Bank runs, bank holiday & 10pct bailout tax on deposits in Cyprus

mmerlinn

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I have no idea why though. The amount of money involved is peanuts in the grand scheme of things.

It's not the money. It's who controls the Eastern Mediterranean. Russia has coveted Cyprus for decades, and fought several wars with that endpoint in mind. Europe has Cyprus by the balls and won't let go for the same reason. In the end Europe will retain control for several reasons.

Germany attacks Russia – run for the hills
 

ancona

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Each passing hour, and with each Cypriot withdraw of cash from ATM's across the island, the banks needs grow. On Tuesday, it goes exponential. The EU knows that there is no stopping the flow of money and the whole idea of confiscation only served to kill all faith in the monetary union. This test balloon was a terrible idea and may well have been the straw to break the EU camels back.

I wonder who had the genius idea in the first place? "Hey, I know what we could do, let's just expropriate all the cash deposits. They're mostly Russian anyway, I don't think they'll mind". "After all, it's in the interests of the people, right"?

On what planet did someone think this was a good idea?
 
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pmbug

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A lot happened over the weekend (or so it seems).

Best I can tell, a deal* is being forced upon the Cypriot people (they don't get a vote on the matter apparently) that will include theft on deposits greater than 100K Euros.

...
Dr. Paul Craig Roberts: “The reason that the EU is redefining depositors in banks as lenders is so their deposit is seen as an investment and is subject to risk in the same way as the banks. So if a depositor is reclassified as a lender, it means they cannot expect to receive back the full value of their deposits in case the bank experiences difficulties.”

Eric King: “This attempt to redefine the nature of bank deposits, isn’t this being done so that the governments can engage in outright theft of bank deposits?”

Dr. Paul Craig Roberts: “They don’t want to call it theft. But they do want to make the depositors have their capital at risk as an investor would. Of course it comes down to theft, given the traditional nature of a depositor. But they are trying to get around that so that the cost can be imposed on depositors. So, yes, it is theft.”
...

http://kingworldnews.com/kingworldn...Roberts_-_Cyprus_May_Dwarf_2008_Collapse.html



*the deal as reported by Reuters:
Cyprus clinched a last-ditch deal with international lenders on Monday for a 10 billion euro ($13 billion) bailout that will shut down its second largest bank and inflict heavy losses on uninsured depositors.

Following is the detail of the deal in a statement from euro zone finance ministers.

1. Laiki will be resolved immediately - with full contribution of equity shareholders, bond holders and uninsured depositors - based on a decision by the Central Bank of Cyprus, using the newly adopted Bank Resolution Framework.

2. Laiki will be split into a good bank and a bad bank. The bad bank will be run down over time.

3. The good bank will be folded into Bank of Cyprus (BoC), using the Bank Resolution Framework, after having heard the Boards of Directors of BoC and Laiki. It will take 9 billion Euros of ELA with it. Only uninsured deposits in BoC will remain frozen until recapitalization has been effected, and may subsequently be subject to appropriate conditions.

4. The Governing Council of the ECB will provide liquidity to the BoC in line with applicable rules.

5. BoC will be recapitalized through a deposit/equity conversion of uninsured deposits with full contribution of equity shareholders and bond holders.

6. The conversion will be such that a capital ratio of 9 % is secured by the end of the program.

7. All insured depositors in all banks will be fully protected in accordance with the relevant EU legislation.

8. The program money (up to 10 billion Euros) will not be used to recapitalize Laiki and Bank of Cyprus.

http://www.reuters.com/article/2013/03/25/us-eurozone-cyprus-text-idUSBRE92O02920130325
 

pmbug

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Bloomberg reports:
Cyprus agreed to the outlines of an international bailout, paving the way for 10 billion euros ($13 billion) of emergency loans and eliminating the threat of default.

The accord between Cyprus and the “troika” representing international lenders was reached in overnight talks in Brussels and ratified by finance ministers from the 17-nation euro area.

