March 18, 2013

Reasons to fear a false dawn

Posted in Sunday Business Post · 186 comments ·
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There are many ways to describe printing money excessively but the following quote from the Wall Street Journal’s money editor, attributed to a US official, is one of the most memorable.

“It is like peeing in bed. It feels good at first, but pretty soon it becomes a real mess.”

Whether the official is overstating the initial enjoyment is really a matter of individual peculiarity, but you get the point.

Now keep this idea in mind and think about what is happening to the Irish bond market because there has been a dramatic reversal of fortune in Irish bonds over the past few months. Has Ireland become suddenly more able to pay all the debts, which the fall in the risk premium implies? If so, it’s happy days.

But if the rally in Irish bonds is driven simply by the ECB printing money, then that’s a different story. If the ECB is swapping bad collateral for real money, giving that money to the banks, allowing the banks and financial speculators to buy up assets of Ireland in the knowledge that Ireland will be backstopped by the same ECB that printed the money in the first place, then we are in the early stages of a bedwetting episode.

If on the other hand, this week’s return to the bond market signals the start of an actual economic recovery, then we can look forward to, at very least, restful times ahead.

This is an important question because if the bond market, which is where the State borrowed money this week, is right and is basing its excitement on “the fundamentals”, then this means the worst is over. If in contrast, the market is wrong, and over-optimistic, all we are seeing is a speculative bubble in bonds – driven by too much central bank liquidity. And, just like the housing and debt bubble, this bubble too will burst leading to another financial crisis.

I am perplexed because I really want it to be the former, that is a real recovery; but I fear it may be the latter – a politics-fuelled bubble.

So is it the case that the financial markets are reacting to real opportunities in Ireland as seen through falling unemployment, proper companies being created, exports expanding and local spending and retail sales ticking upwards? This is what we all want to see, allowing us to look forward to the economy emerging from the torpor in stronger shape.

Unfortunately, the data is weak. We know that exports have slumped in the past few weeks and also it seems now that any improvements in Irish competitiveness reflect the weakness of sterling and the dollar – our two biggest trading partners – against the Euro. If the jump in competitiveness had been due to an increase in productivity, we might be in for a sustained period of expansion, but that’s not the case. Indeed the initial positive movement in Irish competitiveness, seen three years ago, may now have been down to the slump in low-productivity construction employment. Once you strip that out and account for the high-productivity, low employment sectors such as pharmaceuticals, there is no real on-going productivity turnabout.

We know that retail sales fell for the past three months in a row and that the rate of unemployment remains persistently high. Indeed as the Financial Times pointed out this week, there is a good chance that any rises in employment can be explained by the rise in immigration implying that the “quality” of the meager amount of jobs being created is falling. There are more and more part-time, temporary jobs. Indeed the recent rise in the number of people claiming they are self-employed may not be indicative of a new emerging entrepreneurial culture but may be more likely the way middle-income professionals who have lost their jobs prefer to describe their state of unemployment.

In short, there is no real change to the underlying economic picture that pertained a few months ago before the bond rally.

In addition, the moves this week by the government to try to accelerate foreclosures in the buy-to-let housing market might drain the banks’ capital. If the housing market weakens further, the banks might actually run out of capital forcing another recapitalization round.

Taking all this into account, we can see that the reasons for the bond market rally and the high-fiving we saw during the week from bond-spinners on the radio and the politicians desperate (understandably) for some financial market white smoke, might have less to do with economics and more to do with politics.

In the past four weeks, it is clear with the prom note and the ESFS deals, which push Irish debt repayments out for a dozen or more years, that the European elite – the ECB, the EU and the Troika – are underwriting Irish government debt. This will ensure that the poster boy remains the financial equivalent of a Hollister model rather than a real Irishman at the end of the night on St Patrick’s Day.

Eurozone politics explains the conundrum whereby the data are weak but the market is rallying. The market knows that someone else will pay the Irish bill in the short-term. This gives the financial markets a risk-free ride, and why would they not seize this opportunity to make money?

In the medium-term though, such a political strategy means we go further down the road of turning Ireland into a large debt-servicing machine where the willingness to pay these debts at all costs, irrespective of real growth and the willingness of the EU to subsidize such a kamikaze policy becomes the narrow-gauge barometer for economic success.

So the ECB prints money, but this money – as we can see from the M3 money supply graph – doesn’t go into the economy but into the hands of speculators. The economy then doesn’t recover, but the financial markets benefit as prices are pushed up. In terms of just how much of the movement in bonds is related to central bank moves, one of the very best financial market writers David Rosenberg of the Canadian firm Gluskin Sheff calculates that about 80% of movements in bond markets can now be related to what central banks are doing.

This appears to be what is happening now with Irish bonds. The rally is a reflection of politics not economics. In time, the positive liquidity effects of such a rally may trickle down to the economy, who knows? I certainly hope so.
However, right now, the warm trickly feeling we are experiencing is much more likely to be middle of the night, financial bed-wetting than any economic new dawn.


  1. Reality Check

    Snap, where is Adam subscribe?

