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Cyprus: Crumbling Property Rights
by Gordon Long - Market Research and Analytics
Published : March 28th, 2013
The endless EU Bank Stress Tests ALL Cleared Cypriot Banks - Why? How Could This Be? The problems have been clear for a long time as the charts reviewed in this video point out.
Two weeks ago there was no indication of the urgency of the problem, then suddenly Cyprus is in crisis? Why? What was the catalyst? The short answer is the EU's ELA was pressuring the Cypriot government and it 'leaked' that the government was considering a depositor tax. Was this a planned leak? The financial world is now thrust into a dilemma over the sanctity of property rights, due process of law, unlawful Confiscation and the meaningless of deposit insurance. A perfectly executed media event if the goal was to weaken these impediments to the next stage of Financial Repression.
There is much more going on here than what the media is hyping and focused on.
GERMANY & IMF Expect the Cypriot Contribution (of the €17.5B Total) to be:
€5.8 Billion
Equivalent to 30% of GDP,
Equivalent to 40% of Bank Deposits
Total Country Debt to GDP will then rise to 92.6% (from 48.9% in 2008)
Sequence of Solutions Offered:
PLAN A - Steal Cash from Depositors (Wealth Tax Versions 1 & 2)
PLAN B - Steal Cash from Pension Plans, Sell Sovereign Assets & Facilities to Russia
PLAN C - A Solidarity Fund (CCO- Collateralized Cypriot Obligations) to buy Good Bank/Bad Bank with associated Capital Controls implemented to guarantee investors.
*This fund was to be collateralized by state assets, possibly including natural gas revenues, church property, and social security fund reserves.
*Though some form of deposit tax was 'apparently' not ruled out, it seemed the next last best hope for Cyprus was begging the Russians to extend a loan and begging the world to fund more debt from a nation about to see huge capital outflows.
*The approach was, it appears, a 'solidarity' approach - rather than tax the current wealth of depositors (and hand it over to Troika), 'tax' the future possibility of wealth creation and sell that to the next greater fool sovereign wealth fund (or would it be the ECB that decided these CCOs are acceptable collateral?)
PLAN D - Double Dip on Large Depositors over €500,00 (12.2%) and €100,000 (9.46%).
*Shift bad assets to a bad bank (along with the large uninsured depositors) and wound down (meaning 20-40% losses) and still face the initial large-deposit-tax - leaving the Russians large depositors with 50%-plus losses.
PLAN E - FINAL PLAN (maybe)
*The final plan appears to protect insured depositors below €100,000 but stick it to the uninsured depositors.
*Uninsured depositors at the Bank of Cyprus are likely to get 40% 'haircuts' while Laiki depositors are most likely going to be wiped out.
*The fall out for Cyprus is going to be horrendous since the economy has become dependent on being an offshore banking center. That is over. Money has fled and all the business connected to this sector will experience a devastating shock. Expect the problem to not go away but to deteriorate further.
Cyprus should never have been allowed to have a banking sector that was 7 X times (below) the economy with low levels of equity and engaged in risk assets. The EU Bank Stress tests have been shown to be the fraud they were.
This suggests there are still major hidden problems across the entire EU.
30minutes 30 slides (link below)
http://www.24hgold.com/english/news-gold-silver-cyprus-crumbling-property-rights.aspx?article=4308941876G10020&redirect=false&contributor=Gordon+Long&mk=1
Monetary Geopolitics: Have The Russian Oligarchs Withdrawn All Their Cash From Cyprus?
By Tyler Durden
Global Research, March 26, 2013
Zero Hedge
On March 24, we reported on something very disturbing (at least to Cyprus’ citizens): despite the closed banks (which will mostly reopen tomorrow, while the two biggest soon to be liquidated banks Laiki and BoC will be shuttered until Thursday) and the capital controls, the local financial system has been leaking cash. Lots and lots of cash.
Alas, we did not have much granularity or details on who or where these illegal transfers were conducted with. Today, courtesy of a follow up by Reuters, we do.
The result, at least for Europe, is quite scary because let’s recall that the primary political purpose of destroying the Cyprus financial system was simply to punish and humiliate Russian billionaire oligarchs who held tens of billions in “unsecured” deposits with the island nation’s two biggest banks.
As it turns out, these same oligarchs may have used the one week hiatus period of total chaos in the banking system to transfer the bulk of the cash they had deposited with one of the two main Cypriot banks, in the process making the whole punitive point of collapsing the Cyprus financial system entirely moot.
From Reuters:
While ordinary Cypriots queued at ATM machines to withdraw a few hundred euros as credit card transactions stopped, other depositors used an array of techniques to access their money.
No one knows exactly how much money has left Cyprus’ banks, or where it has gone. The two banks at the centre of the crisis – Cyprus Popular Bank, also known as Laiki, and Bank of Cyprus – have units in London which remained open throughout the week and placed no limits on withdrawals. Bank of Cyprus also owns 80 percent of Russia’s Uniastrum Bank, which put no restrictions on withdrawals in Russia. Russians were among Cypriot banks’ largest depositors.
So while one could not withdraw from Bank of Cyprus or Laiki, one could withdraw without limitations from subsidiary and OpCo banks, and other affiliates?
Just brilliant.
And if there was any doubt that the entire process of destroying one entire nation was simply to punish Cyprus, it can be completely cleared away now:
ECB officials contacted Latvia, another EU country that has received large Russian deposits, to warn authorities against taking in Russian money fleeing Cyprus, two sources familiar with the contacts said.
“It was made clear to our Latvian friends that if they want to join the euro, they should not provide a haven for Russian money exiting Cyprus,” a euro zone central banker said.
If one thinks there is any material Russian cash therefore left in Cyprus with this epic loophole in place, we urge them to make a deposit in the insolvent nation. One person who certainly will not be allocating any of his money into Bank of Cyprus is German FinMin Schaeuble:
German Finance Minister Wolfgang Schaeuble said the bank closure had limited capital flight but that the ECB was looking closely at the issue. He declined to provide figures.
Perhaps because if he did, it would become clear that the only entities truly punished by this weekend’s actions are not evil Russian billionaires, but small and medium domestic companies, and other moderately wealthy individuals, hardly any of them from the former “Evil Empire.”
Companies that had to meet margin calls to avoid defaulting on deals were granted funds. Transfers for trade in humanitarian products, medicines and jet fuel were allowed.
The stealth withdrawals by Russians of course means that the two megabanks are now utterly drained of capital, and that the haircuts on those who still have unsecured deposits with the two banks will be so big it will likely mean a complete wipeout of all deposits. As in 0% recovery on your deposits!
In other words, by now any big Russian funds in Cyprus are long gone, and the only damage accrues to the locals: for one reason because their money over the critical EUR100K threshold has been “vaporized”, and for another because the marginal driving force and loan demand creator in Cyprus, the Russians, are gone and are never coming back again.
This is what passes for monetary real-politik in the New Normal – an entire nation becomes collateral when pursuing a wealthy group of people. And the “wealthy group” is victorious in the end despite everything…
If we were Cypriots at this point we would be angry. Very, very angry.
http://www.globalresearch.ca/monetary-geopolitics-have-the-russian-oligarchs-withdrawn-all-their-cash-from-cyprus/5328511
New BRICS Development Bank Announced
By Stephen Lendman
Global Research, March 28, 2013
In September 2006, four original BRIC nations met in New York. On May 16, 2008, Yekaterinburg, Russia hosted a full-scale diplomatic meeting.
In June 2009, Brazil, Russia, India and China again met in Yekaterinburg.
Early steps were taken to end dollar supremacy. Eventual plans may replace it with a global currency or basket of major ones.
In 2010, South Africa joined the BRIC alliance. It was formally invited to do so. The group was renamed BRICS. Annual summits are held.
On March 26 and 27, Durban, South Africa hosted the group’s fifth one. More on that below.
Their “mechanism aims to achieve peace, security, development and cooperation. It also seeks to contribute significantly to the development of humanity and establish a more equitable and fair world.”
America’s economic supremacy is declining. BRICS countries are some of the world’s fastest growing.
They comprise a significant economic and political block. They account for over 20% of world GDP.
They’re on three continents. They cover more than one-fourth of the world’s land mass.
Their population exceeds 2.8 billion. It’s 40% of the world total. By 2020 or earlier, China may become the world’s largest economy.
By mid-century or sooner, India’s predicted to be number three, Brazil number five and Russia number six.
Between 2000 and 2008, BRICS contributed about half of global growth. In the late 1990s, Russia’s debt default and Brazil’s currency crisis rocked world economies. Today they have vast foreign exchange reserves.
BRICS have more global trade than America. China’s the world’s largest exporter. India’s an information technology powerhouse.
Brazil’s a dominant agricultural exporter. It’s highly competitive. It has vast amounts of fertile land. It’s known as “the world’s biggest farm.” Russia is oil and gas rich.
South Africa holds resources worth an estimated $2.5 trillion. It’s rich in gold, platinum, uranium, chrome and manganese ore, zirconium, vanadium, and titanium.
Two key institutions emerged from Durban’s summit. A BRICS Joint Business Council (JBC) and Development Bank were announced.
JBC formerly functioned as a forum. It encourages free trade and investment. Two meetings will be held annually. Rotating chairmen will head them.
Each BRICS country chose five top business executives to represent them. They’ll coordinate relations between member states and private sector players.
Separately, China and Brazil agreed to a bilateral currency swap line. It permits them to trade up to $30 billion annually in their own currencies.
Doing so moves almost half their trade out of US dollars. It suggests other BRICS partners will make similar moves.
They endorsed plans to create a joint foreign exchange reserves pool. Initially it’ll include $100 billion. It’s called a self-managed contingent reserve arrangement (CRA).
It’s a safety net precaution. It’s to strengthen financial stability. It’s an additional line of defense.
They agreed to establish a new Development Bank. The idea was proposed last year in New Delhi.
“It’s done,” said South African Finance Minister Pravin Gordhan. BRICS leaders “will announce the details,” he added.
South African President Jacob Zuma said:
“We have agreed to establish the new development bank. The initial capital contribution to the bank should be substantial and sufficient for the bank to be effective in financing infrastructure.”
Ahead of the summit, officials said each country may contribute $10 billion for starters. It’s aim is to fund infrastructure and other development projects.
It’ll operate separately from Western international lending agencies. It’ll challenge their global dominance. It’ll test how they do business. They prioritize neoliberal harshness.
It includes privatizing state enterprises, selling them at a fraction of their worth, mass layoffs, deregulation, deep social spending cuts, wage freezes or cuts, unrestricted market access for Western corporations, business-friendly tax cuts, trade unionism marginalized or crushed, and harsh recrimination against non-believers.
It strip mines nations for profit. It shifts wealth from public to private hands. It destroys middle class societies. It turns workers into serfs.
It substitutes debt peonage for freedom. A race to the bottom follows. An elite few benefit at the expense of most others. It sacrifices economic growth for private gain. It’s the worst of all possible worlds. Nations are transformed into dystopian backwaters.
BRICS have other ideas in mind. They seek a multipolar world. Much work remains to be done. Agreement on details must be finalized. It’ll take time to begin operations.
It’ll be a second alternative to Western debt bondage. In December 2006, Hugo Chavez proposed a Bank of the South (Banco del Sur).
A November 2007 summit launched it. In September 2009, it was established. Its members include Venezuela, Brazil, Argentina, Ecuador, Bolivia, Uruguay and Paraguay. Plans are to increase initial capitalization.
Member countries pledge to contribute. Full operations are expected to begin later this year. At issue is representing the needs of the South. It’ll contribute to its development. It’ll do so free from debt bondage.
BRICS Development Bank intends no one country to dominate. Voting rights will reflect equality. Economic growth matters most.
India’s Minister of Commerce, Industry and Textiles, Anand Sharma, said:
“Our counties are making their own statement that we are proactively engaged in balancing the global economy.”
“We are creating new axis of global development. The global economic order created several decades ago is now undergoing change and we believe for the better to make it more representative.”
BRICS trade today exceeds $360 billion. By 2015, it should reach $500 billion. Continued longterm growth is expected. Mutual cooperation helps sustain it. Each member country benefits.
It remains to be seen how plans unfold. Hopefully global changes for the better will follow. They’re long overdue. Dominant emerging economies will play leading roles. They’re laying the groundwork to do so.
Stephen Lendman lives in Chicago. He can be reached at lendmanstephen@sbcglobal.net.
His new book is titled “Banker Occupation: Waging Financial War on Humanity.”
http://www.claritypress.com/LendmanII.html
Visit his blog site at sjlendman.blogspot.com.
Listen to cutting-edge discussions with distinguished guests on the Progressive Radio News Hour on the Progressive Radio Network.
It airs Fridays at 10AM US Central time and Saturdays and Sundays at noon. All programs are archived for easy listening.
http://www.progressiveradionetwork.com/the-progressive-news-hour
http://www.dailycensored.com/new-brics-development-bank-announced/
http://www.globalresearch.ca/new-brics-development-bank-announced/5328794
New BRICS Development Bank Announced
By Stephen Lendman
Global Research, March 28, 2013
In September 2006, four original BRIC nations met in New York. On May 16, 2008, Yekaterinburg, Russia hosted a full-scale diplomatic meeting.
In June 2009, Brazil, Russia, India and China again met in Yekaterinburg.
Early steps were taken to end dollar supremacy. Eventual plans may replace it with a global currency or basket of major ones.
In 2010, South Africa joined the BRIC alliance. It was formally invited to do so. The group was renamed BRICS. Annual summits are held.
On March 26 and 27, Durban, South Africa hosted the group’s fifth one. More on that below.
Their “mechanism aims to achieve peace, security, development and cooperation. It also seeks to contribute significantly to the development of humanity and establish a more equitable and fair world.”
America’s economic supremacy is declining. BRICS countries are some of the world’s fastest growing.
They comprise a significant economic and political block. They account for over 20% of world GDP.
They’re on three continents. They cover more than one-fourth of the world’s land mass.
Their population exceeds 2.8 billion. It’s 40% of the world total. By 2020 or earlier, China may become the world’s largest economy.
By mid-century or sooner, India’s predicted to be number three, Brazil number five and Russia number six.
Between 2000 and 2008, BRICS contributed about half of global growth. In the late 1990s, Russia’s debt default and Brazil’s currency crisis rocked world economies. Today they have vast foreign exchange reserves.
BRICS have more global trade than America. China’s the world’s largest exporter. India’s an information technology powerhouse.
Brazil’s a dominant agricultural exporter. It’s highly competitive. It has vast amounts of fertile land. It’s known as “the world’s biggest farm.” Russia is oil and gas rich.
South Africa holds resources worth an estimated $2.5 trillion. It’s rich in gold, platinum, uranium, chrome and manganese ore, zirconium, vanadium, and titanium.
Two key institutions emerged from Durban’s summit. A BRICS Joint Business Council (JBC) and Development Bank were announced.
JBC formerly functioned as a forum. It encourages free trade and investment. Two meetings will be held annually. Rotating chairmen will head them.
Each BRICS country chose five top business executives to represent them. They’ll coordinate relations between member states and private sector players.
Separately, China and Brazil agreed to a bilateral currency swap line. It permits them to trade up to $30 billion annually in their own currencies.
Doing so moves almost half their trade out of US dollars. It suggests other BRICS partners will make similar moves.
They endorsed plans to create a joint foreign exchange reserves pool. Initially it’ll include $100 billion. It’s called a self-managed contingent reserve arrangement (CRA).
It’s a safety net precaution. It’s to strengthen financial stability. It’s an additional line of defense.
They agreed to establish a new Development Bank. The idea was proposed last year in New Delhi.
“It’s done,” said South African Finance Minister Pravin Gordhan. BRICS leaders “will announce the details,” he added.
South African President Jacob Zuma said:
“We have agreed to establish the new development bank. The initial capital contribution to the bank should be substantial and sufficient for the bank to be effective in financing infrastructure.”
Ahead of the summit, officials said each country may contribute $10 billion for starters. It’s aim is to fund infrastructure and other development projects.
It’ll operate separately from Western international lending agencies. It’ll challenge their global dominance. It’ll test how they do business. They prioritize neoliberal harshness.
It includes privatizing state enterprises, selling them at a fraction of their worth, mass layoffs, deregulation, deep social spending cuts, wage freezes or cuts, unrestricted market access for Western corporations, business-friendly tax cuts, trade unionism marginalized or crushed, and harsh recrimination against non-believers.
It strip mines nations for profit. It shifts wealth from public to private hands. It destroys middle class societies. It turns workers into serfs.
It substitutes debt peonage for freedom. A race to the bottom follows. An elite few benefit at the expense of most others. It sacrifices economic growth for private gain. It’s the worst of all possible worlds. Nations are transformed into dystopian backwaters.
BRICS have other ideas in mind. They seek a multipolar world. Much work remains to be done. Agreement on details must be finalized. It’ll take time to begin operations.
It’ll be a second alternative to Western debt bondage. In December 2006, Hugo Chavez proposed a Bank of the South (Banco del Sur).
A November 2007 summit launched it. In September 2009, it was established. Its members include Venezuela, Brazil, Argentina, Ecuador, Bolivia, Uruguay and Paraguay. Plans are to increase initial capitalization.
Member countries pledge to contribute. Full operations are expected to begin later this year. At issue is representing the needs of the South. It’ll contribute to its development. It’ll do so free from debt bondage.
BRICS Development Bank intends no one country to dominate. Voting rights will reflect equality. Economic growth matters most.
India’s Minister of Commerce, Industry and Textiles, Anand Sharma, said:
“Our counties are making their own statement that we are proactively engaged in balancing the global economy.”
“We are creating new axis of global development. The global economic order created several decades ago is now undergoing change and we believe for the better to make it more representative.”
BRICS trade today exceeds $360 billion. By 2015, it should reach $500 billion. Continued longterm growth is expected. Mutual cooperation helps sustain it. Each member country benefits.
It remains to be seen how plans unfold. Hopefully global changes for the better will follow. They’re long overdue. Dominant emerging economies will play leading roles. They’re laying the groundwork to do so.
Stephen Lendman lives in Chicago. He can be reached at lendmanstephen@sbcglobal.net.
His new book is titled “Banker Occupation: Waging Financial War on Humanity.”
http://www.claritypress.com/LendmanII.html
Visit his blog site at sjlendman.blogspot.com.
Listen to cutting-edge discussions with distinguished guests on the Progressive Radio News Hour on the Progressive Radio Network.
It airs Fridays at 10AM US Central time and Saturdays and Sundays at noon. All programs are archived for easy listening.
http://www.progressiveradionetwork.com/the-progressive-news-hour
http://www.dailycensored.com/new-brics-development-bank-announced/
http://www.globalresearch.ca/new-brics-development-bank-announced/5328794
Cyprus: Crumbling Property Rights
by Gordon Long - Market Research and Analytics
Published : March 28th, 2013
The endless EU Bank Stress Tests ALL Cleared Cypriot Banks - Why? How Could This Be? The problems have been clear for a long time as the charts reviewed in this video point out.
Two weeks ago there was no indication of the urgency of the problem, then suddenly Cyprus is in crisis? Why? What was the catalyst? The short answer is the EU's ELA was pressuring the Cypriot government and it 'leaked' that the government was considering a depositor tax. Was this a planned leak? The financial world is now thrust into a dilemma over the sanctity of property rights, due process of law, unlawful Confiscation and the meaningless of deposit insurance. A perfectly executed media event if the goal was to weaken these impediments to the next stage of Financial Repression.
There is much more going on here than what the media is hyping and focused on.
GERMANY & IMF Expect the Cypriot Contribution (of the €17.5B Total) to be:
€5.8 Billion
Equivalent to 30% of GDP,
Equivalent to 40% of Bank Deposits
Total Country Debt to GDP will then rise to 92.6% (from 48.9% in 2008)
Sequence of Solutions Offered:
PLAN A - Steal Cash from Depositors (Wealth Tax Versions 1 & 2)
PLAN B - Steal Cash from Pension Plans, Sell Sovereign Assets & Facilities to Russia
PLAN C - A Solidarity Fund (CCO- Collateralized Cypriot Obligations) to buy Good Bank/Bad Bank with associated Capital Controls implemented to guarantee investors.
*This fund was to be collateralized by state assets, possibly including natural gas revenues, church property, and social security fund reserves.
*Though some form of deposit tax was 'apparently' not ruled out, it seemed the next last best hope for Cyprus was begging the Russians to extend a loan and begging the world to fund more debt from a nation about to see huge capital outflows.
*The approach was, it appears, a 'solidarity' approach - rather than tax the current wealth of depositors (and hand it over to Troika), 'tax' the future possibility of wealth creation and sell that to the next greater fool sovereign wealth fund (or would it be the ECB that decided these CCOs are acceptable collateral?)
PLAN D - Double Dip on Large Depositors over €500,00 (12.2%) and €100,000 (9.46%).
*Shift bad assets to a bad bank (along with the large uninsured depositors) and wound down (meaning 20-40% losses) and still face the initial large-deposit-tax - leaving the Russians large depositors with 50%-plus losses.
PLAN E - FINAL PLAN (maybe)
*The final plan appears to protect insured depositors below €100,000 but stick it to the uninsured depositors.
*Uninsured depositors at the Bank of Cyprus are likely to get 40% 'haircuts' while Laiki depositors are most likely going to be wiped out.
*The fall out for Cyprus is going to be horrendous since the economy has become dependent on being an offshore banking center. That is over. Money has fled and all the business connected to this sector will experience a devastating shock. Expect the problem to not go away but to deteriorate further.
Cyprus should never have been allowed to have a banking sector that was 7 X times (below) the economy with low levels of equity and engaged in risk assets. The EU Bank Stress tests have been shown to be the fraud they were.
This suggests there are still major hidden problems across the entire EU.
30minutes 30 slides (link below)
http://www.24hgold.com/english/news-gold-silver-cyprus-crumbling-property-rights.aspx?article=4308941876G10020&redirect=false&contributor=Gordon+Long&mk=1
THE ROVING EYE
BRICS go over the wall
Mar. 26, 2013
Asia Times
By Pepe Escobar
Reports on the premature death of the BRICS (Brazil, Russia, India, China and South Africa) have been greatly exaggerated. Western corporate media is flooded with such nonsense, perpetrated in this particular case by the head of Morgan Stanley Investment Management.
