    18 Mar 2013, 06:30 AM Reply Like
  • Ooops! If Cypress' situation was akin to US banking it would be equal to the US having 45 JPMs in trouble.


    I need more tea!
    18 Mar 2013, 07:10 AM Reply Like
  • There has been conspiracy theories for many, many years that the mobs have taken over legitimate business. IMO, that is correct. They don't necessarily do the old Chicago mob business, but have control of financial mkts, banks, corporations, all legitimate investments with laundered money.


    They no longer buy an island, or just own a president or politician, they own an entire country. This gives them the inside knowledge of the UN, all gov't politics, they see everything before we do.


    This is one reason why we seen in the near past the money laundering charges on the TBTF banks globally. Everyone knew the Columbian drug lords owned the banks there, it worked so well the global mobs went global too.
    18 Mar 2013, 08:07 AM Reply Like
  • <<NICOSIA, Cyprus — Cyprus’s Parliament on Monday delayed an emergency vote on a bailout plan for the second time in as many days as President Nicos Anastasiades faced trouble rounding up support among lawmakers.


    A vote was scheduled for Tuesday at 4 p.m. local time, the Parliament announced, although there was the possibility it could be delayed until Friday.


    As European stock markets faltered and the euro fell against major currencies, the government said it would also keep Cypriot banks shuttered until at least Friday, well beyond a bank holiday that was supposed to end Monday. The move is aimed at staving off a possible bank run.>>



    <<In Berlin, the German finance minister, Wolfgang Schäuble, sought to deflect criticism for the damage to depositors, saying the “levy on deposits below 100,000 euros was not the creation of the German government,” according to Reuters. “If one reached another solution, we would not have the slightest problem.”>>
    18 Mar 2013, 08:39 AM Reply Like
  • According to WSJ, the new deal being considered is 3% on accounts <100K, 10% for 100-500K, and 15% for accounts >500K euros.


    Soak them gangstas and everyone else should be tickled to be part of that EU happy family.


    Cyprus Prepares New Deposit-Tax Proposal (paywalled)
    18 Mar 2013, 08:53 AM Reply Like
  • You know when Wolfgang posts news that early, it was the Germans, and he is back peddling fast.
    and of course giving permission to relieve the people but still tax the mob.
    18 Mar 2013, 09:18 AM Reply Like
  • Private "gangstas" are often the manifestation of gov "gangstaism". Private gangstas are made possible when gov gangstas don't understand the economics of banning. Whether the product is alcohol, aka Al Capone, or blue jeans, whenever a gov trys to ban via regulation a product that there is a wide demand for, the market will find a way to provide it. What makes it so dangerous is that these so called "black" markets must develop their own police forces because they can't use the ones people are taxed for, and these police forces become ruthless because the economics of banning create profit margins that are worth killing over.


    The reason that Russia or any country for that matter winds up with a problem with gangs is because of crony socialism. The gov uses its coercive power to regulate products based on what special interest (the ultimate manifestation of democracy) decides is in their best interests to have the regulations say, which is basically a monopoly (restricted supply and higher price). So since private markets can increase supply and still charge the higher price due to the gov banning, the profit margins get so high that they are worth killing over.


    If Europe or Russia or the US wanted to end gangs and profit margins worth killing over, just end the gov gangstaism by using the gov to be a neutral force to create markets free of coercion, thus creating free markets. If Europe did that all the capital flows to the US (which is only marginally freer), would reverse, and it would be the US taxing deposit accounts chasing even more capital to Europe. Of course Europe won't do this, thus the European problem will never be solved, only delayed and enlarged, because they are failing to solve their fundamental problem, which is markets polluted with gov coercion. So for the next few decades we will constantly see this sort of capital flight from Europe, keeping interest rates in the US down.
    18 Mar 2013, 09:33 AM Reply Like
  • Hoop-


    Russia is nothing but the mafia with a flag.


    18 Mar 2013, 11:51 AM Reply Like
  • Author’s reply » Majority Of Cypriot Parties Refuse To Support Deposit-Loss Law


    The state-run CYBC media reports that another key Cypriot party, DIKO, has come out and decided to vote against the depositor-loss law on the Parliament's docket tomorrow.


    This is important because it was assumed that DIKO would vote YES because DIKO had supported president Anastasiades in his election bid.


