March 25, 2013

Cyprus Crisis: Betrayal of trust in banks will cause a long economic jam

Posted in Sunday Business Post · 136 comments ·
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If you ever doubted that we lived in an interdependent world, the traffic chaos in south Dublin last Friday will reinforce just how fragile the ecosystem we inhabit is. Running up one rat-run after another to avoid the escalating traffic, it struck me just how similar the flows in the economic and financial world are to the flows in traffic.

 

One small change in the real world of rain and traffic can cause enormous ramifications all around the city. Last Friday, the torrential rain – unusual but hardly unheard of in Ireland – caused flooding, closing the N11 and revealed to all just how dependent we are on each other.

 

People like me, who were only collecting children two miles away from their house, got caught up in a jam which had its origin about five miles away on a main road that had no obvious connection to the blocked-up, suburban road on which I sat, motionless. But once the traffic stopped outside Enniskerry, the resulting chaos spread, revealing how we are all dependent on a smooth flow of traffic, and how an event in one part of the system can have enormous ramifications in another part.

 

Consider the similarities between the movement of traffic on the roads, and the movement of cash and credit in an economy. When credit is flowing and people are spending, and basing that spending on the notion that there will be no credit jams, broken ATM machines or bank runs, the system works fairly well.

 

You pay me, or indicate that your account will be debited, and I trust you and the bank to deliver the cash into my account in a few days. Similarly, when you deposit money in a bank, you fully expect that money to be there when you want it. When you open a savings account, it never strikes you that you are lending the money to the bank.

 

Expressions like ‘safe-keeping’ and ‘nest-egg’ come to mind when you put money in a savings account. Who thinks that, when you set aside money (or when you sell an asset like a house and put the proceeds into the bank, rather than speculate on bank shares or blow the money on fancy stuff), you are being anything other than prudent?

 

This is why the eventual deal being forced on Cyprus is so dangerous, because going after savers to pay for the greed and stupidity of the bankers, regulators and, of course, the EU itself – which created and oversaw the monster that is the Cypriot banking system – breaks the essence of trust between saver and bank.

 

Over the last few days, I have heard all sorts of people – particularly academic economists (who tend not to be the most entrepreneurial people in the world) – suggest that savers ‘lend’ money to the banks. Yes, let’s repeat that: ‘lend’ money to the bank. Is that what you think you are doing when you open a savings account? I defy you to find the word ‘lend’ in any bank literature or advertising about opening a savings account. You won’t find it, because it doesn’t exist.

 

In the main, savers put money in the bank for safekeeping. This is why savers are different. They are not ‘legitimate targets’ to go after in a bankruptcy. They should be regarded as a special case – no matter how big the deposits. Imagine you just sold your house – which you regarded as your pension – in Cyprus, and put the cash in the bank, only to be told you are to be punished for prudence.

 

Depositors are a different type of bank creditor to any other sort. In an insolvency situation, they ought to be regarded as ‘trust creditors’ or ‘creditors in trust’. They deposit their money because they trust the system. They are not ‘investors’ in the traditional sense like shareholders or bondholders. They trust the system to look after their savings and, as such, they need to be protected. If you actively break that trust, as the EU wants to do, you do so at your peril.

 

Of course, the peril or risk here is that depositors in other countries with still-unresolved banking crises, such as Spain, will see the Cypriot deposits being looted, think “we’re next” and take their money out of the banks.

 

This deposit flight is the bank-run – which is the very outcome that the authorities are most keen to avoid.
Why is Cyprus a special case? After all, every eurozone crisis has been labelled a special case by the EU up to now, so why believe that this is the last one? And what if ‘next time’, in the next country, the €100,000 threshold is €60,000, and the levy is even higher?

 

The reason there is likely to be a ‘next time’ is because, now that deposits have been targeted, people all over Europe are realising that the banks actually don’t have all your savings in their vaults, safe and sound. They have lent your money out and, when you look for it, they need to find it elsewhere to plug the deficit.

 

When economists blithely say that depositors are creditors who need to pay in the same way as taxpayers are asked to plug a deficit, they forget the role of psychology in finance and economics.

 

As they say, there are two things certain in life: death and taxes; we mightn’t like taxes, but we are used to them. Therefore, the reaction to higher income taxes is not that dramatic because we know what tax rises look and feel like.

 

Taxing savings is different. It breaks the rules and it causes panic. This is why, no matter what happens tomorrow, there will probably be a run on the Cypriot banks when they open. If you were Cypriot, what would you do the minute the banks open? Would you take the word of people who said that your savings would be safe, only then to turn around and indicate your savings could be confiscated because you had saved in the first place?

 

Once people lose trust in banks, they hoard money. Once they hoard money, credit stops flowing and, once credit stops flowing, the system, like the traffic system, clogs up. People in one part of the economy who mightn’t have been directly affected by the deposit confiscation are affected because credit dries up and the system gets stuck.

 

Credit needs to flow again, but this demands that trust in the system is recovered. However, trust, once it is abused, takes a long time to come back, not just in Cyprus – but all over the eurozone.


  1. Griff

    Swiss banks with minus interest rate back in business

  2. hibernian56

    Its theft.
    It was disturbing to hear muinteoir Noonan stating that the situation in Cyprus has nothing to do with Ireland.
    Really, I would class Cyprus as a test market.

    • W.AxlOFaolain

      This article is spot on, and Im actually glad the Cyprus precedent has been set. The reason being, it destroys utterly the notion that the EU/IMF/ECB are in any way an honest broker with the interests of Europe and its people at heart.

      Maybe we will look back in years to come and point to this cynical act of pure theft as the beginning of the end for the wreckless institutions of the Euro and the EU.

  3. jeeaaan

    THE NEW WORD FOR “LEVY” IS THEFT.I WILL STEAL A BAR OF CHOCOLATE TODAY AND TELL THE SHOP IT IS A “LEVY”.THE BLAME GAME GOES ON.NOONAN BLAMES CYPRUS FOR WANTING TO BURN DEPOSITORS AND CYPRUS BLAME EUROGROUP.IT IS BLANTANTLY OBVIOUS DEMOCRACY IS DEAD AND GERMANY WILL SOON BECOME THE NEW MAIN COMPETITOR TO CHINA.SELF INTEREST AT THE HEART OF THIS PIGS ARE LEFT IN THE SLURRY PITT. IRELAND NEEDS TO EXIT EURO PRETEND GAME, STOP BUYING GERMAN AND MARKET OURSELVES WORLD WIDE.

  4. Puschkin the Black and White Cat

    Although it would not affect me, this would drive me out of my sitting room and on to the streets.
    That’s something Noonan wouldn’t want.

    Noonan was a big man when he threatened a dying woman who was poisoned by his own department. But this, well , come on Noonan do it, Angela would think you were a great boy altogether !!.

    http://en.wikipedia.org/wiki/Michael_Noonan (search for Bridget McCole )

    • hibernian56

      My mother despises the man, reminds me of that story every time his name is mentioned.
      He is a self serving scumbag. Thats my opinion.

    • Deco

      Noonan is the village idiot in the cabinet.

      He speech at the FG Ard Fheis in 2002 is a reminded to anybody that even the most useless morons in Irish politics, can fail abysmally, and still survive due to lack of competent alternatives.

      • molly

        Noonan was on the radio this morning and said the first deal put to cyprus was a bad deal ,he is so full of crap,he’s change his tune.

  5. RapidEddie

    Notice that depositors ‘need’ to plug the deficit, taxpayers ‘need’ to plug the deficit, but banks need to be given money. Funny how that works. We’re living in strange, Alice in Wonderland times. Banks and large financial institutions roll the dice, large men in cheap suits turn up at our doors demanding reparation.

    Personal debt and arrears cannot be forgiven, as this would create ‘moral hazard’, yet the same metric doesn’t appear to apply to financial institutions.

    The only other comment I’d make is that this seems like a never-ending series of collapses and crises. This would suggest that an upturn is not in sight. Perhaps 2 or 3 years down the line a gradual recovery – at which point the recession will have persisted for the best part of a decade – but no guarantee of that.

  6. NeilW

    Unfortunately that is the system we have.

    If you put money in a bank above the taxpayer insurance limit then you are investing in the bank.

    They are senior bond holders.

    Now if you are suggesting that depositors should be protected regardless of the sums in there, then you have to ask whether private lending banks can be permitted to continue in their current form.

    You can’t have a system that privatises profits and socialises losses.

    • joe hack

      It seems David wants that type of system and to correct you slightly here is the EUs bank deposit guarantee which only applies to failed banks…………..

      “””””Deposit Guarantee Schemes reimburse a limited amount of deposits to depositors whose bank has failed. From the depositors’ point of view, this protects a part of their wealth from bank failures. From a financial stability perspective, this promise prevents depositors from making panic withdrawals from their bank, thereby preventing severe economic consequences.””” http://ec.europa.eu/internal_market/bank/guarantee/index_en.htm

    • petrapig

      Investment banks were doing just fine and the old bank manager ran institution was a safe bet for the old savings , till they allowed the sharks at deposits , crazyness couldn’t end any other way than heads we loose .tails we loose .. Goldman sachs runs the world.

  7. David NZ

    You think the Euro-Austerity mentality is going to stay in Europe?

    Here in New Zealand our Reserve Bank has decided it would like to have a look at the new Basel Accord ideas about using depositor funds to pay bank debts if the bank goes under. Our right wing Prime Minister who is unaccountably popular has assured reporters that our banks (mostly Australian owned) are perfectly safe, so it is highly unlikely that this eventuality will ever arise.

