Monday, March 18, 2013

Cyprus

Good evening Ladies and Gentlemen:


Gold closed up by $12.10 to $1604.60 (comex closing time).  Silver rose by 2 cents to $28.84.


Here are the final access closing of gold and silver:

gold:  $1605.6.90
silver: $28.90

In physical news at the comex, even though there was no delivery notices filed, the number of gold ounces standing for delivery rose by 400 oz and thus 10.47 tonnes of gold is standing for March. 

The big news of the day was of course Cyprus. We got word of the "bail in"  (confiscation) early Saturday morning, 1/2 hour after I published my weekend commentary.  It is surprising that the ECB, the EU Commission and the IMF all decided that it was necessary to punish the Russian oligarchs for placing their funds in  Cypriot bank accounts and ordinary Cypriot citizens.  It has been determined that almost 1/2 of all bank deposits in Cyprus are of Russian origin.  The problem with the bail in, is that it breaks the rule of law. Bank accounts are not bonds but are private property and our illustrious bankers, as they did in Greece, broke the sanctity of this important rule of law. The law in Cyprus also states that 100,000 euros of bank deposits are guaranteed.  That rule was broken late Friday night. In Greece, they rewrote covenants on the bond indentures  (Greek origin bonds) such that these guys would receive a haircut on the bonds that they held. With respect to Cyprus there is only 2 billion euros of bank bonds issued and all are written under English law.  It would have been too difficult to go after these bondholders.  Thus the powers to be decided in their wonderful wisdom to break the law and scalp not only the "hot Russian money" but the poor innocent Cypriot citizens to pay for the sins of the Cypriot banks.

There are two major problems unfolding here:

1. The Russian oligarchs and other Russian fronts for the KGB have huge deposits inside the Cypriot banks. I know Russians and they will not be happy campers to see confiscation of some of their deposits. I would not want to be a Cypriot politician who voted to the agreement, or a German politician as Russians like to settle their disagreements through the barrel of a gun.

2.The cat is now out of the bag.  It does not matter if the deal goes through or not as the world now knows that the big European powers- to -be can do anything it wants, to confiscate wealth. I can assure you that many of these Russian oligarchs are chartering a plane to Cyprus with the goal to remove their cash.  This removal of cash will have deadly consequences for Cyprus and again provide for a big mismatch of bank assets with no bank deposits (bank liability).  These oligarchs will not place their cash in any Euro destination for fear of confiscation.  They will probably seek out Dubai or Istanbul.  Gold will be bought in quantity as gold is nobody's liability.

No doubt many wealthy Spanish, Italian, Portuguese, Irish, and Greek citizens upon seeing the above Cyprus affair, will remove their euros from the banks and head for other safe havens outside of the EU, or buy gold.  There is now a premium for cash in your mattress


Today I will provide commentaries of this big event as it unfolded.  First, the release of the news on Saturday, followed by news on Sunday and then today.  I will provide many commentaries from various financial analysts who understand what this day and event means.  However before discussing these stories........


let us head over to the comex and see how trading fared today:

The total gold comex open interest fell by 5198 contracts falling from  452,512 down to 447,314.    The non active front month of March saw it's OI fall by 121 contracts from 182 down to 61.  We had 125 notices filed on Friday so in essence we gained 4 contracts or 400 oz of additional gold will stand for March delivery.  The next big active delivery month is April which is a little more than 2 weeks away from first day notice.  Here the OI fell by 7582 contracts from 196,135 down to 188,553.  The estimated volume today was strong at 179,218.  The confirmed volume Friday was a lot weaker at 111,270.

The total silver open interest rose by 76 contracts from 150,769 up to 150,805.
The active front month of March saw it's OI fall by 42 contracts from 382 down to 3450. We had 3 delivery delivery notice filed on Thursday so in essence we lost 39 contracts or 195,000 oz of silver will not stand for the March contract. The non active April contract rose by 17 contracts up to 368.  The next big active delivery month contract for silver is May and here the OI rose by 270 contracts from 79,555 up to 79,825.  The estimated volume today was fair at 34,915.   The confirmed volume on Thursday was weak at 26,123 contracts. 



