Eurozone official says banks in Spain, Italy, and Europe could be raided to save Euro

March 26, 2013 – EUROPE – The new policy will alarm hundreds of thousands of British expatriates who live and have transferred their savings, proceeds from house sales and other assets to eurozone bank accounts in countries such as France, Spain and Italy. The euro fell on global markets after Jeroen Dijsselbloem, the Dutch chairman of the eurozone, announced that the heavy losses inflicted on depositors in Cyprus would be the template for future banking crises across Europe. “If there is a risk in a bank, our first question should be ‘Okay, what are you in the bank going to do about that? What can you do to recapitalize yourself?,” he said. “If the bank can’t do it, then we’ll talk to the shareholders and the bondholders, we’ll ask them to contribute in recapitalizing the bank, and if necessary the uninsured deposit holders.” Ditching a three-year-old policy of protecting senior bondholders and large depositors, over €100,000, in banks, Mr. Dijsselbloem argued that the lack of market contagion surrounding Cyprus showed that private investors could now be hit to pay for bad banking debts. “If we want to have a healthy, sound financial sector, the only way is to say, Look, there where you take on the risks, you must deal with them, and if you can’t deal with them, then you shouldn’t have taken them on,” he said. “The consequences may be that it’s the end of story, and that is an approach that I think, now that we are out of the heat of the crisis, we should take.” The announcement is highly significant, as it signals the mothballing of the euro’s €700bn bailout fund, the European Stability Mechanism (ESM), which Spain and Ireland wants to be used to recapitalize their troubled banks. “We should aim at a situation where we will never need to even consider direct recapitalization,” he said. “If we have even more instruments in terms of bail-in and how far we can go on bail-in, the need for direct recap will become smaller and smaller.” The eurozone had been planning to roll out the ESM as a “big bazooka” in mid-2014 that could help save banks and prevent financial turmoil in countries such Spain or Italy, a development that has been delayed by German resistance. Mr. Dijesselbloem’s comments will alarm countries like Ireland and Spain that had been hoping to access the ESM in order to restructure banks without killing off their financial sector by inflicting huge losses on investors. “I think the approach needs to be, let’s deal with the banks within the banks first, before looking at public money or any other instrument coming from the public side,” he said. “Banks should basically be able to save themselves, or at least restructure or recapitalize themselves as far as possible.” In a note published on Monday following the Cyprus bailout deal, Barclays warned that “the decision to bail in senior bank debt and large depositors will likely have a price impact on equity and credit instruments of those euro area banks that are perceived as the weakest.”

March 25, 2013 – CYPRUS - Cyprus clinched a last-ditch deal with international lenders to shut down its second-largest bank and inflict heavy losses on uninsured depositors, including wealthy Russians, in return for a 10 billion euro ($13 billion) bailout. The agreement came hours before a deadline to avert a collapse of the banking system in fraught negotiations between President Nicos Anastasiades and heads of the European Union, the European Central Bank and the International Monetary Fund. Without a deal, Cyprus’s banking system would have collapsed and the country could have become the first to crash out of the European single currency. Swiftly backed by euro zone finance ministers, the plan will spare the Mediterranean island a financial meltdown by winding down the largely state-owned Popular Bank of Cyprus, also known as Laiki, and shifting deposits below 100,000 euros to the Bank of Cyprus to create a “good bank.” Deposits above 100,000 euros in both banks, which are not guaranteed under EU law, will be frozen and used to resolve Laiki’s debts and recapitalize Bank of Cyprus through a deposit/equity conversion. The raid on uninsured Laiki depositors is expected to raise 4.2 billion euros, Eurogroup chairman Jeroen Dijssebloem said. Laiki will effectively be shuttered, with thousands of job losses. Officials said senior bondholders in Laiki would be wiped out and those in Bank of Cyprus would have to make a contribution. An EU spokesman said no across-the-board levy or tax would be imposed on deposits in Cypriot banks, although the hit on large account holders in the two biggest banks is likely to be far greater than initially planned. A first attempt at a deal last week collapsed when the Cypriot parliament rejected a proposed levy on all deposits. Cyprus government spokesman Christos Stylianides said: “We averted a disorderly bankruptcy which would have led to an exit of Cyprus from the euro zone with unforeseeable consequences.” Asked about the level of losses on uninsured depositors in Bank of Cyprus, he told state radio: “The assessment is that it will be under or around 30 percent.” The Cyprus central bank said the agreement had also avoided the disorderly default of Laiki Bank. Among Cypriots, there was a mood of wariness about the deal. “How long will it last?” asked Georgia Xenophontos, 23, a hotel receptionist in Nicosia. “Why should anyone believe anything this government says?” But many in the capital appeared intent on enjoying a sunny holiday morning, drinking coffee at pavement cafes and watching camera crews filming people drawing money from bank machines. German Finance Minister Wolfgang Schaeuble said Cypriot lawmakers would not need to vote on the new scheme, since they had already enacted a law on procedures for bank resolution. At a news conference in Berlin, Schaeuble said the agreement was “much better” from Germany’s perspective than the deal last week that would have hit small depositors and was rejected by the Cypriot parliament. The new deal offers the country the best chance of getting back on its feet, Schaeuble said. -Reuters

Embassies around the world received an “urgent bulletin” today from Russia’s Ministry of Foreign Affairs. The MFA is strongly urging Russian citizens and businesses to pull their money from Western financial institutions immediately, at the request of Russian Prime Minister Dmitry Medvedev.