    Great. Just fantastic. We used to have a deposit guarantee, now we have a crap-fest.

    Will I have to split deposits between banks as a form of insurance? Should I buy and sell shares on a short term basis or buy short-term govt bonds as an alternative form of saving?

    Why don’t you Europeans just kill the Euro? Kill it stone cold dead. Get it over and done with before you sink the world economy again. Then we can all get on with business.

    Spain, Italy, France can’t trade their way out with such an overvalued currency. They can’t expand their own national credit when they don’t have their own Reserve Bank. The Germans are never going to let them.

    Surely it is time to face facts, and bite the bullet.

    Ditch the Euro. It doesn’t mean getting rid of the European Union.

    • markodxb

      David NZ has a point in leaving/breakin up the Euro and an opinion that David McW shares as we have seen in many previous articles. However this very action would only increase panic and exacerbate the ‘bank run’. Is that the bad tasting medicine Europe needs to take now?

      • petrapig

        Draggi will preserve the Euro at all costs so that mean we are on borowed time as is a few other pigs in staying in the club of the Euroship.

  8. ToffeeFan1

    Bond holders and deposit holders are fair game in a Euro economy (Cyprus) in which Russian money is the largest portion, when German Pensioners money is at stake – it is impossible to burn the bond holders and large depositors, wake up and stop protecting rich German Pensioners at the expense of our own children’s futures !!!

  9. crossroads

    It seems that the agreement being announced today contains all the elements of the approach promoted consistently on here by David over the past couple of years.

    i.e. A Bank Resolution Framework where the rules of capitalism apply. Failed banks are wound down with shareholders and bondholders being wiped out, depositors below the €100,000 guarantee threshold are saved and larger depositers suffer losses but have the (slim) chance of future upside in a debt-for-equity swap.

    And according to the report, the €10 billion bailout money will not be used to shore up the banks (which although not stated, seems to imply it will used to support the government’s finances and hence the country as a whole, in the likely future bond-market difficulties for Cyprus).

    See http://www.irishtimes.com/news/world/cyprus-clinches-last-ditch-deal-main-points-1.1337850

    The fact that none of this means that Cyprus is out of the woods yet just shows that no solution is perfect or painless. I wonder what would David have done differently to that which seems to have been agreed?

    The fact that the €10 billion bailout money is over 50% of Cyrpus GDP raises questions about Cyprus’ future debt sustainability unless it is used to replace existing debt as it falls due, rather than being used as new additional debt.

    Of course, the earlier consideration of bailing-in sub-€100k depositors was sheer incompetence and is going to cause all sorts of future problems. Just because it didn’t actually happen in this case is unlikely to reassure depositors in other troubled countries and banks.

    And then there is the contradiction that, in order to preserve Cyprus’ membership of a Euro / European Union based on the free movement of capital, among other things, it is necessary to introduce capital controls.

    In the battle to persist with and preserve the euro, the union itself is being ripped asunder.

    • joe hack

      Yes the Cypriot government failed last Friday to tax the lager accounts only – a huge mistake that that I mentioned here last week when I said that they would regret it.

      Their gambling on brinkmanship has now made their situation worse and the small man will now suffer for it.

      I agree too that David is contradicting himself here.

    • mcsean2163

      Well said crossroads.

      I have a few share investments, my wife says to me that it’s gambling to which I agree but remind her that so is depositing money in a bank.

      It seems fairer that the people that put their money in an ultimately insolvent bank will lose out rather than the taxpayer in Cyprus or the taxpayer in Europe as a whole. Of course, it may have very detrimental affects on some, especially if they are highly leveraged but that’s life.

      Why should a disabled person have to pay in loss of services for a person that put their money in a bank. There are no guarantees in life. It’s no harm if people wake up to this reality. Why does it mean that they will hoard? Would it not be more likely that people would invest and do something with their money rather than let it sit in the vaults of bankers.

  10. CorkPlasticPaddy

    I’ve said this before and I’ll say it again, in fact I’ll keep on saying it until the ordinary people of this country eventually sit up and take notice!!! We’ve got clowns running this country and we’ve got even bigger clowns running Europe!!! Yet the people of this country keep on voting for those very same clowns over and over again. Why do they do they keep on doing this???

    What’s sadly lacking in this country is COMMON SENSE!!! We’ve got a government and a civil service that’s full of yes men and women and when it comes down to tackling the problems within the Eurozone,oh, we’ve really got a bad case of the ‘we’d better go with the flow, we don’t want to be upsetting the likes of Herman, Manuel, Ollie, Christine and Angela, now do we???’ It just makes me weep!! Nigel Farage of UKIP has the right idea of how to deal with those clowns in Europe in the way that he keeps on showing them up for what they really are, a bunch of dangerous tossers, who just don’t know their arses from their elbows!!!

    David in NZ? I would agree with you up to a point and that is that all of the problems that have taken place in the European Union up to now is down to the very same European Union in the way that it was set up. None of this would have happened if there had still been an EEC or a single currency.

    • Adam Byrne

      They keep on doing it, because they are all clowns themselves Paddy, worse clowns in fact than the people they vote for.

      I prefer to call them Muppets. They are legion.

      • Reality Check

        Very True Adam, “Government is the great fiction through which everybody endeavors to live at the expense of everybody else.” – Frederic Bastiat.

        • Tony

          Clowns indeed. However the alternative s just as scary. In the last election my choices included 2 FG, 2 Labour, 2 FF, 1 Sinn Fein and a bunch of nut job lefty socialists. I presume I’ll be faced with an equally inept shower at the next election.
          Paddy and Adam, have you guys got realistic alternatives who won’t drive the country further into the crap. The independent option is rarely better than the “establishment” politicians. I think the likes of Flanagan, Daly and Wallace have shown us that.

          • ElectricJohn

            I agree that this is the essence of the problem. There is a significant eurosceptic, centre-right body of public opinion developing in Ireland (especially younger debt-laden electorate), that has no voice in government…..and has no option at the ballot box. Surely someone will fill this vacuum? Stephen Donnelly maybe? David himself?

            you might consider these guys to shake things up?. http://directdemocracyireland.ie/

            I’d hate to see the pragmatic teachers in FG, FF, slowly adjust to fill the vacuum. I want to see them wiped out by a new, competent party representing the younger debt laden demographic!

          • Adam Byrne

            I vote for Sinn Fein myself. Pearse Doherty would make a decent leader in time. I won’t be staying in this country forever though, won’t make a difference to me in the long run.

    • Eireannach

      Paddy,

      We have people from Cork who reckon they should break away from the rest of the Republic, to form a ‘Republic of Cork’.

      But they’re not advancing this plan. It is – literally – just a load of Cork pub-talk.

      Meanwhile, Cork people vote for FF.

      That’s Cork for you. Not doing anything, not going anywhere except back to FF.

    • Deco

      If they are competent, then how come this mess keeps occurring again and again.

      And less face it. The current mess is many times wrse for the ordinary working stiffs, than the ERM mess in the 1990s.

      Though, the bankers are far better insulated now.

      Now we see the real effect of the EU monopoly on policy, and the common currency.

  11. Deco

    What is the lesson in all of this ?

    The lesson is this. If you are an oligarch or a rich bank with more than 100K to spare, then don’t lodge money in a country, whose political system you cannot compromise.

    Actually that was already evident in the Greek and Irish bailouts. But now we are seeing the other side of it.

    A little bit of political corruption, is effective in producing a little bit more political corruption.

    The current deal is bad news for Spain, because of the behaviuour that it will induce.

    It is also bad news for Italy, a country with a lot of money, and whose citizens own high quality investment assets in the Americas. Because now, they are going to go looking for more and using family connections to provide some security against an ECB that they will trust even less.

    • Reality Check

      I see it as the beginning of the end for central banking.
      TRUST IS GONE.
      As you have said yourself Deco “the EU emperor has no clothes”.

    • Tony

      Italians using “family” connections sounds ominous.

    • molly

      I seam to remember the Greek banks gave there deposit holders some notice ,so there was a lot of money taken out before it was to late .
      Unlike cyprus who done a sly way something like the Irish government winding up anglo.

  12. lff12

    David, while I do agree that the imposition of sudden deductions on deposits and transformation of other accounts into deposits is causing panic throughout the European banking system, I would point out the following:

    1. Cypriot saves were receiving interest rates far above the notional interest rate – apparently 15% in 2 years? So a deduction of 9-10% still leave a net return of 6% in two years which is still far above the returns in other countries.
    2. Going on the history of defaults in Argentina and other countries, generally deposits are among the first thing to be seized in event of a default. The grab to the state would then have risen to 40-50%, depending on your source. Pension funds have also been sequestered in the past.

    The Cyprus situation is early days yet – we probably don’t know what is really going on and won’t truly learn for another couple of years, as has been the case elsewhere.

  13. Deco

    If the ECB interest rate is less than inflation, then it is not just greedy people that get involved in asset price speculation, but the entire society.

    And this is the nexus of EU policy post Maastricht, and ECB interest rate policy. The EU is overall uncompetitive, and is losing employment. And the ECB is lowering the interest rate to make up for the deficiencies.

    This will result in the bankruptcy of every Eurozone country, and possibly a few non-Eurozone countries as well, like Denmark, and Sweden.

    The EU’s monopolistic, all embracing, totality approach is not up for negotiation. It will end in ruin, before it gets reformed.

