Tag Archives: EU

EU Confirms Plan For Cyprus-Style Theft of Bank Deposits

6 Jul

As warned here repeatedly…

G20 Governments All Agreed To Cyprus-Style Theft Of Bank Deposits… In 2010

Federal Reserve Governor Confirms – Bank Depositors Will Be Cyprused

Growing Political Deception On Bank Deposits Theft

The Bankers’ Net Is Closing

Federal Reserve Says Bank Bail-Ins Coming To The USA

… the internationalist banksters’ plan to set up a global regime for “resolution” of failing banks, wherein governments will give themselves free reign to “bail-in” the banks using depositors’ savings, is now slowly but surely being enacted by governments worldwide.

From The Telegraph (UK):

EU makes bank creditors bear losses as Cyprus bail-in becomes blue-print for rescues

New European Union “bail-in” rules to impose the losses of failed banks on shareholders, bondholders and some large depositors were agreed early this morning by Europe’s finance ministers.

…Jeroen Dijsselbloem, the chairman of the Eurogroup of finance ministers, hailed the agreement as a major step towards a “banking union” and away from state funded aid to recapitalise or bailout troubled banks across Europe.

…Greg Clark, the financial secretary to the Treasury, declared that Britain was happy with the new rules after securing concessions allowing governments flexibility on how to tailor bank “resolution” to national circumstances and existing British arrangements on banking levies.

…Under the deal, after 2018 bank shareholders will be first in line for assuming the losses of a failed bank before bondholders and certain large depositors. Insured deposits under £85,000 (€100,000) are exempt and, with specific exemptions, uninsured deposits of individuals and small companies are given preferred status in the bail-in pecking order for taking losses.

It is most important to recall what we have shown previously.

Do not be fooled into believing that, because Australia’s government has “guaranteed” (ie, insured) bank deposits up to $250,000, that this means your savings are safe, and that a failing Aussie bank will not be “bailed-in” using your money.

The government’s “guarantee” is limited, to just $20 billion per failed bank.

That’s less than one-tenth of the total amount of customer deposits — digital bookkeeping entries — actually “held” by Australian banks.

(see The Bank Deposits Guarantee Is No Guarantee At All )

To the best of my knowledge, Australia’s politicians have not yet begun to legislate the new, FSB-mandated and G20-agreed bank “bail-in” regime here.

But when they do, your savings will be exposed to confiscation.

Just as intended:

Earlier on Monday, Bank of England Deputy Governor Paul Tucker said the EU law on bank recovery and resolution would be a milestone towards a global system.

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“EU Is The New Communism”

24 Apr

Nigel Farage is right –

TRANSCRIPT:

Years ago, Mrs Thatcher recognised the truth behind the European Project. She saw that it was about taking away democracy from nation states and handing that power to largely unaccountable people.

Knowing as she did that the euro would not work she saw that this was a very dangerous design. Now we in UKIP take that same view and I tried over the years in this parliament to predict what the next moves would be as the euro disaster unfolded.

But not even me, in my most pessimistic of speeches would have imagined, Mr Rehn, that you and others in the Troika would resort to the level of common criminals and steal money from peoples’ bank accounts in order to keep propped up this total failure that is the euro.

You even tried to take money away from the small investors in direct breach of the promise you made back in 2008.

Well the precedent has been set, and if we look at countries like Spain where business bankruptcies are up 45% year on year, we can see what your plan is to deal with the other bailouts as they come.

I must say, the message this sends out to investors is very loud and clear: Get your money out of the Eurozone before they come for you.

What you have done in Cyprus is you actually sounded the death knell of the euro. Nobody in the international community will have confidence in leaving their money there.

And how ironic to see the Russian prime minister Dmitry Medvedev compare your actions and say, ‘I can only compare it to some of the decisions taken by the Soviet authorities.’

And then we have a new German proposal that says that actually what we ought to do is confiscate some of the value of peoples’ properties in the southern Mediterranean eurozone states.

This European Union is the new communism. It is power without limits. It is creating a tide of human misery and the sooner it is swept away the better.

