Tuesday, March 19, 2013

Comments on Cyprus

"Daylight robbery (10% confiscation tax) or night-time robbery (inflation) - you choose" - Anonymous

You wake up one morning. Over the radio, you hear that the government has said that all the banks are bust. Everyone is going to have to sacrifice 10% of their savings to bail the system out. It’s the only solution. - Money Morning

Jim Sinclair:  Well, it should have frightened many of the players involved, and served as a wake-up call.  There was a great miscalculation made with regards to Cyprus, and the situation has quickly turned into a catastrophe.  There was no real understanding of the entities that were behind the Russian corporations which have money in Cyprus, and the effect of what is in reality the confiscation of Russian ex-KGB money.

The Telegraph: The danger may not be immediate but if the economies of Portugal, Spain, and Italy languish through this year in deep slump with no green shoots of recovery starting to sprout in the second half – as many fear – this new dispensation will be tested. The fatal precedent of haircuts for depositors will start to matter a great deal. Hell hath no fury like a saver robbed.

As depositors across Europe realize that they are potentially next in line for a similar (or worse) "haircut" if their bank fails, the realization will dawn upon them that keeping money in said bank, at 0% interest no less, is not a very good idea. As depositors begin to withdraw their cash, the entire fractional reserve system begins to seize up - Turd Ferguson

This is a complete game-changer.  It means that even money in the bank is not safe.  It implies that money in pension and money market accounts is not safe, either.  It means that rule of laws and contracts really don't matter.  Of course, MF Global taught us that.  It finally means that trust is no longer a part of the equation - Peak Prosperity

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