  14. Deco

    War is inevitable when the wealthy in one country start theiving from the wealthy in another country, and they both put the poor to fight for their position.

  15. I think it’s quite misleading to call account holders depositors. Perhaps conforming with the buzzword is forgivable but to continue the story with cash analogies in today’s digital world is not.

    The story still seems to be that customers of the bank deposited money with the bank who later lent it out and can’t give it back. David says, ”They have lent your money out” implying that banks fund loans from other people’s deposits. That is wholly inaccurate because banks don’t process loans in cash form and nobody’s bank balance is decreased when a bank advances a loan. It defies belief at this stage that so many intelligent economists can’t comprehend basic accountancy. When you use cash analogies for the accountancy procedures of banks it never occurs to anyone that money would ever be destroyed by banks but of course it is on a daily basis.

    Only 3% of euros exist as cash and there’s no way this amount of cash could lead to deposits which form the other 97%.

    Most ‘deposits’ are created by the banks when they process a loan. They type a new bank balance for the customer and treat it as if the customer had deposited that amount of cash. The result is that every ‘deposit’ has an even higher debt to the banks and it’s systemically impossible for all loans to be repaid.

    When enough people default and the banks ‘bad debts’ account goes up, Plan B is now to debit people’s account such that the banks liabilities decrease.

    This means the money that was in people’s account will not exist. Plan B does not ‘raise’ the necessary billions – it destroys it. It’s not a tax because the Government won’t have the money afterwards, no one will. It is not theft because no one has stolen any money, rather it’s been deleted.

    The Cypriot economy is short of money and the ‘solution’ is to delete money?

    All of these problems and the contradiction I’ve just highlighted are a consequence of not updating the system to take better account of digital money.

    It’s an accident of technology that we not use the banks’ liabilities as money for 99.9% of transactions by value. We could declare all bank deposits as legal and recognise them as the money they are, thus removing them from the banks’ balance sheet.

    They would be 100% safe. There would never be a bank run again. There would be no need for deposit insurance. There would never be a banks bailout again.

    • joe hack

      “It defies belief at this stage that so many intelligent economists can’t comprehend basic accountancy.” define intelligence?

      “Plan B does not ‘raise’ the necessary billions – it destroys it. It’s not a tax because the Government won’t have the money afterwards, no one will. It is not theft because no one has stolen any money, rather it’s been deleted.” So did Plan A

      “I think it’s quite misleading to call account holders depositors.” YES very misleading – there are savers with real hard earned cash too but they are a minority and most, if not all, would not have 100K in cash savings…

    • joe hack

      YOU MEAN BORROWED MONEY WHICH CAME INTO EXISTENCE AND NOW SITS IN ANOTHER BANK AS A DEPOSIT THE ORIGINAL LENT MONEY WAS LENT IN AN OVER INFLATED ECONOMY – THE VALUE THE LOAN MONEY WAS GIVEN THEN HAS CHANGED SO IT NEEDS TO BE DELETED? THIS IS BETTER THAN AUSTERITY?

    • ShaneH

      Hi Paul,
      At last some common sense on here. A few people have commented here before about the true nature of money creation and the monopoly that the private banking system has on it. This lays at the heart of the systemically flawed financial and economic models adopted around the world today. I rarely read the nonsense posted on here anymore. It becomes so frustrating to read or listen to anything in the mainstream media. The general public are constantly being misinformed through the media by so called experts (David McWilliams Included).

      Economics as a system is criminally flawed; economists understanding of this system are even more flawed, and then at the heart of it we have a privatised monopoly money system that creates perpetual debt, transfers wealth from poor to rich and fuels infinite growth, and the cherry on the top? This all takes place on a finite planet.

      You couldn’t make this stuff up. All the mathematical and Quantum Physics formulas in the world will not correct the systemic issues in this system and all Bank of Sweden awards in the world (so called Nobel Prize) will turn this into a credible profession.

      Shane

      • joe hack

        “You couldn’t make this stuff up. All the mathematical and Quantum Physics formulas in the world will not correct the systemic issues in this system and all Bank of Sweden awards in the world (so called Nobel Prize) will turn this into a credible profession”

        Agree

        it could be that they don’t believe that money is magiced into exisitance after all it is hard to belive

        It seems they are lazy and cant be bothered or are just flowing the herd..

        • joe hack

          Shane I agree,
          It could be that they don’t believe that money is “magiced” into existence after all it is hard to believe.
          It seems they are lazy and can’t be bothered or are just following the herd…

      • Tom Crowley

        Steve Keen on Russian reaction and where this will go
        http://youtu.be/UTNcXnqBUh4

    • ShaneH

      Hi Paul,
      Great work on the site, i have been aware of use for some time. I will touch base with you over the next week or so.

      Shane

  16. redriversix

    War is the next stage Deco…History is always repeating itself and Humans are doomed to continue the same behavior time & time again expecting a different result.

    Ordinary people paying for extraordinary financial disasters & failures…

    Their is zero incentive to end this financial War as it is too profitable..for the few and reduces the rights & aspirations of the many..a further dumbing down of society.

    Levies are theft…levies on pensions, wages, Bank accounts is just theft,nothing more nothing less..call it as it is…

    Ultimate goal is control of a Countries Resources, natural or otherwise.

    The raging apathy of the people is the greatest weapon Countries have against “us”…most people will take whatever shit is thrown at then & ask for more.

    Keep your head down
    Don’t rock the boat
    Comply and don’t ask questions ….

    Governments are clearly just caretakers for Senior civil servants …they are the ones who run the Country.

    Want change.?.FIRE THE TOP 3 LEVELS OF Civil servants across the board…it would be a good start.

    If I was the I.M.F why would I deal with a Government that may lose office after 2,3,4,5 years ? fuck that..deal with Senior Civil Servants..they are their for life..!!!

    Me and a few like me are making life very difficult lately for Banks..it has been a long road..but we are starting to see some results….

    Wanna get involved..? first thing you do , is a budget , protect your family…realize your worth as a person…take back your power..do whats right for you and yours..only when you can help yourself..can you help others..Do you know right from wrong ?… are you doing the best you can…? Good

    Today is the start of the rest of your life…move on , lets go…life is to be enjoyed not endured…do not let your success or your mistakes define who you are…shit happens..get up .. dust yourself down and move on….Being a victim gets really fucking boring after a while.

    Stick with the winners..! stay positive.. but be realistic..!… don’t waste your time with people who cannot hear you…they never will..

    You will always have what you need…! trust me..been their , done that.. I am not writing this from a theory point of view as many of you know….Believe it or not, with all the eloquent articles and economic opinion around… sometimes when you ARE doing the best you can …it comes down to the fact that sometimes you just gotta tell Banks to Fuck off…..

    I did…..and I am still here , still gotta great family and I have enough for today….

    How are you ?

    Have a great day.

    Barry
    RR6

    • Deco

      Barry, the people are often in a trance. The expert at describing this is an American commentator called “James Howard Kunstler”.

      As long as TV coverage reassures people, they are “plugged in” to an alternative interpretation, that effecitively is an electronic world of deceit.

      We had the Man united Taoiseach. And he wanted a Supersize me style sports stadium. So that bankrupt people could be mesmerized by the business of show, while living in a miserable reality. It is about dumbing down the people.

      Good on you that you are finding your personal freedom, your own intellectual space, and your own space. We live in a world where the prevailing wisdom(sic) is that these things are of secondary importance to the centralized and controlling. And of course the super-rich control the centre. The super-rich want concentration of decision making, so as to reduce the number of options available, so that false dicotomy choices are the norm. You are dammed is you choose A, and screwed if you choce the only available alternative.

  17. joe hack

    Finally The EU Is Bringing Thrust Back In To The Banking System…

    It’s great to see the bond holder get burned rather that the postman or the bus driver etc, having to bail out the bond holder.

    This means earned money-money worked for is at work – real money – a real economy.

    Where to run with your money – Noonan could set up a tax haven on Ireland Eye or Dalkey Island maybe D4 but I fear there is already one there common Markel sort it out.

    I wonder did Quinn have money in a Cypriot bank maybe Fitz has some there.

    THERE IS NO EURO WIDE BANK GRANTEE ON FUNCTIONING BANKS IT ONLY APPLY S TO BANKS THAT HAVE FAILED.

  18. 5Fingers

    Not sure there will be banking runs because there is no where to run. There is no solid evidence that taxing savings or wealth really causes that much emmigration of wealth. Basically wealth goes to where it is safe and pleasant and hangs around.

    Europe has been good for Cyprus. No war. Compare that with 30 years ago.

    OK, so the banking tax haven has gone belly up because they over speculated in Greece. Boh Hoo…it still looks a damn sight more prosperous than it was decades ago. It will be again.

    Let’s understand why the EU is there. Eliminate conflict. NOT look after your savings. And it generally works and the bureaucrats will continue to make a big mess of things and patch them up. Let’s wish them luck.

    • joe hack

      Yes in some respects! And this money that is been taxed will not go into the Cyprian governments vault in will be deleted. If it were to it would bloat the economy.

      I not sure when they delete money do they get asked the annoying question “ARE YOU SURE YOU WANT TO DELETE” but in this case it might be advisable to be asked such a question.

  19. 5Fingers

    One thing that will be tested…can bureaucrats really get away will burning the wealth of zillionaires and get away with it. Remember these are people who are used to getting their own way and doing something about it otherwise.

    Interesting test to see who is really running the place.