Reality spells otherwise. The BRICS meet in Durban, South Africa, this Tuesday to, among other steps, create their own credit rating agency, sidelining the dictatorship - or at least "biased agendas", in New Delhi's diplomatic take - of the Moody's/Standard & Poor's variety. They will also further advance the idea of the BRICS Development Bank, with a seed capital of US$50 billion (only structural details need to be finalized), helping infrastructure and sustainable development projects.
Crucially, the US and the European Union won't have stakes in this Bank of the South - a concrete alternative, pushed especially by India and Brazil, to the Western-dominated World Bank and the Bretton Woods system.
As former Indian finance minister Jaswant Singh has observed, such a development bank could, for instance, channel Beijing's know-how to help finance India's massive infrastructure needs.
The huge political and economic differences among BRICS members are self-evident. But as they evolve as a group, the point is not whether they should be protecting the global economy from the now non-stop crisis of advanced casino capitalism.
The point is that, beyond measures to facilitate mutual trade, their actions are indeed becoming increasingly political - as the BRICS not only deploy their economic clout but also take concrete steps leading towards a multipolar world. Brazil is particularly active in this regard.
Inevitably, the usual Atlanticist, Washington consensus fanatics - myopically - can see nothing else besides the BRICS "demanding more recognition from Western powers".
Of course there are problems. Brazil, China and India's growth slowed down. As China, for instance, became Brazil's top trading partner - ahead of the US - whole sectors of Brazilian industry have suffered from the competition of cheap Chinese manufacturing.
But some long-term prospects are inevitable. BRICS will eventually become more forceful at the International Monetary Fund. Crucially, BRICS will be trading in their own currencies, including a globally convertible yuan, further away from the US dollar and the petrodollar.
That Chinese slowdown
It was Goldman Sachs' Jim O'Neill who coined the term BRIC (no South Africa then) in 2001. It's enlightening to check what he thinks about it now.
O'Neill points out that China, even growing by a "mere" 7.7% in 2012, "created the equivalent of another Greek economy every 11-and-a-half weeks". China's slowdown was "structural and cyclical" - a "planned downturn" to control overheating and inflation.
The BRICS push is part of an irresistible global trend. Most of it is decoded here, in a new United Nations Development Programme report. The bottom line; the North is being overtaken in the economic race by the global South at a dizzying speed.
According to the report, "for the first time in 150 years, the combined output of the developing world's three leading economies - Brazil, China and India - is about equal to the combined GDP of the long-standing industrial powers of the North".
The obvious conclusion is that, "the rise of the South is radically reshaping the world of the 21st century, with developing nations driving economic growth, lifting hundreds of millions of people from poverty, and propelling billions more into a new global middle class."
And bang in the middle of this process, we find an Eurasian epic; the development of the Russia-China strategic relationship.
It's always about Pipelineistan
Russian President Vladimir Putin is taking no prisoners; he wants to steer the BRICS towards "a full-scale strategic cooperation mechanism that will allow us to look for solutions to key issues of global politics together".
This will imply a common BRICS foreign policy - and not only selective coordination on some themes. It will take time. It will be hard. Putin is very much aware of it.
What makes it even more fascinating is that Putin advanced his ideas during last week's three-day visit to Moscow by new Chinese President Xi Jinping. He went out of his way to stress Russian-Chinese relations now are "the best in their centuries-long history".
That's not exactly what hegemonic Atlanticists want to hear - still eager to frame the relationship in Cold War terms.
Xi retributed in style; "We did not come to see you for nothing" - as is partially detailed here. And wait till China's creative drive starts yielding dividends.
Inevitably, Pipelineistan is at the heart of the ultimate BRICS complementary relationship.
China's need of Russia's oil and gas is a matter of national security. Russia wants to sell more and more of it, diversifying away from the West; moreover, Russia would more than welcome Chinese investment in its Far East - the immense Trans-Baikal region.
And by the way, the "yellow peril" is not taking over Siberia - as the West would have it. There are only 300,000 Chinese living in Russia.
A direct consequence of the Putin-Xi summit is that from now on Beijing will pay in advance for Russian oil - in exchange for a share in a number of projects, for instance as in CNPC and Rosneft jointly exploring offshore blocks in the Barents Sea and other blocks onshore Russia.
Gazprom, for its part, clinched a long awaited gas deal with CNPC; 38 billion cubic meters a year delivered by the ESPO pipeline from Siberia starting in 2018. And by the end of 2013, a new Chinese contract with Gazprom will be finalized, involving gas supply for the next 30 years.
The geopolitical ramifications are immense; importing more gas from Russia helps Beijing to gradually escape its Malacca and Hormuz dilemma - not to mention industrialize the immense, highly populated and heavily dependent on agriculture interior provinces left behind in the economic boom.
That's how Russian gas fits into the Chinese Communist Party's master plan; configuring the internal provinces as a supply base for the increasingly wealthy, urban, based in the east coast, 400 million-strong Chinese middle class.
When Putin stressed that he does not see the BRICS as a "geopolitical competitor" to the West, it was the clincher; the official denial that confirms it's true. Durban may be solidifying just the beginning of such a competition. It goes without saying that Western elites - even mired in stagnation and bankruptcy - won't let any of their privileges go without a fierce fight.
He may be reached at pepeasia@yahoo.com.
http://www.atimes.com/atimes/World/WOR-01-260313.html
Russia, South Africa Seek to Create OPEC-Style Platinum Bloc
By Ilya Arkhipov & Franz Wild - Mar 27, 2013 7:16 AM ET
Bloomberg
Russia and South Africa, countries that hold about 80 percent of platinum group metal reserves, plan to set up an OPEC-type trading bloc to coordinate exports.
“It can be called an OPEC,” Russian Natural Resources Minister Sergey Donskoy said late yesterday in an interview in Durban. “Our goal is to coordinate our actions accordingly to expand the markets. The price depends on the structure of the market, and we will form the structure of the market.”
South Africa mines about 70 percent of the world’s platinum and Russia 40 percent of its palladium, a metal from the same group used to cut car pollution, Johnson Matthey Plc (JMAT) said in a 2012 report. Other nations would be able to join the group. The U.S., Zimbabwe and Canada are among producers of the metals. The Organization of Petroleum Exporting Countries is an oil cartel.
Platinum and palladium prices rose following yesterday’s comments by Donskoy. South Africa and Russia signed only a “framework” accord, he said, with details yet to be decided.
“We are now forming working groups to work out joint actions on this market,” Donskoy said. “There will be a meeting in the summer to discuss mechanisms in detail.”
South African Mines Minister Susan Shabangu said the deal sought to counter oversupply of platinum, possibly through taxes and incentives. “We’re not really controlling the market,” she said in an interview in Durban. “We want to contribute without creating a cartel, but we want to influence the markets.”
Biggest Producers
Anglo American Platinum Ltd. (AMS), the biggest producer, fell 2.3 percent by 12:36 p.m. in Johannesburg after a 1.8 percent gain yesterday. OAO GMK Norilsk Nickel, the No.1 in palladium, slid 0.4 percent in Moscow after a 1.5 percent jump yesterday.
“We will give access to minerals and then incentivize companies to add value locally,” Lionel October, director general of South Africa’s Trade Ministry, said today in an interview in Durban. “The rest is market driven.”
Platinum today fell 0.4 percent and palladium 1.2 percent.
“We view this announcement as supportive for PGM prices but also as somewhat of a long shot,” Albert Minassian, an analyst at Investec Ltd., said in a note. “Ultimately only a reduction in supply can push prices up sufficiently to maintain investment in the industry, on any practical horizon.”
To contact the reporters on this story: Ilya Arkhipov in Moscow at iarkhipov@bloomberg.net; Franz Wild in Johannesburg at fwild@bloomberg.net
http://www.bloomberg.com/news/2013-03-26/russia-south-africa-seek-to-create-opec-style-platinum-bloc.html
Silver Eagle And Junk Bag Shortages Show Underlying Strength Of Silver Market Demand
Mar 27 2013, 10:44 | includes: SLV
Doug Eberhardt
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. (More...)
The price of silver has been steadily falling since April of 2011. Yet the U.S. Mint is having trouble keeping up with demand for One Ounce American Silver Eagles, as gold dealers tell their customers they will have to wait a week to a week and a half for delivery, and junk bags of the 90% silver coins (the silver coins in use before 1965) are harder and harder to come by. Even with this decline in prices, ETFs like iShares SLV are showing a pent up demand for silver that doesn't seem to want to end despite lower prices.
* March 25: 343,645,323.100
* March 11th: 342.292.222,100 ounces
* March 1st: 342.433.205,000 ounces
* Feb 8th: 335,858,876.200 ounces
The following chart shows overall increase in ETF silver demand has risen the last few years.
While it is easy for those who own silver represented by ETFs to sell with the stroke of a key, why aren't they selling? Perhaps the answer can be found in the mindset of the ones who buy physical gold and silver as many of them own ETFs as well.
People who buy physical silver aren't calling and selling their coins. Why is this? Why do those who buy physical metals not sell when the price drops? We will look at two of the most popular products, One Ounce American Silver Eagles and the 90% "junk" silver bags and try and answer that question.
90% "Junk" Bag Silver Coins
What are "junk" bags of silver and why are they so popular? Junk bags are the 90% silver coins with a date earlier than 1965 that were once circulated here in the United States. They can be dimes, quarters or half dollars. Most of the coins today are just dimes and quarters because half dollars are almost impossible to find any longer.
The mindset of the person who buys 90% silver coins is to buy them to use as barter coins if our economy were to get to a point where the dollar is no longer trusted. As hard as this is to imagine, think for a moment what has already occurred with most not even realizing it.
A 1964 Roosevelt dime could buy you a loaf of bread in 1964. Today, that same exact dime can buy you a loaf of bread with its silver content at $2.06 according to coinflation.com. A 1965 Kennedy dime could buy you a loaf of bread in 1965 too. But what can that same 1965 Kennedy dime buy you today? It still has the purchasing power of 10 cents. This is what the government has done to our money.
In fact, a $1,000 face amount of pre-1965 quarters and dimes goes for just over $22,000 today.
This is why those who buy 90% silver junk bags hoard them. It is peace of mind that knowing if they ever need it, they have something to barter with that has held its purchasing power over time. I imagine many in Cyprus right now are wishing they had something to barter with as their access to their cash has been denied.
American Eagle One Ounce Silver Coins
One ounce silver American Eagle coins are what I consider to be the most beautiful coins in America. People pay much more in spot over the second most popular coins, the Canadian Maple Leaf silver One Ounce coins, because they are just more highly sought after. Even looking at prices on Ebay, you rarely see Canadian Maple Leaf silver coins, but there are auctions for the American Eagle silver coins every day.
Part of the reason for the January increase in popularity of the American Silver Eagle coins is many gold dealers buy them and then get them slabbed by PCGS and mark them up in price as a graded coin (slabbed refers to an expert grading or numeric rating of the coin based on its own merits to include marks and overall condition and put in a coin holder to keep it in that condition). Dealers pay a small fee to have this done for them.
When a coin comes straight from the U.S. Mint in a sealed box, then the odds of that coin getting a grade of 70, the highest numeric grade it can receive, are greater. The higher the grade, the more the dealer can charge, and thus the more commission they can make off the original bullion coin they bought from the U.S. Mint. This can explain why the U.S. Mint at one point ran out of American Eagle Silver coins in January of this year.
Personally, I recommend people buy silver as low a cost to spot as possible which you can do with the American Eagle, Canadian Maple Leaf and 90% junk silver bags. There is no need to pay more for your silver just to possess a shiny coin. If we ever did get to a barter situation, no one will care how shiny your coin is. They will just want to know its weight in silver so they can calculate how much you can purchase with it.
But beyond January, the American Silver Eagle coins sales have stayed strong. They have stayed so strong in fact, that many dealers have to tell their clients that it will take longer to receive the metals. It is important to keep in mind that these types of issues are occurring with the price of silver not really going anywhere. What will occur should the price of silver begin to take off again? I guess we'll find out soon enough.
Conclusion
I have been receiving many calls lately of people selling their silver ETFs like SLV and converting the proceeds to the physical 90% silver junk bags and one ounce American Silver Eagle coins. I expect this trend to grow, especially as the turmoil in Europe unfolds next into other surrounding countries where some are being told to withdraw cash from their banks now, before the crisis hits them. A crisis I have been warning about for a few years now when I mocked the results of the first European bank stress tests in July of 2010.
In January I was recommending silver over gold and silver seems to be holding up well of late. That doesn't mean it won't test the lows and dip below $25 before the price takes off again, since the U.S. dollar has been the beneficiary of European turmoil and silver will typically trade inverse of the dollar. I believe the dollar will continue to move higher, as I have written, because of this European turmoil, and silver will bottom out and take off in price despite any potential move higher in the dollar at some point. I will write a bullish article on silver when I see things line up. Dollar cost averaging into a position in silver is still what I recommend. But a holder of physical silver cares not that the price falls 10% or more on its way to much higher prices in the future. The holders of silver have proven this with the most recent fall in prices, as no one is selling.
Disclaimer: I am a Broker/Dealer selling gold and silver bullion at 1% over wholesale cost.
http://seekingalpha.com/article/1303741-silver-eagle-and-junk-bag-shortages-show-underlying-strength-of-silver-market-demand
Whom to Believe on Gold: Central Banks or Bloomberg?
Tuesday, 26 March 2013
Source: GoldSeek.com
By Jeff Clark, Senior Precious Metals Analyst
Bloomberg reported recently that Russia is now the world's biggest gold buyer, its central bank having added 570 tonnes (18.3 million troy ounces) over the past decade. At $1,650/ounce, that's $30.1 billion worth of gold.
Russia isn't alone, of course. Central banks as a group have been net buyers for at least two years now. But the 2012 data trickling out shows that the amount of tonnage being added is breaking records.
The following table lists the countries that have added to their gold reserves this year, while the second one tallies those that have been selling. You'll see how recently each country has reported, along with its percentage increase.
(Continued at link below...)
http://news.goldseek.com/GoldSeek/1364328360.php
Whom to Believe on Gold: Central Banks or Bloomberg?
Tuesday, 26 March 2013
Source: GoldSeek.com
By Jeff Clark, Senior Precious Metals Analyst
Bloomberg reported recently that Russia is now the world's biggest gold buyer, its central bank having added 570 tonnes (18.3 million troy ounces) over the past decade. At $1,650/ounce, that's $30.1 billion worth of gold.
Russia isn't alone, of course. Central banks as a group have been net buyers for at least two years now. But the 2012 data trickling out shows that the amount of tonnage being added is breaking records.
The following table lists the countries that have added to their gold reserves this year, while the second one tallies those that have been selling. You'll see how recently each country has reported, along with its percentage increase.
Based on current data, the net increase in central bank gold buying for 2012 was 14.8 million troy ounces – and that's before the final 2012 figures are in for all countries.
This is a dramatic increase, one bigger than most investors probably realize. To put it in perspective, on a net basis, central banks added more to their reserves last year than since 1964. The net increase – so far – is 17% greater than what was added in 2011, which was itself a year of record buying.
Here's a picture of total central bank reserves since the financial crisis hit.
Whatever gold's price movements, positive or negative, central bank officials have continued adding a lot of ounces to their reserves.
But this understates the case, because most of the data exclude China, as well as a few other small countries. China last officially reported gold reserves in 2009, so the totals in the chart since then exclude whatever its purchases might have been.
Here's where it gets interesting: Bloomberg claimed that Russia has been a bigger buyer of gold over the past decade than China – by a full 25%. Based on data about gold imports through Hong Kong and the fact that, for the most part, Chinese production doesn't leave the country, it seemed to me that this could not be right.
The Chinese central bank holds an official 1,054 tonnes of gold in its reserves. Bloomberg states, based on IMF data, that China has added somewhere around 425 tonnes over the past decade.
I can't say exactly what the correct number is, but the Bloomberg number almost has to be wrong. Here's why:
* Gold imports through Hong Kong in December alone hit a record high of 109.8 tonnes.
* Imports for 2012 also hit a record high of 572.5 tonnes.
* If you add 2012 mine production – remember that China is now the world's largest gold producer – roughly 970 tonnes of gold was delivered to various entities within the country last year.
* Cumulative imports since 2001 have reached 1,352 tonnes.
* Since 2001, imports plus production total a whopping 4,793 tonnes.
So Bloomberg is essentially saying that roughly 10% of the total gold available inside the country during that period was added to China's reserves. While it's true that Chinese citizens are buying a lot of gold (though perhaps more silver), it's highly doubtful that private parties bought 90% of all the gold brought to the Chinese market during this period. I think – but can't prove – that China's central bank is buying more gold and at a faster pace than its Russian counterpart.
Jim Rickards, a highly respected author and hedge fund manager, said last month that China has probably already accumulated between 2,000 and 3,000 tonnes of additional gold reserves. If he's right, that would be roughly double or triple the 1,054 tonnes it reported in 2009 – not the 40% increase Bloomberg's numbers suggest.
At the very least, we can say that the Bloomberg report left consideration of China's imports and production out of its report naming Russia the top gold buyer of 2012. Okay…but so what?
Well, Jim thinks the next big catalyst for gold will be an announcement from China about its reserve position. Here's what he told me in late December:
"The catalyst for a spike into the $2,500 to $3,000 price range for gold will be an announcement by China, probably in late 2013 or 2014, that they have acquired 4,000 tonnes or more in their official reserve position. This will put China on an equal footing with the US in terms of a gold-to-GDP ratio, and validate gold as the real foundation of the international monetary system. Once that position is validated, gold will move to the $7,000 range in 2015 and beyond."
Even if Jim's estimate is high or China doesn't make an announcement until later, it's clear that central banks around the world are buying gold in record quantities.
It almost makes you wonder… do they know something we don't?
The Russians gave us some hints.
Evgeny Fedorov, a lawmaker for Putin's United Russia Party, said last week, "The more gold a country has, the more sovereignty it will have if there's a cataclysm with the dollar, the euro, the pound, or any other reserve currency."
President Vladimir Putin told his central bank not to "shy away" from the metal, adding "After all, they're called gold and currency reserves for a reason."
The Chinese have been quiet on this topic recently, after being very vocal a few years ago. Here's a recent quote.
"The current international currency system is the product of the past," said Hu Jintao, General Secretary of the Communist Party of China.
Others have provided clues as well.
"We're in the midst of an international currency war," said Guido Mantega, finance minister of Brazil.
"Quantitative easing also works through exchange rates… The Fed could engage in much more aggressive quantitative easing, to further lower the dollar," said Christina Romer, former chair of the Council of Economic Advisors.
Economist Kyle Bass recently spoke to a senior member of the Obama administration about its planned solutions for fixing the US economy and trade deficit. When he asked, "How are we going to grow exports if we won't allow nominal wage deflation?", the answer he got was, "We're just going to kill the dollar."
Yes, we're talking about the US dollar. Perhaps some investors have gotten complacent about the risks to the world's reserve currency – but not central bankers. It's not hard to see why: whether they admit it or not, central bankers must know what it means to run the printing presses the way the US has since 2008, even if price inflation is not immediately obvious. It's no surprise they want to hedge their bets, moving more reserves into something with actual value... something that can't be debased by a few computer keystrokes by an increasingly unfriendly government.
The US dollar has been the world's reserve currency since WWII. That's beginning to change, and the movement into gold is just one facet of that change. The buying by central banks is exactly what one would expect to see as we approach the end of the dollar hegemony.
The message from central banks is clear: they expect the dollar to move inexorably lower. It doesn't matter that it's been holding up against other currencies or that the economy might be getting better. They're buying gold in record amounts because they see a significant shift coming with the status of the dollar, and they need to protect themselves against that risk.
This leads to a second message: gold is not overpriced, in spite of the 500%+ increase since 2001. Indeed, with the recent correction, central banks are likely buying more, even as you read this.
Central bank gold buying will continue, of that we're certain. Even after Putin's binge, gold accounts for only 9.5% of Russia's total reserves. China's 1,054 tonnes is roughly 2% of its reserves. It's clear that both countries, along with others, have decided to accumulate as much gold as they can, as quickly as they can, before the dollar's decline becomes more pronounced... and permanent. This could explain why some central banks don't publicize their purchases. It also means that Bloomberg and other mainstream media outlets could be caught off guard when China announces higher gold reserves than expected – perhaps much higher.
Clearly we should take notice. If central banks are preparing for a major change in the value of the dollar, shouldn't we? The fact remains that the US dollar cannot and will not survive the ongoing abuse heaped upon it by government planners and federal officials. That not only means the gold price will rise, but that many, if not most currencies, will lose a significant amount of purchasing power. This has direct implications for all of us.
Embrace the messages central bankers are telling us – the ones they tell with their actions, not their words. Buy gold. Your financial future may very well depend upon it.
While buying gold will protect your purchasing power, your best bet at growing it substantially is to stake claims in little-known companies that mine precious metals. That's how Doug Casey, Rick Rule, and other well-known contrarian speculators made their millions. To learn exactly how they did it – and how you can too – sign up for Downturn Millionaires, a free video presentation from Casey Research.
http://news.goldseek.com/GoldSeek/1364328360.php
Insider buying of gold stocks surges to multi-year highs
DARCY KEITH
The Globe and Mail
Published Monday, Mar. 25 2013
The TSX global gold index has lost about a third of its value over the past two years. The S&P/TSX Venture Exchange, stock full of gold mining juniors, hit a multi-year low this month.
Yet, executives and officers who work within those businesses are showing remarkable confidence that the sector is poised for better times.
According to INK Research, there are now seven precious metals stocks on the TSX with insider buying for every one with selling. That’s a near doubling of the ratio since mid-January – and represents a level of lopsided transactions that is usually only seen during major market peaks or valleys.
“That is the type of insider buying we saw in the broad market during the height of the great financial crisis in late 2008 and early 2009,” points out Ted Dixon, CEO of INK Research. “A similar situation now seems to be in place among gold and silver miners.”
Insiders are typically contrarian investors – buying shares when they perceive them to be undervalued. Right now, it appears many think the stocks are going for fire-sale prices.
They are usually early, too. Historically, insider transactions often foreshadow market moves six- to 36-months in advance.
While that may be quite a wait, it’s interesting to see insiders display this level of confidence in a sector that the broader investment community has been fleeing.
Mr. Dixon points out that while gold is well off highs near $1,900 (U.S.) an ounce in 2011, the macro backdrop hasn’t radically changed. Central banks are working hard to keep real interest rates in negative territory, and the threat that bond-buying measures will eventually lead to inflation – gold’s best friend – remains intact.