    • Adam Byrne

      Here I am Reality Check.

      • Adam Byrne

        Now to read the column…

        • Reality Check

          Adam, Why do you glance “Padraig Pearse” to the side?

          • Adam Byrne

            I never knew Pearse was noted for doing that but after doing a search on Google Images, I see what you mean.

            That picture is due a change, can’t find where to do it on WordPress but I will. It’s not in the ‘Edit Profile’ section.

            WordPress is way over complicated in how they set up their site/navigation/back end etc. They need an overhaul and to go back to basics. I like this new site better though, in its presentation than the last.

  2. Reality Check

    That’s my third time as 1st comment, Woo hoo!

  3. Reality Check

    Nice article David, as you neatly summed up our fears that that we are merely in the eye of the Hurricane.

    • petrapig

      My question is do the powers that be not se things the way they are in the markets? and if they do why do they allow it? If it is sher incompetence i think i will start investing in canned goods , the new “gold” for the new poor classes.

  4. John Q. Public

    There should be rules that state that when a country returns to the bond market at least some of that money trickles through the system for a start. The private sector should be monitored like a patient in intensive care, let’s face it the banks act as it’s pharmacy. Bailouts are all very well but useless without a direct benefit to the small business.

    • petrapig

      50% of irish retail is about to fold according to some figures. 125k employed in the sector and it’s imploding right in front of their eyes because of their decisions. Where will this leave us as a nation?

  5. Adam Byrne

    Good article – lays it out very clearly. It seems rocky times are ahead. David was very skeptical on Twitter yesterday about the actions in relation to Cyprus. I guess he might expand on that in the next article or two.

  6. David,
    In relation to the bed wetting affect, the ECB swapping bad collateral for printings money will affect the value of the currency itself but Is the major effect the further decrease in purchasing power which will avail as of the increase in money supply? Further down the road this will reduce the incentive to invest plus increase saving. hence, growth at a stand still. your thoughts?

  7. dwalsh

    This article from IT reports the Irish Government welcomes the raiding of Cyprus savings accounts by the IMF.

    This tells me they will probably raid Irish savings accounts sooner or later.

    http://www.irishtimes.com/business/economy/ireland-welcomes-bailout-deal-for-cyprus-as-positive-1.1329388

    Anyone with savings in European banks must be worried.

    • Deco

      If the EU declares that the emperor has a fine outfit, and the emperor is standing shivering in the cold, then you can be certain that the Irish state will express admiration at the emperor’s new suit.

      I reckon that deposit holders above a certain size, in Spain should be concerned. You will see movement in the coming weeks. The crisis in Cyprus was accelerated by a public debate in the German media about bailing out Russian oligarchs. (Needless to say there was no such debate on Irish television – or in the paper of record, with the exception of Fintan O’Toole – the rest of the IT all got on board the Brussels express).

      If the real estate market in the Netherlands or Finland fails, then there will be an even bigger problem.

      At the source of it all is ECB interest rate policy, after Trichet. The one size fits all interest rate policy has been a monumental disaster. And they have made it worse since 2008, by making sure that other previously safe countries also see risk taking.

    • paddythepig

      The Irish government already took 2% from private pensions in 2011.

    • hibernian56

      Cyprus is a good “test market”. These scumbags will gauge reaction, if they think they can get away with it then happy days. One off taxes on savings that they can fill their trough with.

    • ouldbegrudger

      I think Noonan ought to perform an American “fire-side-chat” or an old fashioned Party Political Broadcast (remember those?) to explain exactly how the Cyprus deal is good of Ireland and the Euro. Perhaps the syndrome has moved to Brussels from Stockholm. Noonan chaired the famous meeting of finance ministers which agreed to this petrol-to-bonfire fiasco. If it’s legal in one Euro nation….. @David, your take?

      • Deco

        Noonan gave a Fireside chat, to the nation in his speech at the FG Ard Fhies in 2002.

        It was so effective, that it resulted in the Noonan meltdown in the following election.

        Noonan is an amatuer, who has a very serious task to perform.

  8. Hopefully the reducing investment effects that will seal another dent in Cyprus after the raiding of the savings accounts will seize the IMF from doing so in Ireland

    • joe hack

      “Well worth reading this from Joseph Stiglitz:” I subscribe…

      The USA over the past years is finally looking in at itself.
      There is hope for that delinquent deliquescent place yet… and interestingly the comments suggest this more than article itself.

      • Adam Byrne

        Yes, the comments were good and thankfully didn’t degenerate into a slanging match as is often the case on American forums. Has been known to happen here too, once in a blue moon!

  9. Deco

    David,

    Well done on an excellent article. The Sunday Business Post is worth 10 Euro to anybody who reads that article alone. It literally could save working people who study it carefully, a fortune.

    Everybody should read it.

    thanks,
    (old) Deco.

    • joe hack

      In Ireland we were robed at the source (the bank bailout tax) in Cyprus it is after the source. the methods are different but the result is the similar.
      In some ways the Cyprus method might be fairer as only the people with money pay those with overdrafts don’t yet appear to have to pay – A tax on the richer and not so rich.
      This might something some economists want after all if people get scared of saving they might then just spend – money or gold if you like.