“It’s in best interest of the Cyprus people and the European Union,” Cyprus President Nicos Anastasiades told reporters.
...
Deposits below the EU deposit-guarantee ceiling of 100,000 euros will be protected, and a loss of no more than 40 percent will be imposed on uninsured depositors at the Bank of Cyprus, two EU officials said. Uninsured depositors at Cyprus Popular would largely be wiped out, two other officials said.
...

http://www.bloomberg.com/news/2013-...entative-deal-to-avert-default-euro-exit.html
 

pmbug

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Depositors in the Bank of Cyprus, the biggest bank on the island, will reportedly lose 30 percent on their holdings above 100,000 euros, the chairman of the Cypriot parliamentary finance committee said on Monday.

"I haven't heard a formal announcement about the haircut, but this is the figure I heard," Irish radio quotes Nicholas Papadopoulos as saying.
...
"The result is a fair one for everybody involved,” German Finance Minister Wolfgang Schaeuble told a news conference after the 11th-hour talks ended with a deal.

"I think it's a good one" and it will "serve as a basis for negotiations with the troika" of international creditors, he stressed.

It will help "stabilize the situation in Cyprus and help Cyprus back onto a path of sustainable consolidation. I think the solution can help win back lost confidence for and in Cyprus," he said.

"It is the best path possible even if it isn't an easy one."

Russia doesn’t appear so optimistic. "I think they continue stealing what's already been stolen. We need to understand what this story will finally lead to," Russian Prime Minister Dmitry Medvedev commented on the move during a meeting with his aides on Monday.
...

http://rt.com/business/bank-cyprus-cut-30-percent-deposits-789/
 

pmbug

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There is Russian blood in the streets (figuratively), and Euro bankers are looking to "buy":
For Fedor Mikhin the deluge of overseas phone calls began on Wednesday, just five days after the EU first proposed the ill-fated tax levy on Cypriot depositors.

There were the two Andorran bankers who called offering to open bank accounts for the Cyprus-based businessman in the Pyrenees, and then Mr Mikhin's Swiss bank, which announced it would be sending representatives to Limassol to poach Russian clients on Tuesday, the day Cyprus is due to reopen its banks for the first time in over a week.

While last week saw dozens of well-heeled Russians and their representatives fly down to Cyprus to check on bank accounts and confer furiously with Cypriot officials, they are being closely followed by another wave of visitors: the European bankers who hope Cyprus' loss will be their gain.

One Cypriot lawyer with Russian clients said he had already been approached by half-a-dozen European banks in locales ranging from Latvia to Switzerland to Germany, some of them promising they could open new bank accounts for his clients in under an hour.

In Limassol, a lawyer for a Russian oligarch described receiving a call from the tycoon's Swiss bank, which offered to open bank accounts for all the oligarch's Cyprus-based employees as a favour, as well as emails from a dozen local Cypriot consulting firms imploring him to use their services when opening new accounts abroad.
...

http://gata.org/node/12385
 

pmbug

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Stealing money from depositors in offshore havens appears to be such good business that Russia is now thinking about jumping into it with up to $323B investment:
While some Russian businesses are feeling the pinch in Cyprus, Prime Minister Medvedev has voiced the idea of offshore zones in Russia at a regular meeting of the government, where a state project to develop Russia's Far East was discussed.

"If there is so much fuss going on, may be we should think of creating a kind of zone of our own in the Far East. We have bunch of good places there -- Sakhalin, the Kuril islands," Medvedev said, referring to the ongoing economic turmoil in Cyprus.

Speaking about the project, Medvedev called the budget for it as "unprecedentedly big" -- more than $323 billion. The money will be mostly spent on transport infrastructure in the two remote regions.

In offshore zones non-residential companies are treated to a number of privileged rules and undergo light registration, licensing and taxation. The Bahamas and British Virgin islands are among such zones and local officials pay little interest in the activities of international companies. Dmitry Medvedev hopes, some of the money, parked there, would "move" to a Russian offshore region, if created.
...

http://rt.com/business/russia-offshore-medvedev-601/

"If you build it, he the suckers will come."

Edit: Bwahahahaa....