    But as a result of today's flip, DIKO’s 9 votes will now be aligned with the "NO" votes of AKEL and EDEK, whose combined 33 votes means the proposed bailout law has no chance of passing as the NOs have the needed 29 votes to block any bail-in out proposal!
    So the vote is not only postponed, the NO faction has increased it’s power from 24 to 33.


    There are still 3 votes in the undecided column. But even if the three vote YES, it’s a no go.
    18 Mar 2013, 04:24 PM Reply Like
  • Yikes! What a circus!


    Russia Denounces Proposed Cyprus Bank Tax


    The Russians are none too happy about their 30 Bln in Cyprus and could reneg on the loan restructure.


    <<An official at one Cypriot bank that has about €5 billion in deposits mostly held by Russians, Ukrainians and citizens of Central Asian nations, said he expected sell orders for about half the deposits once the banks reopen, with much of it shifted to Switzerland or Liechtenstein.


    While the Cypriot parliament postponed voting on the measure until Tuesday, and a central bank official said Cyprus's banks would remain closed until Thursday, Russian officials warned they might have to re-evaluate their position on a restructuring of Cyprus's loans.


    Russian Finance Minister Anton Siluanov said Russia would take another look at discussions about a five-year extension on Cyprus's repayment of a €2.5 billion ($3.3 billion) loan from 2011, if the island accepted the proposal on how to raise funds.


    Mr. Siluanov said Russia had an agreement with the euro-zone countries to coordinate action, part of which would include Russia possibly easing the conditions of Cyprus's existing loan payments. Because of this, he said he was surprised that the countries had moved ahead with such a proposal without consulting Russia.>>
    18 Mar 2013, 05:01 PM Reply Like
  • This whole Cypriot thing is a half baked ill thought out scheme to try to avoid the reality of fiscal responsibility.


    These guys had to know Ivan would go ballistic and the Ruskies are one of if not Cyprus' biggest benefactor.


    FPA, is the IMF really that obtuse?


    18 Mar 2013, 07:57 PM Reply Like
  • Author’s reply » The IMF lies for a living. I concluded the IMF lied about their Greek economy forecast in order to provide political cover so the ECB would continue to lend money to the Greeks to prevent a default on Greek sovereign debt bonds. They did this because if the Greeks defaulted, the IMF and the ECB would loose their bailout investments. That would put the IMF and particularly the EU politicians that supported the Greek bailout in a bad position with the people that are going to end up paying the bill, the taxpayers.


    This same situation is present in Cyprus. The reason Cyprus needed a bailout in the first place is because €1.42 billion in four-year sovereign debt bonds becomes due in June, and Cyprus does not have the money to pay back those senior bondholders. I suggest the senior bondholders in Cyprus are the same as those involved with Greek sovereign debt bonds. The ECB can't be seen to take any losses until after the German elections. That left the Cyprus banks depositors.


    Meanwhile, once again, one of the IMFs conditions for the bailout is a 25% increase in the corporate tax rate and demands that telecom, energy and port facilities be privatized... in other words, sold at bargain basement prices to the EU banks and vassal corporations.
    19 Mar 2013, 12:34 AM Reply Like
  • 8:23 PM Little Cyprus is bringing a dangerous new variable into the European bailout crisis, warns Dennis Gartman - the Russian mafia. "Everybody knows that the vast majority of the deposits in Cyprus are from Russia," Gartman says. "They're Russian government officials, they're Russian businessmen, it's Russian mafia – and you don't mess with the Russian mafia." He calls the eurozone demand over the weekend absolute "lunacy on the part of the European monetary authorities." 14 Comments [Global & FX, Financials]
    18 Mar 2013, 10:01 PM Reply Like
  • The Empire Of Lies: Confiscatory Deflation In Cyprus

    19 Mar 2013, 07:31 AM Reply Like
  • A must read (I notice MJ has already commented there). The history timeline, perspective, and supporting quotes are compelling.
    19 Mar 2013, 08:32 AM Reply Like
  • The article was very well done, IMO, and helps educate ones like me that are quite naive about these things.


    19 Mar 2013, 08:41 AM Reply Like
  • Yes TB it is a must read. Great compilation of the cross weaving of related Cyprus events. Thank you SMaturin for highlighting.
    19 Mar 2013, 09:28 AM Reply Like
  • FPA-


    Thanks for clarifying a very complex situation.


