Mass Panic In Cyprus

[Camilo]

The Banks Are Collapsing And ATMs Are Running Out Of Money

European officials are openly admitting that the two largest banks in Cyprus are "insolvent", and it is now being reported that Cyprus Popular Bank only has "enough liquidity to cover the next few hours". Of course all banks in Cyprus are officially closed until Tuesday at the earliest, but there have been long lines at ATMs all over Cyprus as people scramble to get whatever money they can out of the banks. Unfortunately, some ATMs appear to be "malfunctioning" and others appear to have already run out of cash. You can see some photos of huge lines at one ATM in Cyprus right here. Some businesses are now even refusing to take credit card payments. This is creating an atmosphere of panic on the streets of Cyprus. Meanwhile, the EU is holding a gun to the head of the Cyprus financial system. Either Cyprus meets EU demands by Monday, or liquidity for the banks will be totally cut off and Cyprus will be forced out of the euro. It is being reported that European officials believe that the "economy is going to tank in Cyprus no matter what", and that it would be okay to let the financial system of Cyprus crash and burn if politicians in Cyprus are not willing to do what they have been ordered to do. Apparently European officials are very confident that the situation in Cyprus can be contained and that it will not spread to other European nations.

Unfortunately, European officials are losing sight of the bigger picture. If the largest banks in Cyprus are allowed to fail, it will be another "Lehman Brothers moment". The faith that people have in banks all over Europe will be called into question, and everyone will be wondering what major European banks will be allowed to fail next.

Meanwhile, European officials have already completely shattered confidence in deposit insurance at this point. Everyone now knows that when there is a major bank failure that depositors will be expected to share in the pain. Expect to see "bank jogs" all over southern Europe over the coming weeks.

The banks in Cyprus had been scheduled to reopen on Tuesday, but very few people expect that to actually happen at this point. In fact, Bloomberg is reporting that EU officials are actually thinking about shutting down the two biggest banks in Cyprus and freezing their assets...

Finance ministers for the 17 euro countries are considering a plan to shutter the two biggest banks in Cyprus and freeze the assets of uninsured depositors, said the four officials, who asked not to be named because the talks are ongoing. The ministers are holding a teleconference tonight.

Cyprus Popular Bank Pcl (CPB) and the Bank of Cyprus Plc would be split to create a so-called bad bank, one of the officials said. Insured deposits -- below the European Union ceiling of 100,000 euros ($129,000) -- would go into a so-called good bank and not sustain any losses, while uninsured deposits would go into the bad bank and be frozen until assets could be sold, said the four officials.

Losses to unsecured creditors, including uninsured depositors, could reach 40 percent under the plan, which has support from the International Monetary Fund and the European Central Bank. The proposal, a version of which was rejected last week, is considered a better option than taxing insured deposits or allowing Cypriot banks to collapse in a disorderly fashion if they lose access to ECB aid, the officials said.

Such a scenario would be an utter disaster.

How would you feel if you woke up someday and 40 percent of your life savings was suddenly gone?

According to Greek newspaper Kathimerini, European officials are also openly discussing the possibility of a Cyprus exit from the eurozone if a suitable bailout agreement is not worked out...

The possibility of Cyprus exiting the eurozone was discussed during teleconference involving technocrats from the Euro Working Group on Wednesday, Kathimerini understands.

A reliable source told Kathimerini that the technical implications of a euro exit, as well as the adoption of capital controls were debated by the Euro Working Group officials during the teleconference.

As I mentioned above, European officials seemed resigned to the fact that there will be an economic collapse in Cyprus "no matter what", and so letting Cyprus leave the euro would not make that much of a difference. Either way, the banks are going to have to be "reorganized" and capital controls will be imposed...

In detailed notes of the call seen by Reuters, the group’s chair Austria's Thomas Wieser said: “The economy is going to tank in Cyprus no matter what. Restrictions on capital will probably be imposed.”

Never before have we seen European officials impose such a harsh ultimatum with such a short deadline. It is almost as if they want to boot Cyprus out of the euro. The following comes from a recent CNBC report...