      I read people are saying wait they did this on a bank holiday – do the people in Cyprus have bank holiday today… the Cyprus st patrick’s day hoist?

  10. Pat Flannery

    The ability of Ireland to successfully enter the bond market is an essential part of the Euro recovery. That is what is driving the Irish bond rally not the ECB printing money in order to simulate a false dawn. The bond markets want a healthy Euro.

    The latest news from Cyprus effectively ends the day of the bailout. The markets will have to figure this out on their own. No Euro member can ever again countenance a Troika bailout after what happened in Cyprus. Depositor confidence has been shaken to the core. And all because money laundering has polluted the world’s banking system.

    In the international money laundering business Cyprus was just a bunch of peasant women hand-washing Russian underwear down at the creek compared to the smoke stack money laundries of London.

    As for real economic recovery in Ireland, the sooner the markets take back ownership of its Irish colony from the Troika the sooner Ireland and the Euro area will return to the promise of the Deutschmark-style Euro that was the Maastricht dream and London’s nightmare.

    • Deco

      If you have evidence that banks in Cyprus was laundering money, then you might wish to present this to the Cypriot tax authorities.

      If there is funny business that involves Russian citizens, then I am sure that the Russian tax authorities would also be very grateful for any information that you provide them.

    • bonbon

      The DM was Thatcher’s and Mitterand’s nightmare. Return to the DM, now, and shake out the horrible “entente cordialle” of the Franco-Anglo faction. The only single reason for the Euro rollout was disgusting geopolitics against German Re-unification. Look at the result – is is as DMcW says a purely geo-political monetary token and the economy is flushed. For these Mackinder madmen, the economy is collateral damage!

  11. wills

    Nice article on the financial system and its bag of tricks – legalized gangsterism -

  12. redriversix

    The committee that Noonan chairs at EU level voted for the theft of private citizens money in Cypriot Banks.

    Any “levies” like this are robbery,call it as it is ..pure theft..
    Now their are reports that Cypriot Banks will not reopen till Thursday..!!

    “Irish Government welcomes Cyprus Bailout” in Today’s Irish Times

    So Government reaffirms its commitment to Theft..fuckin incredible..!

    How come media cannot call it as it is..Theft..If EU/IMF/ECB Cypriot Bailout is so honest & upright..Why doesn’t the Cyprus Government OPEN THE BANKS and trust their people..!!!

    Good article David.never seen one overshadowed so quickly by events in EU.

    • molly

      Because we all now live in a police state and I think what’s starting to unfold now will only be the start of terrible times ahead.
      That saying the land of the free is the stuff of fairy tails.

    • Deco

      Red
      Nobody takes the Irish government seriously.
      Does naybody take Noonan seriously either ?

      And when they issue a statement in a newspaper that many of us cannot take seriously, it becomes an even bigger joke.

      • redriversix

        +1 Deco

      • bonbon

        What they say is not what they do. Take what they do seriously. They are going to follow the Troika, very likely pilfering, with a smile of course.

        That is why the Triple Curve is a wake-up call. The stratospheric monetary curves, including M3 as DMcW rightly mentions now, is what they say. What they actually do is the plunging wreckage of the physical economy. This metaphor captures exactly the schizoid madness, Orwellian “new speak”, Bertrand Russell “snow is black” downright brainwashing going on.

  13. GOLD IS MONEY…

    EVERYTHING ELSE IS CREDIT

    - J.P. Morgan

    Looking more and more as if he was/is correct.

    • bonbon

      I like the picture of J.P, Morgan being raked over the coals by Ferdinand Pecora. Wall Street’s defense was pathetic, and they organized the “Business Plot” an attempted coup-d’etat against FDR. The very same crowd praising Hitler and Mussolini, and funding their politics.

      What upset the British financier, J.P. Morgan, was that Hamilton’s Credit Clause, partially activated by FDR made them redundant. The pitiful attempt to impose a British Gold Standard then as now is doomed.

      • It does not invalidate his statement.
        The bank JP Morgan is the government banker and has yet to be sucessfully sued for fraud or monopoly activity, or price setting or illegal trading.

        The the pitiful events you mention took place 80 years ago.

      • Still up to your wicked evil ways bonbon.
        Guilt by association as you try to connect gold and precious metals with fascism and other nobel causes.
        Sad sort of argument to have to rely on.

        • bonbon

          The connection is obvious, well documented, and admired by both Keynes and Hayek. In fact anyone who promotes gold is a basket case. Installing a “hard” monetarist regime would cause a catastrophic depression, and that’s fascism.
          Hamilton’s Credit System genius made the empire’s “standards” redundant. It’s the true reason for the War of Independence and the U.S. Constitution.

          • Yes of course. Most of the world is in that particular basket. russia, china, Iran, India, vietnam, Singapore etc to infinity.

            just the west is relying on a credit based debt as money system. Gold is the money of rulers and he who has the gold rules.