    • 5Fingers

      Definitely gah gah today. Could be the cold. My point above is that the majority of the “mega-savers” do not see themselves as answerable to any local laws that allow any expropriation of wealth – call it negative interest rates/ call it what you like. Bank busts were not in their plan. I would not be surprised to see some annoyance being expressed in the coming weeks/ months. Remember we are dealing with people who have resources and I say again, used to getting their own way. For example, I still believe the gas feeds to Europe are a major vulnerability.

      • Eireannach

        The Russians who will lose a lot of money in Cyprus are not the same Russians who operate Gasprom. Even if they are, they won’t give it away by reacting with the gas spigot.

        However, the Russians who’ve had their money confiscated will be plotting revenge of some sort, that’s guaranteed. Economic revenge of some sort.

        • Deco

          Correct on both counts.

          The heaviest losers in this debacle are the oligarchs who keep their money outside the access of the regime in Moscow. Therefore they were never going to get easy treatment from the Kremlin. The Kremlin now wants to renegotiate Russia’s current Cyprus loan deal. Russia has a double tax treaty with Cyprus and is closing in on the oligarchs in Cyprus. But the Kremlin would have regarded much of the money in Cyprus as it’s money.

          The heaviest losers also include some who happen to have a very abusive nature, and think nothing of killing people who cost them money. In fact they have been making it their business to kill those that cross them for a decade, and perhaps even more.

          I expect the Russians to make something of this, and try to use the expertise of Cypriots to develop their own financial services. So that they too can get into the “something for nothing” “business”.

  20. molly

    When the government tells you and me that they need to raise money next year.
    The public have no more to give after been screwed on all the new taxes ,what do you think this government will do go after your savings in the bank.
    Do you trust this government ? I don’t .

  21. Harper66

    “So, you see, Germany has broken the thieves-in-law code by imposing two different deals which, in both cases, protected German interests.

    Just common thieves so.”

    http://namawinelake.wordpress.com/2013/03/25/even-thieves-in-law-have-honour-that-is-missing-in-eu-parliaments/

  22. Deco

    Now, they have done something incredibly stupid.

    The EU is a collection of amateurs in charge of everything, and they have a monopoly.

    http://www.telegraph.co.uk/finance/debt-crisis-live/9951727/Cyprus-bailout-live.html

    {
    Head of the Eurogroup of eurozone finance ministers Jeroen Dijsselbloem has spooked global markets by saying the Cyprus bank restructuring deal should be considered a template for the rest of the single currency bloc.
    }

    Of course, it will get tricky if his country (NL) encounters any more banking difficulties. And his country has just experienced a daft housing market, that is now in decline. And private sector debt in NL is very high.

    Is the smartest man in the room another muppet ?

    • Harper66

      Agree.

      Here is the a different link to the same story should anyone be interested –

      “”If there is a risk in a bank, our first question should be ‘Okay, what are you in the bank going to do about that? What can you do to recapitalise yourself?’. If the bank can’t do it, then we’ll talk to the shareholders and the bondholders, we’ll ask them to contribute in recapitalising the bank, and if necessary the uninsured deposit holders,” he said.”

      http://uk.reuters.com/article/2013/03/25/uk-eurogroup-cyprus-dijsselbloem-idUKBRE92O0IL20130325

      It seems fair play is very important to our European friends now that is it not their money involved…………for now at least.

    • molly

      This thinking from the EU will cause a run on the banks,you would want your head examined to leave your very had earned money in a bank now couple this with crap Returns on your savings is there any point in leaving your money in the bank.

    • Harper66

      “Is the smartest man in the room another muppet ?”
      it appears the answer is yes.

      Eurogroup Chief Makes Hilarious Excuse For His Cyprus Comment Yesterday That Caused Markets To Dive

      Read more: http://www.businessinsider.com/cyprus-dijsselbloem-said-he-didnt-know-the-word-template-2013-3#ixzz2Og44vOO2

      “For what it’s worth, looking at the various reports it doesn’t look like he himself used the word “template” but rather he described what a template is”

      You couldn’t make this stuff up.

  23. Pat Flannery

    The great flaw in David’s thinking is his inability to differentiate between ordinary bank depositors and money launderers/tax avoiders. He is trying to do exactly what the Cypriot President tried to do in Brussels but failed.

    Cyprus tried to hide money launderers and tax evaders among ordinary depositors. The Eurozone managers are not buying it. David and the Cypriot President and all who think like them are on the wrong side of history. Money laundering and tax avoidance as a legitimate state business is over, at least in the Eurozone.

    The Euro is the first major currency to embark on a program of expelling the faceless leeches from its banking system. A seismic shift has taken place and David does not recognize it.

    It was the EU that championed the small depositors against the faceless white collar criminals hiding their ill-gotten cash among the legitimate savings of honest Cypriot workers. The British banking system David grew up in was primarily geared to do exactly that. The Cypriot offshore “banking” business was born in London as was the Irish “financial services” business.

    Too bad the EU did not do in Ireland 2008 what they did in Cyprus 2013.

    • joe hack

      I think this is the first time I agree with you pat…

      David talks about loss of trust in to the banking system well David I trust the banking system more today than I did yesterday and David as they say in the USA go figure…

    • Reality Check

      Why is it that if I steal from someone it is theft and is categorized as a criminal act.
      But if the Government does the exact same thing (taxes,levies) it is to benefit of society – to save the system?

  24. Eireannach

    Well said Pat Flannery.

    Most people( who don’t live with their parents anymore) have long ago discovered some of the limitations to DMcW’s analyses. His love of the ‘big boys’ in business, rather than government, and his championing of Anglo-Saxon liberal capitalism, despite its incipient failure since 2007, being two cases in point.

  25. joe hack

    Eliot Ness rides again…

    When the article above is compared to previous articles written by David there are major contradictions with previous and strongly emphasized positions taken by him. But I am sure the XFactor viewer will enjoy his take on Cyprus- playing to the gallery…or we love the hate the EU for the sake of it…

    but maybe he is worried about his own personal bank account.

    If every bank has the same rules applied to it there can be nowhere to run, nowhere to hide, (Eliot Merkle Ness) no tax haven.

    Why should the tax payer bail a private owned bank, it is clear that David wanted the tax payer to bail out the Cypriot banks, the Irish tax payer included, have we not done enough.

    YOU CAN’T SAY NO TO BAILOUTS AND THEN SAY NO TO WHAT HAPPEN IN CYPRUS- THAT IS NOT LOGICAL. YOU’RE PROPERTY TAX, YOUR BIN TAXES, AND YOUR UNIVERSAL SOCIAL FUND ECT. THESE ARE ALL RESULTS OF BANK BAILOUTS BY TAX PAYERS. THIS IS THE WORST KIND OF THEFT – STEALING FROM THE POOR TO KEEP THE RICH, RICH.

    Private individuals taking risks with other peoples welfare is immoral those that take these risks must pay as they are the ones who risks and the gain.

    The Cypriot government tried to tax the small saver in attempt to avoid this tax knowing it would be less palatable with the public at large, they prevaricated on the decision making over several months.

    They were not asked to put a tax on the smaller savers by the Eurogroup or the IMF that was something they decided themselves.

    Then they made matters worse by bringing unnecessary attention to their banking system. the result is higher taxes and bank closures some of which may have been avoided if they had run with the original plan as envisaged.

    More Press Misinformation: There Is Also No Guarantee Across The Euro Banking System On Deposits In Functioning Banks.

    Finally the Eurogroup is planting at least some of the responsible for the banking crisis with some of those that were responsible for it – for the lack of sensible money management. (A failure responsibility the of euro management itself) is nonsense then to complain when they attempt to fix it.

    If the result is tighter controls on the banking system and a banking union-which is the only doable and practical solution to this crisis, then this has to be a good.

    It maybe a case of locking the stable door after the horse has bolted but when the horse returns the lock might hold, however we need to be wary of the Trojan horses that are still running amok.

    There could be a conspiracy theory to be had out of this…

    The choices are simple burn the bond holders or tax everybody and live with a dysfunctional economy indefinably.

  26. Wills

    Firstly, is not the case according to BASEL II lending restrictions a commercial bank lend NOT the deposits BUT fractionalize ON the deposit.

    Secondly, ‘the essence of trust between saver and bank point’ : that the terms of contract guiding saver putting money in the bank that it transacts legal ownership of the funds, splits the interest. It is on this basis that the ECB can levy depositors savings.

    I challenge anyone to disprove any of these points.

  27. Wills

    I reckon their is a war underway within the walls of global banking between the utility banking system and the shadow banking system and the ECB have check-mated the dirty money laundering shysters and can now jack hammer any financial banking center laundering dirty mine flows throughout Europe.

    Luxembourg will be next.

  28. Skilful and simple writing is the best, thanks DMcW.

    The Troika were ‘flying a kite’ to see the reaction. When it got shot down they turned to Plan B. If that blows up , they’ll cobble together Plan C and re-think future strategy for the next imploding peripheral economy. Of course, no one is discussing the historic negligence of the supposedly prudent and ‘germanic’ ECB in allowing Cyprus’s monstrous banking system to grow so gargantuan relative to GDP, and no systematic effort was made to pro-actively pre-empt and deal with this despite Iceland’s lesson and despite forcing Cyprus to suffer losses on the Greek debacle.