Comex gold/March contract month:
March 18.2013    




Ounces
Withdrawals from Dealers Inventory in oz
nil
Withdrawals from Customer Inventory in oz
99.9  (Brinks)
Deposits to the Dealer Inventory in oz
nil
Deposits to the Customer Inventory, in oz
nil
No of oz served (contracts) today
 0   (nil  oz)
No of oz to be served (notices)
61 (6100) oz
Total monthly oz gold served (contracts) so far this month
3309  (330,900 oz) 
Total accumulative withdrawal of gold from the Dealers inventory this month
xxxx
Total accumulative withdrawal of gold from the Customer inventory this month


 
 xxxxx




We had no activity at the gold vaults.
The dealer had 0 deposits and 0   withdrawals.



We had no   customer deposits:



total deposit: nil   oz



We had 1  customer withdrawals :

Out of Brinks:  99.90 oz





We had 2 huge adjustments:

i) out of HSBC vault: 40,742.32oz was adjusted out of the dealer account and into the customer account at HSBC.

ii) out of the JPMorgan account:  103,602.04 oz was adjusted out of the dealer and into the customer account at JPM.

total adjustments:  144,344.362 oz or 4.48 tonnes of gold.
No doubt some of this was used in the delivery process today.



Thus the dealer inventory rests tonight at 2.455 million oz (76.36) tonnes of gold.

The CME reported that we had 0 notices filed for nil oz of gold today.   The total number of notices so far this month is thus 3309 contracts x 100 oz per contract or 330,900 oz of gold.  To determine how much will stand for March,  I take the OI standing for March (61) and subtract out today's notices (0) which leaves me with 61 notices or 6100 oz left to be served upon our longs.

Thus the total number of gold ounces standing in this non  active month of March is as follows:

330,900 oz (served ) + 6100 oz (to be served upon) = 337,000 oz or 10.482  Tonnes.

we gained another 4 contracts or 400 additional gold ounces will stand in March.  The amount standing is extremely large for a non active delivery month.



Silver:



March 18.2013:   The March silver contract month




Silver
Ounces
Withdrawals from Dealers Inventorynil
Withdrawals from Customer Inventory 352,308.386  oz ,(CNT, HSBC)
Deposits to the Dealer Inventorynil
Deposits to the Customer Inventory  386,907.41 (Brinks)
No of oz served (contracts)0  (nil oz)  
No of oz to be served (notices)340  (1,700,000  oz) 
Total monthly oz silver served (contracts) 1769  (8,845,000  oz) 
Total accumulative withdrawal of silver from the Dealers inventory this monthxxxxx
Total accumulative withdrawal of silver from the Customer inventory this monthxxxxx


Friday, we  had good activity  inside the silver vaults.

 we had 0 dealer deposits and 0 dealer withdrawal.


We had 1 customer deposits of silver:

i) Into Brinks: 386,907.41 oz




 total customer deposit: 386,907.41  oz









we had 2  customer withdrawals:


i) Out of CNT:  46,236.427 oz
ii) out of HSBC:  306,071.959


total customer withdrawal:  352,308.386 oz






we had 0 adjustments:

Registered silver remains Friday at :  42.476 million oz
total of all silver:  163.622 million oz.




The CME reported that we had 0 notices filed for nil oz of silver for the March active contract month. To obtain what is left to be served upon our longs, I take the OI standing for March (340) and subtract out today's notices (0) which leaves us with  340 notices or 1,700,000 oz left to be served upon our longs. 

Thus the total number of silver ounces standing for delivery in silver is as follows:

8,845,000 oz (served)  +  1,700,000 oz (to be served upon)  =  10,545,000 oz

we lost 195,000 oz of  silver standing.











The two ETF's that I follow are the GLD and SLV. You must be very careful in trading these vehicles as these funds do not have any beneficial gold or silver behind them. They probably have only paper claims and when the dust settles, on a collapse, there will be countless class action lawsuits trying to recover your lost investment.
There is now evidence that the GLD and SLV are paper settling on the comex.