            Too bad the US did not hang on to the 20,000 tonnes it used to have.
            it will require 12,000 US dollars per ounce to balance the US books assuming the 8200 tonnes is still there and the balance sheet does not expand at 1.5 trillion per annum.
            Gold is according to Jim Sinclair, the only thing that can balance the books.
            Not too long for a new currency regime. I give it 5 years or less. Nothing can stop it now.

      • bonbon

        Here is a wonderful example of persistent pursuit of Wall Street’s J.P.Morgan by Ferdinand Pecora in 1933. The usual pathetic lies are now well known from banksters, and Pecora’a hard nosed questioning is the example for us all now. JPMC today is the best example of why we need a Pecora Commission and Glass-Steagall.

        As regards the Credit System, let Michael Kirsch explain – the video is excellent.

        This will likely not be to your satisfaction, nor for JPMC’s peace of mind. Be not gold-challenged, have a look at the solution to the crisis.

  14. molly

    It seams only Ireland did not burn bond holders,if this is the case why o why.

  15. Grey Fox

    So David, just to clarify, you are saying that the traditional barometer of the Bond market is now gone, one less method for the ordinary folk to measure the state of the economy.

  16. molly

    David is Ireland the only country in Europe not to burn bond holders?

  17. molly

    Taoiseach Enda Kenny declined to cast judgment on talks to impose losses on senior bondholders in Cypriot banks as part of the country’s imminent bailout, a path barred to Ireland by the EU authorities.
    This smells of scandal and bank protection.

    • paddythepig

      The Cypriot crisis has come to a head as its banks were senior bondholders in Greek bonds, and they had to take a haircut on them. So the dominoe effect is at work here.

  18. joe hack

    The Cyprus bank raid is more like a Robin Hood than it is the black sheriff Merrion Street.

  19. Adelaide

    David.
    Question: Is Money Creation at Source covered in economic texbooks?

    To answer my own question I bit the bullet and relunctantly read ‘Principles of Economics: An Irish Textbook’ (3rd edition) by G&M. A 650 page door stopper.

    For this book, the answer is NO. It covers every other ‘monetary’ aspect you’d wish to know EXCEPT how is money manifested into existence at source.

    Is this oversight common in economics literature?

    I’ve often wondered why the ‘Money Creation/Issuance’ subject is never discussed in the mainstream by commentators and economists.

    Is it because they are simply not aware of it?

    Had I read the above book in isolation I too would not be familiar with how money is issued at source. A pretty big blind spot, you’d have to admit.

    • bonbon

      It think it is obvious why certain things are not discussed in door-stopper text books.

      Have a look at what a Credit System is, as defined by the U.S. Constitution. Flouting this is what’s causing the bewilderment of the hapless.

      Britain’s various outlets and organs do not want you to know this. So have fun!

      • I hoped to get a succinct explanation of a Credit System but was unable to find one. It was not as defined as by the US constitution but as defined by vague statements from LaRouche PAC.

        No wonder you have not come up with an explanation as to how it may work. Larouche is unable to explain it . At least to my satisfaction, and so how can you?

    • joe hack

      Adelaide,

      Economics professors don’t ask questions they are like herds of wildebeest all following and quoting others very if any stop to think or question like a five year old might.

      Economist will be able to quote Friedman, Keynes and others to impress but very few will notice the herd of elephants in the banks they are too busy follow the lead wildebeest.

      Don’t expect an answer from David on that…

    • Central banking and commercial banking fiat debt based interest bearing currency is never mentioned by David so I suspect your question will go unanswered , Adelaide.

      • bonbon

        As DMcW put it in this blog : “It is like peeing in bed. It feels good at first, but pretty soon it becomes a real mess.”

        There you have it.

        The current system needs a nappy change! It stinks to high heaven!

        Now instead of all this childish bed-wetting, monetarism, we need an adult economy and a commitment to progress with the Credit to enable that. Throw off the full nappies of derivative debt with Glass-Steagall. If some bankers and politicians would rather carry on that stinking tradition, let them waddle around, at a safe distance…

  20. joe hack

    Is it not better to tax fat bank accounts than tax the average struggling worker at source who is contributing to the economy?

    Are the Cypriot government not doing what many here have been crying out for, a tax on the rich and their overseas accounts?

    Well Cyprus is overseas and do they not have high proportion foreign owned accounts- money works best when it’s moving and not suck in a fat bank account.

    Why should euro workers taxes increase when there is plenty of money sitting in fat bank accounts?

    If only they had did this here in Ireland.

    • My reading suggested that in Cyprus there is 10 times the amount of foreign deposits than domestic. At least there were but now a run on the banks is inevitable.
      So you think robbing Peter to pay Paul is ok. Or robbing people who are rich is ok.

      Robbery is robbery no matter how it is dressed up.

      • joe hack

        No,i would argue that robbing from the poor is worse for an economy than robbing from the rich whose money just sits in a bank.

        The alternative is to tax the poor at source the source a tax is a taken from is only a mater of semantics a tax is a tax.

        Those who have money in the bank can find ways to avoid tax the person working for minimum or just above minimum wages does have this luxury.