    Some odd comments here with appeal to accounting ‘spells’. This is clear language economics not a jargon wonk site. It’s irrelevant to the issue of ‘credere’ anyway as all must face the fact that, universally, banks advertise and sell their retail products as safe havens, and all Govts conspire in that fiction with deposit guarantees that are great until they’re needed, then as much use as a torn condom. Both actors are fraudulent and bogus from the outset and nothing they say in a crisis is taken seriously by anyone who’s realised their connivance and co-conspiracy.

    @5Fingers writes

    “Let’s understand why the EU is there. Eliminate conflict. NOT look after your savings. And it generally works and the bureaucrats will continue to make a big mess of things and patch them up. Let’s wish them luck.”

    Ahem! Show me one pamphlet or poster from FF/FG or any other major party in Europa that’s ever told this ‘truth’ to their electorate. If they’d have sold it as an explicitly geo-political project from the start they might not be in such a mess now, not that most nation-states would have signed up on those terms,and think what Declan Ganley would have done with such a frank admission. It’s a union of venal bankers, for bankers and any ‘peace dividend’ is incidental to that and time will tell how long it pays out.
    When banks and governments tell the truth about the nature of money creation and the risks of casino capitalism, then I’ll give them something more than withering scorn. Until then, they are devious, truculent and unreliable and their massed phalanxes of accountants and economists do not fool me. Here’s a site and campaign I support. It’s in £ but the principles are relevant, if there’s an Irish equivalent, please give me a link;

    http://www.positivemoney.org/

    Today, I’m hearing calls to clamp down on ‘benefit tourists’ who have the right to free movement under the EU’s supposedly sacrosanct foundational principles, yet I’m hearing nothing about ‘banking tourists’ from Russia who seek to get to Kensington and Chelsea via Cyprus. As in Dublin and the Depfa debacle, I can’t recall the ‘germanic’ ECB complaining before it all went tits up.

    Finally, there’s a lot of quaint talk on this site about ‘real money’ and gold and silver as an escape route from incubus/succubus banks. Good luck with that one! What do you think the windfall taxes on such ‘investments’ would be if the crisis went global? What would an EU, which openly ransacks saver’s accounts do when faced with exponential profit rises in ‘the barbaric relic’: they’ll tax it almost as much as if it were confiscated.

    The only solution is to stop this ‘fantasy football econonmics’ and begin the painful adjustment to post-peak oil economics where ‘recovery’ is only possible by absolutely maximising every energy input per GDP. That’s a real engineering issue, not a financial chimera. From ‘Summly’ to Graphene, it’s the Nick D’Aloisio and James Dysons of the world who will define the future winners, not the latest shower of banking idiots with $1000 trash baskets in their corner-offices in Manhattan on Thames/Liffey or offshore beach banking hotspots like Cyprus. Ryanair looking at re-engineering short haul air-travel to standing up for ergonimics/ergonomics counts as well. Or is that another carrier?

    The truly credulous believe that by sacrificing the European social welfare model to bail out the bankers in a St Vitus Dance of Financial Stockholm Syndrome, that somehow ‘real capitalism’ will emerge from the ashes of this crony empire. How could that possibly happen? How can anyone take contract law in the EU seriously again after the events in Cyprus? Or the idea of ‘democratically elected governments’ who are, in fact, hostages to the banks. From state-owned banks to bank-owned states in less than 5 years. Contract law is a construct for the elite, not the tribe and is infinitely variable by those who write the clauses in arcane legalese, much like the accountant-economist high priest cabal.

    If the EZ implodes, the EU does, the UK does and ‘Ireland Inc’ [sic] does. Time for a reset on the whole nation-state thing. Coming in 2016. The centenary may be more lively than people curently envisage. I remain a Republican: an Irish and and English one, and I look forward to a future for these ‘Isles of Wonder’ that consists of a confederation of republics without the nonsenses of the British Royals or the utterly discredited ‘Soldiers of Destiny’.

    Oh, and Amhrán na bhFiann? The Saxon foe? Yeah, right. How’s that working out? Have fun with Herman for the next 100 years or so. Don’t bother with the death-threat bollix, there’s a long queue and Papa Francis 1′s Jesuit SWAT team are probably on a plane from Rome right now ready to lock’n'load. But I…do…not…give a flyin’ fcuk. November 21st 1974. The ‘flegs’ are flying again up north, it wont’ be long before something gives. It ain’t over till the BrummieBoy sings…and my place in history is now assured.

    Sincerely yours

    ‘AndrewGMooney’ aka Cardinal Assange, ‘mad plastic paddy from brum’ ‘celtic blood, saxon heart: even better than the real thing’. etc.
    ps: cue: avalanche of ‘last warning’ txts from the British, Irish, Vatican and Yank Establishments, all of which will be deleted… unread.
    pps: I see Nick has sold Summly for $30 million, not bad for a teenager, more than One Direction’s combined worth, perhaps. Mentioned him on here a while back, March 11th ‘New York state of mind’. No one was interested. Nick is the future and not bankers. Now everyone’s talking about him:

    http://www.ft.com/cms/s/0/4f45fbea-9551-11e2-a4fa-00144feabdc0.html

    • joe hack

      Below is a link similar to yours…Enjoy:

      http://www.sensiblemoney.ie/welcome/

      You could try Skillful and simple writing with two Ls but that would be churlishness

    • Wills

      On the *contract law* point:

      Contract law is simply a system of jurisprudence and we use one which functions effectively for those who know how it works.

      Now, in regards to *contract law* as a choice of law it may surprise you to discover the system of law the banking system adheres to is constitutional free Maritime code it is on the basis of this it gets away with everything you have touched on in your prosaic comment.

      Regards,

      Wills

    • StephenKenny

      I don’t quite understand all this enthusiasm about ‘Nick’. Anyone who’s interested in this industry know that Yahoo just buy things that’re currently popular. Some survive, but most vanish without trace. Those not interested in the industry just see another young person selling an iPhone app for a lot of money.
      Neither is very interesting.
      I downloaded the app before Christmas, when the UK media went completely berserk over it, and it doesn’t really work for me, although I like the idea.

      In short “Australian teenager sells iPhone app the Yahoo for $30m” isn’t really very interesting.

      I like James Dyson’s hand dryers.

    • joe hack

      I would have to agree with you on graphene it will change many industries it may affect war zones or would be war zone maybe a better choice of words is ‘will be war zones’.

      Graphene is capable of filtering salt from water it may cheapen and increase the volume of water passing through desalinating plants.

      Such an innovation may also have affected on population growth economically where will that take us? Oh ouch! dam innovations the curse of pop growth, it’s amazing what the humble pencil can do the pencil over shadows and highlights but some people invest in gold, some in apps and some in bit-coin (data packets whizzing all over the globe) the pencil is a mighty beast I will stick with the pencil a nice pint of Guinness.

      The USA when planning to send persons into space figured that the pen could not work without gravity so the Parker Pen came into being, it cost millions to develop. The USSR had the same problem to solve – even without gravity the pencil is mightier than the pen and cheaper.

  29. There is one thing that all fail to recognise, and that is who is running the whole show. It is not big business, or big banks, or governments or ECU or the ECB or anything else mentioned.

    All are puppets dancing to the strings or the money masters, those who originate the whole scenario.

    Who owns the system of state currencies. Who funds government. Who is syphoning off the real assets, who stands to gain. The money masters.

    How is a population controled and captured. Devide and conquor is the name of the game. Sow discention within and corrupt the thinking. Throw up smoke screens to confuse and obscure.

    Start from the premise that the powers pulling the strings are very smart people. That the events are planned and orchestrated. Do not assume that these events are random and that someone keeps making mistakes that need to be rectified. That is part of the illusion.

    What is the goal of these PTB. It is full control and reducion of the masses to sevient status. Consider that all laws suggested to combat and control the aberrants in society somehow control all the people and deprive them of freedom and assets.

    The latest discussed are “Money launderers”. Why is it that in these times so called money launderers are not simply identified and charged with the supposed crime. Why is the general population penalized while the money launderers still escape.

    The biggest money launderers of all are the central banks of each country aided and abetted by the nation states. Money launderers simply try to avoid tax inposed on activity. In the meantime the central banks employ a form of counterfeiting that keeps adding to the money supply to the detriment of all people and the economy.

    Many years ago the money launderers were involved in prohibition activities. Now as was then too, it is the illegal drug business, and other things that I know nothing about.

    The main system of control is the central banking system. The countries recently invaded all run a common theme. They either threatened the supremecy of the central banking system or the US dollar.

    Saddam was to sell oil in euros or other currency. Libya was outside the system. It had no central bank and a stash of gold. It also proposed a Pan African currency based on a gold dinar, an ancient coin. The rebels first action while still controlling only a quarter of the country and “backed” by the west, formed what. Why a central bank. Can you imangine that so called rebels would have top of mind to do such a thing?
    Iran sells oil in whatever seems best for Iran. Local currency or gold. Iran has no central bank. Syria I do not know about. But the theme seems clear to me. If the money masters have not implemented a central bank then a war will suffice to do so.
    If people are becoming focused on the bigger picture then provide local issues and dissention. What better way than to raid the bank accounts of the people. Then look around and find such laws are being put in place around the world. Reported from New Zealand, and I have seen the same in Canada. Plans are in place to use the savings accounts to prop up the banking system.

    To achive independence.
    The central banking system must be destroyed
    For a national currerncy to be sound it must operate through treasury under direct issuance of the government, debt free and interest free..
    For the benefit of the people legal tender laws must be repealed so that commerce may be done in the currency of ones choice.
    Sound money must be allowed as a choice and precious metal coin allowed as a parallel currency.