...
Speaking after the meeting, First Deputy Prime Minister Igor Shuvalov said losses to Russian investors in Cyprus were not yet clear.
...
"What is happening is a good signal to those who plan to move their capital to ... Russian banks," he was quoted as saying. "We have very stable banks."
...

http://www.reuters.com/article/2013/03/25/us-eurozone-cyprus-russia-idUSBRE92O09D20130325

* note the description of bank customers as "Russian investors" and not "Russian bank customers". The shift mentioned in the KWN article mentioned in post #124 above is already evident.
 
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bushi

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Dr. Paul Craig Roberts: “The reason that the EU is redefining depositors in banks as lenders is so their deposit is seen as an investment and is subject to risk in the same way as the banks. So if a depositor is reclassified as a lender, it means they cannot expect to receive back the full value of their deposits in case the bank experiences difficulties.”

Eric King: “This attempt to redefine the nature of bank deposits, isn’t this being done so that the governments can engage in outright theft of bank deposits?”

Dr. Paul Craig Roberts: “They don’t want to call it theft. But they do want to make the depositors have their capital at risk as an investor would. Of course it comes down to theft, given the traditional nature of a depositor. But they are trying to get around that so that the cost can be imposed on depositors. So, yes, it is theft.”
http://kingworldnews.com/kingworldn...Roberts_-_Cyprus_May_Dwarf_2008_Collapse.html

Things in bold above, are *NOT* true, in the current state of banking industry, as far as I know. Read the fine prints in your banking account contract. Once you deposit the money, IT IS NOT YOUR MONEY ANYMORE, you are effectively a lender to the bank. How do you guys think otherwise, banks would be able to loan this money further, if it belongs to someone else, not them? IT is only one of the (many) missconceptions, that people in today's world ASSUME are true, but in reality, it is not true. Of course, nobody will be shouting from the rooftops, that it is the case, and try to make people aware of it, but I think, that in case of Cyprus, SHTF, and that just comes into spotlight - but it is (long) the case, not some ad-hoc "redefining". You are not depositing your moneyu in the bank, you are lending it to the bank, and bank has a contractual obligation to pay it back to you, at some stage, on request - but it is not YOUR money, technically.

I am not saying that it is right, I am simply saying, it is the case.

Bottom line?

buy physical :rotflmbo:
 

ancona

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I agree with Bushi. Get your cash in to a safe place and do not let accounts exceed the quantities that are insured by the FDIC. Then, work out how to get out completely from this predatory system.
 

pmbug

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Agree with you bushi, but Joe Sixpack doesn't understand that, IMO. It's good to highlight the issue and educate peeps.
 

pmbug

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Not sure when this letter/email was dated, but ...
Hey fam! Things are getting pretty crazy over here in Cyprus. I don’t know if you guys have been watching the news or seen things online, but Cyprus is on the verge of economic collapse.
...
As it stands now, nowhere in Cyprus accepts credit or debit cards anymore for fear of not being paid, it is CASH ONLY. Businesses have stopped functioning because they cannot pay employees OR pay for the stock they receive because the banks are closed. If the banks remain closed, the economy will be destroyed and STOP COMPLETELY. Looting, robberies and theft are already on the rise. If the banks open now, there will be a massive run on the bank, and the banks will FAIL loosing all of its deposits, also causing an economic crash. ...

http://www.silverdoctors.com/a-letter-from-cyprus-economy-shutting-down-going-cash-only/
 

ancona

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I think Cyprus is already regretting their decision to steal depositors money. The public will react and do so swiftly. The banks will collapse immediately upon reopening, if indeed they ever reopen. It doesn't matter if they limit withdraws to 100 euro per day, because eventually the people will drain the banks at that rate. It may take longer, but it will happen. I further suspect that there will be scandals involving government officials being allowed to move their money in large chunks, ahead of 'ordinary depositors'. the shit is only just beginning to hit the fan in Cyprus, and the blow by will land squarely in the faces of Spanish and Italian depositors faces.

It looks like we're 'gonna need more popcorn.
 

Unbeatable

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As it turns out, these same oligrachs 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.

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.

http://www.zerohedge.com/news/2013-...ready-quietly-withdrawn-all-their-cash-cyprus


I was wondering why the media keeps saying that the death of Boris Berezovsky removes a stumbling block to UK/Russian relations and that things should be a lot more positive from now on.