There are no shortages of forecasts calling for gold’s demise, or at least losing some of its lustre. Last week, for instance, Société Générale predicted gold would pull back to below $1,400 (U.S.) an ounce by the end of this year as the U.S. economy improves and the need for quantitative easing is scaled back.
But there are plenty of others that are more optimistic. John Hathaway, manager of the $1.8-billion Tocqueville Gold Fund, who has one of the best long-term track records in the sector, thinks gold could easily vault 25 per cent from current levels to $2,000 an ounce. The recent events in Cyprus have highlighted the continued risks to the global economy arising from the European debt crisis, and gold could continue to benefit from haven flows into hard assets.
While gold stocks have significantly underperformed the bullion market recently for various reasons, including rising production costs, Mr. Dixon thinks miners have a lot of emerging factors working in their favour.
Several CEOs have recently been fired for investing in projects that ultimately hurt shareholder value, suggesting they'll be more prudent going forward. And technicals suggest gold stocks are cheap in relation to gold; last week, the NYSE Arch Gold Bugs index, made up of U.S.-listed gold companies, hit the lowest levels versus the SPDR Gold ETF – an investment in physical metal – since the Lehman Brothers collapse.
“Such extreme situations usually do not last for long,” notes Mr. Dixon. “With both fundamental and technical conditions supporting recent heavy insider buying, it looks like a significant bottom in precious metals mining shares may be in the process of forming now.”
http://www.theglobeandmail.com/globe-investor/inside-the-market/insider-buying-of-gold-stocks-surges-to-multi-year-highs/article10312788/
Arizona to Make Silver and Gold Money?
Tuesday March 26, 2013, 4:00am PDT
By Michelle Smith - Exclusive to Silver Investing News
SB 1439, a bill that proposes making silver and gold legal tender in Arizona, advanced in the legislative process last week. The state’s House Financial Institutions Committee voted four to two in favor of the bill, prompting some to speculate that Arizona could become the second state to enact this type of hard-currency legislation, Mineweb reported.
SB 1439 aims to alter Arizona’s definition of legal tender to include specie, which it defines as any “coin or bullion [that has] gold or silver content.”
If successful, SB 1439 will allow the metals to be used for the payment of debt and taxes and will prevent taxes from being imposed on conversions between paper currency and specie. Further, it is intended to prevent the metals from being taxed.
The law would prevent any individual from being required to accept silver or gold.
Democrats not enthusiastic
The bill won majority support in the Republican-led Senate following a 17 to 11 vote in February. Now, the bill is set to go before the House, where it is expected to meet opposition from Democrats.
SB 1439 is discussed on the website of Arizona’s Democrats in a post that criticizes Republicans for wasting time to promote an extremist agenda.
“This is a clear example of ideology being put ahead of common sense,” said Representative Lydia Hernandez. “If this bill becomes law, it would create a huge bureaucratic nightmare. There is no plan for how to implement this. How are local businesses going to have the equipment to determine the value of gold and silver?”
On the same note, it is likely that changing the definition of legal tender will impose costs on numerous parties, according to a fiscal note on the bill. As proposed, SB 1439 could necessitate the purchase of additional equipment and facilities or the hiring of specialists, such as assayers, to allow the Department of Revenue and the state Treasurer to handle tax and other transactions, the document notes.
And, such costs may not be limited to the state. Local governments could also be impacted as they too may need to invest in equipment or space to facilitate metal transactions.
The fiscal impact of this legislation cannot be determined with the information that has been made available, the note states.
Paper money increasingly risky, but metals as currency plan not without snags
Paper money is a “recipe for worldwide bankruptcy,” The Huffington Post quoted Keith Weiner, president of the Gold Standard Institute, as saying to Arizona legislators.
“Everybody is going bankrupt on this system so we need a sound and honest money system, such as gold and silver,” he added.
Utah serves as proof that legislative success marks the clearance of an important hurdle, but does not mean the battle is won. When a similar bill was signed into law in 2011, Utah became the first US state to recognize silver and gold as legal tender. But the law lacked practical details, a fact that was highlighted when one taxpayer made headlines by attempting to settle up with the state in silver. He was turned down.
Critics of these hard currency measures consider them shortsighted since there is a major difference between passing a law on what constitutes legal tender and developing a functional system to handle new forms of tender. Details regarding how such gold and silver would be valued and where it would be stored can create significant hurdles to the wide-scale usage of silver and gold, as can conflicting legislation.
“In my mind there’s still no practical way of making this happen,” Richard Ellis, Utah’s treasurer, reportedly said of the state’s ability to conduct transactions in metal. He pointed out that the state is not even allowed to hold metals as an asset because of the risks posed by their price volatility. The state could suffer losses if the metals’ prices drop, according to Ellis.
That is an ironic argument given that hard money advocates support these measures largely because they believe such risk has evolved into reality for the masses who are holding paper money. Individuals are already suffering losses due to the devaluation of currency that is being spearheaded by central banks, these advocates argue.
Hernandez questioned whether there is public demand for this type of measure. She said, “ssues of currency should be handled by the Federal Reserve, so this is yet another attempt to undermine the federal government. There are just too many questions that remain unanswered to even consider this legislation credible.”
Contrary to Hernandez’s suggestion, the Federal Reserve is driving support for hard currency measures. Furthermore, although Utah is the only state to have adopted a silver and gold currency law so far, bills proposing metal as money or calling for some type of consideration of the matter have popped up in numerous states.
Kansas, for example, is currently considering HB 2379, which would recognize certain gold and silver coins as legal tender.
That suggests that if interest is not growing among the people, it certainly appears to be blossoming among the officials that they have elected to represent them.
Securities Disclosure: I, Michelle Smith, hold no direct investment interest in any company mentioned in this article.
http://silverinvestingnews.com/16281/arizona-silver-gold-money-fiat-currency-united-states.html
In Gold, Not Cyprus, We Trust
25 March 2013
Source: GoldSeek.com
By Frank Holmes
CEO and Chief Investment Officer
U.S. Global Investors
Global investors had to muster the courage to keep calm as news of Cyprus’ proposed partial theft of all bank deposits took Wall Street by surprise, closed the country’s banks and drove the price of gold higher.
The thoughtless idea was intended to capture a portion of the $31 billion in bank assets held by Russians. According to the Financial Times, Cyprus has developed a “well-earned reputation for being a haven for dirty money from Russia.”
Although Cyprus’ government came to its senses and blocked the proposed seizure, the damage has been done. To many people around the world, raising income taxes may be one thing, but changing the rules to steal hard-earned savings from all citizens rattles their confidence. What Adrian Ash of BullionVault says is “most amazing” about this situation is that “small savers are no longer sacred.”
It’s remarkable to see the response from Cypriots, as they protested in the streets, with “NO” stamped on their palms, demanding the government take its hands off their money. It’s refreshing to see their pushback to sanity.
How did this tiny island make it into the European Union (EU) in the first place? The Financial Times gave an insightful background:
“Many EU leaders had been deeply reluctant to admit Cyprus into the union in 2004, without a peace settlement that reunified the island. But Greece had threatened to veto the entire enlargement of the EU – blocking Poland, the Czech Republic and the rest – unless Cyprus was admitted. Reluctantly, EU leaders succumbed to this act of blackmail.”
Five years later, we are seeing the fallout of Cyprus due to Greece’s financial woes. Many accuse Greece of cooking the books to get into the EU, and then the country proceeded to blackmail the EU at the expense of other European countries.
Crooks get punished, but what about others who unfairly change the rules or break them? Think back to the anger generated by the Ponzi scheme run by Bernie Madoff, who lost $20 billion in cash. In addition, $65 billion in paper wealth vanished. He’s serving 150 years in prison, his son committed suicide, and he’ll forever be known as a thief and a rat.
In Gold We Trust
Since the global financial crisis began, there’s been a rash of poor economic decisions from socialist policymakers scrambling to bring in more revenue to cover their overspending. Rather than streamline regulations to facilitate trade and flow of funds or cut back on welfare programs, they’d rather maintain the status quo and increase taxes.
In Greece, tough cost-cutting austerity measures were shot down after organized unionized workers were rioting in the streets. France’s socialist president, Francois Hollande, has been trying unsuccessfully to increase the top income tax rate to 75 percent in an attempt to “squeeze fat cats and hit the mega-rich, making them bear the brunt of ‘sacrifices’ needed to fix public finances,” according to The Guardian last summer.
In Hungary and Italy, we have seen the unintended consequences of envy policies after implementing a financial transaction tax.
These types of “envy policies” that would be frowned upon by Moses on Mount Sinai aren’t only happening across the Atlantic. Recently, Gene Epstein from Barron’s compared the U.S. debt situation to that of Greece’s. He writes that national debt could “easily reach 153 percent of economic output by 2035” and unemployment could climb as high as 20 percent, but the solution doesn’t lie in “asking the rich to pay a little more.” He says,
“Barron's calculates that immediately increasing the marginal tax rate to 50% on the top 1% of the country's earners would bring in $500 billion over the next 10 years. This would barely dent the country's debt load, which would then be $20 trillion, and do little to forestall a financial crisis.”
I believe poorly thought out government policies hurt the formation of capital and destroy people’s trust in paper money. Leaders may have good intentions, but some of their actions show disrespect for private property and individualism.
This only reemphasizes gold as an important asset class.
It may be apt timing for investors to become reacquainted with gold, as our oscillator chart shows that the yellow metal appears to be oversold. On a year-over-year basis, gold has fallen more than 2 standard deviations, an event that has rarely occurred over the past 10 years. As I’ve indicated before, following these extreme lows, gold has historically rallied.
It’s only an event like Cyprus to prompt you to make sure your portfolio has a modest weighting of 5 to 10 percent in gold and gold stocks.
U.S. Global Investors, Inc. is an investment management firm specializing in gold, natural resources and emerging markets opportunities around the world. The company, headquartered in San Antonio, Texas, manages 13 no-load mutual funds in the U.S. Global Investors fund family, as well as funds for international clients.
For more updates on global investing from Frank and the rest of the U.S. Global Investors team, follow us on Twitter at www.twitter.com/USFunds or like us on Facebook at www.facebook.com/USFunds. You can also watch exclusive videos on what our research overseas has turned up on our YouTube channel at www.youtube.com/USFunds.
http://news.goldseek.com/GoldSeek/1364240541.php
First Iceland then Greece Now Cyprus and Who is next in Asia ..?
Mar 25, 2013 - 02:27 PM GMT
By: Sam_Chee_Kong
Ever wonder why the shit is starting to hit the fan (SHTF) in Europe now? This kicking the can down the road thingy will have to come to an end one day. The whole financial system is on the verge of collapsing right now as every available effort utilized to pump up the system seems to be going nowhere. Ever since the financial crisis erupted in 2008, the system has been kept afloat by pouring more money into it. Unfortunately the unlimited injection of funds by means of Quantitative Easing has not been very effective as of late mainly because most of it went to unproductive sectors such as the real estate and stock market. Thus what we are ended up is inflated property and stock prices which resulted in a Great Disconnect between the asset prices and the real economy.
The Great Disconnect
What do we mean by the Great Disconnect? It means asset prices and the real economy is moving in different directions. In normal conditions the movement of the stock market follows the economy, meaning if the economy improves then the stock market will follow. However such a relationship does not seem to exist anymore. It seems that the age old investing axiom of good-is-good and bad-is-bad does not hold anymore. What does it mean? A classic case for the good-is-bad is the following. In the olden days when a company announces better than expected earnings its share price will normally go up but nowadays it reacted on the opposite and its stock price plunges. This has baffled many investors for many years.
Similarly when a dodgy company from a low-growth industry announces cost cutting measures such as laying off workers, cutting overtime, no pay rise and bonus, its share price jumped because the public viewed that its projected future earnings will somehow be improved due to the measures taken currently. This is a classic case of bad-is-good because cost cutting measures will only help to improve the bottom line of the company in the short term and will not be sustainable in the long run because there are only so much costs and wages to cut. To achieved a sustainable earnings improvement the company should seek out measures to improve the efficiency of the company and thus to bring in a sustainable sales improvement in the future.
In fact there is currently a Great Disconnect between the financial markets and the Global economy. They no longer follow the axiom of good-is-good and bad-is-bad. The situation has already reached the point where the badder-the-news then the-better-the-market. Heck, currently the situation in Cyprus can be considered critical with threatening bank runs and the closure of its two main banks namely Bank of Cyprus and Cyprus Popular Bank. Thanks for the manipulation by the authorities; stock markets around the world are making record highs instead of plunging. They had no choice because the financial market is their last line of defence against the collapse of the entire global financial system and economy.
But many policy makers failed to realise that it is this very act of saving their financial markets by artificially propping them up is what kills them. Failed and uncompetitive companies and too big to fail banks are bailed out with tax payers money. As a result of such moves the global financial market has turned into a giant casino. Currently the Global GDP is worth about $70 trillion with the total derivatives bet around the world estimated to be between $800 and $1500 trillion. This means the total bets on derivatives had reached a leverage of more than 10x the world GDP. If this house of cards were to come down anytime in the future, how are we going to survive?
We believed that Central Banks around the world has lost this battle when Iceland went down in 2008. One of the main causes of the collapse of Iceland is due to the rapid growth of its balance sheet and assets of the three main banks namely Glitnir, Kaupthing and Landsbanki. The following table is the total assets (in ISK) of the three banks from 2003 to 2008.
Chart 1 (Combined Assets of 3 main banks of Iceland)
(Continued at link below...)
http://www.marketoracle.co.uk/Article39637.html
U.S. Seeks Answers in Liechtenstein on Tax Cheats
By Dylan Griffiths - Mar 24, 2013
Bloomberg
The U.S. has asked Liechtenstein to hand over data on foundations that may have been used to hide untaxed American money from the Internal Revenue Service, a step that may threaten Swiss banks.
The U.S. wants to know the number of foundations set up by fiduciaries -- lawyers, accountants, financial advisers and asset managers -- for American taxpayers, according to a letter sent by the Department of Justice to authorities in the Alpine principality. A “formal request” to fiduciaries will follow, the DOJ said.
Seeking documents from the Liechtenstein fiduciaries is an important investigative step,” which will shed light on “the roles of banks, of bankers outside of Liechtenstein,” the Justice Department wrote in the letter, adding that it looked forward to receiving the data by March 29.
The DOJ is investigating at least 11 financial firms, including Credit Suisse Group AG (CSGN) and Julius Baer Group Ltd. (BAER), for allegedly helping Americans hide money from the IRS. The Liechtenstein request will add to the information the IRS garnered as 38,000 Americans avoided prosecution through an amnesty program, which involved paying back taxes and penalties and disclosing their offshore accounts and bankers.
“It’s a further evolution of the Department of Justice using third-party fiduciaries to gather more information on these structures and the banks involved,” said Milan Patel, a former IRS trial attorney who is now a partner at Zurich-based law firm Anaford AG. “This could be bad news for Switzerland, as the information could be used against more Swiss banks.”
Seeking Settlement
Katja Gey, director of Liechtenstein’s Office for International Financial Affairs, declined to comment. Justice Department spokesman Charles Miller declined to comment.
Banks in Switzerland are seeking a settlement with the U.S. as Liechtenstein’s larger neighbor, the world’s biggest center for offshore wealth, tries to shed its image as a haven for undeclared assets. That may involve negotiating separate deferred prosecution agreements with U.S. authorities.
UBS AG, the biggest Swiss bank, avoided prosecution in 2009 by paying $780 million, admitting it fostered tax evasion and giving the IRS data on more than 250 accounts. It later turned over data on another 4,450 accounts. Before the UBS deferred- prosecution deal, U.S. prosecutors said the bank managed $20 billion in undeclared assets for American clients.
Wegelin & Co., the oldest Swiss private bank, pleaded guilty in Manhattan federal court in January to conspiring to help hide more than $1.2 billion in assets from the IRS, while opening undeclared accounts for at least 70 U.S. taxpayers who were former UBS clients. The bank, which paid $74 million to resolve the investigation, closed its doors after 272 years.
Further Investigations
Since 2008, U.S. prosecutors have charged at least 86 people in their crackdown on offshore tax evasion, including two dozen bankers, lawyers and advisers.
“The purpose of our request is to further our investigations of both U.S. taxpayers who, among other things, engaged in tax evasion through the use of Liechtenstein foundations and establishments, and the banks, bankers, and others who facilitated that tax evasion,” the Justice Department wrote in the letter to Liechtenstein authorities.
The DOJ’s focus is on foundations that existed since the end of 2007, according to the letter.
Beda Singenberger, a Swiss financial adviser, created sham foundations in Liechtenstein and phony corporations in Hong Kong and the British Virgin Islands to help clients hide their ownership of the accounts, federal prosecutors charged in a July 2011 indictment. Singenberger, who lives in Zurich, was charged with helping 60 people in the U.S. hide $184 million in secret offshore accounts. He has not responded to the charge in court.
Unwinding Secrecy
Liechtenstein amended a tax law last year to allow the country of 36,000 people to comply with a U.S. request for account data on American clients of the principality’s oldest bank, Liechtensteinische Landesbank AG (LLB). The bank known as LLB had 49.9 billion Swiss francs ($53 billion) of assets under management at the end of 2012 and is one of the firms being probed by the DOJ.
Liechtenstein started to unwind secrecy after data stolen from LGT Group, the bank owned by the country’s princely family, was used by Germany to prosecute tax evaders in 2008. Former Deutsche Post AG (DPW) Chief Executive Officer Klaus Zumwinkel was convicted of tax evasion and received a two-year suspended prison sentence plus a penalty of 1 million euros ($1.3 million).
Under pressure from the U.S., Germany and France, Liechtenstein said in March 2009 that it would conform with tax standards set out by the Organization for Economic Cooperation and Development to avoid being blacklisted as a tax haven.
To contact the reporter on this story: Dylan Griffiths in Geneva at dgriffiths1@bloomberg.
http://www.bloomberg.com/news/2013-03-24/u-s-seeks-answers-in-liechtenstein-on-tax-cheats.html
The "Wealth Tax" Contagion Is Rapidly Spreading: Switzerland, Cyprus And Now ....
Submitted by Tyler Durden on 03/25/2013
It was only yesterday that we wrote about comparable problems to those which Russian depositors may (or may not be?) suffering in Cyprus right, this time impacting wealthy Americans and their Swiss bank accounts, where as a result of unprecedented DOJ pressure the local banks will soon breach all client confidentiality and expose all US citizens who still have cash in the former tax haven under the assumption that they are all tax evaders and violators. And in the continuum of creeping wealth taxes which first started in Switzerland, then Cyprus, and soon who knows where else, there was just one question: "The question then is: how many of the oligarchs, Russian or otherwise, who avoided a complete wipe out and total capital controls in Cyprus, will wait to find out if the same fate will befall them in Switzerland? Or Luxembourg? Or Lichtenstein? Or Singapore?" Today we got the answer, and yes it was one of the abovementioned usual suspects. The winner is.... Lichtenstein.
Yes: the little principality that is an even greater tax (evasion) haven for the world's ultra wealthy, even more so than Zurich, Geneva or Zug, is now under Big Brother's microscope.
But fear not. All the other tax havens listed above are quite certainly about to meet the iron, resolute fist of the US Department of Injustice. After all, unlike TBTF banks, depositors are hardly "systemic", and thus Eric Holder and his henchmen will have zero reservations when pursuing the full extent of the (selectively crony) US laws against them.
From Bloomberg:
The U.S. has asked Liechtenstein to hand over data on foundations that may have been used to hide untaxed American money from the Internal Revenue Service, a step that may threaten Swiss banks.
The U.S. wants to know the number of foundations set up by fiduciaries -- lawyers, accountants, financial advisers and asset managers -- for American taxpayers, according to a letter sent by the Department of Justice to authorities in the Alpine principality. A “formal request” to fiduciaries will follow, the DOJ said.
“Seeking documents from the Liechtenstein fiduciaries is an important investigative step,” which will shed light on “the roles of banks, of bankers outside of Liechtenstein,” the Justice Department wrote in the letter, adding that it looked forward to receiving the data by March 29.
The DOJ is investigating at least 11 financial firms, including Credit Suisse Group AG (CSGN) and Julius Baer Group Ltd. (BAER), for allegedly helping Americans hide money from the IRS. The Liechtenstein request will add to the information the IRS garnered as 38,000 Americans avoided prosecution through an amnesty program, which involved paying back taxes and penalties and disclosing their offshore accounts and bankers.
“It’s a further evolution of the Department of Justice using third-party fiduciaries to gather more information on these structures and the banks involved,” said Milan Patel, a former IRS trial attorney who is now a partner at Zurich-based law firm Anaford AG. “This could be bad news for Switzerland, as the information could be used against more Swiss banks.”
In case anyone is still confused about what is going on, here is the summary: any geographic venue that for whatever reason was once considered a global tax haven in the "Old Normal", be it Switzerland, Greece, Luxembourg, Singapore, or as the case may be Lichtenstein, is now fair game for confiscation and otherwise expropriation of local capital.
Alas, as this money will not be enough to plug what is not a liquidity but global insolvency black hole, which is made worse daily by the endless interventions of central planners, once the deposits of the wealthy at these small, powerless to defend themselves countries is concluded, next come the entities with the really big deposits: the US, the Eurozone, and the grand daddy of them all: China.
In other words, the forced ~30% wealth tax on all financial assets is coming. Just as foretold here first in September of 2011 and as was recapped last weekend.
http://www.zerohedge.com/news/2013-03-25/wealth-tax-contagion-rapidly-spreading-switzerland-cyprus-and-now
Nice limerick basserdan.
Nigel Farage - Major European Bank Runs Now Taking Place
Mar. 25, 2013
Today Nigel Farage told King World News that what they have done in Cyprus has now sparked major banks runs in Europe. Farage, who is Britain’s popular MEP, also stated, “Even people like me who have spent many long years warning that things are out of control are really, really scared by the events of the past few days.” Below is what Farage had to say in this extraordinary and exclusive interview
Eric King: “The Cyprus deal that’s been brokered here, your thoughts in the aftermath of that?”
Farage: “Clearly the little man (under 100,000 euro deposits) has gotten off of the hook for the moment. They were quite prepared to break their own deposit guarantee scheme initially, but they have now gone for a much, much more spectacular coup in terms of the amount of money they are going to steal from big companies, and from bigger savers (deposits over 100,000 euros)....