        I simply am saying this from of tax is much better that the tax the Irish paid to bail out the banks so that the Oligarchy can sip their vodka or their oysters and Guinness.

        As for worrying about precedents that is just rubbish a tax is a tax this is just another version.

        I prefer to one here 3 meals is all most people need

        If they have gold in their bank accounts i would say tax it rather than tax someone surviving on 20,00 euros and paying taxes to support a bailout.

        Its a societal choice, which one you chooses is your prerogative
        i am not so worried about this tax than i am about the taxes been imposed here in Ireland.

        This type of tax would be better for our economy than the bank bailouts taxes

        • A tax is a tax and may be deemed robbery.
          Robbery is robbery and can never be deemed to be a tax.
          Rationalization of activity does not make it right.
          Lets shoot the ptisoner. We all know he is guilty and we will save the court’s time.

          OR two wrongs do not make a right.

          • bonbon

            JPMorgan did not pay any tax as Pecora proved.

            But lecturing on ethics is quaint, we need action and action now as FDR said. Glass-Steagall hives off the synthetic debts, never to be honored. Prevaricating on this essential legislation is literally a crime against humanity. Any attempt to honor the derivative gambling tokens is genocide.

    • Deposits do not just sit there. As interest is paid they become a loan to the bank and become an asset of the bank. the bank can then use that asset as reserve to lend out 9 times more than the deposit.

      So all that money from the rich dudes are the reserves backing all those loans that your mates can no longer afford.

    • jeeaaan

      YES EXCEPT GOING FOWARD GOVTS WILL NOT GET THE CHANCE TO DO IT NOW,AS AFTER THIS WEEKEND CONFIDENCE IS ZILCH AND MANY WILL REMOVE THEIR MONEY

  21. Sinclair: “Taking Russian money is very foolish. You have to understand the culture of the people you are dealing with. The government leaders in Cyprus have no ability to protect themselves from the retribution of the former Russian KGB agents, including Putin himself.

    http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2013/3/18_Sinclair_-_All_Hell_Is_Breaking_Loose_After_Cyprus_Catastrophe.html

    The government leaders in Cyprus are trying to back-pedal right now in order to save their lives. Let me say it again, they are trying to save their own lives. Remember, ‘revenge is best served cold.’ This means the revenge never comes at the moment of the miscreant act. But it will come in time

    • Deco

      I think this would be a fair assessment.

      As Winston Churchill once commented

      “Don’t Mess with the Russians”.

      And Churchill should know well.

  22. http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2013/3/19_Sinclair_-_Cyprus_Disaster_Is_Much_Bigger_Than_Being_Reported.html

    The grab of deposits is a greater deal than recognised. Involved is 100′s of billions of russian money.

    That money will now be diverted into physical gold to the detriment of western bankers who hold a lot of paper promices for gold that will never be delivered.

    It is important to read the interview of Jim Sinclair.

    • ME

      I agree. Jim Sinclair says that. “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. People need to grasp that this is not about $130 billion. The real dollar figure is orders of magnitudes larger than that number”. So Sinclair is suggesting $1.3 Trillion or more. Sinclair continues, “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 think Zerohedge mentioned that Russia is sending 5 or 6 warships to the Mediterranean Sea.

      Also, does anyone in Ireland still keep their money in the Bank? I know what I’d be doing. There was an interesting article at http://www.zerohedge.com/news/2013-03-16/everyone-shocked-what-just-happened-and-why-just-beginning You can download the report.

      I’m beginning to wonder, “If those people who are in favour of the 10% (Tax) Theft in Cyprus, are biased because they have no money of their own to lose?

      • bonbon

        So now we have trillions in Cyprus banks? Very nice way to take the heat off the Carribean, Ugland House for example. This kind of hysterical frothing apparently has not noticed that Syria is the target of Obama right now and Russia fully opposes regime change – see what happened to Libya.

        Interesting that Obama’s new Treasury Sec. Mr. Lew, has links to Ugland House, the building with 12,000 “businesses”.

        Begin to wonder about that.

  23. Ben Davies of Hinde Capital makes interesting points on the Cypriot crisis

    http://www.hindecapital.com/blog/cyprus-oh-the-irony/

    Cyprus – Oh the Irony!?

    March 18th, by Ben Davies (Co-Founder and CEO)

  24. bonbon

    A Cypriot Lesson: Glass-Steagall or Suicide

    Friday’s EU Council meeting, was shamefully presided over by Ireland, which holds the rotating presidency of the EU Council, took austerity to a new depth.

    Who’s next?

    • joe hack

      Time to stop to the money hoarders and raid all bank accounts where is robin of the hoodie when we need him.

      Why should we bail out the rich, the gold hoarders, the money hoarder, the miser, let the fear mongers run to their bomb shelter off now down into your rabbit hole with your tins of beans, your gold and don’t forget those out of date Joe Jacob iodine tabs, fear is easy pill to swallow…

      The wildebeest are on the rampage again…

      These people need a climax to clam them down.