Meanwhile now I'm pretty sure a big part of the reason we will have better relations in future is because we let them get their money out of Cyprus last week.
 

pmbug

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http://www.zerohedge.com/news/2013-...ready-quietly-withdrawn-all-their-cash-cyprus

I was wondering why the media keeps saying that the death of Boris Berezovsky removes a stumbling block to UK/Russian relations and that things should be a lot more positive from now on.

Meanwhile now I'm pretty sure a big part of the reason we will have better relations in future is because we let them get their money out of Cyprus last week.

Back on March 18, ThomsonReuters published this "bail-in calculator":

http://graphics.thomsonreuters.com/BV/Cyprus.html

Slide the "tax on deposits under 100K Euros" to 0% and it shows a requisite tax/theft of 15.26% on accounts over that amount. Presumably, this would be applied evenly across the two banks in question.

News reports are saying that the theft from one bank (on accounts over 100K Euros) will be anywhere from 25% to 40%. And the theft from the other bank, which will be dissolved, will likely be 100% on accounts over 100K Euros. Assuming the total amount they are trying to steal didn't change, the numbers are indicating that the pool of available money in the >100K accounts shrunk considerably.
 

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lois_fire.jpg
 

pmbug

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pmbug

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Cyprus' capital controls illegal?
...
In spite of the fact the Maastricht Treaty under which the eurozone was formed mandates a free flow of capital, Cyprus unveils severe capital controls.
...
But What about those advertised losses of 30% on large Cyprus depositors?

Glad you asked. "Laiki depositors holding more than €100,000 may lose up to 80 per cent of their funds, and only get the remaining 20 per cent back over a period of years, Cyprus’s finance minister said on Tuesday."
...

http://globaleconomicanalysis.blogspot.com/2013/03/you-have-to-destroy-maastricht-treaty.html
 

pmbug

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When the world's leading expert on Sovereign debt restructurings believes that the endgame for Cyprus might be another round of restructuring, adding that "I'm not sure this is over," it is important to listen. With the calmness in Cyprus today more reflective of paralysis than confidence, Lee Buchheit senses that the parameters of how much money will be needed to recapitalize the banks have changed. He tells Bloomberg TV's Lee Pacchia in this brief clip, "the situation is spiraling down... they'll need more money because the economy is worse, tax collections less, deposits will flow out when they can flow out." As for which European nation will be next in need of assistance with its sovereign debt burdens? Buchheit agrees with us that while many are looking to Slovenia, he sees real economic and political problems in both Italy and Spain remaining especially since the EU "have certainly changed the rules of the game."

Video: http://www.zerohedge.com/news/2013-03-28/buchheit-cyprus-situation-spiralling-down

So, Medvedev was right?

Also, it appears that Cypriot banks had record outflows all through January and February before this confiscation deal penetrated the news media here in the USA. Comment in ZH discussion shows British media were warning about it in February:

http://www.zerohedge.com/news/2013-...tflows-soared-three-year-high#comment-3384807

I have to think that the simple math from ThompsonReuters' calculator may have been very optimistic on how much money Cypriot banks had when the original deal was being debated in Cyprus' parliament.
 

ancona

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PMBug,
The truth of it is that the whole thing is so fluid right now that they can never really know where exactly these banks stand. At this point, I suspect that the quantity of money coming in as deposits approaches zero, while the amounts being withdrawn are shooting skyward. I further suspect that ALL monies above the 100k threshold will be taken, but it remains to be seen. It's going to be a while before the smoke clears on this one.
 

mmerlinn

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So, Medvedev was right?

Also, it appears that Cypriot banks had record outflows all through January and February before this confiscation deal penetrated the news media here in the USA.

What I see here is a deal behind the curtains between Russia and Germany. Germany wants control of Cyprus, just as she wanted and got control of the Balkans and Greece. However, with Cyprus there was a minor problem - Russia.