But what of this place, what of the parliament? This parliament has the ability to hold the Commission to account. I have put down a motion of censure debate on the table. I wonder whether any of you have the courage to recognise it and to support it. I very much doubt that.

And I am minded that there is a new Mrs Thatcher in Europe and he is called Frits Bolkenstein. And he has said of this parliament – remember he is a former Commissioner: ‘It is not representative anymore for the Dutch or European citizen. The European Parliament is living out a federal fantasy which is no longer sustainable.’

How right he is.

EU Madness: Bank Deposits Stolen For Bailout Of Cyprus

17 Mar

Cross-posted from a project update on Professor Steve Keen’s MINSKY Kickstarter fundraiser (please donate now, ends tomorrow a.m.).

This is big. HUGE:

Madness in the European Union

I write a weekly column for the Australian online newspaper Business Spectator. Today’s startling news out of Europe will be this week’s topic, and given how topical this is I thought I’d share my reactions with Kickstarters:

Europe Goes Troppo

John Lennon’s best line in a lifetime of song-writing was “Life is what happens when you’re busy making other plans”. I had planned today to write about the excellent Atlantic Monthly The Economy Summit 2013 conference I spoke at in Washington on Wednesday, where it seemed that senior figures in the US were finally starting to realize that private debt, not public, was the main game in a debt-deflation.

Then “I read the news today, oh boy”: I woke at 4am to the news that the EU has confiscated 10% of depositors’ funds in its “bailout” of Cyprus. Lennon didn’t go far enough. It seems political suicide is also what happens when you’re busy making other plans. If there was one lesson that I thought the world had learnt from the Great Depression, it was the need to guarantee depositors’ funds.

So much for that fantasy. Now the EU has shown that its obsession with austerity has gone so far that even this historical wisdom has been abandoned. Not only are depositors’ funds not guaranteed, they are being lost even in banks that have not (yet) failed. Many banks are likely to fail however, if depositors come to believe—as this action gives them every right to believe—that their savings are not safe in banks. The public’s first response will be to no longer trust the digital 1s and 0s in their bank statements, and to demand their funds in cold, hard cash. The only way to do this is to front up at the bank, present it with a withdrawal equivalent to the deposit balance, and wait for the teller to count out the notes.

The public will be waiting a while: the cash currently simply doesn’t exist. Currency constitutes only a tiny percentage of the aggregate money supply—whether defined as that found in bank at-call cheque and savings accounts (M2), or including term deposits and other not-at-call accounts (M3). If everyone wants it, then only one in twenty will get it, if Europe’s figures are at all comparable to America’s.

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That’s why a collapse in confidence in deposits is called a bank run: only those who run first to the bank get their money.

Only Cypriots — and Russians, who apparently put substantial funds in Cyprus, probably in search of either a safe haven or high returns (that’s one trivia question I don’t know the answer to) — have an immediate motivation to demand cash, but they won’t be able to, thanks to a “bank holiday” in Cyprus on Monday, and withdrawal restrictions from Tuesday on.

But what about depositors in the other Mediterranean states—in fact, anywhere other than Germany? I can’t imagine them not queuing at their banks on Monday, and in large numbers.

With the inability of individuals to freely withdraw funds will come a political credit crunch. Commerce relies upon the easy transfer of funds from buyer to seller. Companies can’t have these restrictions imposed on their accounts without causing commerce to grind to a halt, but surely their suppliers—particularly tradesmen and small businesses—are going to demand cash payments in future. What happens when companies start demanding cash from their banks, rather than relying upon e-commerce?

What will happen to e-commerce after this? Would you trust the swipe of a card for a cappuccino now, or would you demand coin—even if they were Euro coins? And what on earth will money markets make of this? What will a Euro be worth on Monday morning?

Goldbugs will rejoice I am sure—here comes the currency apocalypse they have eagerly anticipated. The Bitcoin community is going to rejoice as well—theirs is one form of e-commerce that is likely to prosper after this insane act. The great attraction of Bitcoin is that it is the creature of no State, and therefore it can’t be confiscated by one.