In stark twin warnings on Thursday, the European Central Bank said it would cut off liquidity to Cypriot banks and a senior EU official made clear to Reuters that the bloc was ready to see the bankrupt island banished from the euro in the belief it could then contain damage to the wider European economy.

And European officials are even publicly talking about the possibility that Cyprus will soon need to start using "their own currency"...

In Brussels, a senior European Union official told Reuters that 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.

This is absolutely shocking. Everyone always thought that Greece would be the first to leave the euro, but now it looks like it might be Cyprus.

However, there is still a chance that Cyprus may find a way to comply with EU demands. Politicians in Cyprus are frantically searching for a way to raise the needed cash without raiding private bank accounts. The following is what CNN is saying about the latest efforts...

Leaders of Cyprus' political parties agreed Thursday to create an "investment solidarity fund," which would issue bonds backed by state and church assets.

The plan was due to be discussed by the Cypriot government and parliament on Thursday evening, but few details were available and it was not clear how much the fund would be worth.

According to Reuters, other proposals have been under consideration as well...

The government said a "Plan B" was in the works.

Officials said it could include: an option to nationalize pension funds of semi-government corporations, which hold between 2 billion and 3 billion euros; issuing an emergency bond linked to future natural gas revenues; and possibly reviving the levy on bank deposits, though at a lower level than originally planned and maybe excluding savers with less than 100,000 euros.

At this point it is unclear whether any of those proposals will turn out to be acceptable to European officials.

In fact, the tone of European officials has noticeably changed from previous bailout efforts. They now seem much more willing to play hardball. For example, just check out what German Finance Minister Wolfgang Schaeuble is saying about the situation in Cyprus...

German finance minister Wolfgang Schaeuble told the ZDF public broadcaster on Tuesday night (19 March) he "took note with regret" of the Cypriot parliament's rejection of the bailout deal, but insisted that the terms will stay the same.

Asked if the eurozone was willing to let Cyprus go bust, he answered: "Well, we are much more stable in the eurozone - we took measures to protect ourselves from the risks of contagion ... but I don't want to have any of this."

He added: "It is a serious situation, but this cannot lead to a decision that makes absolutely no sense, to rescue a business model that has failed. Cyprus has a banking sector that is totally oversized and this made Cyprus insolvent. And nobody outside Cyprus is to blame for it."

Schaeuble knows that the EU is holding all of the cards and that Cyprus is doomed without their help...

"The Cypriot state cannot fund itself on the markets. Its two largest banks are insolvent and are being kept afloat with emergency funding from the ECB, but only on the condition that there will be a long-term rescue programme. If this condition is no longer met, Cyprus will no longer be solvent and this is something Cypriot decision makers must know"

But the truth is that the EU can't really afford to allow major banks to fail or for a single member to leave the eurozone. If either of those things happen, the confidence game that has been holding the European financial system together will begin to rapidly evaporate.

If the EU thinks that they can abandon Cyprus without the crisis spreading to the rest of southern Europe they are just being delusional.

At least there are a few politicians in Europe that understand what is happening. Nigel Farage, a very outspoken member of the European Parliament, is telling people to get their money out of banks in southern Europe as quickly as they can. He is warning that a great collapse of the European financial system is coming and that people need to get prepared for it...

[Calz]

Banksters having their way again ... why is it so few see it for what it is???

Source: https://youtube.com/watch?v=hC0twcvcAnY

[aranuk]

Can someone explain to me simply how banks get into trouble? They can print money. With fractural reserve banking they create 10 times or more the money in loans that is deposited. Is it because the top executives are paying themselves huge million pound bonuses every year or what?

Stan

[Corncrake]

Stan - I went to a lecture by Positive Money at the London Zeitgeist Day last Saturday and found it very helpful - run your eye over their website as you may find it useful.

http://www.positivemoney.org/

[jc71]

Hi Stan,

I don't know much about this type of thing, but I think that anyone / any company / any bank can get into trouble however large their assets they have by making big bets and getting them wrong.

They can "print money" but not infinite amounts.