Germany cannot hit Russia headon because Russia controls Germany via the Baltic pipeline. So, it appears that with major Russian money in Cyprus, the only option was for a new Molotov-Ribbentrop agreement between the two. With the massive withdrawal of Russian funds from Cyprus, it sure appears that the two had an agreement beforehand. More confirmation is that Russia did NOTHING except put on a show when they could have and would have shut down the Baltic pipeline if Russian funds were really at risk just like they shut down the Ukrainian pipelines several years ago to squash Western leaning of Ukraine.

So, it appears to me that

1) Germany wanted control of Cyprus for whatever reason, probably because of its strategic value.
2) Russian money was a major obstacle.
3) So the two made a deal.
4) Russia backs out with little or no loss of either money or face.
5) Germany gets to tighten the screws with no backlash from a major player.
6) Russia may get access to a naval port on Cyprus to replace Russia's Syrian port presence in the Mediterranean.

If this is true, get prepared. This is the same kind of deal the two did immediately before both World Wars.
 

pmbug

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... Yiannakis Omirou, Cypriot House of Representatives President, ... today, as Cyprus' Famagusta reports, he believes the 'Troika-imposed' responsibility will, "turn Cyprus into a colony of the worst possible type." His 'Icelandic' solution is to "leave the Troika and EMS behind," to ensure "national independence, national sovereignty, moral integrity, and economic independence." He may have a point; judging from the chart below of the Troika's poster-child Greece, relative to Iceland, things are not going so well. As Omirou ominously concludes, "if we remain bound by the Troika and the memorandum Cyprus’ destiny is already foretold and there will be no future."

http://www.zerohedge.com/news/2013-...no-future-under-troika-calls-iceland-solution
 

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I been warning about this 18 months ago on RPF ( www.ronpaulforums.com/showthread.ph...old-to-kick-the-can-down-the-road-for-a-while ), now it's beginning. Governments are selling gold to kick the can down the road:
Here We Go: Cyprus To Sell €400 Million In Gold, About 75% Of Its Total Holdings, To Finance Part Of Its Bailout

Curious why every bank and their grandmother, and most recently Goldman today, has been lining up to push the price of gold as low as possible? Here's why:

CYPRUS TO SELL 400 MLN EUROS WORTH OF GOLD RESERVES TO FINANCE PART OF ITS BAILOUT - TROIKA DOCUMENTS - RTRS

Or about 10 tons of gold. But... the bailout was prefunded and there was no need to provide any additional cash? What happened: was the deposit outflow discovered to have been even greater than the worst case scenario and thus Cyprus needed even more cash? As for the buyers? We will venture a guess: central banks buying at the lows.

Finally: congratulations Cypriots. You are now handing over your gold for the one time, unbeatable opportunity to remain a vassal state to the Eurozone. But at least you have your €.

The good news: Cyprus will have at least another 4 or so tons after selling the 10 demanded now, before the Troika kindly requests that Cypriot citizens sell a kidney or two to pay for the ongoing deposit outflow from its insolvent banks, and indirectly, the endless bailout of the Euro.
http://www.zerohedge.com/news/2013-...ll-€400-million-gold-finance-part-its-bailout
 

pmbug

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AEP on the Cyprus gold grab:
First they purloin the savings and bank deposits in Laiki and the Bank of Cyprus, including the working funds of the University of Cyprus, and thousands of small firms hanging on by their fingertips.

Then they seize three quarters of the country’s gold reserves, making it ever harder for Cyprus to extricate itself from EMU at a later date.

The people of Cyprus first learned about this from a Reuters leak of the working documents for the Eurogroup meeting on Friday.

It is tucked away in clause 29. "Sale of excess gold reserves: The Cypriot authorities have committed to sell the excess amount of gold reserves owned by the Republic. This is estimated to generate one-off revenues to the state of €400m via an extraordinary payout of central bank profits."

This seemed to catch the central bank by surprise. Officials said they knew nothing about it. So who in fact made this decision?
...
Cyprus may not be a “template” but it is clearly a warning to any other EMU country that needs help from now on. The creditor powers will go to extraordinary lengths to avoid sharing the costs.

We now learn that one of those lengths is to seize gold reserves. So what will happen as Portugal’s economy slides deeper into its contractionary vortex, and its deficits remain stubbornly stuck near 6pc of GDP despite the fiscal cuts, and its public debt hits 124pc of GDP this year?