There will be political demands for the return to national currencies: better the national State you can control than the supra-national State that controls yours. I can’t think of any other act that could do more to bring the Euro to an end than the news that a country has had 10% of its deposits confiscated, because that nation was foolish enough to cede the right to issue its own currency to the European Union a decade ago.

This will also surely stir the Russian Bear. I have no idea which Russians have funds that are now being used to bailout European banks, but I doubt that Vladimir Ilyich … I’m sorry, I mean Vladimir Putin … will take kindly to this effective seizure of Russian assets. Putin certainly has to act: his strongman image in Russia would be in tatters if he did not. What might his comeback be—turning off Russian gas supplies to Europe perhaps, until Russian depositors are repaid? And probably in dollars rather than Euros? What then in Europe, if strongman tactics force compensation for Russians, but none is forthcoming for Cypriots?

The most ominous political portent lies in the legitimacy this will bestow on the Far Right. This betrayal of the people of Cyprus by its politicians and bureaucrats will be seized upon by the fascist (and leftist) parties throughout Europe. The centrist parties whose politicians and bureaucrats have insisted on depositors contributing to a bank bailout to appease German voters have just thrown the center away.

God knows what the long term consequences will be, but if I had to identify one single act that could lead to a rerun of the political chaos of the 1930s in Europe today, this would be it. I began this post with John Lennon. Maybe the story will end with the resurrection of Vladimir Ilyich Lenin. But in the interim I expect that the Right—and most immediately, Golden Dawn in Greece—will make the most political capital out of Brussels’s incredible folly

I’ve written this quite literally “up in the air” — flying from Washington to Los Angeles — wondering what else will have occurred by the times I touchdown. Surely there will be a reaction by Cypriots today—and demonstrations elsewhere in Europe by both Left and Right. These might cause some backdown by the idiot bureaucrats and politicians who forged this plan, but even then it will be too late: the damage to the credibility of the Euro and the entire European banking system will already have been done.

Monday is going to be a very interesting day in Europe. And Tuesday in Cyprus? I would not like to be a bank teller on that day.

As I’ve been saying…

Do not – not for a moment – think that this will not impact us here in Australia.

Wars have begun over less.

See also –

UPDATE:

It has begun. From BBC News:

Cyprus bailout: Man threatens bank with bulldozer

People in Cyprus have reacted with shock to news of a one-off levy of up to 10% on savings as part of a 10bn-euro (£8.7bn; $13bn) bailout agreed in Brussels.

Savers queued at cash machines amid resentment at the charge, while co-operative credit societies shut to prevent a run on deposits.

At one Kyperounta Co-operative bank branch, a frustrated man parked his bulldozer outside, apparently threatening to break in.

UPDATE 2:

excavator cyrpus_0

UPDATE 3:

From Zero Hedge (emphasis in original):

But it doesn’t stop there: a partial “bail-in” of junior bondholders is also possible, as for the first time ever the entire liability structure of a European bank – even if it is a Cypriot bank – is open season for impairments. The logical question: why here, and why now? And what happens when the Cypriot bank run that has taken the country by storm this morning spreads everywhere else, now that the scab over Europe’s biggest festering wound is torn throughout the periphery as all the other PIIGS realize they too are expendable on the altar of mollifying voters and investors in the other countries that make up Europe’s disunion.

For the real response, look to Russia:

The island’s bailout had repeatedly been delayed amid concerns from other EU states that its close business relations with Russia, and a banking system flush with Russian cash, made it a conduit for money-laundering.

“My understanding is that the Russian government is ready to make a contribution with an extension of the loan and a reduction of the interest rate,” said the EU’s top economic official, Olli Rehn.

Almost half of [Cyprus’] depositors are believed to be non-resident Russians, but most of those queuing on Saturday at automatic teller machines to pull out cash appeared to be Cypriots.