Regards,

J

[northstar]

Posted by Corncrake (here)
Stan - I went to a lecture by Positive Money at the London Zeitgeist Day last Saturday and found it very helpful - run your eye over their website as you may find it useful.

http://www.positivemoney.org/

Excellent short video at that link!

Source: https://youtube.com/watch?v=fJqf5kNlVgg

[aranuk]

Thanks for giving me direction here boys! I am a wee bit wiser now.

Stan

[Etherios]

Excellent easy solution ... tho ... Bank of england is owned by the same bankers ... so they wont comit suicide just to save us ... their hole plan is to destroy us.

Thus the above idea will never even start.

[puurfectten]

Posted by aranuk (here)
Can someone explain to me simply how banks get into trouble? They can print money. With fractural reserve banking they create 10 times or more the money in loans that is deposited. Is it because the top executives are paying themselves huge million pound bonuses every year or what?

Stan

mostly due to derivatives exposure..for example jp morgan has around 1.5 trillion in assetts of which alot are bs since soveriegn bond holdings i'm pretty sure get booked as assetts..has around 80 trillion in derivatives exposure...which..is supposed to be hedged but all it takes is a 2% hit when your leveraged 80 to 1 and poof!..your insolvent.....

[Czarek]

Posted by aranuk (here)
Can someone explain to me simply how banks get into trouble? They can print money. With fractural reserve banking they create 10 times or more the money in loans that is deposited. Is it because the top executives are paying themselves huge million pound bonuses every year or what?

Stan

Banks have a sweet deal, borrowing at 0% from the Fed and lending it out to you and me at 4-8%. But that's not enough! The problem is that banks are behaving like greedy casino addicts, placing BAD bets, hiding some (if not most) of them as derivatives. With time, for every dollar you deposit, they gamble with $26. (that was Lehman bro. bank) Slightest change in interest rates makes them insolvent and you and I my friend are bailing them out. If it gets really bad, they just announce that they will take a little portion of your money to cover their bad bets. You can't do anything about it. Oh, btw this decision did not go through the senate. Do you get that? That's the most important point.

[ThePythonicCow]

Posted by aranuk (here)
Can someone explain to me simply how banks get into trouble?

The purpose of the banks is to get us into debt, from the lowly 19 year old student to the United States government and every person, corporation and government large and small in between.

That debt exchanges the right to use something now, for the right to future income streams (pledged to pay off the debt), and the right to foreclose on property and income if the payments aren't made.

Then the bastards in power shut down those future income streams with economic depressions. This causes the debt to fail. The debt is handed over to the thugs, who foreclose on every bit of property and future income stream they can get their hands on.

So, yes, there is a period during when the debts are being forced to fail (which we are in now) when the banks are screaming bloody murder. Some of the banks will offload their bad debt paper on the governments (the ultimate source of thug power), and some of the smaller or less favored banks will fail, as fewer banks are needed in the next stage of this endless cycle (there being less new debt to issue during the depression phase of this farce.)

Being able to run a printing press legally is a relatively minor power in this grand scheme of things, and besides your ordinary bank cannot even do that. They don't create money out of nothing, but rather they exchange present spending power for future foreclosing power. They make money out of debt ... our debt ... our futures. We owe our souls to the company store

[Hervé]

some background tapestry about Cyprus, from http://www.marketoracle.co.uk/Article39600.html:

Could Cyprus Banking Crisis Trigger a War?
Mar 22, 2013 - 11:50 AM GMT By: LewRockwell

Eric Margolis writes: Realizing they will never be a world power, the Cypriots have decided to settle for being a world nuisance. ~ George Mikes, Hungarian writer

Cyprus is a big pain in the neck for one and all. Its banks are bust due to reckless lending to Greece. The sunny island is a beehive of tax evasion, money laundering, dodgy trade and espionage.

Now, the threatened bankruptcy of Cyprus has triggered the latest European financial crisis.

Russian businessmen and the Russian Mafia have some 30 billion euros stashed away in Cyprus. Russians make up the second largest biggest cohort of Greek Cyprus’ 869,000 people. Some 260,000 ethnic Turks live in the isolated Turkish Republic of Northern Cyprus, which no one but Turkey recognizes.