    In the meantime, one must protect ones self and ones family and friends.
    Do not use the banking system except for day to day transactions.
    Keep major assets away from the banking system.
    Buy land for security and food, buy precious metals and coins to hold in hand. It is the only trustworthy money, and an international currency.

    • Wills

      Tony the *money makers* are invested with the authority to carry their credit provision out accordingly wether we like it or not.

      • Well that I do not deny. The only escape is an educated nation state to take back the control. Else it is servitude and the screws tightened periodically.
        it requires an educated people to accomplish and the likelihood is slim. That does not prevent a proposal and an awareness.
        I confess it is like Hereward the Wake combatting the Norman invasion singlehanded. Most do not give a damn.

    • joe hack

      I missed you, stop living in fear of…. it may never happen however gold is taxable too…

      Bit-coin is not yet taxable but that wont take long… how safe is positive or negative bias diodes or packet data compered to gold or euros the type of money we use is in the head/mind

      OK you are 59 years young slim toned slightly red/ginger @ 5’9″

      • I do not live in fear. Prudence is now taxed. Savings are denigrated as hoarding. Profligasy is rewarded. Right is wrong and black is white.

        Actually I am 5’7′, 38-24-36, blue eyed, raven haired and totally gorgeous. Age immaterial. And definately not for sale.

        • joe hack

          To hot to handle with a hart gold that might melt when you meet the tax man…

          • Legal tender is generally not taxable. bullion may be

          • So Joe, will you hold your savings in paper subject to inflationary taxes or will you hold in a bank pulling a minute interest with the chance of a 10% or more theft from the bank.
            or will you hold your savings in an inflation protected money and only pay the tax when due, even if immorally imposed.

          • 5Fingers

            Tony, this old saying applies in all our cases.

            A man with a hammer sees a world full of nails.

            Maybe that is the curse we have and need to recognize.

        • joe hack

          Tony define immoral

          Is tax immoral

          Is a tax to sustain bank bail outs immoral while hospital Qs lengthen etc.

          This really about what type of society you want if you believe people should pay tax which i do and i am guessing you do too. the question then becomes what is a fair tax and what befits the whole of society – freedom is not cheap

          • There are taxes for sevices for the people and then there is theft and stealing.
            The grabbing of money from private bank accounts for any reason is theft.

            You contort the discussion. You have previously stated that it is ok to steal from whom you descibe as hoarders. That is immoral. Even some taxes are immoral. Levied for purposes that can not be justified. or obtained by lieing about the purpose. Income tax may be immoral as it was imposed as a ‘Temporary” tax in many countries. I do not like being lied to, do you?

            As for freedom not being cheap, you are correct. It requires complete self reliance. Your equation of freedom involving paying taxes is perverse. Absolute freedom is paying no taxes and receiving no benefits. No restictions of any kind.
            Most people are not ready for freedom but prefer the certainty of servitude.
            A free society is one that prefers the least amount of intrusion from the states institutions while maintaining a degree of protection form those abberants both within and without a country or state.
            The state is rightfully the servant of the people and not the reverse. So as far as I am concerned the state can keep their cotton picking fingers out of my hip pocket or bank account unless they have my prior authorization.

          • joe hack

            Tony if you were in the position of the eurogouup what plan would have suggested remember we are where we are now so saying I would not have let happen in the first is pointless rembmember you will be contributing to that 10 billion bailout alocated to Cypriots

          • Your question is pointless
            I have issued the prescription many times.

            The central banks must be closed.

            Fractional reserve banking must be banned.

            Nations must revert to individual currencies.

            Legal tender laws must be repealed

            Silver coin must be reinstalled and montetized for day to day use.

            Currencies must be valued by the yardstick of a weight of gold which is remonetized and all settlement of trade between nations settled on a quarterly basis.(Your currency is already measured by gold except it is overvalued by a factor of 10 as the values of the currencies have been artificially elevated by central bank policy and subtefuge.

            All currencies would normally have much higher interest rates and lower values if not manipulated.soon the real value of the currencies will be apparent. The adjustment will be called inflation (which has already occurred) When the trust in the currency fails the inflation will be manifest.

            The first thing is the mistrust in the banking system. The next is what to do with the currency(money?)hide it or convert it to solid assets.
            What solid assets. you tell me. I am betting gold and silver.

            The devaluation of the currency will be reflected in the apparent rise in the price of the Precious Metals. IIt is not the value of the gold changing just the collapsing value of the currency.

            Debt suffocation will produce a hyperinflationary depression. The way out of the depression is the useof honest asset based currency. Best on the block is gold and silver.

            china, russia, Iran, turkey, India accumulate and many other countries beside. A new financial system approaches to fill the void and it will contain gold and silver within it.

            Ireland and any other country’s best course is to leave any currency group and have a national currency. It must be based as suggested and not on the basis of debt and interest. Honest money must prevail to save the people. The people must demand the change. The politicians will not provide unless the demand is there.
            Education is key.
            Read Creature from Jekyll Island by G Edward Griffin and Paper Money Collapse by Detlev Schlichter

            It is useless telling me that this will cause a depression because that is a deliberate lie. We are already in a depression.

            The depression is caused by debt suffocation. Suffocation is caused as all currencies under the central bank system are loaned into existence with interest payable.(if you do not understand this I waste my breath)

            There is no currency issued to allow for the payment of interest. therefore more currency must be issued to allow this to be paid. this is also issued as a loan and so the interest payable and the debt spiral grows.

            The debt grows exponentially until it suffocates the economy. We are there.

            There is no escape from debt servitude under this system.

            It is a deliberate policy to do just what it has done.

            Now will come the authoritarian decrees in defense of the system. Laws are passed to control the populations.

            We move from debt servitude to dictatorship while everyone is occupied in interminal debate lead by prattling politions and egomaniacal economists.

            The instigators of this policy have obtained all the wealth and money (read gold) while the western nations have been sytematically stripped.

            There is no solution with the current policies.
            We are trapped.

            all transactions must be transparent.

  30. Cyprus Crisis: Betrayal of trust in banks will cause a long economic jam

    Nice headline and commentary on the evident. Some of us have been warning of such for years.

    How about an alternate plan in which the people can have faith and confidence?

  31. CorkPlasticPaddy

    @ Eireannach. That’s one of the main reasons why Cork is known as the ‘Rebel County’. I’ve never voted FF in my life and never will either!!! I always voted for Labour and FG in the past, but not anymore!!! I gave my No. 1 to the Sinn Fein candidate in Cork SC last time out and I’ll most likely do the same the next time out and then after that I’ll more than likely give my other preferences to some of the Independent candidates on my paper.The trouble with the majority of Cork people is that they’ve always considered the FFers to be a type of rebel and so they rallied to that kind of trait.

    There have been some good Independent T.D’s elected to the Dail, Stephen Donnelly and Shane Ross have performed well since they were elected last time out. Peter Matthews is completely wasted in FG. If he’d had stood as an Independent last time out he would’ve had no trouble getting elected either. He’s completely ‘whistling in the wind’ as a backbench FG TD!! David has constantly said that he wouldn’t put his hat ‘into the ring’ politically, but as far as I’m concerned I think that he should and if he did I’d say that he’d really ‘put the cat among the pigeons’ in regard to the clowns in our present government!!! What happened to FF and the Greens last time out is going to happen to Labour in the next General Election and I can tell you one thing for sure all of the establishment parties candidates who call to my house are ‘going to get it in the teeth!!’

  32. molly

    Will there be a bank run when the banks open in cyprus?
    This agreed deal with the EU will push cyprus into a very big recession ,its to harsh into short a time frame.

  33. http://www.goldmoney.com/gold-research/alasdair-macleod/money-supply-accelerating.html?gmrefcode=gata

    Low interest rates will turn to 0 zero interestrates and then inflation of consumables kicks in. The inflation rate is understated and the real economies are in depression (unstated)

  34. http://www.kingworldnews.com/kingworldnews/Broadcast/Entries/2013/3/24_Dr._Paul_Craig_Roberts_files/Dr.%20Paul%20Craig%20Roberts%203%3A24%3A2013.mp3

    DR Paul Craig Roberts
    Very sobering observations.
    Do not pss this by.
    He suggests the Cypriot suggested sizure od bank accounts is theft and a complete denial of democratic principles.
    He suggests the people should get out on the streets and use whatever amount of vilence and force it requires to get the government to reverse policy.
    He states that in the US all the preparations are in place for an authoritarian military state. Any person can be executed, detained, tortured, punish, etc by unaccountable order of the president. Not only foreign nationals deemed terrorists but resident nationals deemed to be not acting in the benefit of the country. Any person , in short, who criticises the government can be targeted.

    Listen to the broadcast three times. Then consider the implications of doing nothing at all.

  35. grinderman

    Ok , so if I have this right . Depositors are now fair game in this shambles that is the Euro . What is it with the Cypriots ? Dirty Russian money ? The Greeks were not paying taxes . Did they come up with one for the Portuguese or did they not bother ?

    I have lost track . Are the Spanish in a bailout or some kind of a half a bailout ? Who else is in bailout . I have actually lost track .
    One of these days somebody is going to figure out that the Euro is a bad currency and it does not suit the very different cultures and economies that exist within the Eurozone .

    I have been to Greece and I have done business with Greeks . Guess what ? They don’t pay taxes and are the first ones to want a cash under the table deal . I really dislike doing business with them for this reason . Yet it’s like , when the brown stuff hits the fan , everybody act surprised .