While “saving”, pardon the pun, yet another insolvent country merely has the intent of keeping it in the Eurozone, and thus preserving Europe’s doomed monetary block and bank equity for a little longer, this idiotic plan will achieve two things: i) infuriate not just Russians but very wealthy, and very trigger-happy Russians. The revenge of Gazpromia will be short and swift, and we certainly would not want to be Europeans next winter when the average heating level of Western European will depend on the whims of Russian natural gas pipeline traffic; ii) start a wave of bank runs first in Cyprus and soon everywhere else that has the potential of being the next Cyprus.

Now the only thing unknown is Russia’s response:

Corporate tax rates in Cyprus will rise to 12.5 percent to 10 percent as part of the deal, Dijsselbloem said. Rehn told reporters that Russia, whose banks have loaned as much as $40 billion to Cypriot companies of Russian origin, would ease terms on its existing loans to Cyprus as the rescue unfolds. Cyprus’s finance minister is scheduled to fly to Moscow on March 20.

What is known, however is that Cypriots have taken the news in stride…. and to their local ATM machine, which sadly is showing the following message: “Your transaction has been cancelled due to a technical issue. This ATM cannot complete withdrawals at this time” (courtesy of Yannis Mouzakis).

Cyprus ATM two_0

It didn’t take long before the Cyprus Cooperative bank issued a statement saying “some ATMs run out of cash” – by some they likely mean all as the entire country is now gripped in a full force depositor run.

Congratulations Cyprus savers – you were just betrayed by both your politicians, and by Europe – sorry, but you are the “creeping impairments” in the game known as European bankruptcy. And so is anywhere between 6.75% and 9.9% of your money, which you were foolish enough to keep with your banks (where at least you were compensated with a savings yield of… 0%).

More importantly, as of this morning Europe has finally grasped that there is a 6.75% to 9.9% premium to holding physical cash in your mattress rather than having it stored with your local friendly insolvent bank.

UPDATE 4:

From Zero Hedge:

As the President of Cyprus proclaims to his people that “we’ should all take responsibility as his historic decision will “lead to the permanent rescue of the economy,” it appears that the settled-upon 9.9% haircut is a ‘good deal’ compared to the stunning 40% of total deposits that Germany’s FinMin Schaeuble and the IMF demanded.

Swan’s Pot Is Slowly Boiling Dry

20 Apr

From Yahoo!7 News:

Get budgets in order, Swan tells Europeans

Treasurer Wayne Swan will tell his European counterparts at this weekend’s Group of 20 meeting in Washington they must continue to adopt the reforms needed to boost economic growth and get their budgets under control.

Ahead of the meeting, Mr Swan said Australia not only needed to get its policy settings right but would do everything it could to help the world avoid a repeat of the “devastation” caused by the global financial crisis.

“There is a difficult road ahead for many advanced economies, and we shouldn’t be surprised to see bouts of instability continue for some time to come,” Mr Swan said in a statement on Friday.

“That’s why I will first and foremost be making clear to European finance ministers the need to continue putting in place the reforms needed to lift economic growth and get their budgets in order.”

From the 2008-09 Budget forecast:

Total Revenue (estimate) – $319.464 billion
Total Expenditure (estimate) – $292.470 billion

From the 2008-09 Final Budget Outcome:

Total Revenue – $298.933 billion ( -$20.53 billion)
Total Expenditure – $324.569 billion ( +$32.09 billion)

Deficit – $51.44 billion

From the 2009-10 Budget forecast:

Total Revenue (estimate) – $290.612 billion
Total Expenditure (estimate) – $338.213 billion

From the 2009-10 Final Budget Outcome:

Total Revenue – $292.767 billion ( +$2.15 billion)
Total Expenditure – $339.239 billion ( +$1.02 billion)

Deficit – $46.472 billion

From the 2010-11 Budget forecast:

Total Revenue (estimate) – $321.822 billion
Total Expenditure (estimate) – $354.644 billion

From the 2010-11 Final Budget Outcome:

Total Revenue – $309.89 billion ( -$11.93 billion)
Total Expenditure – $356.10 billion ( +$1.45 billion)

Deficit – $50.5 billion

From the 2011-12 Budget forecast:

Total Revenue (estimate) – $349.961 billion
Total Expenditure (estimate) – $365.817 billion

From the 2011-12 Mid-Year Economic and Fiscal Outlook (November updated estimate):

Total Revenue – $344.11 billion ( -$5.85 billion)
Total Expenditure – $371.747 billion ( +$5.93 billion)

Deficit – $43.38 billion

Oh yes.