“I must say the thing I find the shabbiest about it is there insisting that it doesn’t need to be subjected to a vote in the Cypriot Parliament. I very much hope that the members of the Cypriot Parliament say, ‘To hell with that, we demand another vote.’
It’s funny isn’t it, the Germans are going to have a vote on it in their Parliament, but the Cypriots are being told that they shouldn’t have a vote on it. If that’s not moving into a German dominated Europe, I don’t know what is.
I said last week that I felt any savers who had money in other eurozone banks, particularly in the Southern eurozone countries, really ought to think seriously about getting their money out. Well, this afternoon something far more serious has happened. The Dutch Finance Minister, about an hour and a half ago, said that he saw the Cyprus eurozone bailout as now being a template of how they intend to act in the future. So the burden of all of this will now fall on the private sector, and not on the public sector.
Frankly, what that now says is that anybody that has money, or anybody that has big money sitting in a Spanish or an Italian bank, and particularly if you happen to be a financial officer for a company, it would be criminally negligent of you to now leave your money or a company’s money in a Spanish or an Italian bank.
I think what they’ve done today is to spark a major run on those banks. I see that some of the banks stocks have fallen 6% this afternoon, and I think in their desperation to keep the eurozone propped-up, I really believe that long-term they have made an absolutely fatal error. They have now crossed the bounds into one of complete criminality, and from this their reputations will never, ever recover.”
Eric King: “Nigel, there are so many people around the world that are disturbed by what they have seen in Cyprus, what do you see going forward?”
Farage: “What I see is a Western political class that has effectively bankrupted countries, firstly by spending far more than we’re earning in order to pander to electorates. And nobody has had an honest conversation with those people about what a mess countries are in.
And secondly, I see all of that compounded many times more seriously by the sheer stupidity and lunacy of the eurozone project. But now there is the total refusal to accept that the best way forward would simply be to break the whole thing up.
Western civilization hinges on democracy and the rule of law, and what we are seeing is democracy being smashed and the rule of law of law being treated with contempt. Even people like me who have spent many long years warning that things are out of control are really, really scared by the events of the past few days.”
Eric King: “Can the West recover from this going forward?”
Farage: “The sooner the whole eurozone breaks up and collapses the better off we will all be. Clearly, any sense of an orderly retreat from the eurozone is now going to be very difficult to achieve. But the alternative to that is the rise of violence and extremism across the south of Europe. It’s not pretty whichever way it goes, but as I said, the sooner it breaks up the better.
The game that is going on now is so big it is really difficult to foretell what’s going to happen. But I do fear that if the Cypriot banks have suffered the way they have, mostly of course because of their holdings of Greek debt and the haircuts they had to take, I really think the concern now will move toward the Spanish banking sector.
We need to remember that Spain is a very big country. To bail out Spain appeared to me to be something that was just too big. I have said before on King World News that it would mean massive amounts of IMF and American money. The scale of a Spanish bailout would be a staggering 500 billion to 700 billion euros, but now they have shown they are prepared to steal private money. I just do not know where we go from here, but it’s very, very difficult to see things getting better.”
http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2013/3/25_Nigel_Farage_-_Major_European_Bank_Runs_Now_Taking_Place.html
Texas Hoarding Gold In Its Own Fort Knox?
25 MAR 13 | 07:15 AM ET
CNBC
Lawmakers in the Lone Star State are proposing the creation of a depository that would allow the state to store gold at its own facility. Will it work and could other states do the same? Jim Rickards, Tangent Capital, weighs in.
Video Link;
http://video.cnbc.com/gallery/?video=3000156375
Cyprus Shows Your Savings Will be Stolen! UK Theft is by Means of High Inflation
Mar 25, 2013 - 03:24 AM GMT
By: Nadeem_Walayat
http://www.marketoracle.co.uk/Article39630.html
Cyprus Shows Your Savings Will be Stolen! UK Theft is by Means of High Inflation
Mar 25, 2013 - 03:24 AM GMT
By: Nadeem_Walayat
http://www.marketoracle.co.uk/Article39630.html
$1 Billion of Gold Bars Taken Delivery Of By Pension Fund Due to Risk of COMEX Default and Shortages
Submitted by Tyler Durden on 04/18/2011 06:59 -0400
From Gold Core
$1 Billion of Gold Bars Taken Delivery Of By Pension Fund Due to Risk of COMEX Default and Shortages
Concerns that the sovereign debt crisis may be entering a new phase and the risk of contagion has seen peripheral eurozone bonds fall sharply and the euro fall against major currencies and gold today.
Sovereign debt risk, global inflation concerns, geopolitical risk, disappointing European earnings and concerns about Japan's coming reporting season have seen equities weaken and new record nominal highs for gold and silver (all time and 31 year).
Greek bond yields have continued their relentless march higher and have risen above 14.07% (10 year) and Portuguese debt (10 year) has risen to a euro era record over 9.27%.Spanish and Irish debt are also under pressure this morning.
Euro gold has been in a range between €900 and €1,070 for nearly a year (since last May – see chart) and this period of consolidation looks set to come to an end as gold pushes higher. Once the technical resistance at the record high of €1,072/oz (12/28/10) is breached, gold will challenge €1,100/oz .
In the current bull market, euro gold has seen many long periods of correction and consolidation prior to rapid gains and sharp moves upwards. The length of the recent correction (almost a year) suggests that the coming move could be very sharp and see gold rise to €1,200/oz in the coming weeks.
Gold is increasingly being seen as the superior currency in a world of trillion dollar and euro deficits and bailouts. Indeed, the printing and electronic creation of billion and trillions of the major paper currencies is increasingly making gold and silver the currencies of last resort.
Governments and central banks are debasing currencies through bailouts, deficit spending and quantitative easing which is leading to a massive increase in the supply of fiat currencies. Precious metals are rare and finite and this is why major currencies are falling in value versus gold and silver.
One of the largest pension funds in the world, the University of Texas Investment Management Co (which manages the endowment for the Texas teachers pension fund), has realized this and has put 5% of the pension fund into gold bullion (see news).
Unusually, but likely to be seen more frequently in the coming weeks and months, the pension fund has opted to own physical bars worth nearly $1 billion dollars in allocated accounts.
The fund has previously expressed concerns about the counter party risk in ETFs. However, the reason given for opting for taking delivery of 100 oz gold bars in a warehouse was that if the holders of just 5 percent of COMEX futures contracts opted to take delivery of the metal, there wouldn’t be enough to cover the demand leading to a COMEX default.
The risk of a COMEX default increases by the day and appears to be moving from the realms of the “conspiracy theory” to that of “of course we knew it would happen, it stands to reason and was inevitable”.
(Cont...)
http://www.zerohedge.com/article/1-billion-gold-bars-taken-delivery-pension-fund-due-risk-comex-default-and-shortages
Another Gold Shortage? Dutch ABN To Halt Physical Gold Delivery
Submitted by Tyler Durden on 03/24/2013 16:44 -0400
Based on a letter to clients over the weekend, it appears Dutch megabank ABN Amro is changing its precious metals custodian rules and "will no longer allow physical delivery." Have no fear, they reassuringly add, your account will be settled at the bid or offer price in the 'market' and "you need to do nothing" as "we have your investments in precious metals."
Via Google Translate,
Changes in the handling of orders in bullion
On 1 April 2013,. ABN AMRO to another custodian for the precious metals gold, silver, platinum and palladium. This we your investments in precious metals otherwise handle and administer. In this letter you can read more about it.
What will change?
With the transition to the new custodian will include the following from 1 April 2013 for you to change.
• You can have your precious metals to your investment account no longer physically let us extradite
• Gives you order in precious metals via the giro ABN AMRO? Then the settlement of orders that henceforth performed at bid prices or at the offer prices prevailing on the market for precious metals. no longer based on the the mid-price, as you used to.
• The bid price is the price that merchants offer for precious metals that are offered for sale, so if you sell.
• The ask price is the price at which traders want to sell precious metals, so if you buy.
• We are the positions in these precious metals in your investment statements against future bid prices appreciate
You can read more about investing in precious metals in Chapter 4 (Supplementary conditions for investing in precious metals) of the Conditions Beleggersgiro. You can find these at abnamro.nl / Conditions invest
Should I do anything?
You need do nothing. We ensure that we have your investments in precious metals now the new way to handle and administer[/b].
(h/t MDG by way of Frank Knopers)
http://www.zerohedge.com/news/2013-03-24/another-gold-shortage-abn-halt-physical-gold-delivery
Gold, Euro Problems And Currency Politics
Mar 24 2013, 01:02 | includes: ABX, AUY, EGO, FCX, IAG, KGC, MUX, PLG, RMB, RVRLF.OB, SAND, SCPZF.PK, SLW, SPPP, SSRI, VGZ
(special thanks to the cork)
Disclosure: I am long SLW. (More...)
The Cyprus bank crisis exposes the risks of highly leveraged and inflated currencies. The ECB and Cyprus will digitally cover this problem lest the island become a Russian colony which would tilt all issues in the Levant and Middle East. It would greatly impact all commerce. Solvency problems, shrinking growth and demographic crises in Europe will roil markets and speed transition to a new monetary order. The crisis boosts the $ and Yuan (RMB) which like precious metals are set to rise with the new reserve basket of currencies.
The Savings & Loan crisis of the 1980s and the collapse of Lehman Brothers are not ancient history. The latter led to the unprecedented expansion of US monetary base. JP Morgan's derivative exposure is about $450 T and impossible to cover. The Attorney General has stated on the record such Banks cannot be prosecuted. So issues in Cyprus are a valuable window on structural problems in fiat currency economies.
Taxing bank depositors to pay for bad loans "proved enormously controversial across Europe" since people in Italy, Spain, Greece and Portugal fear they will be the next to pay as the Irish did, taking on the debt of their banks per the ECB. Iceland's option, punishing some banks and letting foreigners take a loss seems like a one-and-done event. The era of resentment is here: some say Cypriots deserve to be punished because their banks pay higher interest, and they pay lower taxes than others. Such comparisons mark an invidious trend. They also distract from an important debate. Cyprus does not tax dividends or capital gains on foreign investment. If DC wanted to grow America's economy, a 5-10% graduated rate on such income would spur investment, hiring and help seniors on fixed income as would capping corporate taxes at 12%.
For five years the major central banks have created debt currency to float banks and increase the size, expense and power of government. Suppressing interest rates impoverishes savers and those who rely on fixed income. The juice lifts equities but Inflated values mask economic problems resulting from policies that encourage speculation while hampering investment and hiring. Equity prices have soared on liquidity while debt / insolvency issues swell. On March 20 Mr. Bernanke made a point I have stressed: the DOW's nominal highs do not mean the economy has recovered. The Chairman thus did not merely justify extended QE but also sounded a cautionary note about growth. The Consumer Confidence Index continues the bottom crawl in place for six years. Inflation-adjusted index levels show 2009-13 as a cyclical oft-punctuated rise within a secular bear market that began after the crash of 2000. This will continue to lift gold despite its secular basing.
Manipulation of the LIBOR added to structural problems in state, county and municipal bonds and pension plans and deficits. These large discords cannot be finessed indefinitely. Americans may find themselves forced to pay more to right the ship but taxes do not build structural growth. Declining median net real worth in time will cramp rising markets. Even Merkel's party's leader said "we cannot accept that people's pensions be used as collateral." In Cyprus as in other markets large and small, big money flows in and leaves first and "in the end it's the little investors who lose the most."
The Cyprus issue strikes at the unmerited confidence and growing optimism Fed credit creation has built. A deal is unclear and changes outpace the writing of an article. Could bankers and high government officials, not American depositors bear the brunt here? In Cyprus the people want their money but so do their banks and ECB. President Putin terms the ECB plan "unfair, unprofessional and dangerous," two keen thrusts followed by a shot across the bow. Russian billionaire Vladimir Potanin stated that the crisis was like the failure of Lehman Brothers. In that the problem exposes the fraudulent financial basis of the world's fiat economies he's correct. In any case, Russia now says it won't bail Cyprus out, -- most tycoon money already has left. The wisdom of von Mises and Hayek is being demonstrated. The fiat system's slow-motion collapse will accelerate amid rising geopolitical-financial turmoil.
For now the Dollar and RMB are the cleanest shirts in the laundry basket but precious metals and the platinum and palladium needed to address China's terrible air pollution (often at levels "hazardous to humans" and requiring masks to go outside) are set for secular expansion. With China's cars and trucks increasing from 90 million to 400 million by 2030 even slight attempts to stem its pollution will boost demand for catalytic converters and override the costs of political volatility in major world supplier South Africa. The other main producer (15%) is Russia who has a major stake in the Cyprus matter and upon which Europe depends for oil and natural gas. Here is a crux of energy - economic growth, finance and geopolitics. These three nations are integral to the new monetary order.
Europe could rely more on American energy but executive branch policies crimp US production and limit exports, raise prices and feed the geopolitical crises that lead to currency and market swings and collapse. The $/BRICS-gold reserve suggested by OMFIF expects that China's ancient hegemonic views, Russian suspicions and fiat-bloc games can engage in mutual productive fashion. We will see. Note that the plan excludes Europe from its core currencies. Current problems make that look prescient. Late Friday evening, a group of UK Treasury seniors flew to Nicosia to help forge a compromise in its former colony.
Googling "Cyprus crisis" gives stories from The Guardian, The Telegraph (several each), the Economist, New York Times and NBC news. The list varies day to day: later Saturday it included the BBC and Reuters. This nexus of media and geopolitical - financial power should be considered in analysis of all related issues. Cyprus used the pound until 2008 when it switched to the Euro which appears ill-considered like much of the EU plan. Euro growth and demographics are sinking faster than our own and a sinking Euro makes other fiats look less bad.
Amid substantial turmoil, the world's monetary system is being re-shaped and equities will be shaken. Precious metals and mining prices in the past two weeks are rising from a rounded bottom made in the previous four weeks. Trim your equity positions and add metals and miners including the platinum group, for example via the eponymous (PLG) or Sprott Physical Platinum (SPPP). Mr. Potanin, quoted above, is CEO of Norilsk Nickel (GMKN.MM) the world's largest miner of palladium and nickel.
Precious metal miners that have recovered particularly strongly from the 52-week or secular bottoms they made in February or early March include Silver Standard Resources (SSRI), Sandstorm Gold (SAND) and debt-free juniors like McEwen Mining (MUX) and Vista Gold (VGZ) which are 45% and 40% respectively off recent lows. Also coming back strong are mid-tier producers IamGold (IAG), Kinross Gold (KGC) and Yamana (AUY), dividend payers I have mentioned several times. Those who entered the bottom have enjoyed gains of 19% and 10% respectively. Friday, a day of light trading in the sector Eldorado Gold (EGO) rose 1.14% on double volume. Also track Canadian exploration company Reservoir Minerals (RVRLF.OB) which is developing a large high-grade property in Serbia in collaboration with Freeport McMoran (FCX) and its Serbian partner. On March 21 streaming company Silver Wheaton (SLW) rose after announcing increased revenues, EPS, income and dividends. Its fundamentals, model and contracts are good and its fall only retraced 26% from its 52-week high. With its reserves, 2.6% dividend and streamlined plans Barrick Gold (ABX) below $32 is deep value. Mixed natural resource, agricultural and bullion play Sprott Natural Resources (SCPZF.PK) has proved solid and pays a monthly dividend that annualizes to 10.4%. In equities, the markets confirm my suggestion that Consumer Goods and Services, Health Care and Energy sectors will lead in uncertain times. One still must run with this market.
We are at a major inflection point for world finance with the frayed hegemony of the fiat currency experiment leading to a new monetary reserve system. Coming weeks will show if this transition is to be managed in a collegial manner or if "the controlling oligarchy" that Huxley described will continue "to use terroristic stress to induce people to consent to their servitude" and declining real wealth.
If you have not already begun to do so, it is the time to add to your precious metals and selected miners positions. Increase your allocation to them to 15-25% depending on your circumstances. Keep some extra cash on hand and take advantage of the CAD .978 to buy some Canadian, a neighboring currency that cannot so readily be inflated. With Japan structurally finished and ongoing Euro crises, the dollar looks strong. But with an economy and markets built on debt and declining demographics the road will get bumpy. Shunned metals and miners like those mentioned above will rise as world economies re-set.
http://seekingalpha.com/article/1296661-gold-euro-problems-and-currency-politics?source=email_the_daily_dispatch&ifp=0
Shanghai Bourse Mulls After-Hours Trade in Gold, Silver
Published March 21, 2013
Dow Jones Newswires
The Shanghai Futures Exchange said Wednesday that it is considering extending the trading hours for gold and silver contracts to help institutional investors respond faster to international news.
The bourse has issued a draft proposal for public comment on its website on allowing trading from 9 p.m. to 2.30 a.m., in addition to current trading periods of 9.00-11.30 a.m. and 1:30-3.00 p.m.
"This will ensure futures companies can cover, as best as possible, the main trading hours of international markets," the exchange said.
Citing industry feedback, it said after-hours trade will improve pricing and risk management, "moving more effectively in step with the global market.. [and] help the hedging of risk."
"This will help bring domestic precious metal prices more in line with global ones, and reduce overnight risk for market participants."
The comment period ends April 3, it added.
Write to Chuin-Wei Yap at chuin-wei.yap@dowjones.com
Read more: http://www.foxbusiness.com/news/2013/03/21/shanghai-bourse-mulls-after-hours-trade-in-gold-silver/#ixzz2OOlkCaGd
Former US Treasury Official - Threats, Cyprus & Massive Crisis
Mar. 22, 2013
KingWorldNews
Today a former Assistant Secretary of the US Treasury spoke with King World News about what he warned is “The biggest crisis.” Former Assistant of the US Treasury, Dr. Paul Craig Roberts, also told KWN that government leaders in Cyprus are now being actively intimidated by the West. This is taking place on the heels of a terrible defeat at the hands of Putin, and the deadly Russian ex-KGB agents. Below is what Dr. Roberts had to say in the first of two extraordinary interviews that will be released today.
Eric King: “I have to ask you about Cyprus and what’s happening over there, the chaos that’s developing. Your thoughts?”
Dr. Roberts: “What we are seeing, as in Greece, is the response to the effort to make the public responsible for the mistake of private banks. In Greece they forced the people to have wages cut, pensions cut, social services cut, public assets sold off, in order to cover the losses of banks.
In Cyprus they are trying to make the depositors in the banks bear the burden of the adjustment. In other words, the whole EU approach is to save the banks from their mistakes and impose the cost on the public. So in Cyprus the Parliament refused to vote for it. What’s happening right now is their arms are being twisted....
They (the Cypriot government officials) are being told all sorts of dire things will happen if they don’t vote for this. You may remember that the Secretary of the Treasury of the United States went to Congress and said, ‘If you don’t give us $750 billion to bailout the banks there will be Martial Law.’
Well, they are pulling all of that kind of stuff now in Cyprus. Whether or not they will succeed in buffaloing the Parliament, or whether the Parliament will stand with the people remains to be seen. Now if the Parliament stands with the people it will give more courage to the Parliaments in Greece, Italy, Spain, Portugal, and elsewhere, where efforts will be made to force the public to pay for the mistakes of the banks.
If they don’t stand with the people, there will be more political and social unrest and more discrediting of governments. What’s happening is governments are revealing that, even if they are democratically elected governments, they do not represent the people. They only represent a very few, very powerful folks. This of course destroys any confidence in democracy. That’s really what we are seeing. That’s the biggest crisis.”
Here is the link to Part II of the extraordinary Dr. Paul Craig Roberts written interview. The written portion above is just a small part of this tremendous interview with Dr. Roberts where he discusses the Cyprus crisis, the increasingly desperate situation the West faces going forward, and much more. In addition to the two written interviews which have been released today, the KWN audio interview with Dr. Roberts will also be available late today and you can listen to it by CLICKING HERE.
http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2013/3/22_Former_US_Treasury_Official_-_Threats,_Cyprus_%26_Massive_Crisis.html
Perry, Some Lawmakers Want State's Gold Back in Texas
by Emily Ramshaw and Aman Batheja
March 21, 2013
Call it the Rick Perry gold rush: The governor wants to bring the state’s gold reserves back from a New York vault to Texas.
And he may have legislative support to do it. Freshman Rep. Giovanni Capriglione, R-Southlake, is carrying a bill that would establish the Texas Bullion Depository, a secure state-based bank to house $1 billion worth of gold bars owned by the University of Texas Investment Management Company, or UTIMCO, and currently stored by the Federal Reserve.
The idea isn’t entirely new. Some Republican members worked on a gold bill last session that was never filed. And gold-standard-backing Ron Paul, the former Texas congressman, has raised repeated concerns about the safety of states' gold supplies.
"If you think gold is a hedge, or a protection, you always want it as close to the individual and the entity as possible," Paul told the Tribune on Thursday. "Texas is better served if it knows exactly where the gold is rather than depending on the security of the Federal Reserve."
Bringing Texas' gold home has gained more traction this legislative session because of Perry’s vocal support for it. On conservative radio host Glenn Beck’s show on Tuesday, the governor said Texas was “in the process” — the legislative process, he later clarified — of “bringing gold that belongs to the state of Texas back into the state.” He argued that the state was at least as capable as the Federal Reserve of safeguarding Texas’ “physical gold.”
“If we own it,” Perry said, “I will suggest to you that that’s not someone else’s determination whether we can take possession of it back or not.”
State Rep. Lon Burnam, D-Fort Worth, said he was familiar with Capriglione's bill but was skeptical that it addresses a legitimate problem facing the state.
“We’ve got plenty of real problems that we’re not going to deal with this session," Burnam said. "Let’s deal with them.”
Capriglione said he was at a Tea Party event in Tarrant County earlier this year where Perry spoke about the state’s gold investments as an economic development tool. Since then, he has been working with Perry’s office on the bill.
“Something on the scorecards of a lot of these businesses in deciding whether they want to come to Texas is stability and gold as being one of those items,” Capriglione said. “I think it’s been in his consciousness for a while in trying to get some sort of depository in the state of Texas.”
He has also spoken with UTIMCO, which owns the 6,643 gold bars currently housed underground in New York City.
“We’re trying to figure out the right amount of gold to have here in Texas,” Capriglione said. “'We don’t want just the certificates. We want our gold. And if you’re the state of Texas, you should be able to get your gold.”