Earlier today, the EU announced its intentions to destroy the banking system in Cyprus if the small country refuses to raid the savings accounts of its citizens. The EU Times reports “that if the Cypriot government did not allow the raiding of private bank accounts by Monday they [the EU] would be forced to destroy their banks, which remain closed for the seventh straight day and have no signs of opening soon.” Thus far, the Cypriot Parliament has stood strong against the EUs demands, apparently planning an outright default instead of pillaging the accounts of citizens.

The EU Times also reports that some recent suspicious actions by President Barack Obama could be indicative of plans falling into place.

"According to Kremlin sources, though, President Obama’s sudden visit to Israel this week, the first he has made since being elected in 2008, was to personally warn top Israelis of his regimes “plan” to begin confiscating his citizen’s bank deposits too."

"Embassies around the world received an “urgent bulletin” today from Russia’s Ministry of Foreign Affairs. The MFA is strongly urging Russian citizens and businesses to pull their money from Western financial institutions immediately, at the request of Russian Prime Minister Dmitry Medvedev."

According to Kremlin sources, though, President Obama’s sudden visit to Israel this week, the first he has made since being elected in 2008, was to personally warn top Israelis of his regimes “plan” to begin confiscating his citizen’s bank deposits too.

Interesting to note is that the Obama regimes “master plan” to steal their citizen’s wealth that is no longer protected was detailed by the global management consulting giant, and the world’s leading advisor on business strategy, The Boston Consulting Group (BCG) who in their 2011 September report titled Collateral Damage: Back to Mesopotamia? The Threat of Debt Restructuring warned of the US governments plan confiscate up to 30% of not just the Americans people bank accounts, but also of their other wealth. http://www.zerohedge.com/news/muddle-through-has-failed-bcg-says-there-may-be-only-painful-ways-out-crisis


We believe that some politicians and central banks - in spite of protestations to the contrary - have been trying to solve the crisis by creating sizable inflation, largely because the alternatives are either not attractive or not feasible:

Austerity - essentially saving and paying back - is probably a recipe for a long, deep recession and social unrest

Higher growth is unachievable because of unfavorable demographic change and an inherent lack of competitiveness in some countries

Debt restructuring is out of reach because the banking sectors are not strong enough to absorb losses

Financial repression (holding interest rates below nominal GDP growth for many years) would be difficult to implement in a low-growth and low-inflation environment

Inflation will be the preferred option - in spite of the potential for social unrest and the difficult consequences for middle-class savers should it really take hold. However, boosting inflation has not worked so far because of the pressure to deleverage and because of the low demand for new credit. Moreover the inflation "solution" while becoming more tempting, may come to be seen as having economic and social implications that are too unpalatable. So what might the politicians and central banks do?

Since the publication of Stop Kicking The Can Down The Road, a number of readers have asked us what would happen if governments persisted in playing for time. To what measures might they have to resort? In this paper, we describe what might need to happen if the politicians muddle through for too much longer.

It is likely that wiping out the debt overhang will be at the heart of any solution. Such a course of action would not be new. In ancient Mesopotamia, debt was commonplace; individual debts were recorded on clay tablets. Periodically, upon the ascendancy of a new monarch, debts would be forgiven: in other news, the slate would be wiped clean. The challenge facing today's politicians is how clean to wipe the slates. In considering some of the potential measures likely to be required, the reader may be struck by the essential problem facing politicians: there may be only painful ways out of the crisis.

And if the prospect that very soon a government near you will force you to hand over a third of your wealth, here is the rest of the terrifying analysis of what will happen to the world in order to get it back in order:

A Program for the United States

The situation in the U.S. is different from that of the euro zone and, in a way, would be less complicated to resolve. The U.S. has all the levers with which to address the crisis and would not need to coordinate 17 countries with divergent interest. But some facts would need to be acknowledged before decisive action could be taken:
In spite of massive intervention by the Fed and the US government, growth remains anemic

The deleveraging of private households will have to go on for many years

The real estate market has not yet stabilized. About 11 million US households suffer from negative equity (their mortgage outstanding is higher than the value of their home). And the supply of homes is still in excess by 1.2 to 3.5 million (depending on the data used to estimate this number).

The US government deficit is not sustainable and will need to be brought to acceptable levels, which will slow growth and amplify the problems of the private sector.
In spite of a significant weakening in the dollar, the U.S. is still running a trade deficit that cannot be blamed on China alone. It reflects a lack of competitiveness in some key markets and the low proportion of manufacturing in the U.S. economy compared with countries such as Germany and Japan.

There is a striking similarity between the US and Japan in the development of stock and real estate prices (See chart below). A correlation does not mean causality, but it is a sobering picture should Ben Bernanke and his team fail to reflate the economy.