By the way.

We will not bother to mention the tens of billions in spending on such things as the NBN, and the Clean Energy Finance Corporation, that are not included in the budget.

Because they are hidden Off Balance Sheet.

Wayne. Europe.

Pot. Kettle.

Both slowly but steadily boiling dry.

China To EU: “This ETS Is Illegal And Unreasonable … Now The Whole World Is Opposing It”

14 Mar

Those noble saviours of Planet Earth, the EU political elites, have simultaneously managed to inflame both the Chinese, and, their own manufacturers of passenger aircraft.

It seems that legislating a CO2 derivatives scam designed by and for the sole benefit of bankers and traders, can result in unintended blowback.

From the Irish Times:

European aviation bosses have urged political leaders to stop an escalating global row over an EU carbon levy, warning it is threatening their industry and has already led to $12 billion worth of orders being suspended.

Airbus CEO Tom Enders said 2,000 positions were at risk after China – at the forefront of opposition to the EU Emissions Trading Scheme (ETS) – had suspended orders for Airbus aircraft worth $12 billion.

Alongside Mr Enders, eight chief executives of airlines and engine makers wrote to the leaders of Britain, France, Spain and Germany saying they expected “suspensions, cancellations and punitive actions to grow as other important markets continue to oppose ETS”.

All airlines using EU airports must pay to offset their carbon emissions under a new law that took effect in January. The carbon cost for a flight from China to Europe is around €2 per passenger but as the scheme is being phased in gradually, airlines will not face a bill until April next year.

In addition to Airbus, the signatories included the heads of airlines British Airways and Iberia, owned by International Airlines Group, Air Berlin, Air France, Lufthansa and Virgin Atlantic.

The heads of French and German aircraft engine makers Safran and MTU Aero also signed the letter.

In a separate letter to European Commission president Jose Manuel Barroso, Enders deplored the “very serious situation” caused by the threat of reprisals from China and other nations.

“It seems that these threats are now becoming very real and are being translated into concrete action, which is starting to have serious consequences on the European aviation business,” he wrote in his letter, also obtained by Reuters.

The European Commission said it was forced to act alone after the United Nations’ International Civil Aviation Organization failed to come up with a viable global scheme. It has said it will modify its law if the ICAO, which has stepped up work on its own system, comes up with a scheme.

On Friday a meeting of environment ministers from all 27 EU nations reiterated they were fully behind the EU scheme.

China, the world’s fastest-growing airline market, is a major purchaser of both Airbus and Boeing jets.

It tends to buy in large quantities, through a central purchasing entity, before the jets are allocated to individual airlines, but final Beijing government approval is needed before the aircraft can be delivered.

“It is not just China’s airlines and industry association opposing the scheme. Now the whole world is opposing it,” Cai Haibo, deputy secretary-general of the China Air Transport Association (CATA), told Reuters.

“This shows that this ETS is illegal and unreasonable and should be withdrawn or postponed.”

Critics of the EU’s plans say they do not just affect profitability, but touch on national sovereignty, making the risk of a trade war that could disrupt air traffic more serious.

h/t Twitterer “Tracy'” aka @seahorse555 (website: seahorsejewellery.com.au)

9 Charts Show Why Eurozone Collapse Is Inevitable

10 May

Here are some simple charts that demonstrate why anything and everything that the EU, ECB and/or the IMF can do now, is simply to delay the inevitable disintegration of the Eurozone.

From Der Spiegel: (click on images to enlarge)

And finally, one more chart showing how interconnected (thus vulnerable) the Eurozone countries are, due to the enormous sums of money owed by member countries just to each other: (click on image to enlarge)

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