The United States and many other countries stopped pegging their currencies to the gold standard decades ago. Capriglione said the bill is not about putting Texas on its own gold standard. Rather, a depository would give the state a reputation as being more financially secure in the event of a national or international financial crisis.
“For us to have our own gold, a lot of the runs on the bank and those types of things, they happen because people are worried that there’s nothing there to back it up,” Capriglione said. “So I think this cures a problem before it can happen.”
Physically transporting gold that various state entities own from New York City or other banks to Texas would be impractical from a security and logistics standpoint, Capriglione said. He believes it makes more sense to sell the gold Texas has elsewhere and repurchase it within state lines.
He said he doesn't think the measure would be a significant expense, because the gold bars could be safeguarded in a small area, no bigger than 20 square feet.
Capriglione said he is working on revisions to the bill to address some concerns he has heard. He plans to make sure the bill would not cause the state to change its overall asset portfolio to be more heavily invested in gold. Also, to lower the bill’s costs, he expects to change the language to allow some of the administrative costs of building and running the depository to be handled by the private sector.
Such a bill might not divide lawmakers along strictly party lines. State Sen. Rodney Ellis, D-Houston, called the bill "an interesting concept" but said he would want to learn more about it and talk to "colleagues in the financial industry" before weighing in on its merits.
http://www.texastribune.org/2013/03/21/perry-some-lawmakers-want-states-gold-back-texas/
As Cyprus Collapses, It's A Race To The Mediterranean Gas Finish Line
Submitted by Tyler Durden on 03/22/2013
Submitted by Jen Alic of OilPrice.com,
Cyprus is preparing for total financial collapse as the European Central Bank turns its back on the island after its parliament rejected a scheme to make Cypriot citizens pay a levy on savings deposits in return for a share in potential gas futures to fund a bailout.
On Wednesday, the Greek-Cypriot government voted against asking its citizens to bank on the future of gas exports by paying a 3-15% levy on bank deposits in return for a stake in potential gas sales. The scheme would have partly funded a $13 billion EU bailout.
It would have been a major gamble that had Cypriots asking how much gas the island actually has and whether it will prove commercially viable any time soon.
In the end, not even the parliament was willing to take the gamble, forcing Cypriots to look elsewhere for cash, hitting up Russia in desperate talks this week, but to no avail.
The bank deposit levy would not have gone down well in Russia, whose citizens use Cypriot banks to store their “offshore” cash. Some of the largest accounts belong to Russians and other foreigners, and the levy scheme would have targeted accounts with over 20,000 euros. So it made sense that Cyprus would then turn to Russia for help, but so far Moscow hasn’t put any concrete offers on the table.
Plan A (the levy scheme) has been rejected. Plan B (Russia) has been ineffective. Plan C has yet to reveal itself. And without a Plan C, the banks can’t reopen. The minute they open their doors there will be a withdrawal rush that will force their collapse.
In the meantime, cashing in on the island’s major gas potential is more urgent than ever—but these are still very early days.
In the end, it’s all about gas and the race to the finish line to develop massive Mediterranean discoveries. Cyprus has found itself right in the middle of this geopolitical game in which its gas potential is a tool in a showdown between Russia and the European Union.
The EU favored the Cypriot bank deposit levy but it would have hit at the massive accounts of Russian oligarchs. Without the promise of Levant Basin gas, the EU wouldn’t have had the bravado for such a move because Russia holds too much power over Europe’s gas supply.
Cypriot Gas Potential
The Greek Cypriot government believes it is sitting on an amazing 60 trillion cubic feet of gas, but these are early days—these aren’t proven reserves and commercial viability could be years away. In the best-case scenario, production could feasibly begin in five years. Exports are even further afield, with some analysts suggesting 2020 as a start date.
In 2011, the first (and only) gas was discovered offshore Cyprus, in Block 12, which is licensed to Houston-based Noble Energy Inc. (NBL). The block holds an estimated 8 trillion cubic feet of gas.
To date, the Greek Cypriots have awarded licenses for six offshore exploration blocks that could contain up to 40 trillion cubic feet of gas. Aside from Noble, these licenses have gone to Total SA of France and a joint venture between Eni SpA (ENI) of Italy and Korea Gas Corp.
But the process of exploring, developing, extracting, processing and getting gas to market is a long one. Getting the gas extracted offshore and then pumped onshore could take at least five years and some very expensive infrastructure that does not presently exist. The gas would have to be liquefied so it could be transported by seaborne tankers.
The potential is there: Cyprus’ gas discoveries adjoin Israeli territorial waters where the discovery of the massive Leviathan gasfield (425 billion cubic meters or 16 trillion cubic feet) and smaller Tamar gasfield (250 billion cubic meters or 9 trillion cubic feet) have foreign companies in a rush to cash in on this.
There are myriad problems to extracting Cypriot gas—not the least of which is the fact that some of this offshore exploration territory is disputed by Turkey, which has controlled part of the island since 1974.
Gas exploration has taken this dispute to a new level, with Turkey sending in warships to halt drilling in 2011, and threatening to bar foreign companies exploring in Cyprus from any license opportunities in Turkey. The situation is likely to intensify as Noble prepares to begin exploratory drilling later this year in Block 12.
In the meantime, there is no shortage of competition on this arena. Cyprus will have to vie with Israel, Lebanon and Syria—all of which have made offshore gas discoveries of late in the Mediterranean’s Levant Basin, which has an estimated total of 122 trillion cubic feet of gas and 1.7 billion barrels of oil.
Blackmailing Cyprus?
While Greek Cypriot citizens are not willing to gamble away their savings on gas futures, Russia and the European Union are certainly less hesitant.
This is both a negotiating point for Cyprus and a convenient tool of blackmail for Russia and the EU. Essentially, the bailout is the prop on a stage that will determine who gets control of these assets.
Theoretically, Cyprus could guarantee Russia exploration rights in return for assistance. As much as this is possible, the EU could ease its bailout negotiations if it becomes clear that a Russian bailout of sorts is imminent.
Gas finds in the Mediterranean and particularly across the Levant Basin—home to Israel’s Leviathan and Tamar fields—could be the answer to Russian gas hegemony in Europe. The question is: How much does Cyprus count in this equation? A lot.
Though only half of the estimated resources in the Levant Basin, Cyprus’ potential 60 trillion cubic feet of gas could equal 40% of the EU’s gas supplies and be worth a whopping $400 billion if commercial viability is proven.
Russia is keen to keep Cyprus and Israel from cooperating too much toward the goal of loosening Russia’s grip on Europe before Moscow manages to gain a greater share of the Asian market.
Russia is also not keen on Israel’s plan to lay an undersea natural gas pipeline to Turkey’s south coast to sell its gas from the Leviathan field to Europe. Turkey hasn’t agreed to this deal yet, but it is certainly considering it. This is fraught with all kinds of political problems at home, so for now Ankara is keeping it as low profile as possible.
With all of this in mind, Russia is doing its best to get in on the Levant largesse itself. While it’s also courting Lebanon and Syria, dating Israel is already in full force. Gazprom has signed a deal with Israel that would give it control of Tamar’s gas and access to the Asian market for its liquefied natural gas (LNG). Tamar will probably begin producing already in April at a 1 billion cubic feet/day capacity.
In accordance with this deal, which Israel has yet to approve, Gazprom will provide financial support for the development of the Tamar Floating LNG Project. In return, Gazprom will get exclusive rights to purchase and export Tamar LNG. It is also significant because Tamar is a US-Israeli joint venture—so essentially the plan is to help Russia diversify from the European market.
What does this mean for Cyprus? The chess pieces are still being put on the board, and both fortunately and unfortunately, Cyprus’ gas potential will be intricately linked to its bailout potential.
http://www.zerohedge.com/news/2013-03-22/cyprus-collapses-its-race-mediterranean-gas-finish-line
As Cyprus Collapses, It's A Race To The Mediterranean Gas Finish Line
Submitted by Tyler Durden on 03/22/2013
Submitted by Jen Alic of OilPrice.com,
Cyprus is preparing for total financial collapse as the European Central Bank turns its back on the island after its parliament rejected a scheme to make Cypriot citizens pay a levy on savings deposits in return for a share in potential gas futures to fund a bailout.
On Wednesday, the Greek-Cypriot government voted against asking its citizens to bank on the future of gas exports by paying a 3-15% levy on bank deposits in return for a stake in potential gas sales. The scheme would have partly funded a $13 billion EU bailout.
It would have been a major gamble that had Cypriots asking how much gas the island actually has and whether it will prove commercially viable any time soon.
In the end, not even the parliament was willing to take the gamble, forcing Cypriots to look elsewhere for cash, hitting up Russia in desperate talks this week, but to no avail.
The bank deposit levy would not have gone down well in Russia, whose citizens use Cypriot banks to store their “offshore” cash. Some of the largest accounts belong to Russians and other foreigners, and the levy scheme would have targeted accounts with over 20,000 euros. So it made sense that Cyprus would then turn to Russia for help, but so far Moscow hasn’t put any concrete offers on the table.
Plan A (the levy scheme) has been rejected. Plan B (Russia) has been ineffective. Plan C has yet to reveal itself. And without a Plan C, the banks can’t reopen. The minute they open their doors there will be a withdrawal rush that will force their collapse.
In the meantime, cashing in on the island’s major gas potential is more urgent than ever—but these are still very early days.
In the end, it’s all about gas and the race to the finish line to develop massive Mediterranean discoveries. Cyprus has found itself right in the middle of this geopolitical game in which its gas potential is a tool in a showdown between Russia and the European Union.
The EU favored the Cypriot bank deposit levy but it would have hit at the massive accounts of Russian oligarchs. Without the promise of Levant Basin gas, the EU wouldn’t have had the bravado for such a move because Russia holds too much power over Europe’s gas supply.
Cypriot Gas Potential
The Greek Cypriot government believes it is sitting on an amazing 60 trillion cubic feet of gas, but these are early days—these aren’t proven reserves and commercial viability could be years away. In the best-case scenario, production could feasibly begin in five years. Exports are even further afield, with some analysts suggesting 2020 as a start date.
In 2011, the first (and only) gas was discovered offshore Cyprus, in Block 12, which is licensed to Houston-based Noble Energy Inc. (NBL). The block holds an estimated 8 trillion cubic feet of gas.
To date, the Greek Cypriots have awarded licenses for six offshore exploration blocks that could contain up to 40 trillion cubic feet of gas. Aside from Noble, these licenses have gone to Total SA of France and a joint venture between Eni SpA (ENI) of Italy and Korea Gas Corp.
But the process of exploring, developing, extracting, processing and getting gas to market is a long one. Getting the gas extracted offshore and then pumped onshore could take at least five years and some very expensive infrastructure that does not presently exist. The gas would have to be liquefied so it could be transported by seaborne tankers.
The potential is there: Cyprus’ gas discoveries adjoin Israeli territorial waters where the discovery of the massive Leviathan gasfield (425 billion cubic meters or 16 trillion cubic feet) and smaller Tamar gasfield (250 billion cubic meters or 9 trillion cubic feet) have foreign companies in a rush to cash in on this.
There are myriad problems to extracting Cypriot gas—not the least of which is the fact that some of this offshore exploration territory is disputed by Turkey, which has controlled part of the island since 1974.
Gas exploration has taken this dispute to a new level, with Turkey sending in warships to halt drilling in 2011, and threatening to bar foreign companies exploring in Cyprus from any license opportunities in Turkey. The situation is likely to intensify as Noble prepares to begin exploratory drilling later this year in Block 12.
In the meantime, there is no shortage of competition on this arena. Cyprus will have to vie with Israel, Lebanon and Syria—all of which have made offshore gas discoveries of late in the Mediterranean’s Levant Basin, which has an estimated total of 122 trillion cubic feet of gas and 1.7 billion barrels of oil.
Blackmailing Cyprus?
While Greek Cypriot citizens are not willing to gamble away their savings on gas futures, Russia and the European Union are certainly less hesitant.
This is both a negotiating point for Cyprus and a convenient tool of blackmail for Russia and the EU. Essentially, the bailout is the prop on a stage that will determine who gets control of these assets.
Theoretically, Cyprus could guarantee Russia exploration rights in return for assistance. As much as this is possible, the EU could ease its bailout negotiations if it becomes clear that a Russian bailout of sorts is imminent.
Gas finds in the Mediterranean and particularly across the Levant Basin—home to Israel’s Leviathan and Tamar fields—could be the answer to Russian gas hegemony in Europe. The question is: How much does Cyprus count in this equation? A lot.
Though only half of the estimated resources in the Levant Basin, Cyprus’ potential 60 trillion cubic feet of gas could equal 40% of the EU’s gas supplies and be worth a whopping $400 billion if commercial viability is proven.
Russia is keen to keep Cyprus and Israel from cooperating too much toward the goal of loosening Russia’s grip on Europe before Moscow manages to gain a greater share of the Asian market.
Russia is also not keen on Israel’s plan to lay an undersea natural gas pipeline to Turkey’s south coast to sell its gas from the Leviathan field to Europe. Turkey hasn’t agreed to this deal yet, but it is certainly considering it. This is fraught with all kinds of political problems at home, so for now Ankara is keeping it as low profile as possible.
With all of this in mind, Russia is doing its best to get in on the Levant largesse itself. While it’s also courting Lebanon and Syria, dating Israel is already in full force. Gazprom has signed a deal with Israel that would give it control of Tamar’s gas and access to the Asian market for its liquefied natural gas (LNG). Tamar will probably begin producing already in April at a 1 billion cubic feet/day capacity.
In accordance with this deal, which Israel has yet to approve, Gazprom will provide financial support for the development of the Tamar Floating LNG Project. In return, Gazprom will get exclusive rights to purchase and export Tamar LNG. It is also significant because Tamar is a US-Israeli joint venture—so essentially the plan is to help Russia diversify from the European market.
What does this mean for Cyprus? The chess pieces are still being put on the board, and both fortunately and unfortunately, Cyprus’ gas potential will be intricately linked to its bailout potential.
http://www.zerohedge.com/news/2013-03-22/cyprus-collapses-its-race-mediterranean-gas-finish-line
The Cyprus Bank Battle: The Long-planned Deposit Confiscation Scheme
A Safe and a Shotgun or Public Sector Banks?
By Ellen Brown
Global Research, March 22, 2013
Web of Debt
“If these worries become really serious, . . . [s]mall savers will take their money out of banks and resort to household safes and a shotgun.” — Martin Hutchinson on the attempted EU raid on private deposits in Cyprus banks
The deposit confiscation scheme has long been in the making. US depositors could be next …
On Tuesday, March 19, the national legislature of Cyprus overwhelmingly rejected a proposed levy on bank deposits as a condition for a European bailout. Reuters called it “a stunning setback for the 17-nation currency bloc,” but it was a stunning victory for democracy. As Reuters quoted one 65-year-old pensioner, “The voice of the people was heard.”
The EU had warned that it would withhold €10 billion in bailout loans, and the European Central Bank (ECB) had threatened to end emergency lending assistance for distressed Cypriot banks, unless depositors – including small savers – shared the cost of the rescue. In the deal rejected by the legislature, a one-time levy on depositors would be required in return for a bailout of the banking system. Deposits below €100,000 would be subject to a 6.75% levy or “haircut”, while those over €100,000 would have been subject to a 9.99% “fine.”
The move was bold, but the battle isn’t over yet. The EU has now given Cyprus until Monday to raise the billions of euros it needs to clinch an international bailout or face the threatened collapse of its financial system and likely exit from the euro currency zone.
The Long-planned Confiscation Scheme
The deal pushed by the “troika” – the EU, ECB and IMF – has been characterized as a one-off event devised as an emergency measure in this one extreme case. But the confiscation plan has long been in the making, and it isn’t limited to Cyprus.
In a September 2011 article in the Bulletin of the Reserve Bank of New Zealand titled “A Primer on Open Bank Resolution,” Kevin Hoskin and Ian Woolford discussed a very similar haircut plan that had been in the works, they said, since the 1997 Asian financial crisis. The article referenced recommendations made in 2010 and 2011 by the Basel Committee of the Bank for International Settlements, the “central bankers’ central bank” in Switzerland.
The purpose of the plan, called the Open Bank Resolution (OBR) , is to deal with bank failures when they have become so expensive that governments are no longer willing to bail out the lenders. The authors wrote that the primary objectives of OBR are to:
ensure that, as far as possible, any losses are ultimately borne by the bank’s shareholders and creditors . . . .
The spectrum of “creditors” is defined to include depositors:
At one end of the spectrum, there are large international financial institutions that invest in debt issued by the bank (commonly referred to as wholesale funding). At the other end of the spectrum, are customers with cheque and savings accounts and term deposits.
Most people would be surprised to learn that they are legally considered “creditors” of their banks rather than customers who have trusted the bank with their money for safekeeping, but that seems to be the case. According to Wikipedia:
In most legal systems, . . . the funds deposited are no longer the property of the customer. The funds become the property of the bank, and the customer in turn receives an asset called a deposit account (a checking or savings account). That deposit account is a liability of the bank on the bank’s books and on its balance sheet. Because the bank is authorized by law to make loans up to a multiple of its reserves, the bank’s reserves on hand to satisfy payment of deposit liabilities amounts to only a fraction of the total which the bank is obligated to pay in satisfaction of its demand deposits.
The bank gets the money. The depositor becomes only a creditor with an IOU. The bank is not required to keep the deposits available for withdrawal but can lend them out, keeping only a “fraction” on reserve, following accepted fractional reserve banking principles. When too many creditors come for their money at once, the result can be a run on the banks and bank failure.
The New Zealand OBR said the creditors had all enjoyed a return on their investments and had freely accepted the risk, but most people would be surprised to learn that too. What return do you get from a bank on a deposit account these days? And isn’t your deposit protected against risk by FDIC deposit insurance?
Not anymore, apparently. As Martin Hutchinson observed in Money Morning, “if governments can just seize deposits by means of a ‘tax’ then deposit insurance is worth absolutely zippo.”
The Real Profiteers Get Off Scot-Free
Felix Salmon wrote in Reuters of the Cyprus confiscation:
Meanwhile, people who deserve to lose money here, won’t. If you lent money to Cyprus’s banks by buying their debt rather than by depositing money, you will suffer no losses at all. And if you lent money to the insolvent Cypriot government, then you too will be paid off at 100 cents on the euro. . . .
The big winner here is the ECB, which has extended a lot of credit to dubiously-solvent Cypriot banks and which is taking no losses at all.
It is the ECB that can most afford to take the hit, because it has the power to print euros. It could simply create the money to bail out the Cyprus banks and take no loss at all. But imposing austerity on the people is apparently part of the plan. Salmon writes:
From a drily technocratic perspective, this move can be seen as simply being part of a standard Euro-austerity program: the EU wants tax hikes and spending cuts, and this is a kind of tax . . . .
The big losers are working-class Cypriots, whose elected government has proved powerless . . . . The Eurozone has always had a democratic deficit: monetary union was imposed by the elite on unthankful and unwilling citizens. Now the citizens are revolting: just look at Beppe Grillo.
But that was before the Cyprus government stood up for the depositors and refused to go along with the plan, in what will be a stunning victory for democracy if they can hold their ground.
It CAN Happen Here
Cyprus is a small island, of little apparent significance. But one day, the bold move of its legislators may be compared to the Battle of Marathon, the pivotal moment in European history when their Greek forebears fended off the Persians, allowing classical Greek civilization to flourish. The current battle on this tiny island has taken on global significance. If the technocrat bankers can push through their confiscation scheme there, precedent will be established for doing it elsewhere when bank bailouts become prohibitive for governments.
That situation could be looming even now in the United States. As Gretchen Morgenson warned in a recent article on the 307-page Senate report detailing last year’s $6.2 billion trading fiasco at JPMorganChase: “Be afraid.” The report resoundingly disproves the premise that the Dodd-Frank legislation has made our system safe from the reckless banking activities that brought the economy to its knees in 2008. Writes Morgenson:
JPMorgan . . . Is the largest derivatives dealer in the world. Trillions of dollars in such instruments sit on its and other big banks’ balance sheets. The ease with which the bank hid losses and fiddled with valuations should be a major concern to investors.
Pam Martens observed in a March 18th article that JPMorgan was gambling in the stock market with depositor funds. She writes, “trading stocks with customers’ savings deposits – that truly has the ring of the excesses of 1929 . . . .”
The large institutional banks not only could fail; they are likely to fail. When the derivative scheme collapses and the US government refuses a bailout, JPMorgan could be giving its depositors’ accounts sizeable “haircuts” along guidelines established by the BIS and Reserve Bank of New Zealand.
Time for Some Public Sector Banks?
The bold moves of the Cypriots and such firebrand political activists as Italy’s Grillo are not the only bulwarks against bankster confiscation. While the credit crisis is strangling the Western banking system, the BRIC countries – Brazil, Russia, India and China – have sailed through largely unscathed. According to a May 2010 article in The Economist, what has allowed them to escape are their strong and stable publicly-owned banks.
Professor Kurt von Mettenheim of the Sao Paulo Business School of Brazil writes, “The credit policies of BRIC government banks help explain why these countries experienced shorter and milder economic downturns during 2007-2008.” Government banks countered the effects of the financial crisis by providing counter-cyclical credit and greater client confidence.
Russia is an Eastern European country that weathered the credit crisis although being very close to the Eurozone. According to a March 2010 article in Forbes:
As in other countries, the [2008] crisis prompted the state to take on a greater role in the banking system. State-owned systemic banks . . . have been used to carry out anticrisis measures, such as driving growth in lending (however limited) and supporting private institutions.
In the 1998 Asian crisis, many Russians who had put all their savings in private banks lost everything; and the credit crisis of 2008 has reinforced their distrust of private banks. Russian businesses as well as individuals have turned to their government-owned banks as the more trustworthy alternative. As a result, state-owned banks are expected to continue dominating the Russian banking industry for the foreseeable future.
The entire Eurozone conundrum is unnecessary. It is the result of too little money in a system in which the money supply is fixed, and the Eurozone governments and their central banks cannot issue their own currencies. There are insufficient euros to pay principal plus interest in a pyramid scheme in which only the principal is injected by the banks that create money as “bank credit” on their books. A central bank with the power to issue money could remedy that systemic flaw, by injecting the liquidity needed to jumpstart the economy and turn back the tide of austerity choking the people.