Now let us check on gold inventories at the GLD first:



March 18/2013:




Tonnes1,219.45

Ounces39,206,667.98

Value US$62.859  billion







March 15.2013:



Tonnes1,233.00

Ounces39,642,063.95

Value US$63.232  billion







March 14.2013:






Tonnes1,236.31

Ounces39,748,497.42

Value US$63.025   billion






March 13.2013:


Tonnes1,236.31

Ounces39,748,497.42

Value US$63.155  billion





March 12.2013:




Tonnes1,236.31

Ounces39,748,497.42

Value US$63.345 billion








we  lost a massive 13.55 tonnes of gold at the GLD tonight night.
With gold rising big time today, this does not pass the smell test.  The gold is being liquidated to feed the huge appetites for gold from our Eastern persuasion friends.
(China, Russia, South Korea)


And now for silver:

March 18.2013:


Ounces of Silver in Trust345,095,059.100
Tonnes of Silver in Trust Tonnes of Silver in Trust10,733.66



march 15.2013:

Ounces of Silver in Trust345,095,059.100
Tonnes of Silver in Trust Tonnes of Silver in Trust10,733.66







Ounces of Silver in Trust344,128,591.100
Tonnes of Silver in Trust Tonnes of Silver in Trust10,703.60



March 13.2013:



Ounces of Silver in Trust344,128,591.100
Tonnes of Silver in Trust Tonnes of Silver in Trust10,703.60



March 12.2013:


Ounces of Silver in Trust342,292,222.100
Tonnes of Silver in Trust Tonnes of Silver in Trust10,646.48


March 11.2013:
Ounces of Silver in Trust342,292,222.100
Tonnes of Silver in Trust Tonnes of Silver in Trust10,646.48



 Today the inventory at the SLV remained the same.

Please note the difference between gold and silver.  The gold inventory drops and the silver inventory rises.


end 




And now for our premiums to NAV for the funds I follow:





Sprott and Central Fund of Canada. 




(both of these funds have 100% physical metal behind them and unencumbered and I can vouch for that)




1. Central Fund of Canada: traded to a positive 1.4 percent to NAV in usa funds and a positive 1.2%  to NAV for Cdn funds. ( March 18 2013)   

2. Sprott silver fund (PSLV): Premium to NAV rose to 2.35% NAV  March 18/2013
3. Sprott gold fund (PHYS): premium to NAV  fell to 1.12% positive to NAV March 18/ 2013.



end


And now for the major physical stories we faced today:

(courtesy Goldcore)


Savings Confiscation Risks ‘Bank Runs’ – Highlights Importance of Owning Gold



-- Posted Monday, 18 March 2013 | Share this article | Source: GoldSeek.com

Today’s AM fix was USD 1,599.50, EUR 1,236.09 and GBP 1,057.45 per ounce.
Friday’s AM fix was USD 1,593.25, EUR 1,219.39 and GBP 1,051.23 per ounce.
Gold rose above $1,600/oz for the first time in more than two weeks on news of the Cypriot savings confiscation. The euro fell against all currencies and particularly gold. Gold in euro terms rose 1.7%, from €1,218/oz at the close on Friday to €1,237/oz in trade late this morning.
Silver is trading at $28.80/oz, €22.40/oz and £19.20/oz. Platinum rose to $1,587.25/oz, palladium to $771.00/oz and rhodium stayed at $1,250/oz.
GoldCore Market Performance Table

Gold rose 0.86% last week to close at $1,591.60/oz. Silver fell 0.76% to close at $28.73/oz.

The radical ECB, IMF, EU bank levy and ‘bailout’ package for Cyprus threatened to trigger fresh turmoil in the euro zone, which will lead investors and savers to seek safety in gold.
The deposit levy plan in Cyprus may be the spark that gold needed to overcome its recent weakness and commence the next phase of the bull market.