    There must be a lot of speculation on what the potential impact(s) will be on the rest of the under pressure debtor countries and the rest of the EuropeZone, not to mention the rest of the world.


    This is like being a kid again who can't wait until the next segment of the cliff-hanger is in the movie theatre next Saturday.


    19 Mar 2013, 08:55 AM Reply Like
  • WT,
    Who did shoot JR?
    19 Mar 2013, 01:05 PM Reply Like
  • >Stilldazed


    I'm pretty sure it was Tinkerbell.


    20 Mar 2013, 11:43 AM Reply Like
  • >Stilldazed


    "I'm pretty sure it was Tinkerbell."


    JRs mom.


    20 Mar 2013, 03:40 PM Reply Like
  • I have not seen anyone mention what happens next year or maybe later this year when the cyprius banks need more money. Tax em a second time? Will most of the hot money leave once the banks open to avoid that issue leaving the banks empty?


    My money would leave the minute the banks opened. Swiss bound or Lictenstein or caymans.
    19 Mar 2013, 09:49 AM Reply Like
  • I believe a run is inevitable, but the thieves are trying to pin the depositors in place by making them unwilling co-owners of the banks. Large depositors will of course see that withdrawing their funds will destroy their new "investment"...


    Even so, I think the run is on. I have no doubt about that, IF the Cypriot parliament votes to ratify the plan.


    And that might yet be a very big "if".


    I am more interested in how much negotiating will take place. The wild variance in the % rate of the "tax" drifting out of the negotiations would indicate that it is likely that the small depositors under 100k euros might escape, though this would probably mean an even larger bite for the bigs.


    The more I look over the articles, the more I see the MSM doing their usual smoke screen. This is far from a done deal, and its still in flux.


    I believe the link to the negotiations to boost their maximum corporate tax rate from 10% to 12.5% is almost certainly going to be revisited. Politically, it is almost always easier to bump up corporate taxes than mount an outright theft from lower level taxpayers...


    And a quick check of European corporate tax rates would indicate that the Cypriot rates are VERY low, even at 12.5%.


    Finally, this little side show MUST be viewed as containing any number of trial balloons for other PIIGS... Think, "Italy"...
    19 Mar 2013, 10:29 AM Reply Like
  • I think you are on the right track, I feel the same way.
    19 Mar 2013, 10:56 AM Reply Like
  • TB, "Finally, this little side show MUST be viewed as containing any number of trial balloons for other PIIGS... Think, "Italy"..."


    Exactly! Who cares about Cyprus and a bunch of Russian mobsters? They could never get away with that in my country!.... Could they...?


    "Trial balloon" is exactly the words in my mind for the last couple of days. Open the door to the idea by picking on little ole Cyprus's money laundering "problem," even if it gets voted down as "preposterous."


    Slippery slope.


    Moral Hazard to the second power.
    19 Mar 2013, 12:01 PM Reply Like
  • TB-


    If I were a bank depositor in any of the PIIGS I would be seriously considering pulling my shekels out- sooner than later. PMs would be one alternative, Norwegian krone another.


    I think that euro holders outside the PIIGS may be thinking similarly.


    Which gives thought to brokerage account MM funds- Hmmm.


    19 Mar 2013, 11:20 AM Reply Like
  • WT -- I think lots of folks across the pond are thinking about their cash deposits. I listen to network news from Spain on the internet and its been interesting to hear how frequently the media is saying "but depositors have nothing to worry about in Spain ... we have already tightened our belts" [don't they wish.] Clearly nerves are frayed across the region -- but I suspect the biggest depositors pulled cash out long ago.


    On the flip side -- I thought Paulo Santos had an interesting contrarian view re: the Euro's likely ability to hold its value:
    19 Mar 2013, 11:59 AM Reply Like
  • Yes, I have encountered that viewpoint before...


    IF the Europeans were allowing the investors and companies involved to take the hit, and a market to clear their assets, I would tend to agree that this would be supportive of the Euro. If...


    But as we all know, the opposite is true. Once again we are seeing that the productive portion of their economy is being sacrificed to feed the hungry mouths of government and non-productive activities.


    There is also a very clear event horizon approaching involving social support systems throughout the EU. As more and more load is placed upon fewer and fewer productive citizens, the stress is starting to show. Only in a zero sum environment (where humans are the static component in the equation) will this fail to ignite a strong reaction, destroying the long term plan where "eventually" these moves result in salvation for the EZ and the Euro.