The push to confiscate the savings of hard-working Cypriot citizens is a shot across the bow for every working person in the world, a wake-up call to the perils of a system in which tiny cadres of elites call the shots and the rest of us pay the price. When we finally pull back the veils of power to expose the men pulling the levers in an age-old game they devised, we will see that prosperity is indeed possible for all.
For more on the public bank solution and for details of the June 2013 Public Banking Institute conference in San Rafael, California, see here.
Ellen Brown is an attorney, chairman of the Public Banking Institute, and the author of eleven books, including Web of Debt: The Shocking Truth About Our Money System and How We Can Break Free. Her websites are webofdebt.com and ellenbrown.com.
http://www.globalresearch.ca/the-cyprus-bank-battle-the-long-planned-deposit-confiscation-scheme/5328098
The Cyprus Bank Battle: The Long-planned Deposit Confiscation Scheme
A Safe and a Shotgun or Public Sector Banks?
By Ellen Brown
Global Research, March 22, 2013
Web of Debt
“If these worries become really serious, . . . [s]mall savers will take their money out of banks and resort to household safes and a shotgun.” — Martin Hutchinson on the attempted EU raid on private deposits in Cyprus banks
The deposit confiscation scheme has long been in the making. US depositors could be next …
On Tuesday, March 19, the national legislature of Cyprus overwhelmingly rejected a proposed levy on bank deposits as a condition for a European bailout. Reuters called it “a stunning setback for the 17-nation currency bloc,” but it was a stunning victory for democracy. As Reuters quoted one 65-year-old pensioner, “The voice of the people was heard.”
The EU had warned that it would withhold €10 billion in bailout loans, and the European Central Bank (ECB) had threatened to end emergency lending assistance for distressed Cypriot banks, unless depositors – including small savers – shared the cost of the rescue. In the deal rejected by the legislature, a one-time levy on depositors would be required in return for a bailout of the banking system. Deposits below €100,000 would be subject to a 6.75% levy or “haircut”, while those over €100,000 would have been subject to a 9.99% “fine.”
The move was bold, but the battle isn’t over yet. The EU has now given Cyprus until Monday to raise the billions of euros it needs to clinch an international bailout or face the threatened collapse of its financial system and likely exit from the euro currency zone.
The Long-planned Confiscation Scheme
The deal pushed by the “troika” – the EU, ECB and IMF – has been characterized as a one-off event devised as an emergency measure in this one extreme case. But the confiscation plan has long been in the making, and it isn’t limited to Cyprus.
In a September 2011 article in the Bulletin of the Reserve Bank of New Zealand titled “A Primer on Open Bank Resolution,” Kevin Hoskin and Ian Woolford discussed a very similar haircut plan that had been in the works, they said, since the 1997 Asian financial crisis. The article referenced recommendations made in 2010 and 2011 by the Basel Committee of the Bank for International Settlements, the “central bankers’ central bank” in Switzerland.
The purpose of the plan, called the Open Bank Resolution (OBR) , is to deal with bank failures when they have become so expensive that governments are no longer willing to bail out the lenders. The authors wrote that the primary objectives of OBR are to:
ensure that, as far as possible, any losses are ultimately borne by the bank’s shareholders and creditors . . . .
The spectrum of “creditors” is defined to include depositors:
At one end of the spectrum, there are large international financial institutions that invest in debt issued by the bank (commonly referred to as wholesale funding). At the other end of the spectrum, are customers with cheque and savings accounts and term deposits.
Most people would be surprised to learn that they are legally considered “creditors” of their banks rather than customers who have trusted the bank with their money for safekeeping, but that seems to be the case. According to Wikipedia:
In most legal systems, . . . the funds deposited are no longer the property of the customer. The funds become the property of the bank, and the customer in turn receives an asset called a deposit account (a checking or savings account). That deposit account is a liability of the bank on the bank’s books and on its balance sheet. Because the bank is authorized by law to make loans up to a multiple of its reserves, the bank’s reserves on hand to satisfy payment of deposit liabilities amounts to only a fraction of the total which the bank is obligated to pay in satisfaction of its demand deposits.
The bank gets the money. The depositor becomes only a creditor with an IOU. The bank is not required to keep the deposits available for withdrawal but can lend them out, keeping only a “fraction” on reserve, following accepted fractional reserve banking principles. When too many creditors come for their money at once, the result can be a run on the banks and bank failure.
The New Zealand OBR said the creditors had all enjoyed a return on their investments and had freely accepted the risk, but most people would be surprised to learn that too. What return do you get from a bank on a deposit account these days? And isn’t your deposit protected against risk by FDIC deposit insurance?
Not anymore, apparently. As Martin Hutchinson observed in Money Morning, “if governments can just seize deposits by means of a ‘tax’ then deposit insurance is worth absolutely zippo.”
The Real Profiteers Get Off Scot-Free
Felix Salmon wrote in Reuters of the Cyprus confiscation:
Meanwhile, people who deserve to lose money here, won’t. If you lent money to Cyprus’s banks by buying their debt rather than by depositing money, you will suffer no losses at all. And if you lent money to the insolvent Cypriot government, then you too will be paid off at 100 cents on the euro. . . .
The big winner here is the ECB, which has extended a lot of credit to dubiously-solvent Cypriot banks and which is taking no losses at all.
It is the ECB that can most afford to take the hit, because it has the power to print euros. It could simply create the money to bail out the Cyprus banks and take no loss at all. But imposing austerity on the people is apparently part of the plan. Salmon writes:
From a drily technocratic perspective, this move can be seen as simply being part of a standard Euro-austerity program: the EU wants tax hikes and spending cuts, and this is a kind of tax . . . .
The big losers are working-class Cypriots, whose elected government has proved powerless . . . . The Eurozone has always had a democratic deficit: monetary union was imposed by the elite on unthankful and unwilling citizens. Now the citizens are revolting: just look at Beppe Grillo.
But that was before the Cyprus government stood up for the depositors and refused to go along with the plan, in what will be a stunning victory for democracy if they can hold their ground.
It CAN Happen Here
Cyprus is a small island, of little apparent significance. But one day, the bold move of its legislators may be compared to the Battle of Marathon, the pivotal moment in European history when their Greek forebears fended off the Persians, allowing classical Greek civilization to flourish. The current battle on this tiny island has taken on global significance. If the technocrat bankers can push through their confiscation scheme there, precedent will be established for doing it elsewhere when bank bailouts become prohibitive for governments.
That situation could be looming even now in the United States. As Gretchen Morgenson warned in a recent article on the 307-page Senate report detailing last year’s $6.2 billion trading fiasco at JPMorganChase: “Be afraid.” The report resoundingly disproves the premise that the Dodd-Frank legislation has made our system safe from the reckless banking activities that brought the economy to its knees in 2008. Writes Morgenson:
JPMorgan . . . Is the largest derivatives dealer in the world. Trillions of dollars in such instruments sit on its and other big banks’ balance sheets. The ease with which the bank hid losses and fiddled with valuations should be a major concern to investors.
Pam Martens observed in a March 18th article that JPMorgan was gambling in the stock market with depositor funds. She writes, “trading stocks with customers’ savings deposits – that truly has the ring of the excesses of 1929 . . . .”
The large institutional banks not only could fail; they are likely to fail. When the derivative scheme collapses and the US government refuses a bailout, JPMorgan could be giving its depositors’ accounts sizeable “haircuts” along guidelines established by the BIS and Reserve Bank of New Zealand.
Time for Some Public Sector Banks?
The bold moves of the Cypriots and such firebrand political activists as Italy’s Grillo are not the only bulwarks against bankster confiscation. While the credit crisis is strangling the Western banking system, the BRIC countries – Brazil, Russia, India and China – have sailed through largely unscathed. According to a May 2010 article in The Economist, what has allowed them to escape are their strong and stable publicly-owned banks.
Professor Kurt von Mettenheim of the Sao Paulo Business School of Brazil writes, “The credit policies of BRIC government banks help explain why these countries experienced shorter and milder economic downturns during 2007-2008.” Government banks countered the effects of the financial crisis by providing counter-cyclical credit and greater client confidence.
Russia is an Eastern European country that weathered the credit crisis although being very close to the Eurozone. According to a March 2010 article in Forbes:
As in other countries, the [2008] crisis prompted the state to take on a greater role in the banking system. State-owned systemic banks . . . have been used to carry out anticrisis measures, such as driving growth in lending (however limited) and supporting private institutions.
In the 1998 Asian crisis, many Russians who had put all their savings in private banks lost everything; and the credit crisis of 2008 has reinforced their distrust of private banks. Russian businesses as well as individuals have turned to their government-owned banks as the more trustworthy alternative. As a result, state-owned banks are expected to continue dominating the Russian banking industry for the foreseeable future.
The entire Eurozone conundrum is unnecessary. It is the result of too little money in a system in which the money supply is fixed, and the Eurozone governments and their central banks cannot issue their own currencies. There are insufficient euros to pay principal plus interest in a pyramid scheme in which only the principal is injected by the banks that create money as “bank credit” on their books. A central bank with the power to issue money could remedy that systemic flaw, by injecting the liquidity needed to jumpstart the economy and turn back the tide of austerity choking the people.
The push to confiscate the savings of hard-working Cypriot citizens is a shot across the bow for every working person in the world, a wake-up call to the perils of a system in which tiny cadres of elites call the shots and the rest of us pay the price. When we finally pull back the veils of power to expose the men pulling the levers in an age-old game they devised, we will see that prosperity is indeed possible for all.
For more on the public bank solution and for details of the June 2013 Public Banking Institute conference in San Rafael, California, see here.
Ellen Brown is an attorney, chairman of the Public Banking Institute, and the author of eleven books, including Web of Debt: The Shocking Truth About Our Money System and How We Can Break Free. Her websites are webofdebt.com and ellenbrown.com.
http://www.globalresearch.ca/the-cyprus-bank-battle-the-long-planned-deposit-confiscation-scheme/5328098
Russia rebuffs Cyprus, EU awaits bailout "Plan B"
By Michele Kambas and Lidia Kelly
NICOSIA/MOSCOW | Fri Mar 22, 2013 9:56am EDT
(Reuters) - Russia rebuffed Cypriot entreaties for aid on Friday, leaving the island's increasingly isolated leaders scrambling to strike a bailout deal with the European Union by next week or face the collapse of its financial system.
In Nicosia, the country's biggest bank urged politicians to make haste and cut a deal with their EU partners as parliament considered proposals to nationalize pension funds, pool state assets and split the country's second-largest bank in a desperate effort to satisfy those exasperated European allies.
The governor of the Central Bank, Panicos Demetriades, warned political leaders the country would face a disorderly bankruptcy on Tuesday unless they approved the bills, an official present at the talks said.
"The next few hours will determine the future of the country," government spokesman Christos Stylianides said before the parliamentary debate. "We must all assume our share of the responsibility."
Even if the measures are approved, there was no confirmation they would raise the 5.8 billion euros demanded by the EU in return for a 10 billion euro ($12.9 billion) bailout to avoid a default.
The biggest local bank, the Bank of Cyprus, urged the government to go back and make a deal from the European Union, under which larger deposits over 100,000 euros, would be taxed. It was preferable, it said, to a collapse of the system and a return to the Cypriot pound which would wipe out assets.
"There must be no further delay," the bank said.
Cypriot insistence on taxing even small savers - in hopes of limiting damage to an offshore banking sector heavily dependent on larger Russian depositors - saw a bailout deal that had been agreed with the EU a week ago rejected by parliament on Tuesday.
Several hundred people rallied peacefully outside parliament on Friday, holding banners saying 'No to the victimization of banks'. "Our so-called friends and partners sold us out," said Marios Panayides, 65.
"They have completely abandoned us on the edge of an abyss."
Elsewhere, depositors, who have been besieging bank cash machines all week, queued again to withdraw what they could.
The clock was running down to a Monday deadline set by the European Central Bank for a deal to be in struck before it cuts funds to Cyprus's stricken banks, potentially pushing it out of Europe's single currency.
RUSSIAN REFUSAL
Nicosia angrily rejected a proposed levy on tax deposits in exchange for the EU bailout on Tuesday and turned to the Kremlin to renegotiate a loan deal, win more financing and lure Russian investors to Cypriot banks and gas reserves.
"The talks have ended as far as the Russian side is concerned," Russian Finance Minister Anton Siluanov told reporters after two days of crisis talks with his Cypriot counterpart, Michael Sarris.
Russians have billions of euros at stake in Cyprus's outsized and now crippled banking sector, a factor in the EU's unprecedented demand that bigger depositors take a hit in the interests of keeping Cyprus afloat.
But Siluanov said Russian investors were not interested in Cypriot gas and that the talks had ended without result. Sarris was due to fly home, where lawmakers were locked in yet more crisis talks.
New bills submitted to the Cypriot parliament included a "solidarity fund" to bundle state assets, including future gas revenues and nationalized semi-state pension funds, as the basis for an emergency bond issue.
JP Morgan likened it to "a national fire sale", and euro zone paymaster Germany indicated it opposed the nationalization of pension funds.
They were also considering a bank restructuring bill that officials said would see the country's second largest lender, Cyprus Popular Bank, split into good and bad assets, and a government call for the power to impose capital controls to stem a flood of funds leaving the island when banks reopen on Tuesday after a week-long shutdown.
"PLAYING WITH FIRE"
There was no silver bullet, however, and Cyprus's partners in the 17-nation currency bloc were increasingly unimpressed. It was unclear whether parliament would even vote on the bills on Friday.
"I still believe we will get a settlement, but Cyprus is playing with fire," Volker Kauder, a leading conservative ally of German Chancellor Angela Merkel, told public television ARD.
Merkel told lawmakers that nationalization of pension funds was unacceptable as a way to plug a hole in finances and clinch the bailout, parliamentary sources said.
Two lawmakers quoted the chancellor as saying debt sustainability and bank restructuring would have to be the core of any deal, which she called a matter of "credibility".
They also quoted Merkel as saying: "There is no way we can accept that", and "I hope it does not come to a crash".
Her finance minister, Wolfgang Schaeuble, said he did not know whether euro zone finance ministers would meet over the weekend. "I can't say in advance if and when Cyprus will deliver results," he said.
Cypriots have been stunned by the pace of the unfolding drama, having elected conservative President Nicos Anastasiades barely a month ago on a mandate to secure a bailout.
News that the deal would involve a levy on bank deposits, even for smaller savers, outraged Cypriots.
While EU lenders, notably Germany, had wanted larger, uninsured bank depositors to bear some of the cost of recapitalizing the banks, Cyprus feared for its reputation as an offshore banking haven and planned to spread the levy to deposits under 100,000 were covered by state insurance.
Senior euro zone officials acknowledged in a confidential conference call on Wednesday that they were "in a mess" and discussed imposing capital controls to insulate the currency area from a possible collapse of the small Cypriot economy.
Cyprus itself refused to take part in the call, minutes of which were seen by Reuters. Several participants described its absence as troubling and reflecting the wider confusion surrounding the island's predicament.
In Brussels, a senior European Union official told Reuters an ECB withdrawal would mean Cyprus's biggest banks being wound up, wiping out the large deposits it has sought to protect, and probably forcing the country to abandon the euro.
"If the financial sector collapses, then they simply have to face a very significant devaluation, and faced with that situation, they would have no other way but to start having their own currency," the EU official said.
Cypriot banks have been crippled by their exposure to Greece, the center of the euro zone debt crisis.
On Friday, Greece began transferring the Greek units of Cypriot banks to a Greek banking group, in coordination with the central bank in Cyprus, ending uncertainty for local savers.
(Additional reporting by Jan Strupczewski and Luke Baker in Brussels, Karolina Tagaris and Costas Pitas in Nicosia, Georgina Prodhan in Vienna, Lidia Kelly and Darya Korsunskaya in Moscow, Paul Carrel in Frankfurt and Gernot Heller in Berlin; Writing by Matt Robinson; Editing by Philippa Fletcher and Alastair Macdonald)
http://www.reuters.com/article/2013/03/22/us-cyprus-parliament-idUSBRE92G03I20130322
Plunderball – The new Euro banking game
by Golem XIV on MARCH 20, 2013 in LATEST
So who will get shafted next? Will your lucky numbers come up?
We’ve all heard of deposit insurance, but does it mean what we all thought it meant – that up to a given sum we would not lose any money if our bank collapsed? And by the way – who pays the bill?
The simple idea we have all believed in was that up to a specified amount our money was guaranteed by a government deposit insurance scheme. Most countries have one. As long as your bank is in it you’re covered. Or at least you were till this week.
Before we get to the rapidly evolving changes lets just go over the details of what used to be the case.
It used to be that below the guarentee limit your money was safe. It was only any amount above the guarantee, that you could lose in a restructuring. When a bank went under the normal bankruptcy rules swung into action (I’m leaving aside the TBTF gorilla in the room. Let’s not poke him just yet).TBTF aside – the collapsed banks’ assets would collected in into a pile and all the bank’s creditors (those who bought its debt, lent it money, put their money into it) would be put on a list in order of seniority, with share holders at the bottom, unsecured and Junior bond holders next with Senior insured bond holders at the top. Depositors were always ranked up there with Senior bond holders. Those at top would get most if not all of their money back and not take a loss, those at the bottom would lose everything.
As a depositor you could still lose whatever money you had in the bank that was above the threshold but you might not. Your chances would be in line with the Senior bond holders. But as this bank debt debalce has mutated over the past 5 years so the old ranking of creditors has mutated with it. First the bail out funds like the EFSF and the ECB itself have made themeslves super senior. They have put themselves above Senior bond holders meaning in the event of a bank collape the ECB and EFSF, if they had been lending the bank money in return for collateral – would be first in line to get paid.
The private bond holders and the banks struck back at this idea a couple of years ago by ramping up the use of Covered Bonds. Covered bonds are way of trying to put private bond holders back above the ECB and EFSF. They are sold to investors on the claim that they are not just covered by a senior claim on the general assets of the bank – which would make them the same as traditional Senior bond holders – but that the Covered Bonds were also backed by a specially ‘ring-fenced’ set of assets of their own. So in a collapse the Covered Bond holders would have those ring-fenced assets withheld specially for them from the general pool of assets everyone else was queuing up for.
It remains to be seen if the ECB et al would recognize this arrangement as being senior even to them. It also is not clear to me in what I have read – if even the assets in the ‘ring-fence’ might not be pledged to more than one covered bond and possible even be hypothecated. None of this has, so far as I know, actually been tested in a case of competing claims at bankruptcy.
Be all that as it may – what is clear is that any amount of money you had above the guaranteed threshold would always have been at risk, BUT at the top of the pecking order alongside Senior Bond holders.
It is this long established order of seniority that has been torn up by what the EU tried to force upon Cyprus. As the financial publication Euromoney comments in an article on events in Cyprus,
…the complacent bailing in of the man-in-the street was the casual abandonment of the creditor hierarchy.
This is why the finanical markets were nearly as shocked as the man in the street. This established hierachy is the entire basis of all the arguments for saying Senior Bond holders could not be made to take losses in a bank collapse. They had to be protected. Now I always dissagreed with this and still do. I feel very strongly that depositors should morally come above everyone, and the senior bond holders should be in line like everyone else, not held as sacrosanct. Basically my view is we should protect the 99% ordinary depositors NOT the 1% bondholders.
But here we are now with that order of seniority having been torn up by the politicians. How now to argue for the Senior bond holders not to be touched? Suddenly there is no argument from principle. The principle was flushed when the Troika backed the Cypriot plan to seize money from ALL depositors. They can back-track and mumble about amendments to the plan all they like – the principle has been torn up.
So what now? What happens in this new disorder?
Well it turns out other countries have been preparing to enforce this same – ‘force losses on all depositors’ – idea. New Zealand, as reported in an article by interest.co.nz has been working on what it calls its new Open Bank Resolution Policy (OBR). If put in place – and that is the NZ government’s intention,
The implementation of OBR would see all unsecured liabilities that rank equally among themselves, including deposits, having a portion frozen (My emphasis)
In response, as picked up over at Jesse’s cafe Americain, NZ Central bank has argued that really nothing has changed because,
…depositors have always needed to understand that deposits are not guaranteed… [OBR]…does not change the fact that depositors and other creditor funds are at risk…
This is at best highly disingenuous. Actually everything has changed. Under deposit guarantee depositors only lose ABOVE a threshold amount. Under OBR they ALL LOSE a given amount straight away.
As the co-leader of NZ Green party Russel Norman pointed out,
… if a bank fails under OBR, all depositors will have their savings reduced overnight to help fund the bank’s bail out.
So it’s not just Cyprus. New Zealand has been working on the same idea. What about European countries?
ZeroHedge reported yesterday quoting from a report in El Pais, that Spain too has been working to implement the same idea.
Spain, it would appear, has changed constitutional rules to enable a so-called ‘moderate’ levy on deposits
And what about the UK ? Surely those fine bowler hatted gents of Threadneedle Street and the Right Honourable fellows over at Westminster – who stand for all that is good and dependable and NOT FOREIGN or FRENCH, wouldn’t ever think of such an outrage.
Well sadly…
Back in December 2012 the FDIC and he BoE published a joint paper outlining their new approach for how to resolve any future collapse of one of the Too-Big-To-Fail banks, called “Resolving Globally Active, Systemically Important, Financial Institutions” . The paper is the blue print for how collapses, at what it calls G-SIFIs (Globally Systemically Important Financial Institutions) – get used to this term it will figure largely in your life in future whether you want it to or not- how they will be dealt with in future. I shall write more about this paper and the regime it outlines in future. It is not a pretty picture at all. But for now we need only look at section 34. which says,
34 The U.K. has also given consideration to the recapitalization process in a scenario in which a G-SIFI’s liabilities do not include much debt issuance at the holding company or parent bank level but instead comprise insured retail deposits held in the operating subsidiaries. Under such a scenario, deposit guarantee schemes may be required to contribute to the recapitalization of the firm, as they may do under the Banking Act in the use of other resolution tools. The proposed RRD also permits such an approach because it allows deposit guarantee scheme funds to be used to support the use of resolution tools, including bail-in, provided that the amount contributed does not exceed what the deposit guarantee scheme would have as a claimant in liquidation if it had made a payout to the insured depositors. (My emphasis)
As usual the official language is there to obscure rather than enlighten. But what it says is that the money that the Deposit scheme contains, instead of going to you, could now be used (read would be used) to bail out to the bank in order to prop it up. In other words the new system makes the Deposit Guarantee fund available for use as bail out money.