Savers in the periphery nations of the EU, such as Spain, Italy, Portugal and Ireland, will likely choose to diversify some of their life savings from bank deposits into gold.
Up until now bank deposits were sacrosanct and had government 'guarantees' but these guarantees look less safe after this deposit levy plan.
Savers in countries whose governments have welcomed the savings confiscation measure will be especially worried about the safety of their “government guaranteed” deposits.
Cross Currency Table - Bloomberg
Cross Currency Table - Bloomberg

The move shows the importance of being diversified and again highlights gold's role as a safe haven asset in uncertain times.

The dawn raid on the wealth of the ordinary people of Cyprus, including hard working families and businesses, may mark the beginning of the end of the Euro project as the Troika have unwittingly attacked the very cohesion of the euro.
They have effectively segregated one European people from another and exposed the hypocrisy of the German elites and have by extension created a Northern or German euro and a Southern or periphery euro or euros.

gold_euros_5days
Gold in Euros - 5  Days - Bloomberg 
It flies in the face of the very foundation of the European Union, ideals forged in the European Union Charter of Fundamental Rights where its signatories, including Germany, swore "to promote balanced and sustainable development and ensure(s) free movement of persons, goods, services and capital, and the freedom of establishment."

In the short term, programme country depositors can no longer be sure that their deposits are safe which will provide a new, potentially significant, demand for gold.
Every time a programme country misses a programme target or starts negotiations to finance its debt, the spectre of savings confiscation will loom creating an ongoing risk of bank runs.
This will act as a inhibitor to growth and progress and stymie negotiations. The option of pulling out of the Euro will now become politically popular. The net gain from the Cyprus deal is minuscule in comparison with the potential costs to the Euro zone.
gold_euros_2years
Gold in Euros - 2 Year - Bloomberg

A policy of raiding citizens bank accounts will undermine every countries financial system and central bank and it sets a dangerous precedent. How will Spanish savers greet negotiations with the IMF and how will they begin to withdraw their savings from the already fragile Spanish banking system.
Once again the ECB, the IMF and the EU elites have looked after the interests of banks and institutions over those of the ordinary people. Corporatism is alive and well and it threatens our banking systems and capitalism itself which cannot function without a healthy banking system.

News From Around The World


Bloomberg
  
Bloomberg

Brian Lucey


-- Posted Monday, 18 March 2013 | Digg This Article | Source: GoldSeek.com


end

James Turk on the "Cyprus bail in":


Cyprus boosts gold and physical buyers always win, Turk tells King World News

 Section: 
1a HKT Tuesday, March 19, 2013
Dear Friend of GATA and Gold:
Nothing in the world banking system is safe from the kleptocracy of government as property rights increasingly are being trampled, GoldMoney founder James Turk today tells King World News in response to the turmoil around Cyprus. Turk sees the insolvency of Cyprus as another argument for owning gold and vaulting it outside the banking system.
Turk adds: "Give this backdrop, it is not surprising that the gold and silver picture is becoming increasingly bullish. First, it has been four weeks since the low was made. Second, and more importantly, the trading range in which the metals have been stuck is narrowing. While the shorts and central planners have been steadfast with their selling and intervention to keep gold under $1600, and silver under $29, the physical buyers under the market have become more aggressive. So we are getting ever closer to the breakout above resistance. The shorts and central planners cannot hold the line much longer.
"We've seen this scenario unfold many times over the past 12 years and the outcome is always the same. The physical buyers always win. While the shorts and central planners can throw a lot of paper at the market -- and they do -- in a battle like this, they eventually have to come up with the goods. In other words, they have to keep delivering physical metal into the market to keep their credibility. Any hint of a default or force majeure would knock the props out from under the paper traders and clearly signal an end to their price suppression scheme."
An excerpt from Turk's interview is posted at the King World News blog here:
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

end




More industrial uses for silver:

(courtesy abnewswire.net)