  25. bonbon

    YAKUNIN: `DAMAGING TO RUSSIA-EU RELATIONS’

    March 18, 2013 (LPAC) — Russia blasted the Cyprus deposit
    robbery today, as estimates were that Russian and Ukrainian
    depositors alone would lose billions of euros they had in Cypriot
    banks, and investment of these funds back into Russia would be
    affected to an even greater degree. President Vladimir Putin told
    a meeting of officials today that the EC scheme ws “unfair,
    unprofessional, and dangerous.”
    According to Finance Minister Anton Siluanov, EC and IMF
    leaders did not even consult Russia before announcing the Cyprus
    bank robbery, and that although a EU2.5 billion Russian loan
    constituted the only assistance the Cyprus {government} has
    received during the past year’s crisis. The loan had been under
    discussion for extension and restructuring, but Siluanov said
    March 18 this would now have to be “further considered” since the
    EC had acted unilaterally in such a manner.
    The {Financial Times} quoted “Vladimir Yakunin, head of
    state-owned Russian Railways and a close associate of Mr. Putin,
    [who] warned that the proposal could be damaging for Russian-EU
    relations. `Everyone knows that one-third of the deposits belong
    to Russian companies and individuals,’ Mr. Yakunin said. How does
    such a decision get made, and without even consulting with
    Russia?… They are solving their problems at our expense,’ he
    said.”
    Russian corporations (including banks) and individuals are
    estimated to hold about EU20-25 billion in deposits on Cyprus.
    Russian bank stocks fell very sharply, by 5-7%, on today, equal
    to the worst-affected banks in Spain and Italy.

  26. 5Fingers

    Great article. Nothing to be challenged there. Someone above said we are in the eye of a hurricane. Very very apt.

    So the EU has managed to pi$$ off the Russians. I’d love to get a better view of what is really going on there. I know stupidity abounds in bureaucratic circles, but this stupid? Question? Were any Irish Bondholders Russian? Anyway, that’s another story in the making and I cannot help feeling that the Euro is now moribund. Germans will pull the plug on this one.

    Back to the article. Growth has stalled…indeed everything is stalling no matter that sort of political backstop is in place. I see 3 competing reasons and maybe all are correct or maybe one drives the others:

    1) Deliberate Speculative Engineering to draw wealth to one center of control and make 99.9% be debt slaves to the remaining 0.1% and maybe even starve a lot of them out of it to solve a number of other issues relating to population, climate change etc.

    2) Financial / political management to maintain pre-bust status quo for a political and business elite in the hope that a new boom can be engineered before social unrest creeps in. This may be the EU and US strategy and definitively the Irish strategy. False dawns etc are all part of the propaganda

    3) (My personal favorite( A natural outcome of optimization in large global corporates (who have banks or are banks in some cases) who can wipe out local business and over-ride all local laws by virtue of their ability to buy and sell resources, services and products and settle for same where they like. I call it a financial/economic parallel world. Easy to spot. Nice shiny buildings in the middle of the shanty towns.

    Ireland is an open economy. When exports fall and retail keeps dropping away, you know something is up globally – make no mistake, Ireland is a litmus test of a lot of the world. Watch out.

  27. joe hack

    Cyprus is tax haven a tax avoidance scam for the rich, I say down with that Sort of thing, why should the Irish / EU tax payer bailout tax evaders in that Trojan Donkey.
    Why should the Irish sponsor the rich by way payments into the universal social fund it’s like?

  28. joe hack

    Cyprus a is tax haven, a tax avoidance scam for the rich, I say down with that Sort of thing, why should the Irish / EU tax payer bailout tax evaders in that Trojan Donkey.
    Why should the Irish sponsor the rich by way payments into the universal social fund and it’s like?

  29. joe hack

    Time to stop to the money hoarders and raid all bank accounts where is robin of the hoodie when we need him.

    Why should we bail out the rich, the gold hoarders, the money hoarder, the miser, let the fear mongers run to their bomb shelter off now down into your rabbit hole with your tins of beans, your gold and don’t forget those out of date Joe Jacob iodine tabs, fear is easy pill to swallow…

    The wildebeest are on the rampage again…

    These people need a climax to clam them down…

  30. molly

    Banks will get there just deserts what goes around comes around,for to long banks have had it all there way,its heading in the direction of people just won’t put there savings into a bank.
    Once trust breaks down the end is near.

  31. redriversix

    unconfirmed reports that the Cypriot Finance Minister has resigned..will update later

  32. redriversix

    http://on.rt.com/oysvrf

    RT News Cypriot finance minister resigns

    Is Europe’s bluff about to be called with a rejection of Bailout in Cyprus..?

  33. joe hack

    “”"Bank of Ireland CEO Richie Boucher received a total package of pay and benefits of €843,000 last year.”"”"” (RTE)

    Let do like they do it in Cyprus-raid his bank acount

    • 5Fingers

      Who does the bank raiding? Who polices the police? So far, I would not trust anyone doing anything right and rarely does it wind up that the less well off ever fare any better.