The rationale is that if using your deposit guarantee fund for propping up the bank ‘saves’ the bank from collapse then you wouldn’t need that deposit guarantee would you? This overlooks the one lesson we have all learned from the bank bail outs of the last 5 years, that the bail outs are never, ever, ever, a one off. The first one fails to save the bank as does the second and third and and and.
So if I have read the above correctly – the new system raids the Deposit Protection scheme, gives it to the bank instead of you and when that fails to save the bank…then what? The bank fails again and there is no money left in the Deposit Guarantee scheme.
And then? My guess is the government would say how they will replenish the fund – because they have your best interests at heart after all – BUT given ‘the exceptional circumstances’ and the ‘unforeseen severity of events’, no doubt forced upon them by rotten foreigners – the scheme cannot now be as generous as they would have liked it to be and the amount of the guaranntee has to be lower.
So, so sorry.
And that is what I think is being planned in the UK and USA.
Will the UK and USA also go for the automatic seizure of money from accounts? My guess is they have been quietly planning on it but will now think twice about admitting to it. Preferring to keep it quiet until the next collapse when ‘circumstances call for desperate measures’ etc etc.
The reality is the banks are still bust – even the ones making huge profits – and when – not if – when the next bubble bursts and one bank starts to bring down another – they will all come for your money and we will all be collectively punished in order to make sure the wealthy and the powerful stay that way.
http://www.golemxiv.co.uk/2013/03/plunderball-the-new-euro-banking-game/
German Economic War Reparations - Cyprus Is The Start
Mar 19, 2013 - 07:31 PM GMT
By: Andrew_McKillop
IT HAPPENED BEFORE
It was also not good for Germany - in the end. For other "players" it started bad, and got worse. Major spinoff from war reparations won by a triumphant Germany in 1871 included a worldwide stock market crash starting in Europe, and a Long Recession which was especially strong in Europe - but among today's differences we already have a "relatively weak and manageable" European recession. Already set and ready to spin entirely out of control.
The roots of the 19th century crash and following depression in Europe can be traced to the 1870 Franco-Prussian War that forced the French to make large war reparations payments to Germany. Many people are familiar with the German Reparations after World War I, because they are often presented as a direct cause of the German Nazi Party gaining huge voter support, and because they were loudly opposed by Keynes. Later Keynesians often claim that Germany's forced payment of repearations was a major factor contributing to the Great Depression as well as the rise of Nazism.
The main difference between France's payment of reparations after its defeat in the Franco-Prussian War and its earlier "Napoleonic reparations", after its defeat at Waterloo in 1815, is that these repearions were paid in full and on time. After 1918, Germany only partly paid the massive repearations demanded - especially by France, with the UK often dithering on amounts it wanted. The US for its part often urged slower and lower payments by Germany of "war damages" and by 1924, with the Dawes Plan, then in 1929 with the Young Plan the US advocated "partial debt forgiveness".
The post-1815 and post-1871 French reparations were unlike the largely uncollected post-World War I German reparations. Not once, but twice the French paid in full and on time. A very simple and likely explanation for what the UK and US often called the "impossibly intransigent" stance of the French at the Versailles Treaty summits after 1918, the full programme of reparations demanded from Germany was in fact almost certainly impossible to pay. This is exactly like the PIIGS debt explosion and the "reparations" demanded from the unemployed millions in Greece, Spain, Italy and Portugal today, and from Cypriots who are menaced by a pure and simple collapse of their entire bank sector.
In 1919, John Maynard Keynes said the post-World War I reparations demand of (at its highest) 133 billion gold marks, about $33 bn in 1921 dollars were: "A policy of reducing Germany to servitude for a generation, of degrading the lives of millions of human beings, and of depriving a whole nation of happiness". Critics of Merkel today can say: Germany remembers!
THE REPARATIONS WINDFALL OF 1871
In 1871 the Prussians under Prince Otto von Bismarck imposed an indemnity of 5 billion gold francs (at a gold price of $19 per Troy ounce!) on the defeated French. At the time an extraordinarily heavy sum, it was however paid off by the French in less than 4 years. The temptation for newly created Germany to increase the value of its gold booty and treasury - including a strategy of demonetizing silver - is often used by monetary historians to explain the near total collapse of world silver prices by 1874. To be sure, other factors were in play including US monetary policy regarding silver, increasing silver mine output (as well as gold mine output), increasing paper bank credit, and rapid economic growth.
What counts is France paid its war reparations in full and ahead of schedule. The inflow of gold to Germany very surely triggered, or at very least bolstered Germany's decisions to set a new gold standard of the German Empire. This was inaugurated on July 9, 1873 when the new gold coin, the Gold Mark made its debut. The action was preceded by the closing down of all German Mint coinage of silver Taler or Thaler coins in 1871, the first overt step towards demonetizing silver.
By 1873 the new German Empire existed, with a strong gold money and an expanding industrial economy. Silver had also been demonetized in the United States through a highly politicized and complex series of Congressional Acts, and by State initiatives, for example by and against the silver and gold mining States. Speculators dumped silver in large quantities and sold it short, in a process of which the outriders had started as early as 1870.
Many US politicians and jounalists accused the speculators of operating in collusion with Germany.
With highly unstable monetary conditions, but strong economic growth driven by new scientific and industrial inventions and development, notably the US railroad boom and later by electric power production, the scene was set for frenetic speculation of all kinds. European stock markets, banks, brokers and finance houses enjoyed boom times. The wave of optimism which drove the boom, shown by extreme high stock prices in central European markets - which in some cases were not reattained for 10 years - reached its limits in Vienna in late April of 1873. The collapse of the Vienna Stock Exchange began on May 8, 1873 and after three days of massive losses the exchange was closed on May 11. It was reopened, but by that time trading was "low volume subdued". Stock market players elsewhere in Europe hoped the panic had faded or was circumscribed to Austria-Hungary.
Financial panic arrived in the US in Sept 1873. The celebrated collapse of the Lehman Bros of the time - another private banking banking house, called Jay Cooke & Company - is usually cited as the marker event, with its main "underlying security" of US railroad stocks, hopelessly overpriced. The collapse of Jay Cooke & Co was shortly followed by a wave of major bank collapses. Panic spread in every direction in New York's business district as prices "fell off the wall". The New York Stock Exchange closed for ten days from Sept 20 in an attempt to limit the damage.
THE EUROPEAN CRISIS SPREAD
Current German-approved, even German-ordered action in Cyprus can be clearly seen as a "panic limiting attempt", regarding finance sector sentiment, but in 1873 the newly founded, rich and powerful Germany was helpless in the face of market panic. Following the US stock exchange panic of Sept 1873 the financial crisis returned to its European hearth, firstly through a new panic in Vienna, then further failures right across continental Europe. The UK, which had experienced earlier and recurring crises ever since the 1815 war reparations programme following Napoleon's defeat, almost on a 10-year cyclic basis since 1820, was at first little affected. It was however the last European economy to recover from the "crisis of '73", and experienced very slow growth until the late 1880s.
France experienced the worst effects of the crisis. Having been defeated in the Franco-Prussian War, the country was in the process of paying reparations to the Germans and its economy weakened, when the 1873 crash occurred. The French took a policy of deliberate deflation while paying the reparations, but the Paris Bourse crash of 1882 sent France further into recession - intensified by a range of factors including decline of the Bordeaux wine and Lyon silk industries, affected by bad weather and by disease. The Union Générale bank failed in 1882, prompting the French to withdraw three million gold pounds from the Bank of England. French stock prices collapsed.
Possibly hard to predict given the circumstances - very large increases in amounts of both silver and gold circulating in Europe and the US - the depression of about 1873–1895 that affected most European countries was accompanied and driven by a drastic fall in prices. All kinds of factors - including industrial productivity gains and early market saturation effects - were in play, for example industrial production increased by 40% in Britain but increased by about 125% in Germany in 15 years.
Germany's strategy, then as now, especially featured mercantilism or running a trade surplus at all possible times, and continued industrial investment and industrial production growth, also including military materiel. Strong money was central to German policy. Conversely, the British approach was to accept economic defeat, contract, deflate domestic consumption and allow market-led devaluation of the money. The international context, then as now experienced falling rates of trade growth, increasing sovereign debt, and for Germany soon created major problems. Chancellor Bismarck was forced to veer away from classic liberal economic policies by the late 1870s, and applied domestic economy safeguarding policies including higher tariffs for electricity and transport, nationalized railroads, national preference purchasing, and compulsory social and unemployment insurance.
THEN AND NOW
In the 1870s and following World War I, French "revanchism" was a recurring accusation by Germans against the French - the first time however, it was France which had to pay. Today's de facto European crisis context, where euro currency strength and stability of the Eurozone are treated as critical goals in every single German-French bilateral summit, no longer reflects the real goals of most European states, nor unfolding reality in Europe, or the world. In Europe today, Germany now calls the tunes and pays the piper. France is drifting further into PIIGS-style debt and deficit, has ever rising unemployment and a large trade deficit - and wants a lower valued euro. Germany may or may not want this, and at present no single coherent political line is coming out of Berlin.
Germany above all wants monetary stability and banking sector stability - but this does not rhym with the euro money, or the Eurozone as presently organized, structured and governed.
Massive differences exist between the 1870s monetary and economic context, and today's. In particular, the Crisis of '73 came amidst an era of very strong economic growth, and featured the demonetization of silver as one clear trigger. Today's potential equivalents could or might include the abandonment of sovereign debt in Europe (and by the US!), and the radical devaluation of the euro. However, this would only be "an alternate route" to financial market collapse, due to the either-or nature of the almost certain economic result: very deep recession and net contraction of the economy.
Economic implosion is the most likely result whatever "strategy" is applied by Europe's powerbrokers and Technocrats. Their action, always confused, too little and too late, will almost surely and certainly trigger global economic recession.
The major similarities between the Long Recession of about 1873-1888 and today's European, American and global macro context are however impressive. In particular, the geopolitical drivers of crisis in the late 19th century, from a European crisis hearth, most surely set the gameplan for and the future belligerants of the coming 1914-18 war. The monetary-then-economic crisis of the 1870s spurred intense rivalry and new alliances between the major powers. Effects ranged from German-decided de facto assumption of Turkish Ottoman sovereign debt, resulting in Turkey's military alliance with Germany in World War I, to French and British hostility against Germany, and US attempts at neutrality and fence-sitting. Russia's hostility against Germany, and its participation on the Allied side in the war, until the 1917 Bolshevik revolution can also be traced to the lasting effects of the Long Recession.
As we know, Russia is very surely and directly implied in the Cyprus bank crisis of today. All major international banks are also implied, including US banks. Within Europe, public opinion has quite rapidly become openly anti-German in several countries, including the UK and France, directly because of the euro and Eurozone crisis. As their Me Too political leaders however say, when or if they "pull the plug on Europe", the Eurozone is cut to perhaps 6 or 7 member states, and each state cuts away and deals with its own sovereign debt crisis - the result will inescapably include the worst economic crisis that Europe has ever experienced.
The 1930s Great Depression will be a quaint historical interlude of relative economic decline, by comparison. Germany will certainly not be unscathed!
by Andrew McKillop
Contact: xtran9@gmail.com
Former chief policy analyst, Division A Policy, DG XVII Energy, European Commission. Andrew McKillop Biographic Highlights
http://www.marketoracle.co.uk/Article39551.html
German Economic War Reparations - Cyprus Is The Start
Mar 19, 2013 - 07:31 PM GMT
By: Andrew_McKillop
IT HAPPENED BEFORE
It was also not good for Germany - in the end. For other "players" it started bad, and got worse. Major spinoff from war reparations won by a triumphant Germany in 1871 included a worldwide stock market crash starting in Europe, and a Long Recession which was especially strong in Europe - but among today's differences we already have a "relatively weak and manageable" European recession. Already set and ready to spin entirely out of control.
The roots of the 19th century crash and following depression in Europe can be traced to the 1870 Franco-Prussian War that forced the French to make large war reparations payments to Germany. Many people are familiar with the German Reparations after World War I, because they are often presented as a direct cause of the German Nazi Party gaining huge voter support, and because they were loudly opposed by Keynes. Later Keynesians often claim that Germany's forced payment of repearations was a major factor contributing to the Great Depression as well as the rise of Nazism.
The main difference between France's payment of reparations after its defeat in the Franco-Prussian War and its earlier "Napoleonic reparations", after its defeat at Waterloo in 1815, is that these repearions were paid in full and on time. After 1918, Germany only partly paid the massive repearations demanded - especially by France, with the UK often dithering on amounts it wanted. The US for its part often urged slower and lower payments by Germany of "war damages" and by 1924, with the Dawes Plan, then in 1929 with the Young Plan the US advocated "partial debt forgiveness".
The post-1815 and post-1871 French reparations were unlike the largely uncollected post-World War I German reparations. Not once, but twice the French paid in full and on time. A very simple and likely explanation for what the UK and US often called the "impossibly intransigent" stance of the French at the Versailles Treaty summits after 1918, the full programme of reparations demanded from Germany was in fact almost certainly impossible to pay. This is exactly like the PIIGS debt explosion and the "reparations" demanded from the unemployed millions in Greece, Spain, Italy and Portugal today, and from Cypriots who are menaced by a pure and simple collapse of their entire bank sector.
In 1919, John Maynard Keynes said the post-World War I reparations demand of (at its highest) 133 billion gold marks, about $33 bn in 1921 dollars were: "A policy of reducing Germany to servitude for a generation, of degrading the lives of millions of human beings, and of depriving a whole nation of happiness". Critics of Merkel today can say: Germany remembers!
THE REPARATIONS WINDFALL OF 1871
In 1871 the Prussians under Prince Otto von Bismarck imposed an indemnity of 5 billion gold francs (at a gold price of $19 per Troy ounce!) on the defeated French. At the time an extraordinarily heavy sum, it was however paid off by the French in less than 4 years. The temptation for newly created Germany to increase the value of its gold booty and treasury - including a strategy of demonetizing silver - is often used by monetary historians to explain the near total collapse of world silver prices by 1874. To be sure, other factors were in play including US monetary policy regarding silver, increasing silver mine output (as well as gold mine output), increasing paper bank credit, and rapid economic growth.
What counts is France paid its war reparations in full and ahead of schedule. The inflow of gold to Germany very surely triggered, or at very least bolstered Germany's decisions to set a new gold standard of the German Empire. This was inaugurated on July 9, 1873 when the new gold coin, the Gold Mark made its debut. The action was preceded by the closing down of all German Mint coinage of silver Taler or Thaler coins in 1871, the first overt step towards demonetizing silver.
By 1873 the new German Empire existed, with a strong gold money and an expanding industrial economy. Silver had also been demonetized in the United States through a highly politicized and complex series of Congressional Acts, and by State initiatives, for example by and against the silver and gold mining States. Speculators dumped silver in large quantities and sold it short, in a process of which the outriders had started as early as 1870.
Many US politicians and jounalists accused the speculators of operating in collusion with Germany.
With highly unstable monetary conditions, but strong economic growth driven by new scientific and industrial inventions and development, notably the US railroad boom and later by electric power production, the scene was set for frenetic speculation of all kinds. European stock markets, banks, brokers and finance houses enjoyed boom times. The wave of optimism which drove the boom, shown by extreme high stock prices in central European markets - which in some cases were not reattained for 10 years - reached its limits in Vienna in late April of 1873. The collapse of the Vienna Stock Exchange began on May 8, 1873 and after three days of massive losses the exchange was closed on May 11. It was reopened, but by that time trading was "low volume subdued". Stock market players elsewhere in Europe hoped the panic had faded or was circumscribed to Austria-Hungary.
Financial panic arrived in the US in Sept 1873. The celebrated collapse of the Lehman Bros of the time - another private banking banking house, called Jay Cooke & Company - is usually cited as the marker event, with its main "underlying security" of US railroad stocks, hopelessly overpriced. The collapse of Jay Cooke & Co was shortly followed by a wave of major bank collapses. Panic spread in every direction in New York's business district as prices "fell off the wall". The New York Stock Exchange closed for ten days from Sept 20 in an attempt to limit the damage.
THE EUROPEAN CRISIS SPREAD
Current German-approved, even German-ordered action in Cyprus can be clearly seen as a "panic limiting attempt", regarding finance sector sentiment, but in 1873 the newly founded, rich and powerful Germany was helpless in the face of market panic. Following the US stock exchange panic of Sept 1873 the financial crisis returned to its European hearth, firstly through a new panic in Vienna, then further failures right across continental Europe. The UK, which had experienced earlier and recurring crises ever since the 1815 war reparations programme following Napoleon's defeat, almost on a 10-year cyclic basis since 1820, was at first little affected. It was however the last European economy to recover from the "crisis of '73", and experienced very slow growth until the late 1880s.
France experienced the worst effects of the crisis. Having been defeated in the Franco-Prussian War, the country was in the process of paying reparations to the Germans and its economy weakened, when the 1873 crash occurred. The French took a policy of deliberate deflation while paying the reparations, but the Paris Bourse crash of 1882 sent France further into recession - intensified by a range of factors including decline of the Bordeaux wine and Lyon silk industries, affected by bad weather and by disease. The Union Générale bank failed in 1882, prompting the French to withdraw three million gold pounds from the Bank of England. French stock prices collapsed.
Possibly hard to predict given the circumstances - very large increases in amounts of both silver and gold circulating in Europe and the US - the depression of about 1873–1895 that affected most European countries was accompanied and driven by a drastic fall in prices. All kinds of factors - including industrial productivity gains and early market saturation effects - were in play, for example industrial production increased by 40% in Britain but increased by about 125% in Germany in 15 years.
Germany's strategy, then as now, especially featured mercantilism or running a trade surplus at all possible times, and continued industrial investment and industrial production growth, also including military materiel. Strong money was central to German policy. Conversely, the British approach was to accept economic defeat, contract, deflate domestic consumption and allow market-led devaluation of the money. The international context, then as now experienced falling rates of trade growth, increasing sovereign debt, and for Germany soon created major problems. Chancellor Bismarck was forced to veer away from classic liberal economic policies by the late 1870s, and applied domestic economy safeguarding policies including higher tariffs for electricity and transport, nationalized railroads, national preference purchasing, and compulsory social and unemployment insurance.
THEN AND NOW
In the 1870s and following World War I, French "revanchism" was a recurring accusation by Germans against the French - the first time however, it was France which had to pay. Today's de facto European crisis context, where euro currency strength and stability of the Eurozone are treated as critical goals in every single German-French bilateral summit, no longer reflects the real goals of most European states, nor unfolding reality in Europe, or the world. In Europe today, Germany now calls the tunes and pays the piper. France is drifting further into PIIGS-style debt and deficit, has ever rising unemployment and a large trade deficit - and wants a lower valued euro. Germany may or may not want this, and at present no single coherent political line is coming out of Berlin.
Germany above all wants monetary stability and banking sector stability - but this does not rhym with the euro money, or the Eurozone as presently organized, structured and governed.
Massive differences exist between the 1870s monetary and economic context, and today's. In particular, the Crisis of '73 came amidst an era of very strong economic growth, and featured the demonetization of silver as one clear trigger. Today's potential equivalents could or might include the abandonment of sovereign debt in Europe (and by the US!), and the radical devaluation of the euro. However, this would only be "an alternate route" to financial market collapse, due to the either-or nature of the almost certain economic result: very deep recession and net contraction of the economy.
Economic implosion is the most likely result whatever "strategy" is applied by Europe's powerbrokers and Technocrats. Their action, always confused, too little and too late, will almost surely and certainly trigger global economic recession.
The major similarities between the Long Recession of about 1873-1888 and today's European, American and global macro context are however impressive. In particular, the geopolitical drivers of crisis in the late 19th century, from a European crisis hearth, most surely set the gameplan for and the future belligerants of the coming 1914-18 war. The monetary-then-economic crisis of the 1870s spurred intense rivalry and new alliances between the major powers. Effects ranged from German-decided de facto assumption of Turkish Ottoman sovereign debt, resulting in Turkey's military alliance with Germany in World War I, to French and British hostility against Germany, and US attempts at neutrality and fence-sitting. Russia's hostility against Germany, and its participation on the Allied side in the war, until the 1917 Bolshevik revolution can also be traced to the lasting effects of the Long Recession.
As we know, Russia is very surely and directly implied in the Cyprus bank crisis of today. All major international banks are also implied, including US banks. Within Europe, public opinion has quite rapidly become openly anti-German in several countries, including the UK and France, directly because of the euro and Eurozone crisis. As their Me Too political leaders however say, when or if they "pull the plug on Europe", the Eurozone is cut to perhaps 6 or 7 member states, and each state cuts away and deals with its own sovereign debt crisis - the result will inescapably include the worst economic crisis that Europe has ever experienced.
The 1930s Great Depression will be a quaint historical interlude of relative economic decline, by comparison. Germany will certainly not be unscathed!
by Andrew McKillop
Contact: xtran9@gmail.com
Former chief policy analyst, Division A Policy, DG XVII Energy, European Commission. Andrew McKillop Biographic Highlights
http://www.marketoracle.co.uk/Article39551.html
Now New Zealand Plans Cyprus-Style Bank Customer Confiscations
By Staff Report
The Daily Bell
Tuesday, March 19, 2013
(special thanks to basserdan)
National planning Cyprus-style solution for New Zealand ...The National Government are pushing a Cyprus-style solution to bank failure in New Zealand which will see small depositors lose some of their savings to fund big bank bailouts, the Green Party said today. Open Bank Resolution (OBR) is Finance Minister Bill English's favoured option dealing with a major bank failure. If a bank fails under OBR, all depositors will have their savings reduced overnight to fund the bank's bail out. "Bill English is proposing a Cyprus-style solution for managing bank failure here in New Zealand – a solution that will see small depositors lose some of their savings to fund big bank bailouts," said Green Party Co-leader Dr Russel Norman. – Scoop
Dominant Social Theme: It's all ours now.
Free-Market Analysis: First Cyprus and now New Zealand. Is it coincidence or something more?
Globalists that are trying to create an international monetary solution often implement programs in various countries at once. The question arises as to whether Money Power itself – the banking entities and those behind them that control a good deal of the world's wealth – have decided to "send a message" about the relationship between citizens and their banks.