Industrial Uses Forecast to Boost Demand for Silver

http://www.abnnewswire.net/Press Release: ABN Newswire – 5 hours ago
Washington, D.C, United States, Mar 16, 2013 - (ABN Newswire) - Industrial demand for silver has increased substantially over the past two decades and is expected to soar to a new record level in the coming year. Speaking last week at the annual Prospectors & Developers Association of Canada convention in Toronto, Michael DiRienzo, Executive Director of the Silver Institute, said that demand for silver is broadening in many directions.
Industry's widening use of the precious metal is expected to average more than 483 million ounces (Moz.) from 2012 to 2014, a level 53 percent greater than the average annual industrial fabrication demand of 313.4 Moz from 1992-2001.
Silver provides a unique combination of properties that make it ideal for applications in industries ranging from health and medicine to electronics, communications, solar power, batteries, superconductors, and computers, as well as jewelry and silverware. Silver withstands extreme temperatures, serves as an excellent reflector of light and conductor of heat and electricity, and is a natural anti-microbial agent.
"Silver helps make today's interconnected lifestyle possible and is a vital component of virtually every automobile, cell and smart phone, computer and laptop, appliance and electronic device we use. Further, silver's antibacterial properties are finding new uses in textiles, medical instruments and hospital equipment, providing an effective tool in combatting infection and bacteria," according to Mr. DiRienzo.
As industry continues its wide-ranging use of silver, investors are also increasingly acquiring silver bullion, seeking the safety of the precious metal as a store of value. Investor demand for silver can be seen in the record-shattering sale of 7.5 million American Eagle Silver Bullion Coins by the U.S. Mint in January of this year. In fact, over the first two months of 2013 investors purchased 10.9 million American Eagle Silver Bullion Coins, up by 43 percent over the sale of the coins in the first two months of 2012.
Further, Exchange Traded Funds (ETFs) that track physical backed silver are at a record high. As of March 8, total silver ETF holdings were 653.7 Moz, up by 22 Moz from year-end 2012. "Clearly, investor demand for silver remains buoyant by any measure," Mr. DiRienzo said.
Established in 1971, the Silver Institute serves as the industry's voice in increasing public understanding of the many uses and values of silver.
-END-




And now for our more important paper stories which will have an influence on gold and silver.

As many of you are aware, Cyprus declared a depositor haircut. All deposits of less than 100,000 euros
will be taxed at 6.75%.  Over 100,000 euros will be taxed at 9.9%.  Interest income will be taxed at
 25%.  Income taxes will be raised from 10% up to 12.5%.

Some facts:  1. GDP of Cyprus  17.5 billion euros
                     2.  Total bank deposits approximately 70 billion euros ($92 billion)
                     2b. Total bank assets approximately 125 billion euros. 
                     3.  The EU will inject 10 billion euros to the sovereign Cyprus
                     4.  Cyprus sovereign debt  16.3 billion euros.  Debt to GDP 93.3
                     5.  With the bailout pkg, Cyprus Debt to GDP rises to 152%
                     6.  The depositor tax lowers total debt by 5.8 billion euros.
                     7.  Half of the depositors are Cypriots and half are Russian oligarchs.
                
I will try and piece this very important story into sections as it was first reported to us.
The first section will deal with Cypriot stories from Saturday.  Then yesterday's stories and finally today.

First:  the official story as told by zero hedge early Saturday morning as this amazing story first broke:

(courtesy zero hedge)


                   

Europe Does It Again: Cyprus Depositor Haircut "Bailout" Turns Into Saver "Panic", Frozen Assets, Bank Runs, Broken ATMs

Tyler Durden's picture




Europe has done it again.
Late last night, after markets closed for the weekend, following an extended discussion the European finance ministers announced their "bailout" solution for Russian oligarch depositor-haven Cyprus: a €10 billion bailout (Europe's fifth) with a huge twist: the implementation of what has been the biggest taboo in European bailouts to date -the  impairment of depositors, and a fresh, full blown escalation in the status quo's war against savers everywhere.
Specifically, Cyprus will impose a levy of 6.75% on deposits of less than €100,000 - the ceiling for European Union account insurance, which is now effectively gone following this case study - and 9.9% above that. The measures will raise €5.8 billion, Dutch Finance Minister Jeroen Dijsselbloem, who leads the group of euro-area ministers, said.
But it doesn't stop there: a partial "bail-in" of junior bondholders is also possible, as for the first time ever the entire liability structure of a European bank - even if it is a Cypriot bank - is open season for impairments. The logical question: why here, and why now? And what happens when the Cypriot bank run that has taken the country by storm this morning spreads everywhere else, now that the scab over Europe's biggest festering wound is torn throughout the periphery as all the other PIIGS realize they too are expendable on the altar of mollifying voters and investors in the other countries that make up Europe's disunion.
Bloomberg's take on the sacrifice of Cyprus' savers:
Officials have struggled to find an agreement that would rescue Cyprus, which accounts for just half of a percent of the euro region’s economy, without unsettling investors in larger countries and sparking a new round of market contagion. Policy makers began meeting at 5 p.m. yesterday in a hastily convened gathering, seeking to overcome differences on bondholder losses while financial markets were closed.