    Was the fact that Cyprus had a massive offshore banking system some kind of huge secret . We’re those banks not stress tested by the EU a couple of months ago ?

    Without even doing any research I am guessing that the Russian money in Cyprus belongs to legit Russian businesses . I have been to Russia . Even getting a tourist visa is a nightmare . Somebody forgot to tell the Russian border guards that communism is over and the Moscow traffic cops are deeply and openly corrupt . Doing business there must be a nightmare so no wonder they would want to use Cyprus .

    Anyway back to depositors . Do you feel safe keeping your money in a Irish bank , given that Troika can swoop in at any time and steal your hard earned savings ? This is stunning .

    Finally , I am guessing that big money left Cyprus just before they closed the banks and when they look at the figures in the banks they will be much worse than originally expected . It will make Anglo look like your local credit union .

    A currency union that is so desperate to survive that it will actually raid depositors accounts has no future .

  36. DC

    “Economics is a study of man in the ordinary business of life. It enquires how he gets his income and how he uses it. Thus, it is on the one side, the study of wealth and on the other and more important side, a part of the study of man”. (Alfred Marshall Principle of Economics)

    looking at situation in Cyprus and other European Debt bound countries, one must ask the question, do politicians really understand Math?

    One can discuss the Political machinations of various bailouts,OMT’s LTRO’s etc, until blue in the face. So much commentary with so little regard for basic math whisch will eventually decide the outcome – repudiate debts or enter into debt slavery.

    I am constantly amazed at the willful ignoring of the exponential function in economics – s simple yet brutal and powerful factor in the repayability of debt.

    Debt always grows exponentially, while the economy always grows as an S-curve.
    Every rate of interest can be viewed in terms of the time that it takes for a debt to double. At 5%, a debt doubles in 14½ years; at 7 percent, in 10 years; at 10 percent, in 7 years. As early as 2000 BC in Babylonia, scribal accountants were trained to calculate how loans principal doubled in five years at the then-current equivalent of 20% annually (1/60th per month for 60 months). “How long does it take a debt to multiply 64 times?” a student exercise asked. The answer is, 30 years – 6 doubling times.
    No economy ever has been able to keep on doubling on a steady basis. Debts grow by purely mathematical principles, but “real” economies taper off in S-curves. (Michael Hudson)

    our modern fractional reserve banking system is really a debt-creation system, which is guaranteed to create more and more debts.

    Now looking at the cyprus deal – with an almost instanteous reduction in GDP of about 20%, the vapourisation their financial sector, drop in tourism, effective isolation of their currency from the rest of the eurozone via capital controls (how can that be – we are all one currency,
    and then do the math of debt repayment with compound interest, an one quickly relaises cyprus has been effectivley wiped out.

    Does anyone care – its a small nation – it will manage – its business model was unsustainable- blah blah that seems to be the meme from Noonan et al.

    Whereas the reality is Cyprus cannot repay its debts and will be forced into bailout number 2.

    What about Spain, France Italy and Ireland? apply the math and once again the answer is clear – economic growth will never keep pace with the exponential fucntion applied to debt.

    All other economic debate IMO is just skirting around the issue, whilst cyprus has brought up real issues of

    1 Accountability( the banks were stress tested 18 months ago, they were victims of a haircut with greek bonds at the behest of the troika,the ECB were aware of the impact on the cypriot banking sector)

    2 Democracy – why is that a handful of creditor nations in the EU call all the shots

    3 Duplicity – why was the ESM mechanism not used? the rules were established for this very scenario.

    The real debate on Western economic debt has yet to take place, this debate will not be one of semantics and ideology – but of equations and outcomes.

  37. Bamboo

    Ok, if I had any money at all, I’d take it out and put it somewhere else. Maybe in another bank, gold or silver or some other investment.

    So banks are not to be trusted and we shouldn’t come near them. So gold and silver, is the one option. Should I have pots and bags of gold in the house or should I have this gold converted into electronic currency, in other words – put again in a bank so the government can take it off me.

    Maybe other commodities like grain, oil, coffee, etc and keep an area of the garden to store the oil and coffee. This may be a health and safety issue and the county council will tell you to take that away.

    Invest in property maybe? Well, if you had any intelligence at all and able to read and listen that is not an option either.

    Or should I simply keep wads of cash under my matras? Which is logistically the easiest option.

  38. TheGermanPublican

    Quote: With the current policy, they (EU Governments) will need force to keep it going against the interests of the people. You do not need to be a eurosceptic to conclude that such a monetary union is also deeply immoral.
    – Wolfgang Münchau today in the FT.

  39. 5Fingers

    In this era of globalization, it may be we simply do not have a proper global narrative or have yet figured out the cognitive wherewithal to fix this mess. Wills and Andrew Mooney’s comments on contract law are pertinent.

    Here’s a recent article:
    New Scientist: http://www.newscientist.com/article/mg21729090.200-banks-gone-bad-our-evolved-morality-has-failed-us.html

    Here’s the bit to read for those who cannot access…
    =======
    Modern democracies are quite similar to egalitarian hunting bands in that moralistic public opinion helps to protect populaces against social predation, and dictates much of social policy. In a sense, the Founding Fathers were brilliant in creating a larger-scale system, one that basically guarantees personal autonomy yet permits enough centralised control to run a much bigger ship.

    However, the sheer scale of society, combined with the internationalisation of business, has produced cognitive challenges that must, in an age of increasing manipulation by lobbyists, be met by ordinary voters. Fortunately, voters don’t always follow the political advertising money.

    Simplistic solutions, such as criminalising any financial rule-breaking that leads to serious social harm, would provoke much debate. What is beyond debate is that in the case of major corporate crimes an ancient approach to making justice serve the greater good is creaking and groaning, and that new answers must be sought.

  40. From Graham Summers– Phoenix Capital Research

    March 26, 2013

    The ECB’s Balance Sheet Is Literally a Work of Fiction

    As noted in numerous articles, the entire European banking and corporate system is over-burdened with debt.

    Jagadeesh Gokhale of the Cato Institute puts the situation as the following, “The average EU country would need to have more than four times (434 percent) its current annual gross domestic product (GDP) in the bank today, earning interest at the government’s borrowing rate, in order to fund current policies indefinitely.”

    Put another way, for Europe’s Government to fund all the entitlements they have, they would need an amount equal to 400% of GDP to be sitting in the bank collecting interest.

    Virtually NO European country is running a surplus, let alone has an amount equal to 100% of GDP let alone 400% of GDP sitting around.

    How come no one is openly admitting this?

    The reason none of this shows up is because Europe’s accounting for unfunded liabilities as well as its accounting for banking liabilities. As noted by Mark Grant, the ECB even ADMITS that it doesn’t record most of the garbage it owns:

    “Recognition of assets and liabilities

    An asset or liability is only recognized in the Balance Sheet when it is probable that any associated future economic benefit will flow to or from the ECB, substantially all of the associated risks and rewards have been transferred to the ECB, and the cost or value of the asset or the amount of the obligation can be measured reliably.”

    So the ECB has openly admitted: “we don’t actually count something as an asset or liability unless we believe it should be.”

    In other words, the ECB’s balance sheet, which backs up the entire EU banking system it essentially a work of fiction. Unless the ECB officials feel like admitting something is an asset or liability, it doesn’t exist.

    At this point, no sane person could possibly invest in Europe. And given that EU bureaucrats are now proposing STEALING depositors savings, I can’t think why anyone would have a bank account there either.

    At the end of the day, this is all you need to know about Europe’s Crisis:

    1) The European Banking system is over $46 trillion in size (nearly 3X total EU GDP).

    2) This banking system is officially leveraged at 26 to 1. Realistically it’s likely closer to 50 to 1.

    3) The ECB’s balance sheet is entirely made up based on how the ECB feels like valuing what it owns (how’d that concept work out for Wall Street banks in 2008?)

    4) Over a quarter of the ECB’s balance sheet is PIIGS debt which the ECB will dump any and all losses from onto national Central Banks (read: Germany).

    So we’re talking about a banking system that is nearly four times that of the US ($46 trillion vs. $12 trillion) with at least twice the amount of leverage (26 to 1 for the EU vs. 13 to 1 for the US), and a Central Bank that has stuffed its balance sheet with loads of garbage debts, giving it a leverage level of 36 to 1…

    And all of this is occurring in a region of 17 different countries none of which have a great history of getting along… at a time when old political tensions are rapidly heating up.

    To be clear, the Fed, indeed, Global Central Banks in general, have never had to deal with a problem the size of the coming EU’s Banking Crisis. There are already signs that bank runs are in progress in the PIIGS.

    Thus, the World’s Central Banks cannot possibly hope to contain the coming disaster. They literally have one of two choices:

    1) Monetize everything (hyperinflation)

    2) Allow the defaults and collapse to happen (mega-deflation)

    If they opt for #1, Germany will leave the Euro. End of story. They’ve already experienced Weimar and will not tolerate aggressive monetization.

    So even the initial impact of a massive coordinated effort to monetize debt would be rendered moot as the Euro currency would enter a free-fall, forcing the US dollar sharply higher which in turn would trigger a 2008 type event at the minimum.

    In simple terms, this time around, when Europe goes down (and it will) it’s going to be bigger than anything we’ve seen in our lifetimes. And this time around, the world Central Banks are already leveraged to the hilt having spent virtually all of their dry powder propping up the markets for the last four years.