    • molly

      One thing is for sure crime pays its now official the best buiness to set up is your own bank and when you screw up with other people’s money ,you get saved by the tax payer.
      Hell you even get to walk away with a huge lump sum and a pension to die for and there’s nothing you or the government can do about it just smile.
      Well it’s about time we started playing by the bankers rules,maybe one needs to become a rat to catch a rat.

      • bonbon

        My tomcat brought in a big fat rat as a gift early this morning. Very proud, and no intention of becoming a rat at all! A calm self assured cat, sphinx like, it is no wonder the Egyptians did such beautiful cat sculptures.

        Take a lesson from the cat.

        • 5Fingers

          Lot of rat poison laid these days with all the wet weather (climate change and all that – don’t you know) – I’d have that cat checked out – contagion can take many forms.

  34. joe hack

    “”"”Establishing a banking union in the eurozone area has taken a significant step forward, with final agreement reached on what is called the Single Supervisory Mechanism.
    The deal between the European Parliament, Council and Commission was signed off this afternoon.
    Under the plans, the European Central Bank will have direct oversight of eurozone banks.”"”(RTE)

    Welcome to the Real Euro it hasn’t gone away you know and it ain’t going away.

  35. joe hack

    If we are in the euro we need clean banking system the EU is right on this point.

  36. joe hack

    With the end of cash every cent you spend can be policed it also means you don’t control it and soon your bills and taxes will be deducted at source.

    The Irish people voted for this and those that don’t vote let others make their decisions for them so by default those that did not vote supported the euro the result is the Irish got what they asked for the Euro is here to stay but it is less likely to be in the form of cash.

    Bit Money is on the way with 8 bits in Byte 1 euro may = a byte and the average industrial wage might = 1 kilobyte.

    Your wallet might be some form of flash drive so that when you walk by a wifi hotspot the ESB bill which you might have tried to avoid paying will downloaded automatic to an ESB account and when the government needs more tax they will just download it from your flash drive.

    The good news is that this should will work both ways, so you’ll be paid on time?

  37. Cyprus adjusts theft rates to baypass the lowest 20,000
    Canadian bloggers on this site see the deal as theft.

    http://www.ctvnews.ca/world/cyprus-revises-bailout-terms-proposes-no-levy-on-small-savers-1.1201428

  38. joe hack

    “Cyprus MPs reject EU-IMF bailout tax on bank depositors” ( BBC) really gosh would not have expected that! after all the country makes money out of been a tax haven for tax evaders. corruption rules – so what next?

    What can the Russians and the Cyprus come up with and who will own Cyprus now – I hope it is the Cypriot people and that they follow Iceland example but sadly that is unlikely?

  39. bonbon

    Iceland shows yet again how to do the necessary :

    Icelandic parliamentary committee unanimously passes bank separation motion

    19 Mar. 2013 (EIRNS) – Last night, the Economics and Trade Committee of the Icelandic parliament Althingi, voted unanimously to pass bank separation motion 239, which reads:

    “Parliament resolves to entrust the Minister of Economic Affairs
    with the task of appointing a committee which is to revise the framework of banking services in Iceland in order to minimize—through the separation of commercial and investment banks—the risk of disruptions within the banking sector for the national economy. The committee is to examine the policy-making of neighboring countries in this regard, and to submit its proposals”.

  40. Bamboo

    I guess we should be lucky that our governments are introducing taxes to raid us so it looks less abrupt. Our government had the time to slowly introduce taxes and austerity.

    In Cyprus – This is the first time that the concept of raiding peoples innocent savings with immediate affect. It may or may not go ahead but the precedent of the concept has been set. There is obviously no time to introduce austerity measures.

    Pension payments in Ireland will end up in vouchers. Soon we and pensioners in particular will have to pay a heavy tax if they opt to stay abroad in the sun shine for a couple of months during the winter period as pensioners simply won’t be able to afford to keep their homes warm.

    The government would want you to spend the money at home. If it goes on like this we will have food vouchers, heating vouchers, clothes vouchers and luxury vouchers for cars, phones, broadband, TV subscriptions, etc.

    So be prepared!!

    • bonbon

      Apparently the “generous” move to compensate savers with shares in future (who knows when) of oil/gas finds did not quite work.

      I’ll bet there’s an eejit who will propose shares in ghost estates to compensate for pilfering pensions and very soon savings! Or even dafter, the “sure thing” of windy power, for Britain of course.

  41. Bamboo

    Anybody with some savings should be prepared for things to happen soon. In the last few years people have been saving like mad as they are afraid to spend their money on anything. And RIGHT they are to do so.

    • molly

      That depends on 2 things people need to spend money on goods and services to help these survive and the other reason money in banks earn crap intrest and its only a mater of time before the government try to tax grab that money.

  42. Bamboo

    I was lucky enough last year to travel through Asia. I was prepared to be screwed at every corner but I was screwed only for a couple of euros everytime. The tuk tuk driver, the old people selling you stuff on the streets, the shops, customs officer, etc. But nothing like the biggest rip off by the embassies in London.