We've certainly noticed that the advent of the Internet and ever-rising level of information sharing has sparked additional assertiveness from Western governments. The US in particular, with its expanding wars in Africa and assertion that US officials are to collect taxes anywhere in the world, is becoming extraordinarily aggressive.
But even US officials have not yet suggested that in the case of banking failures, citizens would be liable for a significant haircut or even lose their entire life-savings.
Cyprus and New Zealand are well down this road.
Is a message being sent to savers? Is this going to become the new normal in the West?
We're all for risk taking, by the way. But the banking system today administers government monopoly money. And the dollar reserve system itself is propped up by Saudi willingness to accept dollars for oil in preference to any other currency.
Thus, the banking system is nothing near a free-market one. In this artificial construct, asking savers to take risks is not merely unfair; it is a recipe for increasing social dissent.
Interestingly, the Green Party in New Zealand seems to recognize this. Here's more from their press release, excerpted above:
"The Reserve Bank is in the final stages of implementing a system of managing bank failure called Open Bank Resolution. The scheme will put all bank depositors on the hook for bailing out their bank.
"Depositors will overnight have their savings shaved by the amount needed to keep the bank afloat.
"While the details are still to be finalised, nearly all depositors will see their savings reduced by the same proportions.
"Bill English is wrong to assume everyday people are able to judge the soundness of their bank. Not even sophisticated investors like Merrill Lynch saw the global financial crisis coming.
"If he insists on pushing through this unfair scheme, small depositors can be protected ahead of time with a notified savings threshold below which their savings will be safe from any interference."
Investors, of course, are not able to judge the soundness of banks because banks are part of a larger fiat-money system that is foundering. There is only one sure thing about current economic systems worldwide – and that is that they will undergo regular crises as money printing becomes overwhelming and economic instability results.
The press release goes on to point out that New Zealand ought to promote a deposit insurance scheme rather than an open-bank resolution scheme that includes deposit confiscation.
But the release leaves unanswered the larger question, which is one that has to do with the sudden occurrence of such approaches. One is left with the uneasy feeling that top Western bankers somehow DO want to send a message to citizens that the banking system itself is the master not the servant.
If so, people will trust banks even less than they do now, and the result will be, generally, a financial system increasingly prone to failure.
Conclusion: Out of chaos ... what?
http://www.thedailybell.com/28847/Now-New-Zealand-Plans-Cyprus-Style-Bank-Confiscations
Freddie Mac Sues Multiple Banks Over Libor Manipulation
By Tom Schoenberg & Andrew Zajac - Mar 20, 2013 12:01 AM ET
Bloomberg
Freddie Mac (FMCC) sued Bank of America Corp., UBS AG (UBSN), JPMorgan Chase & Co. (JPM) and a dozen other banks over alleged manipulation of the London interbank offered rate, saying the mortgage financier suffered substantial losses as a result of the companies’ conduct.
Government-owned Freddie Mac accuses the banks of acting collectively to hold down the U.S. dollar Libor to “hide their institutions’ financial problems and boost their profits,” according to a complaint filed in federal court in Alexandria, Virginia.
“Defendants’ fraudulent and collusive conduct caused USD LIBOR to be published at rates that were false, dishonest, and artificially low,” Richard Leveridge, a lawyer for Freddie Mac, said in the complaint, which was made public yesterday.
Manipulation of interest rates by some of the world’s biggest banks has spawned probes by half a dozen agencies on three continents in what has become the industry’s largest and longest-running scandal. More than $300 trillion of loans, mortgages, financial products and contracts are linked to Libor.
Libor is calculated by a poll carried out daily by Thomson Reuters Corp. on behalf of the British Bankers’ Association, an industry lobby group that asks firms to estimate how much it would cost to borrow from each other for different periods and in different currencies.
Dozen Banks
The complaint lists 15 banks as defendants as well as the British Bankers’ Association. They include Citigroup Inc. (C), Barclays Plc, Royal Bank of Scotland Group Plc (RBS), the Royal Bank of Canada, Deutsche Bank AG and Credit Suisse Group AG. (CSGN)
Freddie Mac accuses the banks of fraud, violations of antitrust law and breach of contract. The housing financier is seeking unspecified damages for financial harm, as well as punitive damages and treble damages for violations of the Sherman Act.
“To the extent that defendants used false and dishonest USD LIBOR submissions to bolster their respective reputations, they artificially increased their ability to charge higher underwriting fees and obtain higher offering prices for financial products to the detriment of Freddie Mac and other consumers,” the U.S.-owned company said in the complaint.
No Comment
Representatives of the banks who declined to comment on the lawsuit include Danielle Romero-Apsilos, a spokeswoman for New York-based Citigroup,, Jennifer Zuccarelli, a spokeswoman for New York-based JPMorgan, Brandon Ashcraft, a Barclays spokesman, Bill Halldin, a Bank of America spokesman, and Victoria Harmon, a spokeswoman for Credit Suisse.
Ed Canaday, a spokesman for Edinburgh-based Royal Bank of Scotland, Brian Mairs, a spokesman for British Bankers Association and Eberhard Roll, a Portigon AG spokesman, didn’t immediately respond to e-mail and phone messages requesting comment.
Brad German, a spokesman for McLean, Virginia-based Freddie Mac, said the company does not comment on litigation. Denise Dunckel, a spokeswoman for the Federal Housing Finance Agency, the conservator of Freddie Mac, also declined to comment.
Freddie Mac and its sister company, Washington-based Fannie Mae, could have lost a combined $3 billion because of Libor manipulation, the auditor of the FHFA said in a Nov. 3 internal memo urging the regulator to investigate further.
Floating-Rate
Freddie Mac and Fannie Mae use Libor to determine interest payments on their investments in floating-rate financial instruments such as bonds and swaps.
The two companies, which package mortgages into securities on which they guarantee payments of principal and interest, have been under U.S. conservatorship since 2008.
Barclays, UBS and RBS have been fined more than $2.5 billion following a global probe into Libor manipulation. Traders rigged the benchmark to profit from bets on derivatives, while banks sought to submit artificially low rates to appear financially healthier than they were, according to regulators.
From August 2007 and through at least May 2010, the defendants “formed, a combination, conspiracy, or agreement,” to submit false Libor rates, Freddie Mac alleged in the complaint.
The case is Federal Home Loan Mortgage Corp. v. Bank of America Corp. (BAC), 13-cv-00342, U.S. District Court, Eastern District of Virginia (Alexandria).
To contact the reporters on this story: Tom Schoenberg in Washington at tschoenberg@bloomberg.net; Andrew Zajac in Washington at azajac@bloomberg.net
http://www.bloomberg.com/news/2013-03-19/freddie-mac-sues-multiple-banks-over-libor-manipulation.html
Cyprus seeks Russian bailout aid, EU threatens cutoff
By Michele Kambas and Karolina Tagaris
NICOSIA | Wed Mar 20, 2013 8:39am EDT
(Reuters) - Cyprus pleaded for a new loan from Russia on Wednesday to avert a financial meltdown, but won no immediate relief after the island's parliament rejected the terms of a European bailout, raising the risk of default and a bank crash.
Finance Minister Michael Sarris said in Moscow he had reached no deal with his Russian counterpart Anton Siluanov, but talks would continue.
Russia's finance ministry said Nicosia had sought a further 5 billion euros on top of a five-year extension and lower interest on an existing 2.5 billion euro loan.
Cyprus has to seek Moscow's help after the euro zone's plan for a 10 billion euro bailout was cast into disarray on Tuesday when the island's parliament rebuffed EU demands for a levy on bank deposits to raise 5.8 billion euros.
Moscow has its own interests in ensuring the survival of Cypriot banks, which have served as an offshore financial haven for Russian businesses and individuals.
The European Central Bank's chief negotiator on Cyprus, Joerg Asmussen, said the ECB would have to pull the plug on Cypriot banks unless the country took a bailout quickly.
"We can provide emergency liquidity only to solvent banks and... the solvency of Cypriot banks cannot be assumed if an aid program is not agreed on soon, which would allow for a quick recapitalization of the banking sector," Asmussen told German weekly Die Zeit in an interview conducted on Tuesday evening.
Austrian Chancellor Werner Faymann said he could not rule out Cyprus leaving the euro zone, although he hoped its leaders would find a solution for it to stay.
Cypriot officials disclosed that the country's energy minister was also in Moscow, ostensibly for a tourism exhibition, fuelling speculation that access to offshore gas reserves could be part of any deal for Russian aid.
Cyprus has found big gas fields in its waters adjoining Israel but has yet to develop them.
"We had a very honest discussion, we've underscored how difficult the situation is," Sarris told reporters after talks with Siluanov. "We'll now continue our discussion to find the solution by which we hope we will be getting some support.
"There were no offers, nothing concrete," he said.
Not a single Cypriot lawmaker voted for the bailout, which included a proposed levy that would have taken up to 10 percent from accounts over 100,000 euros.
Smaller bank accounts would also have been hit, although the government proposed to spare small savers with less than 20,000 euros in the bank.
It was the first time a national legislature had rejected the conditions for EU assistance, after three years in which lawmakers in Greece, Ireland, Portugal, Spain and Italy all accepted biting austerity measures to secure aid.
German Chancellor Angela Merkel, whose country is Europe's main paymaster, said it was up to the Cypriot government to come up with an alternative proposal but it was fair to expect savers with deposits over 100,000 euros to contribute to the bailout.
The EU has a track record of pressing smaller countries to vote again until they achieve the desired outcome.
"PLAN B"
Nicosia was eerily quiet on Wednesday, the morning after demonstrators cheered parliament's rejection of what was seen as an unfair EU diktat.
The government has not allowed banks to reopen this week to prevent a run, but cash machines which were emptied over the weekend have been replenished, giving people access to limited amounts of cash.
"Things won't be so bad as long as people can withdraw from ATMs but if they go too there will be a huge problem," said Titos Pitsillides, 50.
President Nicos Anastasiades, barely a month in the job, met party leaders and the governor of the central bank at his office. Government spokesman Christos Stylianides said a "Plan B" was in the works.
"A team of technocrats has gone to the central bank to discuss a plan B related to financing and reducing the 5.8 billion euro amount," he told reporters during a break in the meeting with party leaders. He did not elaborate.
Lawmaker Marios Mavrides told Reuters one option under discussion was to nationalize pensions funds of semi-government corporations, which hold between 2 and 3 billion euros.
Anastasiades was also due to hold a cabinet meeting and talk with officials from the so-called "troika" of the EU, European Central Bank and International Monetary Fund.
Among the most urgent decisions awaited was whether the government will allow banks to reopen as planned on Thursday, or keep them closed until next week. Deputy Central Bank governor Spyros Stavrinakis said no decision had been taken yet.
The crisis is unprecedented in the history of the divided east Mediterranean island of 1.1 million people, which suffered a war with Turkey and ethnic split in 1974 in which a quarter of its population was displaced. The Turkish-populated north considers itself a separate country, recognized only by Turkey.
While Brussels has emphasized that the tax measure was a one-off for a country that accounts for just 0.2 percent of Europe's output, fears have grown that savers in other, larger European countries might be spurred to withdraw funds.
GAS DEPOSITS
Leaders of the currency union said the bailout offer still stood, provided the conditions were met. Teetering Cypriot banks have been crippled by their exposure to the financial crisis in neighboring Greece, where the euro zone debt crisis began.
Germany, facing an election this year and increasingly frustrated with the mounting cost of bailing out its southern partners, said Cyprus had no one to blame but itself.
With Sarris and Energy Minister George Lakkotrypis in Moscow, there was mounting speculation that Russian oil and gas giant Gazprom had mooted its own assistance plan in exchange for exploration rights to Cyprus's offshore gas deposits.
Noble Energy reported a natural gas recovery of 5 to 8 trillion cubic feet of gas south of Cyprus in late 2011, in the island's first foray to tap offshore resources.
A senior source in the "troika" said dealing with Cyprus was even more frustrating than protracted wrangling with Greece.
"The Greeks wanted to cheat on you all the time, but they knew what they wanted. The Cypriots are leaving us really confused," the source said.
(Additional reporting by Matt Robinson in Nicosia, Annnika Breidthardt in Berlin, Sakari Suoinen and Eva Kuehnen in Frankfurt, Georgina Prodhan in Vienna, and Lidia Kelly in Moscow; Writing by Matt Robinson and Paul Taylor; Editing by Peter Graff)
http://www.reuters.com/article/2013/03/20/us-cyprus-parliament-idUSBRE92G03I20130320
Cyprus seeks Russian bailout aid, EU threatens cutoff
By Michele Kambas and Karolina Tagaris
NICOSIA | Wed Mar 20, 2013 8:39am EDT
(Reuters) - Cyprus pleaded for a new loan from Russia on Wednesday to avert a financial meltdown, but won no immediate relief after the island's parliament rejected the terms of a European bailout, raising the risk of default and a bank crash.
Finance Minister Michael Sarris said in Moscow he had reached no deal with his Russian counterpart Anton Siluanov, but talks would continue.
Russia's finance ministry said Nicosia had sought a further 5 billion euros on top of a five-year extension and lower interest on an existing 2.5 billion euro loan.
Cyprus has to seek Moscow's help after the euro zone's plan for a 10 billion euro bailout was cast into disarray on Tuesday when the island's parliament rebuffed EU demands for a levy on bank deposits to raise 5.8 billion euros.
Moscow has its own interests in ensuring the survival of Cypriot banks, which have served as an offshore financial haven for Russian businesses and individuals.
The European Central Bank's chief negotiator on Cyprus, Joerg Asmussen, said the ECB would have to pull the plug on Cypriot banks unless the country took a bailout quickly.
"We can provide emergency liquidity only to solvent banks and... the solvency of Cypriot banks cannot be assumed if an aid program is not agreed on soon, which would allow for a quick recapitalization of the banking sector," Asmussen told German weekly Die Zeit in an interview conducted on Tuesday evening.
Austrian Chancellor Werner Faymann said he could not rule out Cyprus leaving the euro zone, although he hoped its leaders would find a solution for it to stay.
Cypriot officials disclosed that the country's energy minister was also in Moscow, ostensibly for a tourism exhibition, fuelling speculation that access to offshore gas reserves could be part of any deal for Russian aid.
Cyprus has found big gas fields in its waters adjoining Israel but has yet to develop them.
"We had a very honest discussion, we've underscored how difficult the situation is," Sarris told reporters after talks with Siluanov. "We'll now continue our discussion to find the solution by which we hope we will be getting some support.
"There were no offers, nothing concrete," he said.
Not a single Cypriot lawmaker voted for the bailout, which included a proposed levy that would have taken up to 10 percent from accounts over 100,000 euros.
Smaller bank accounts would also have been hit, although the government proposed to spare small savers with less than 20,000 euros in the bank.
It was the first time a national legislature had rejected the conditions for EU assistance, after three years in which lawmakers in Greece, Ireland, Portugal, Spain and Italy all accepted biting austerity measures to secure aid.
German Chancellor Angela Merkel, whose country is Europe's main paymaster, said it was up to the Cypriot government to come up with an alternative proposal but it was fair to expect savers with deposits over 100,000 euros to contribute to the bailout.
The EU has a track record of pressing smaller countries to vote again until they achieve the desired outcome.
"PLAN B"
Nicosia was eerily quiet on Wednesday, the morning after demonstrators cheered parliament's rejection of what was seen as an unfair EU diktat.
The government has not allowed banks to reopen this week to prevent a run, but cash machines which were emptied over the weekend have been replenished, giving people access to limited amounts of cash.
"Things won't be so bad as long as people can withdraw from ATMs but if they go too there will be a huge problem," said Titos Pitsillides, 50.
President Nicos Anastasiades, barely a month in the job, met party leaders and the governor of the central bank at his office. Government spokesman Christos Stylianides said a "Plan B" was in the works.
"A team of technocrats has gone to the central bank to discuss a plan B related to financing and reducing the 5.8 billion euro amount," he told reporters during a break in the meeting with party leaders. He did not elaborate.
Lawmaker Marios Mavrides told Reuters one option under discussion was to nationalize pensions funds of semi-government corporations, which hold between 2 and 3 billion euros.
Anastasiades was also due to hold a cabinet meeting and talk with officials from the so-called "troika" of the EU, European Central Bank and International Monetary Fund.
Among the most urgent decisions awaited was whether the government will allow banks to reopen as planned on Thursday, or keep them closed until next week. Deputy Central Bank governor Spyros Stavrinakis said no decision had been taken yet.
The crisis is unprecedented in the history of the divided east Mediterranean island of 1.1 million people, which suffered a war with Turkey and ethnic split in 1974 in which a quarter of its population was displaced. The Turkish-populated north considers itself a separate country, recognized only by Turkey.
While Brussels has emphasized that the tax measure was a one-off for a country that accounts for just 0.2 percent of Europe's output, fears have grown that savers in other, larger European countries might be spurred to withdraw funds.
GAS DEPOSITS
Leaders of the currency union said the bailout offer still stood, provided the conditions were met. Teetering Cypriot banks have been crippled by their exposure to the financial crisis in neighboring Greece, where the euro zone debt crisis began.
Germany, facing an election this year and increasingly frustrated with the mounting cost of bailing out its southern partners, said Cyprus had no one to blame but itself.
With Sarris and Energy Minister George Lakkotrypis in Moscow, there was mounting speculation that Russian oil and gas giant Gazprom had mooted its own assistance plan in exchange for exploration rights to Cyprus's offshore gas deposits.
Noble Energy reported a natural gas recovery of 5 to 8 trillion cubic feet of gas south of Cyprus in late 2011, in the island's first foray to tap offshore resources.
A senior source in the "troika" said dealing with Cyprus was even more frustrating than protracted wrangling with Greece.
"The Greeks wanted to cheat on you all the time, but they knew what they wanted. The Cypriots are leaving us really confused," the source said.
(Additional reporting by Matt Robinson in Nicosia, Annnika Breidthardt in Berlin, Sakari Suoinen and Eva Kuehnen in Frankfurt, Georgina Prodhan in Vienna, and Lidia Kelly in Moscow; Writing by Matt Robinson and Paul Taylor; Editing by Peter Graff)
http://www.reuters.com/article/2013/03/20/us-cyprus-parliament-idUSBRE92G03I20130320
Sinclair - Cyprus Disaster Is Much Bigger Than Being Reported
Mar. 19, 2013
KingWorldNews
Today legendary trader Jim Sinclair told King World News that the Cyprus disaster is much bigger than what is being reported and the implications are stunning. Sinclair, who was once called on by former Fed Chairman Paul Volcker to assist during a Wall Street crisis, had this to say in this extraordinary and exclusive KWN interview:
Sinclair: “If people believe that $13 billion is the total of this bailout, they are out of their minds. $130 billion is not the true total of even the Russian deposits in Cyprus banks. One important Russian businessman, in his various business enterprises, would have $100 billion on deposit himself. 10% of all deposits in Cypress could be $500 billion or more because Cyprus is the banking entity for Russia, not Switzerland or Grand Cayman.
The Central Bank of Cyprus doesn't even know how big the Russian deposits are because it is held as secret at the behest of the Russians. It is a secret banking system set up for the Russians, by the Russians, and the IMF has just taken a large bite out of that elephant.
Because of that, any attempt to shift the weight of bank solvency to depositors has failed. This was the grand experiment which was the defining event where the financial shift from the onus of insolvency was to be placed on the shoulders of depositors rather than on quantitative easing....
Before Sinclair continues with this interview, people around the world should understand the significance in history of this legendary trader and his family. Sinclair’s father (Bert Seligman), his firm used to control a staggering 10% of the daily New York Stock Exchange trading volume throughout the 1950s.
Sinclair was always around his father’s firm as a kid and even as a young man, but he started full-time in 1958. For people in the know, Bert Seligman and Jesse Livermore were business partners, and the Seligman name is truly legendary. But his father wasn’t just business partners with Jesse Livermore, Sinclair also remembers his father telling him stories about operations that he and Joe Kennedy (who later headed the SEC) conducted together in the stock market as well as the commodity markets in the 1920s and 1930s.
Being around and later working in his father’s firm shaped his entire career and molded him into the legendary trader he ultimately became. Sinclair later earned the nickname “Mr. Gold” because he was considered to be the largest trader in the 1970s bull market in gold, later calling the top of that market to the day.
But later in his life and when Wall Street found itself in jeopardy because of the significant break in the price of gold and silver in 1980, it (Wall Street) petitioned the Fed for a $1 billion bailout. People don’t know this, but Bache was broke and so was Merrill Lynch. At that time a bailout of that size was almost unthinkable, but something had to be done.
Well, the $1 billion was granted on one condition by Paul Volcker, who headed the Fed at that time, and that condition was that Jim Sinclair was to be retained by the Hunt’s to effect the liquidation of their monstrous positions in silver, copper, zinc, and gold. Volcker literally made it a criteria of granting the one billion dollars in loans that Jim Sinclair would guide the Hunt liquidation.
With KWN readers having a better understanding of his background, Sinclair continues: “People need to grasp that this is not about $130 billion. The real dollar figure is orders of magnitudes larger than that number. How much higher we’ll never know, but it is massive. This is the Bank of Russia we are talking about here. The Central Bank of Russia is for the people in Russia. What the IMF went after here is the central bank of the Russian elite and former KGB, and the Russians simply will not stand still for that.”
Sinclair also added: “When the Cyprus event first took place, the mainstream media completely missed the entire point of the story. This is why I immediately did an interview with King World News to explain that what the IMF had just done was to steal the Russian elite, or ex-KGB officials’ money.
Although the mainstream media is days late and a dollar short, I find it flattering that they are now taking my words almost verbatim and using them in their reports. I noticed that when you released the second interview that we did earlier today, I listened to and read my words being read back to me almost verbatim by the mainstream media within 22 minutes. As I said, I guess copying us is the sincerest form of flattery at this point.
Part of the result of all of this is the Russian elite will now move heavily out of currencies and into gold. Going forward, the Russian sovereign entity will now support the price of gold and it will be for the benefit of the Russian oligarchy. This will also serve to bring Russian and Chinese financial interests closer together, and, in time, will finally result in freeing the gold market from Western price manipulation and influence.
This IMF catastrophe in Cyprus is literally a landmark event in history, and the single most important event in the entire history of the gold market. I full expect that the key point I have now made, that this concerns much more money than has been reported, will now be cloned in the mainstream media as well.”
http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2013/3/19_Sinclair_-_Cyprus_Disaster_Is_Much_Bigger_Than_Being_Reported.html