    Also hidden in the wings is the tacit cooperation from other major economic players, ie, the US, the various resource exporters, and China. Only if these blocs continue supporting this plan can it continue extending the delaying tactics into the indefinite future, and those support systems are unreliable IMO.


    The political and geopolitical risks involved are astounding.
    19 Mar 2013, 12:11 PM Reply Like
  • Author’s reply » MSM = Mainstream Media.


    Latest News:
    * The vote has been delayed again on lack of support, as the latest proposal is not sufficient for Parliament Support. The latest offer is no confiscation on deposits up to EU 20k.


    * Cyprus Finance Minister Resigns, President Refuses To Accept Resignation.


    * Wait a second... Parliament has decided to go ahead and vote after all, but now the Cypriot ruling party, formerly the only party willing to vote Yes on the Bail-In, would abstain, which means there is no support at all in the Cypriot parliament for the deposit haircut proposal.
    19 Mar 2013, 11:57 AM Reply Like
  • Author’s reply » SPIN and REALITY:
    The EU and the IMF are desperately trying to sell the idea that the more money in a Cyprus bank account, the higher the probability that 'most' of that money is from the Russian mob. Therefore, it's OK to steal from their accounts. Of course, there will be some unfortunate collateral damage, but that's OK because those people and businesses can afford the loss. That's the spin.


    The reality is that trust is the central issue, not the amount of stealing. The people are seeing that a governments deposit guarantees are WORTHLESS. At this point, it does not matter anymore what the deal is. Even if a new deal is made that does not steal depositors money, it no longer matters. The damage has been done. The government failed to honor its guarantee. Trust has died, and as a consequence, people’s eyes have been opened.


    Meanwhile, Bloomberg tells us that 'Stocks rise as housing data outweigh Cyprus on Street'. Look at the Euro..
    19 Mar 2013, 12:12 PM Reply Like
  • As far as the housing data goes newly formed unit investment trusts have been buying up forfeit houses in California and Nevada by the truckload and renting them out, many to former/current residents. No attempt to sell, just use the rental cash flow as investment income to enable the marketing of the trusts.


    Brighter minds than mine can compute the effect on housing stats coming out now, but I do suspect anything coming down the propaganda line these days..


    19 Mar 2013, 12:34 PM Reply Like
  • Hi gang,
    I am not really up on all the EXX alphabet soup nomenclature, but I remember not long ago that one of them was taking sov bonds as full collateral to free up bank funds for reinvestment in more sov bonds, is this the LTRO? It seems to my poor memory that this was during the Italian- Greek bond sales. Massive leverage/Ponzi type action. Is this action what is hitting home in Cyprus now, or is that a future collapse in the making? And where has the Feds backdoor funding left us standing? Arrg, the curse of poor memory and too many unknowable's.
    19 Mar 2013, 01:33 PM Reply Like
  • Author’s reply » Cyprus Parliament Rejects European Bailout Proposal:


    * Cyprus bank levy bill defeated with 36 votes against


    ECB Responds To Cyprus, Says "Will provide liquidity to Cyprus within existing rules"


    No one knows exactly what that means, but it probably means they will provide some liquidity, but not all cash needed.
    19 Mar 2013, 03:14 PM Reply Like
  • I applaud the Cyprus legislators for voting down the swindle of confiscating between 6-10% on bank deposits.
    Why should the population pay for the folly of bankers who fed on Greek debt?
    Now the next step is for them to realize that borrowing greater amounts of money to pay back lesser amounts never works.
    19 Mar 2013, 03:17 PM Reply Like
  • Author’s reply » Totally agree... next raise in the game will probably be talk of defaulting on the bond payments due in June...


    I see the algos took the ECB comment as a fold.... I don't think they folded... more like a 'check'.
    19 Mar 2013, 03:26 PM Reply Like
  • I might bet that the ECB comment about granting Cyprus liquidity will either come out after the market close as not being a true report or completely meaningless...which we all know already.
    19 Mar 2013, 03:36 PM Reply Like
  • FPA -- don't know if you need to start a new Insta or not but I have been getting "An error occurred" often when I try to give a "Likes" to a comment and now I just got an option to check off saying "Prevent this page from a continuing dialogue" ... strange. This is just FYI.
    19 Mar 2013, 03:35 PM Reply Like
  • Mercy: I have found that when I want to like someone's comment, and if they are editing said comment, that your "like" gets rejected until the editing process has been completed; that's when I see "An Error Occured."


