Monday, March 18, 2013

Cyprus: The End Of Systemic Trust

This title comes from Zero Hedge and brings forth the stark reality of the situation in Cyprus - a situation that looks ominously like the world of "1984" and it is happening all too fast. In fact, of all recent prophetically related events that we have been tracking, this one may send more chills up your spine than all of the others combined, and that is saying a lot. More on this topic later, but first, to the news and commentaries that are starting to circulate on this situation as people begin to come to terms with the magnitude of this EU move:

However, post the Cyprus decision, the curtain has been pulled back and wizard revealed with all his faults and warts.  The age of innocence is dead and with it died institutional and retail trust, confidence in the system writ large and the rule of law.
It would be hard to over-emphasize how significant the Cyprus situation is.  The EU demonstrated under no uncertain circumstances that they will destroy the rule of law to maintain their own power. 

It was a recognition of tyranny that many of us have always assumed was the case but yesterday became reality.

The damage done here is not related to the size of the haircut - currently discussed between 3 and 13% - but rather that the legal language which each and every investor on the planet must rely on in order to maintain confidence in the system has been subordinated to the needs of the powerful elite.  To the power elite making the major decisions in DC, London, Berlin, France, Brussels, et. al., laws are like ice cream, easily melted.

Which begs the question, who is next?  Will it be Portugal?  Greece? Spain?  Italy?  France???
Will they impose a “one-time” tax on your bank account?  Your house?  Your stocks and bonds?  Retirement accounts?

With the Cyprus decision, investors now know what the price is: your money is not really your money.  Your bank account is not really your bank account.  Your bonds, stocks, home and anything else you thinkyou own isn’t really yours.  The governments of the world will take it from you whenever things get bad enough.

Pimco CEO Mohamed El-Erian told CNBC today that the decision to loot the bank accounts of Cypriot savers could blow up Europe and lead to civil unrest across the continent.

El-Erian said that the European Union had lit two sticks of dynamite in backing a proposal that could see bank accounts raided for up to 15% of their value in what has ludicrously been described as a “wealth tax” yet amounts to nothing less than an act of wanton financial plunder.
“By including small depositors, they are risking social unrest, political disorder, and potentially an exit from the eurozone,” said El-Erian, referring to people with under 100,000 euros who will still be hit by a levy of 6.75% under current proposals. Savers with 500,000 euros in the bank face losing as much as 75,000 euros.
“The worst outcome is that you get complete political breakdown, social unrest, and then Cyprus is forced to exit,” said El-Erian, adding that the move had accelerated the journey to disorder which could lead to more countries exiting the eurozone.
“The other stick of dynamite that’s been lit is much more complicated and more uncertain,” El-Erian stated. “That is a question mark about the sanctity of bank deposits in Europe,” alluding to the threat of bank runs in other Mediterranean countries.

Large protests are set to take place in the Mediterranean country tonight as well as during tomorrow’s parliamentary vote. Demonstrators have already begun congregating with signs that read “hands off Cyprus”.

Many commentators note that the deposit grab may cause panic among bank depositors in Spain and other vulnerable countries as well. Indeed, many are asking whether this could be a modern Creditanstalt situation. Another common analogy is that this could be “worse than Lehman” failing.
On the other hand – given that the entire economy of Cyprus is smaller than that of Shreveport, Louisiana, and that Cyprus is mainly a parking spot for hot money from Russian oligarchs and mafia – some say that the whole crisis will quickly blow over.
What’s the bigger picture? Bank deposit grabs may spread to other vulnerable European countries. The New York Times reports:
Jeroen Dijsselbloem, the president of the group of euro area ministers, declined early Saturday to rule out taxes on depositors in countries beyond Cyprus.
And the chief economist of the German Commerzbank has called for private savings accounts in Italy to be similarly plundered:
A tax rate of 15 percent on financial assets would probably be enough to push the Italian government debt to below the critical level of 100 percent of gross domestic product.
Indeed, Zero Hedge has been warning about this kind of scenario for years.
Why are they doing it?

As Tyler Durden notes, the Cypriot deposit grab is just one of a wide variety of forms of financial repression that central banks, big private banks and governments are using to grab money from the people. For example, negative interest rates are an ongoing theft.
Sajiyat Das writes:
A debt crisis, especially on the current scale, cannot be dealt without other than by financial repression. To date, it has taken the form of higher taxes, interest rates below the rate of inflation, directed investment and increased government intervention in the economy. Cyprus marks a new phase of financial repression, shifting the burden increasingly onto savers directly by confiscating savings.

While not the Molotov-cocktail-throwing, smoke-bomb-hurling debacle that Greece (and Spain) became, the Cypriot demonstrations are gathering pace with a large protest planned for this evening and tomorrow during the parliament’s vote. The following images give a sense of the feeling among the people…

 One has to consider the fact that now - as a result of the EU's actions -  the financial decisions that are being made for previously sovereign countries are done so by unelected officials not even from these countries. Consider that for a moment. A brave new world indeed. 

The dominos could most definitely begin to fall in the EU, especially if we see any other dramatic financial moves in countries such as Italy, Portugal, Greece, etc. 

Things are most definitely moving faster right now. It seems that the entire world is teetering just on the brink. We should expect the pace to pick up even more in the coming weeks, as we know birth pains don't reverse course or slow down. Buckle up, we may be in for a ride prophetically speaking. 


Unknown said...

So, in Cyprus we are shocked to see governmental action partnered with banks to take money from the citizens? Everytime the Fed pumps money through QE1,2,3,etc. the money you have and earn becomes a little more worth-less. Cyprus is being done without the financial camouflage of boosting the economy.

Secondly, seizing the assets of Russians who can afford or need off-shore accounts is stupid. In the late 1970s, Westerners were routinely kidnapped in the Middle East. One day, a Soviet citizen was kidnapped by mistake. The KGB kidnapped the family of the hostage taker, killed the brother and sent his body to the suspect that the rest if his family would arrive soon if the Soviet hostage was not released unharmed.

This has the potential of wrecking a very fragile world economy. Trust is a major part of how economies move. There is a great deal of misplaced trust in the market and when 1+1 no longer equals 2, people and economies stop and wait.

God Bless

Robin said...

I agree, Scott . . .few stories related to prophetic end times, are as chilly as this one. I'm not sure, however, which I find more troubling . . .that the EU pulled off this heist in plain sight for the world to see, or that Big Media could ignore something so blatant. That the EU appear to be doing encouraging a bank run on purpose as part of a plan to swoop in and take control or that there's so little reaction from the public at large?

Fellow prophecy watchers on my Facebook page appear completely oblivious to the implications and consequences of what the EU are doing. It's almost like Hitler's Germany, when Hitler's actions were so obvious. And yet, like a lobster in a pot of tepid water placed on the stove, as the temperature increases, the lobster simply closes his eyes and drifts into peaceful slumber.

Ally said...

So fantastically excellent to hear your opinion Dr Who! You've been sorely missed around these parts! Now if only we can locate No Fog, my answered prayers will be complete indeed. Was beginning to wonder if I'd have to wait til our picnic at the tree of life to catch up!
It always amazes me how much we really do love each other here!!!!
And boy o boy, it sure seems like it's getting really close now, doesn't it?

Unknown said...

Ally - Thanks. It is good to be back