“Further measures concern the increase of the withholding tax on capital income, a restructuring and recapitalisation of banks, an increase of the statutory corporate income tax rate and a bail-in of junior bondholders,” according to a communique released by ministers after the talks. It didn’t specify whether bank or sovereign bond holders could be affected.

The European Central Bank will use its existing facilities to make funds available to Cypriot banks as needed to counter potential bank runs. Depositors will receive bank equity as compensation.

Finance Minister Michael Sarris said the plan was the “least onerous” of the options Cyprus faced to stay afloat.

“It’s not a pleasant outcome, especially of course for the people involved,” said Sarris. The Cypriot parliament will convene tomorrow to vote on legislation needed for the bailout.
Needless to say, the locals are delighted:
In the coastal town of Larnaca, where irate depositors queued early to withdraw money from cash machines, co-op credit societies that are normally open on Saturdays stayed closed.

"I'm extremely angry. I worked years and years to get it together and now I am losing it on the say-so of the Dutch and the Germans," said British-Cypriot Andy Georgiou, 54, who returned to Cyprus in mid-2012 with his savings.

"They call Sicily the island of the mafia. It's not Sicily, it's Cyprus. This is theft, pure and simple," said a pensioner.
For the real response, look to Russia:
The island's bailout had repeatedly been delayed amid concerns from other EU states that its close business relations with Russia, and a banking system flush with Russian cash, made it a conduit for money-laundering.

"My understanding is that the Russian government is ready to make a contribution with an extension of the loan and a reduction of the interest rate," said the EU's top economic official, Olli Rehn.