    The "Prevent this page from continuing dialgue" is a new one to me.
    19 Mar 2013, 03:41 PM Reply Like
  • Author’s reply » And I did edit the last two comments... Thanks Maya.
    Let me know if you keep getting the error would you Mercy...
    19 Mar 2013, 03:44 PM Reply Like
  • Maya: I've seen it (prevent ...) a few times. I think most of the time it's a results of SA not being able to complete their scripts (data gathering, delivering ads, or ...?) in a reasonable time (from the browser's POV). Might be network congestion, desktop/laptop overloaded, ...


    Usually I just keep trying and it eventually clears up.


    19 Mar 2013, 03:45 PM Reply Like
  • OK thanks, Maya. Will do FPA.
    19 Mar 2013, 03:46 PM Reply Like
  • Hard: After "liking" about 97% of the 47,000 comments over on the APCs, I've run into this problem more times than I can count.


    Pretty sure the comment while being edited is shut down to getting liked, until the editing process has been completed.
    19 Mar 2013, 04:07 PM Reply Like
  • Maya: No argument - I was referencing the script thing.


    19 Mar 2013, 06:01 PM Reply Like
  • Nigel Farage. "Get your money out while you can"

    19 Mar 2013, 05:24 PM Reply Like
  • Author’s reply » 'You have to be mad to invest anywhere in the EU.... '


    His read is ... it would be better for Cyprus to default on international bond obligations and keep their most important industry (financial) going than except the bulling terms from Brussels...
    I could not agree more Mr Farage! The bond holders took the risk, they should eat the losses, not bank depositors.
    19 Mar 2013, 05:44 PM Reply Like
  • It looks like our abrogation of the rule of law here has gone viral like our inflation did. I guess, as it's likely always been, the law only applies to certain classes of folks without $, power and connections.


    19 Mar 2013, 06:04 PM Reply Like
  • >FPA ... A Cyprus default. Would that trigger the thing that the past 5 years has been all about ... a derivatives default? I certainly hope so because I think $780T in unregulated notional asset value is just too ridiculous for words. It will hurt everyone because its been going on much too long, but finally we might get a new crop of rich people that are interested in contributing to the economic health of the world.
    19 Mar 2013, 06:11 PM Reply Like
  • Have to wonder what they are really up to while we are all watching Cyprus. Kind of like a shell game. Get everybody to watch the distraction and make your move behind the scenes and far away. If the governments and the banks that bought their debt default, who gets all the hard assets? In short, who benefits, not in paper but in tangible assets? (Who is "they")
    19 Mar 2013, 07:18 PM Reply Like
  • Author’s reply » I don't know DRich... I think we will have a better idea of the possibilities after the dust settles a bit... It's an issue of damage control now... you can see the spin that some of the media is attempting to put on this... I see the big threat now as contagion. For example, a loss of trust in the bank deposit guarantee could translate into bank runs in Spain. Everyone knows the banks in Spain are in trouble... a bank run could push them over the edge.
    19 Mar 2013, 07:24 PM Reply Like
  • DRich: Recall when Greece defaulted? They declared it no default, regarding the CDSs. They won't let it happen.


    19 Mar 2013, 07:26 PM Reply Like
  • >Stilldazed ... Back in the last frenzy for the Greek bond impending default that wasn't, I was watching CNBC and they had on a HUGE holder of Greek debt, Wilbur Ross (Sorry, I can't find the clip). I was shocked (but shouldn't have been) as he stated that he would happily forgive all of the Greek debt if they would just hand over their water & sewer systems, ports, road and electrical grid. If not he was satisfied to buy the bonds and rehypothecate them with the CB's.