    Given what is happening in Europe right now, we wanted to alert investors to a major development we’ve noticed in the markets.

    The markets look to be setting up for the next Crisis. Indeed, multiple metrics we track are flashing RED ALERT

  41. dwalsh

    Cyprus is a Rubicon event.

    We are entering the final stages of the collapse of the world order as we have known it. The confiscation of private monies and savings to pay unsecured senior bond holders is the final bell for the current financial system.

    According to Jeroen Dijsselbloem, the chairman of the eurozone, this will be the pattern applied to other European provinces – formerly known as nations – as the crisis continues.

    Mr Dijsselbloem says the market will like it; so it must be a good thing.

    I say that whatever remaining trust the general public has in the banking system and in our leaders will quickly evaporate if this policy is implemented elsewhere; and without trust I do not see how the system can continue to function.

    The crisis will continue; and it will get worse. The reason is simple: nothing is being done to address the cause of the crisis; unregulated and out of control financial markets.

    Financial capitalism has lost its way; it is pathological and presents a mortal threat to our civilisation and our world.

    The people managing all this are not fools. They know what is happening and they know why it is happening. They also know that a crisis is an opportunity; and an epic crisis is an epochal opportunity.

    Some are using this crisis to accumulate personal wealth. Others are using it to fundamentally alter the economic and political structure of our world.

    If the human world survives – meaning, does not tear itself apart in worldwide military conflagrations – the world that emerges post-crisis will be significantly different than the world we know today.

  42. conor

    Hi David,
    How about this for a different view on things from across the Atlantic.

    The Seeds of War Have Been Sown …
    by Larry Edelson

    Dear Subscriber,

    In a previous column, I showed you how the war cycles turn violently higher this year. I also addressed the issue of war, and its implications for the markets, at the Weiss Global Wealth Summit in January.
    It’s a topic that no one likes to talk about. Yet I’ve studied the history and Cycles of War in detail. And I do not like what I see happening now in the least bit.
    As I’ve also previously told you, I do not expect a war between China and the United States, nor between China and Taiwan, nor Russia and the United States.
    But it’s also clear to me that there are many seeds of war now being sown, in many different areas.
    First, we have the rising military might of China, and its territorial expansion into the South China Sea and the Spratly Islands.
    Beijing wants control over the vast oil reserves in those regions, which could turn out to be the biggest in the world. Beijing also wants to exercise control over the vast, hugely important shipping lanes in the South China Sea, another reason we should all be concerned.
    How Your Senator Is Robbing Your Retirement Account …
    Shocking new video exposes three ways that politicians are already stealing your retirement money … plus the more extreme measures they’re planning next.
    Click here and the free video will begin playing automatically.

    Internal Sponsorship
    And make no mistake about it. China is becoming a military giant. It now has the largest number of active-duty troops in the world, at 2.28 million.
    It has 7,400 tanks. 44 attack helicopters. 71 submarines. 2004 combat-ready aircraft. And a brand-spanking new, state of the art aircraft carrier.
    And Beijing is upping its military budget over 10 percent this year, increasing its military spending by $106 billion.
    Second, we also have rising cyber espionage all over the world, much of it instigated by China and North Korea. The media calls it “hacking.” I call it “spying.” Either way, there’s a good chance we may one day, in the not-too-distant future, see a full-scale cyber war break out.
    Third, we have Iran and Israel, the Middle East. Always a problem, my models show this year could be the year that war breaks out in the Middle East. The Arab Spring is a prelude, one that has sown the seeds of war and uprisings and rebellions all over the Middle East.
    But the area that worries me the most is none other than Europe, where the demons of previous wars are still very much alive.
    Europe is a cesspool of rotten politics, inept leaders,
    and a monetary system that was flawed from the outset.
    And worse now, is that the latest Cyprus developments are directly planting the seeds for a civil war in Europe.
    Europe is going to splinter apart at the seams. I am sure of it.
    The mere gall that northern European leaders have to even suggest that Cypriots’ bank accounts be raided is something no one should take lightly. It shows how desperate the situation is in Europe … and how desperate the so-called “Troika,” has become.
    The European Commission (EC), the International Monetary Fund (IMF), and the European Central Bank (ECB) are all clamping down hard on weaker European peripheral countries with austerity programs and now, threats of confiscation …
    When in reality, they have no one to blame but themselves for the mess that Europe is in.
    Yes, countries such as Greece, Cyprus, Portugal and others were profligate. But the stronger countries of Europe — Germany especially — are equally to blame. They are the countries that practically forced the weaker European countries to adopt the euro, putting them in a position where they could not compete against the stronger economies of Germany and France …

    And they are the countries that rammed loans, that are now unpayable, down the throats of those countries.
    It’s gotten so bad in Europe, the rise of neo-Nazi parties is astounding.
    In Greece, the neo-Nazi “Golden Dawn” party has risen in popularity from 0.3 percent of the Greek people polled in 2009 to as much as 7 percent late last year. A 23-fold increase in just three years.

    Germany’s Angela Merkel is now being portrayed in many European publications in Nazi garb.
    From the north of Europe to the Mediterranean in the south, fascist and neo-Nazi parties are growing at an alarming rate, gaining over 15 percent of the vote in recent local elections in many countries.
    As EU Home Affairs Commissioner Cecilia Malmström recently stated, “Not since World War II have extreme and populist forces had so much influence on the national parliaments as they have today.”
    Will Europe See a Civil War?
    Unless the Troika backs off the weaker, heavily-indebted countries, which is not likely, yes, I believe Europe is headed toward massive civil unrest and war.

    Internal Sponsorship
    Another aspect that worries me, is Russia. According to Moody’s ratings agency, Russians have $19 billion in Cypriot banks, nearly as much as Cyprus’ entire GDP. Russian banks have an additional $12 billion invested and have loaned another $40 billion to Cypriot companies of Russian origin.
    That’s just Cyprus. While there are no clear estimates on how much Russian money, legally or illegally, is spread out over Europe, it’s safe to assume there are boatloads. In 2012 alone, an estimated $56 billion left Russia, much of it going into Europe.
    Vladimir Putin is up in arms over the crisis in Cyprus. He will not stand idly by while Russian money is at risk in Europe.
    Keep in mind that Russia largely controls the European energy sector. The European Union depends on Russia for more than 32 percent of its crude oil, and nearly 39 percent of its natural gas needs.
    Many countries in Europe depend upon Russia for 100 percent of their energy needs.
    Germany depends upon Russia for as much as 36 percent of its energy needs.
    If Putin feels Russian financial losses in Europe are unjust, I don’t doubt for one minute that he would threaten to retaliate by “turning the lights out” in Europe.
    Sadly, based on my work on the war cycles and what’s happening now in the next phase of the great financial crisis and Europe’s sovereign debt crisis, war and massive civil unrest in many parts of the world is a very real threat. And it’s already starting to impact the financial markets.
    It’s a major geo-political reason why the dollar is now breaking out to the upside, precisely as I have been forecasting.
    And, it’s a major reason behind my forecast for a much higher U.S. equity market. Frightened capital from all over the world will pour into the U.S. and emerging markets of Asia.

  43. bonbon

    After Cyprus, Who’s Next? Luxembourg? Malta? Slovenia?

    March 26, 2013–The first use of capital controls by a euro-area
    member, in the case of Cyprus, may also pose a challenge to
    countries such as Malta, Luxembourg, and Estonia whose banks also
    boast large foreign deposits, wrote Jacques Cailloux and Dimitris
    Drakopoulos, economists at Nomura International Plc., in a report
    to clients.
    “Fearing a fate similar to those who held deposits in
    Cyprus, these depositors may well decide to reduce their
    exposure, putting other countries under stress,” they warned.
    Indeed, if, as it is said, Cyprus basically ran into trouble
    because its banking sector outstripped the entire GDP by a factor
    of eight, then what about Luxembourg, where the GDP is
    outstripped by a factor of twenty-four
    ?
    The possibility of a Cyprus-like “downsizing” including the
    seizure of uninsured deposits in countries like Luxembourg, was
    hinted at by none other than Eurogroup President Jeroen
    Dijsselbloem, the Dutch Finance Minister, in interviews
    yesterday. Both Luxembourg and Malta have higher ratios of
    banking sector balance sheets to GDP than Cyprus. Immediately
    coming under pressure from some Eurozone governments, as well as
    by the ECB, Dijsselbloem quickly backed off from his remarks,
    insisting that Cyprus is a “specific” case.
    But Carsten Brzeski, senior economist at ING Group in
    Brussels, told ekathimerini.com that “the true test may only come
    if the rot spreads from Nicosia and starts to infect larger
    economies.” Italy and Spain are struggling, and in Slovenia,
    where bad loans equal a fifth of economic output, lawmakers are
    scrambling “to avoid becoming the sixth country needing a
    bailout,” he said.
    Charles Goodhart, London School of Economics professor
    emeritus, told ekathimerini.com, “[T]hey will swear black and
    blue that Cyprus is a unique case, but so was Greece. You can
    talk about the inviolability of insured deposits, but the problem
    now is, would anyone believe you?”

  44. joe hack

    A UN report has found that (surprise, surprise) the neoliberal experiment of the last few decades has had the effect of concentrating an increasing amount of wealth in the hands of an increasingly small proportion of the population, thereby making the masses and states poorer and more indebted. The resulting fall in consumer demand has, and will continue to push up unemployment levels:

    unctad.org/en/PublicationsLibrary/tdr2012_en.pdf

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