A 10 billion euro EU bailout is in the works. But the Germans, who will have to fund most of the rescue, are loathe to rescue the Russian mob, and who can blame them?
So the Germans seem set on punishing the wayward Greek Cypriotes and their Russian pals by trying to impose a tax on local bank deposits. This ham-handed plan triggered outrage and fear across Europe, and may ignite a run on banks in Cyprus and Greece. Moscow is furious.

But there’s much more to the Cyprus crisis than its dubious banks. Cyprus has bedeviled Europe and world diplomacy since 1974, then Greek Cypriot far rightists staged a coup and sought union – or "enosis" – with mainland Greece. Turkey promptly intervened with 30,000 troops to protect Turkish Cypriots in the north. Many Greeks fled or were expelled to the south.

Europe and the UN have been trying to sort out the Cyprus mess ever since. After decades of mind-numbing negotiations, former UN chief Kofi Annan proposed a sensible deal in 2004 for a Greek-Turkish federation. Turks accepted, but Greek Cypriots blocked it. Britain, which has two important air bases in Cyprus, backed the status quo.

In the same year, the EU committed the grave error of admitting Cyprus as a member without first insisting that Greek Cypriots agree to a peace deal and Greek-Turkish federation.

Northern Cyprus was left in limbo while the south became part of the EU, assuring the island’s ugly dispute would become part of the European Union. Cyprus should never have been admitted to the EU.

Europeans who opposed Turkish membership in the EU used Cyprus as a pretext to delay admission, infuriating Turkey.

After decades of patient work developing normal relations after centuries of conflict, Greece and Turkey are again up in arms again over Cyprus. Their dangerous problem of overlapping air and sea claims in the Aegean has revived - just when Greece must slash its bloated military budget.

It gets worse. Very large underwater gas deposits were recently discovered between Cyprus and Israel. Both Cyprus and Israel, who are to jointly develop them, could become energy exporters. They have become very close allies.

"Not so fast" say Cyprus’ Turkish minority. ‘That gas also belongs in part to us!" Ankara insists the gas must be shared and has sent ships to back its claim.

Palestine, Egypt, Lebanon and Syria are also advancing claims to the "Aphrodite" gas field off Cyprus -shades of the tense South China Sea. But most likely to clash are the Turks and Israelis.

Turkey is still boiling mad over the Israeli seizure of a Gaza bound relief ship in 2010 and the killing of nine Turks.

Israel has emerged as a major backer of the embattled Greek government, using its influence in Washington and financial clout.

Russia, increasingly interested in the Greece-Cyprus-Syria region, says it will keep a nine-ship squadron in the eastern Mediterranean as Moscow’s worries over Syria, now under western siege, grow by the day. Moscow is hinting that it mighty bail out Cypriot banks in exchange for the lion’s share of the "Aphrodite" gas fields.

All the elements are in place for a very nasty, dangerous multi-party confrontation in the eastern Mediterranean. The EU could have pre-empted this danger by using a bank rescue of Cyprus to force Greek Cypriots to make a sensible peace deal with their Turkish neighbors. And by forcing Cyprus to fairly share the offshore gas bonanza with neighboring states. But it probably won’t.

Eric Margolis [send him mail] is contributing foreign editor for Sun National Media Canada. He is the author of War at the Top of the World and the new book, American Raj: Liberation or Domination?: Resolving the Conflict Between the West and the Muslim World. See his website.

Copyright © 2013 Eric Margolis

[mgray]

Posted by aranuk (here)
Can someone explain to me simply how banks get into trouble? They can print money. With fractural reserve banking they create 10 times or more the money in loans that is deposited. Is it because the top executives are paying themselves huge million pound bonuses every year or what?

Stan

Stan specifically the Cypriot banking system was hard hit by the Greek bailout. These Cyprus-based banks were advised by EU and US banks to load up on Greek debt when they were brought into the EU 5 years ago, since no one else wanted to buy Greek debt. Deutsche Bank, Goldman Sachs and others sold the questionable paper to Cyprus telling them they were safer buying from larger country that was less fragile than their own the island nation. How did that work out?