    The difference is that you are in a position to look someone in the eye and you just know that you are being screwed. Anyway it is only a couple of euros everytime. Then after some time you just accept it as it is the way people have to survive. It is cute in some way and all you can do is smile.

    We in the west have a system and culture of making sure the customer doesn’t get ripped off for the small little things. So it looks that it is all fair and above board. The problem is when you get stung, you get stung really bad and there is nothing to smile about.

    I heard a lady telling her upsetting story on the Joe Duffy show today. I wasn’t able to hear fully what her story is but all I know that she was an innocent lady trying to build up a life with her partner and she was badly stung and wasn’t able to get any sympathy from anyone anywhere.

    • molly

      Was that the lady who had bought the house in the ghost estate?
      That story was a total disgrace of how banks and developers and county councils can do what they like to who ever they like,regulations me arse,that woman and her husband should be givin all the money they payed back plus intrest plus compensation .
      This country is so tied up in red tape it chokes its self to death.

  43. Dave from Denver:

    “Looks like the bail-in vote will fail, which means Cyprus goes belly-up, which means Greece goes belly-up, which means the trigger is pulled on the massive U.S. bank off-balance-sheet OTC derivatives exposure to the southern European sovereigns and big banks.”

    • molly

      Do you really think EU will let the EU collapse ,one country after another is getting into trouble its the ripple effect and will strangle all the country’s in the EU as the whole of the EU struggles to cope its an impossible place to be.
      Bigger country’s will struggle to save smaller ones and I think the EU will collapse later rather than sooner.

      • Deco

        The EU will not let the institutional state that they have contructed collapse.

        And the EU will not let the banks collapse.

        But the people get ignored repeatedly. And then they get asked to carry the can.

        Nobody has yet resigned in the EU, or in the ECB, over this debacle. Trichet, and Jacque Delors are both forgotten about, despite their legacy of disasters.

        • Bamboo

          Same with Patrick Neary. also forgotten

        • molly

          They have been rewarded for there disasters ,surly at some stage the money to save the EU must dry up ,the so called country’s that are to big to bail out,what happens to them?

          • molly

            Decko who has the main say in the EU ?
            Decko who has the most to loose in the EU?
            If the answer is Germany and are driving the EU,they will try to force other EU country’s to be part if some sort of a bail out machine,remember the saying get your house in order well its a pit to late for that?

        • bonbon

          How silly can you get, they cannot hod the idiotic thing together! It would be funny to watch them putting humpty dumpty together, if they were not so dangerous.

          Desperation is all they have.

          We have Glass-Steagall, and they know it!

    • Dilly

      ECB to Cyprus: “‘It rubs the lotion on its skin or else it gets the hose again.”

  44. Great analysis. you probably know my gripe with it at this stage though. It’s so misleading to talk only of the ECB printing money. Even if this is an analogy for the creation of electronic reserves the analogy has to end at banks using this money to lend on to SMEs because this is a different type of money to that which the banks create through lending. Brendan Keenan and Mario Draghi made this related point. The liquidity (loans) given to the banks by the ECB is used by the banks to lend to and borrow from each other. It does not automatically increase money in the economy.

    • bonbon

      Exactly, no “tricke-down”. They, I believe cannot understand it.
      It is the lawful end of monetarism.

      The Triple Curve shows the various monetary aggregates rocketing stratospherically, but the plunging physical economic disaster is the result of their “heroic” efforts.

      The obvious remedy, is first to split off the synthetic iou’s but to institute a national credit program along Hamilton’s lines as will be the foundation of the US Third National Bank.
      Restoring the US Credit System

  45. A pure piss take. You guys are laughing all the way. Can’t beat some old fashoned disaster capitalism to turn you on and turn some buck can you?

    Sad shameless blood sucking tape worms with brains the size of planets and hearts the size of a pea

    As long as you get scraps from the table you are like little boys in wonderland. To make tory boys laugh all you have to do is rattle off some toilet jokes. They love that sort of thing. Crap jokes that only a simpleton could laugh at

    Unemployed people should be given ‘vouchers’ to attend your courses and if they refuse they are cast adrift to a life of crime, self abuse and or / or suicide. That’ll keep em right and show them what’s morally proper. Wankers

    And sick people can just fuck right off! This country needs proper heroes and not cowardly weaklings. I wish granny would just fuck off and die because she is not part of our future ‘vision’ and she serisouly hinders our ‘competitiveness’ and anyway she is costing a feckin fortune. If she had any spark of patriotism in her miserable old hearet she’d get the message and expyre for olde Ireland.

    Besides I could buy a new Apple Mac with the insurance lolly

    We can make compulsory purchase orders on land near Naas to bury the fuckers and get a private company to run it

    The landwoners will object but we will tell them to fuck right off because we can

    Onwards on upwards in the white heat of the Irish recovery.

    Corporate rules. Get yourself a cozy job with a corporation and keep your head down until they decide you are expirable. Go to sleep. The truth is too hard to take

    We are on day 42 of the hunger stike in Gitmo and you guys are still talking banks and the price of gold. Fuck you.

    Hail Hail Fine Gail !!!!

    Gail was my first and a nice un too.

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