Almost half of [Cyprus'] depositors are believed to be non-resident Russians, but most of those queuing on Saturday at automatic teller machines to pull out cash appeared to be Cypriots.
While "saving", pardon the pun, yet another insolvent country merely has the intent of keeping it in the Eurozone, and thus preserving Europe's doomed monetary block and bank equity for a little longer, this idiotic plan will achieve two things: i) infuriate not just Russians but very wealthy, and very trigger-happy Russians. The revenge of Gazpromia will be short and swift, and we certainly would not want to be Europeans next winter when the average heating level of Western European will depend on the whims of Russian natural gas pipeline traffic; ii) start a wave of bank runs first in Cyprus and soon everywhere else that has the potential of being the next Cyrpus.
Sure enough, here come the bank runs:
While the tax on deposits will hurt wealthy Russians with money in Cypriot banks, it will also sting ordinary citizens. Some ATMs in the country have run out of cash, Erotokritos Chlorakiotis, general manager of the Cooperative Central Bank, told state-run CYBC.
Frozen assets and "national bank holidays" are baaaaack:
Funds to pay the levy were frozen in accounts immediately, ECB Executive Board Member Joerg Asmussen said. The levy will be assessed before Cypriot banks reopen on March 19 after a March 18 national holiday. Sarris said electronic transfers will also be limited until then.
Europe's response: this is a unique situation. Just like the Greek bailout was unique;  just like the Irish and Portuguese bailouts were unique;  just like the bailout of Spanish banks was unique.
“As it is a contribution to the financial stability of Cyprus, it seems just to ask a contribution of all deposit holders,” Dijsselbloem said, noting the country’s financial industry was five times the size of its economy. The plan includes “unique measures” that address the “exceptional nature” of Cyprus and show “inflexible commitment to financial stability and the integrity of the euro area.”
Curiously, even everyone's favorite liar, former Eurogroup president, Jean-Claude Juncker, has a warning that this "bailout" is the worst thing Europe could have done:
Skeptics including Luxembourg’s Jean-Claude Juncker had said that imposing investor losses in Cyprus risked reigniting the financial crisis that has so far pushed five of the euro zone’s 17 members to seek aid. Last year, the euro area took what officials called a unique step to ask Greek bondholders to absorb losses.
But fear not: Europe has promised this absolute resolution taboo won't repeat itself...
When asked if a deposit assessment could be ruled out for future rescues, Rehn said in an interview: “It can and there is no concrete case where it should be considered.”
... Until it does repeat itself of course - after all the fundamental problem for Europe has never been resolved: the continent is still broke, and it still is running out of good, unencumbered assets (which as being repledged by the banking oligarchy) with every passing day.
Now the only thing unknown is Russia's response:
Corporate tax rates in Cyprus will rise to 12.5 percent from 10 percent as part of the deal, Dijsselbloem said. Rehn told reporters that Russia, whose banks have loaned as much as $40 billion to Cypriot companies of Russian origin, would ease terms on its existing loans to Cyprus as the rescue unfolds. Cyprus’s finance minister is scheduled to fly to Moscow on March 20.
What is known, however is that Cypriots have taken the news in stride.... and to their local ATM machine, which sadly is showing the following message: "Your transaction has been cancelled due to a technical issue. This ATM cannot complete withdrawals at this time" (courtesy of Yannis Mouzakis).
It didn't take long before the Cyrpus Cooperative bank issued a statement saying "some ATMs run out of cash" - by some they likely mean all as the entire country is now gripped in a full force depositor run.
Some other snapshots of what is currently happening in Cyrpus, where locals are using excavators if not to force the ATMs into "compliance" then to block bank entrances out of blind fury. From Philenews:
Indignant citizen who has the testimony of the Cooperative Credit Society Kyperoundas, cut the morning the entrance of the branch of the SEA, located on Avenue Nikos and Despina Pattichi in Limassol.

He said he believes that deceived by the assurances that the relevant deposits are insured citizens and decided how to express his protest, parking the excavator outside the entrance of the branch of SEA

And more from iefimeirda:
With the first light of day after the unprecedented decision to the Eurogroup on the terms of the Memorandum of Agreement and the taxation of savings, hundreds of people flocked to Cyprus stores credit cooperatives Larnaca to withdraw their deposits.
With the opening of stores found they could not withdraw all their money, because the electronic system of credit cooperatives was not working. And when it became possible, writes the Daily Cyprus, the system seemed to finally hit the appropriate amount of the new tax, which provoked strong reactions. Even after the government ordered the stores eventually closed.

At the same time, according to information or ATMs of banks give no money so that there is a huge inconvenience.

After lunch return to Cyprus President Papadopoulos Nikos Anastasiadis from Brussels in the morning reached political agreement on the rescue of the economy, while in the meantime the Presidential prepares emergency meeting of ministers of the government.

According to all the information, will this weekend be submitted and voted on bills in the form of urgency, before the banks opened Tuesday morning.

In the text of the agreement, with the characteristic title "We caught napping," the website says Sigma Live Nicosia agreed terms "under threat of closing banks."  painful Describing the agreement, Sigma relies on sources from Brussels you speak of night thriller and roll jams, and the Cypriot delegation warned even withdrawal from the negotiations.
Congratulations Cyprus savers - you were just betrayed by both your politicians, and by Europe - sorry, but you are the "creeping impairments" in the game known as European bankruptcy. And so is anywhere between 6.75% and 9.9% of your money, which you were foolish enough to keep with your banks (where at least you were compensated with a savings yield of... 0%).
More importantly, as of this morning Europe has finally grasped that there is a 6.75% to 9.9% premium to holding physical cash in your mattress rather than having it stored with your local friendly insolvent bank.
Luckily Cyrpus is so "small" what just happened there will never happen anywhere else: after all in Europe nobody has ever heard of "setting an example". Or so the thinking among Europe's unthinking political elite goes.
And congratulations Europe: just when people almost believed you things are "fixed" you go ahead and prove to the world that you are as disunified (because size doesn't matter in a true union), as confused, as stupid and as broke as ever.