Portugal holds 382 tonnes of gold, the 14th largest holding in the world, and more than either Britain or Spain. For the sake of delicacy, I will skip over the methods by which Salazar acquired that gold.

So will the Troika order Portugal to hand over these reserves if the country requires a second bail-out, as deemed likely by a great number of analysts in the City?
...
Yet this escalating assault on bank savings and on the state assets of victim nations is gradually taking its toll. Throw gold into the mix and you touch an atavistic nerve. The Cypriot gold confiscation of April 2013 may matter more than first meets the eye.
...

More: http://blogs.telegraph.co.uk/financ...dles-as-creditors-seize-cyprus-gold-reserves/
 

pmbug

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...
So we have a standoff yet again. Cypriot president Nicos Anastasiades says the country needs "extra assistance", and indeed it does since the extra demands on Cyprus are a further 28 percent of GDP.

If the eurozone refuses to offer any further help, there must surely be a greater temptation to withdraw from the euro and default on sovereign debt in a classic restructuring deal with the IMF.

That is what the IMF is there to do. Such restructurings have been done countless times across the world over the last 50 years. It is traumatic, but countries usually recover after a couple of years.

The crucial point for the Cypriot people is that the cost-benefit calculus is moving in that direction. Whether they have understood this is another matter. They may in due course as the ghastly reality of Troika policy hits them.

And just to clarify, the reason why the rescue costs are shooting up is because the Troika has finally recognised that its treatment of Cyprus is pushing the economy over a cliff. The depressionary spiral itself is causing the numbers to spike.

So Cyprus is very far from being solved, and so is Portugal. A fresh Troika leak, this time to the Pink Sheet, has confirmed what anybody following Portugal already suspected. The country is stuck in a debt-compound trap. The economic slump is proving much deeper than forecast. The deficit has been rising not falling, in spite of austerity cuts.
...

http://blogs.telegraph.co.uk/financ...rom-bad-to-worse-by-the-day-so-does-portugal/

Anyone think Cyprus or Portugal will have any gold left after all is said and done?
 

mmerlinn

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http://blogs.telegraph.co.uk/financ...rom-bad-to-worse-by-the-day-so-does-portugal/

Anyone think Cyprus or Portugal will have any gold left after all is said and done?

If there are smart they will dump the Euro TODAY and bite the bullet while there is still a chance to remain a sovereign country. However, that won't happen. Why? Because if they were smart, they would have NEVER jettisoned their old currencies in favor of a currency (The Euro) that from its inception was DESIGNED TO LOOT THE TREASURIES of the weaker nations in the Euro world.

Where is this gold going? To Germany. They are financing the debt. Once the debt becomes impossible to repay, then they are demanding the gold as "collateral" for the debt knowing that the debtor cannot ever redeem that collateral.

Once the Euro has served its purpose (to LOOT the treasuries of Europe), the Euro will be abandoned and a new currency (a gold-backed Mark?) will be established by Germany and all of Europe will be forced to use it since no one else will have any gold to re-establish their own currencies. Until all of the treasuries of the Euro nations have been looted, Germany cannot re-establish a new "Mark" because of potential competition by other members of the Euro community.

Britain is not a member of this Euro community which means that Britain's treasury cannot be looted in this manner. It also means that sooner or later Britain must leave the EU because they will be the only other major EU nation besides Germany with gold to fund a currency, putting them at loggerheads with each other.
 

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Oops, possible game changer:
Cyprus parliament will have to vote on bailout deal

Full article (translation):

- The memorandum and the loan agreement will be submitted for approval and before the Cypriot Parliament, according to a letter from the Attorney General Petros Clerides to the President of the College Giannakis Homer.

- In the letter, the Attorney General shall attach the opinion according to which no power can not have any agreement that binds the Republic without first approved by the House of Representatives.
http://ransquawk.com/headlines/cyprus-parliament-will-have-to-vote-on-bailout-deal-16-04-2013
 

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The market (and financial media) appear to ignore a lot of important stories.
 
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