    He is just one of the "THEY", but I'm sure if you got your hands on a list of the attendees at DAVOS you would have some semblance of a subset.
    19 Mar 2013, 08:13 PM Reply Like
  • >FPA ... I see reports that the Cyprus deposits are in large measure belonging to the Russian oligarchs. That makes sense to me because Europe is nearly devoid of tangible assets to bond. Who knows what will happen if all that debt & associated monetary reserve ever made it out of the CB & Primary Dealer network. Russia would be a God Send to drag into the mix.
    19 Mar 2013, 08:18 PM Reply Like
  • Author’s reply » Yes, the Russians are a wild card... they would love to have a military base in Cyprus, a major influence in the banks, and a controlling interest in the new gas find...
    19 Mar 2013, 09:26 PM Reply Like
  • Can you imagine bank runs in Spain, then Italy, then France......this could get so ugly. If it starts I suggest you get some cash for the house....for just in case...what your not prepared for will hurt you.


    I would venture that the folks with a lot of money in Cyprus will be exiting with that cash post haste once the banks open. Its like there is almost a guarantee of that because what happens when plan B is not good enough.....they come back to plan A and steal the money from the banks.
    19 Mar 2013, 07:55 PM Reply Like
  • I believe there WILL be runs on banks throughout Europe, but at least for the time being they will be orderly... We probably won't see the news until we start seeing monthly recaps of fund flows, which will indicate an orderly shuffle of funds from the PIIGS "elsewhere".


    Before this becomes epidemic, however, I expect the installation of "temporary" capital controls (stronger than those already moving into place). This could also include equity markets, and countries in the EU which are quite secure and solvent (fear has few rational boundaries). Even countries that retain their own currencies may see a disruption as bank deposits dip and people hoard cash.
    19 Mar 2013, 08:28 PM Reply Like
  • Putin getting involved in you still have doubts about the Russians now ? this is such a small deal all around that I expect Russia to do the entire bailout to save the gangs money.
    I am so tired of this entire mess, here, the EZ, .... the people paying 30-40% tax rates..corps & rich paying 0%. It's not only the rate, it's loopholes & the off shoring of money & profits. IMO, I have warned before that US corps will get burnt sooner or later with $2 T parked overseas. With every country broke because of corp welfare there is no where else to go but try to tap into corp cash....will be a disaster when it happens.
    20 Mar 2013, 05:41 AM Reply Like
  • Just as with the Communist Party oligarchies that run/own China, the same situation is pervasive in Russia. I would not assume that the list of "Russian mafia" members was NOT a subset of a list of Russian political oligarchs, including Putin.
    20 Mar 2013, 09:58 AM Reply Like
  • Will this be the song in the EuroZone soon? Or maybe the US?



    20 Mar 2013, 11:12 AM Reply Like
  • WT, that song is singing to the chior here. I have been a member of that chior for a loooonnnnng time but it feels good to see others warming up the vocals. teeeheee!!
    20 Mar 2013, 12:18 PM Reply Like
  • Analysis of Cyprus banking issues


    "...we need to consider who these depositors are. We are not only talking about the deposits of individual investors. Also companies, which have deposits in Cypriot banks will lose money. Around 40% of the $85 billion in deposits are from foreigners and 30% of the $85 billion of deposits are from Russian companies. This implicitly means that 80% of the foreign money is from Russians. What this tax really does is target these Russian companies. They could lose up to $3 billion and this could put many companies on the brink of collapse. On a side note, Britons are also affected by this levy, but to a lesser extent (3%). All of this is true if the numbers are actually correct. "

    21 Mar 2013, 09:57 AM Reply Like
  • As a small business owner I can just imagine the problems of making payroll, paying bills, getting deliveries from vendors, etc not to mention that with reduced commerce a lot less taxes are getting collected.


    The IMF seeks a pound of flesh and it matters not whos rear gets carved up along the way to get that pound.delivered. Many pounds will be wasted for the delivery of the IMF's pound.
    21 Mar 2013, 10:47 AM Reply Like
  • A Modest Cyprus Proposal
    Why not let the banks go bust and follow with a deposit-for-equity swap?

    22 Mar 2013, 06:32 PM Reply Like
  • I think the Ivan would be happy to take over the utilities, harbor control, fishing rights and maybe even a military naval/airspace agreement in exchange for helping out their good buddies the Cypriots.


    They might even consider establishing a financial center- for everyone's convenience.


    A sidebar would take care of any deposits held by the heavies.


    21 Mar 2013, 10:28 AM Reply Like
  • Cyprus bank run started at the ATMs which I did not know were open but its a great capital control tool. 300 euros per day.


    I would be there every day.

    21 Mar 2013, 10:59 AM Reply Like