[ghostrider]

Posted by aranuk (here)
Can someone explain to me simply how banks get into trouble? They can print money. With fractural reserve banking they create 10 times or more the money in loans that is deposited. Is it because the top executives are paying themselves huge million pound bonuses every year or what?

Stan

the bank president takes all the deposits of that day , and invests them in a bulk amount on the stock market, and the next day the money goes back to the indiviuals accounts and the bank keeps the profit made that night... my mother has worked for a large bank for forty years... I quiz her alot ... go online at look at your balance at three or four in the morning it will say zero , then after nine or so it will return to normal ... fractional reserve lending is real and does happen... some employees don't agree with it, hence the turnover and buyouts at your local branches...

[ghostrider]

when you buy someones debt , you own them... you can make a claim on property if they default ...you can write your own rules , and what can someone in debt do about it ??? oh we had to raise your interest rate, oh theres an admin fee, oh there a new late charge, oh there a fee for paying online, oh theres a fee for paying cash, oh we were bought out by another bank, and their policy is blah blah so there is another fee for any outstanding debt over 500 dollars that has a different fee that is in flux with inflation blah blah ...oh and a processing fee, and a convienence fee , no joke I dropped my cricket cell service over a two dollar convienence fee, yeah they charge you a fee for paying your bill ...where is the better business bureau ??? a fee for paying my bill ...

[ThePythonicCow]

Joseph P. Farrell is engaging in some super test high octane speculation regarding the events in Cyprus, in a multi-part series on his blog, just beginning today at CYPRUS: CLASH OF OLIGARCHIES AND GEOPOLITICS, PART ONE.

He ends todays installment with these words:

Enter Cyprus, and our story, for Cyprus quickly became a haven for the money of the late Soviet-era and Yeltsyn-era oligarchs. Thus, lurking behind the story of the European banks’ attempt to steal the savings of Cypriots, is the longer-running story of the attempt of Western banksters to rape Russia, and the long-running conflict between them and the nationalistic interests represented by Vladimir Putin & Co.

The problem is, the Russians got wind of it (I mean, c’mon here folks, Mr. Putin is the “KGB president”, and the idea that Russian intelligence doesn’t monitor the activities of Western central and prime banks is…well, absurd). Anyway, the Russians got wind of the planned theft, and withdrew their money prior to the announcement.

Now… this is where the story gets interesting… but that will have to wait for tomorrow.

[sigma6]

My take...

It gets worse. Very large underwater gas deposits were recently discovered between Cyprus and Israel. Both Cyprus and Israel, who are to jointly develop them, could become energy exporters. They have become very close allies.

That and the Russian money. This is a Western stab at the Russians. It looks to become one big money free for all. I'd like to see the Russians make a deal with Cypress and snatch the prize right out from under the Banks, and take the oil fields. It's push come to shove time. And from the sounds of it, Cypress was set up... take on all the Greek debt? ...well now it's time to take a walk on the short pier. Who's 'loving' arms will they be pushed into? I am going to guess there were various agents feeding information back to the Banks for years. This is what we can expect from the Banks in the future.

[Flash]

well, twelve years ago, it was the Turkish banks that were hosting the Russian drug and related mafia/prostitution/government corruption money. In 2001, banks went bankrupt in Turkey, pretty similar to what happened in 2008 in the USA, with the difference that the IMF got involved into it, forced Turkey to correct its banking system (Turks lost lots of money) and obliged the banks to list and check the depositors and investors. In order, the IMF took control.

As a foreigner, you could not anylonger enter banks in Turkey and deposit money without being thoroughly checked and the source of money checked. Even if 80% of the economy was under the table. Lots of cash around.

After that, the rich corrupted Russians went to Cyprus (certainly not to America, although some did).

Now, the EU and IMF are putting its hand on Cyprus. Yes, to me, it is definitely a way to get Russian money and attack their economy. This will backfire. Russia seems able to withstand it.