The interventions of the Fed, notably the programs designed to buy financial assets, have created a monetary overhang that could be the basis for sizable inflation in the future.

Addressing the debt overhang.

The US would also need to reduce the debt overhang of the government, of consumer loans besides mortgages, and of non-financial corporate sector in the same way as in Europe. As exhibit 2 shows, the total debt overhang in the US equals $11.5 trillion or 77% of GDP. In the somewhat unlikely event of the US following the same path that Europe might pursue, a one-time wealth tax of 25% of financial assets would be required. As in Europe, this would also require the following initiatives.

Cleaning up the banking sector by calculating the losses and recapitalizing as needed – even if it means wiping out existing shareholders.

Additional taxes on real estate, including an increased capital-gains tax to offset the support for the real-estate market.

Creating an incentive for corporations to invest in R&D and new machinery by taxing profits not reinvested.

A commitment by the government to restrict its debt level and to prepare for the increasing costs of an aging population by either limiting benefits or raising the retirement age.

Addressing the fundamental issues of the US Economy.

We have argued for a long time that the US economy needs to address some fundamental issues in order to become globally competitive again. In putting an end to muddling through, the government might also embark on a major restructuring of the economy:

Reindustrialize and grow the share of the manufacturing sector from the current low of 12% of GDP to 20% of GDP . This might then allow a rebalancing of trade flows.
Revisit income distribution. Most U.S. families cannot make up for their income shortfall with increased credit – and 41 million Americans are officially considered to be below the poverty line.

Take action to reduce dependency on imported oil by investing in new technologies and modernizing existing infrastructure.

As in Europe, an administration that truly bit the bullet would take a long-term view and invest more in education.

All this is still speculation. But history shows that the US economy, like no other, is capable of adjusting and implementing quite radical changes. And in our view, some of the actions described above might be pursued by the US government if things do not improve soon.

BCG's conclusion:

The programs we have described would be drastic. The would not be popular, and they would require broad political coordinate and leadership – something that politicians have replaced up til now with playing for time, in spite of a deteriorating outlook. Acknowledgment of the facts may be the biggest hurdle. Politicians and central bankers still do not agree on the full scale of the crisis and are therefore placing too much hope on easy solutions. We need to understand that balance sheet recessions are very different from normal recessions. The longer the politicians and bankers wait, the more necessary will be the response outlined in this paper. Unfortunately, reaching consensus onsuch tough action might requiring an environment last seen in the 1930s.

Just received a call from a highly agitated bank manager who stated that within 60 days, banks will be greatly reducing their hours, days of operation, amount of withdrawals and a requirement to fill out "paperwork" if the amount is questioned by bank officials. Unless the form is completed, money will not be disbursed.

What really irritated this manager is that after hearing our statements on the air, and receiving years of assurance that our positions and contacts were so much bravo sierra, now he hears from corporate people that it is apparently true after all. He said, "screw them, grab the money while you can." The parameters given were banks open two days a week for four to five hours with below minimum staffs, increased security and greatly reduced amounts of actual cash in the vault. Amount of withdrawal will be held to $500-2000 per day per customer account--not customer. So my account could only have either my wife or I withdraw, not both. That level could change at ANY time.

There is no plan (at least known) for automatic confiscation from accounts--yet, and he said that the banks hold the "ownership" authority and final disposition of any items found in safety deposit boxes. (surprise, surprise!) Withholding mortgage payments could result in expedited (30) day foreclosures and 15 day Sheriff's locks on your front door.

The Federal Reserve could and will initiate other more draconian restrictions on all aspects of "private" banking and access to any property held by banks. It could include forfeiture of your primary (paid for) residence if your summer cottage has a mortgage and you fail to pony up to keeping it current or any forthcoming restrictions on your accounts.

Clearly, the only option is to close accounts or only keep funds that can be paid instantly to keep electric, water, or other critical accounts paid. Cash will be drying up---so, unless people hold precious metals, bullets (the new currency) or medicines, etc., you are screwed. Barter will be king. As the Colonel said yesterday, "the universe is contracting into the black hole. There is no way to escape its pull."

(Political/economic/social order black hole) Received at 1545 hours


20 March 2013

The Lawman

http://www.stevequayle.com/index.php?s=33&d=325


I'm sorry but the "cat is out of the bag" when it comes to FRACTIONAL RESERVE BANKING and it will NEVER crawl back in the bag. Yes, the Cyprus banks will open but depositors will not be able to take all their money out...EVER!

The name of the game will be Capital Controls...meaning that depositors will only be allowed to take out little bits of their money for as long as the system is under stress.

Which will be FOREVER!

The same will happen in Greece, Spain and Italy in the coming weeks with the same disastrous consequences. This will topple the $100 Trillion European Derivative Complex...

THEN GET READY USA!

The US media and market riggers are doing all they can to DUMB DOWN the Sheeple but they are starting to look more and more disingenuous. How many times can they say "everything is fine here" and have people believe them?

Stay alert and stay OUT of the system. It won't be long now.

May the Road you choose be the Right Road.

Bix Weir
www.RoadtoRoota.com