end

Please read the following carefully.  This gives the true account on what was happening internally in 
Cyprus prior to the deal.  Germany and the IMF originally requested a 40% 'tax'  (confiscation) on

depositors cash.
It is important to read the statement from the President of the Republic as to what may happen if
they do not get the necessary votes in Parliament.  In other words, the IMF and Germany put the

screws to the Cypriots as they had no option.  The ECB was going to curtail the emergency lending

facility the ELA forcing a disorderly bankruptcy of the banks and the sovereign.

(courtesy zero hedge) 




Germany And IMF's Initial Deposit Haircut Demand: 40% Of Total

Tyler Durden's picture




As the President of Cyprus proclaims  to his people that "we' should all take responsibility as his historic decision will "lead to the permanent rescue of the economy," it appears that the settled-upon 9.9% haircut is a 'good deal' compared to the stunning 40% of total deposits that Germany's FinMin Schaeuble and the IMF demanded. This action, his statement notes, enables the rescue of 8,000 banking sector jobs and ensuring the liquidity of the banks, "allowing the economy to proceed decisively to a new beginning." Ekathimerini reports," this is the first time in the eurozone that a levy has been imposed not on the interest of bank accounts but on the capital itself," and was the only way to bridge most of the the gap between the EUR17bn Nicosia needed and the EUR10bn the ESM was offering, though tax on interest in Cypriot banks will also rise to 20-25%. It is the 40% haircut requirement that concerns us the most as clearly going forward that means other nations, starting Monday (or Tuesday given national holidays) see deposit outflows surge, as the willingness to take such steps is now painfully clear.

It is well known that the deep economic crisis and the state of emergency in which the country has found itself did not come about in the last fortnight since we have undertaken the administration of the country.

The state of emergency and critical nature of the times do not allow me, as they do not allow anyone, to embark on a blame game.

In the extraordinary meeting of the Eurogroup, we faced decisions that had already been taken and came across faits accomplis through which we were faced with the following dilemmas:

On Tuesday, March 19 we would either choose: the catastrophic scenario of disorderly bankruptcy or the scenario of a painful but controlled management of the crisis, which would put a definitive end to the uncertainty and restart our economy.

A possible choice of the catastrophic scenario option would have the following consequences:
  1. On Tuesday, March 19, immediately after the holiday weekend, one of the two banks in crisis would cease to operate, since the European Central Bank, following the decision already taken, would terminate the provision of liquidity. The second bank would suspend its work, and neither could avoid collapse. Such a phenomenon would instantly lead 8.000 families to unemployment.
  2. The State would be obliged to compensate depositors in response to the obligation regarding guaranteed deposits. The capital required in such a case would amount to about 30 billion euros, which the State would be unable to pay.
  3. A proportionate amount corresponding to the deposits of thousands of depositors for deposits over 100.000 Euro, would be led to a vicious cycle of asset liquidation, and these depositors would suffer losses of over 60%.
  4. Such an uncontrolled situation would push the whole banking system into collapse with all the attendant consequences.
  5. Thousands of small and medium enterprises, and other businesses would be driven to bankruptcy due to their inability to trade.
As a result of the above, the service sector would be led to a complete collapse with a possible exit from the euro. That, in addition to the national weakening of Cyprus, would lead to devaluation of the currency by at least 40%.

The second choice was the controlled management of the crisis, through the decisions taken and which can be summarized as follows:
  1. Ensuring the liquidity of the banks and the rescue of the banking system through their recapitalization.
  2. Rescuing 8.000 jobs in the banking sector and thousands of others which would be lost as a corollary of not maintaining the operations of banks.
  3. Total rescuing of deposits, with just the exchange of a small percentage of savings with shares of the two banks. Currently, these shares do not have their full value, but with the economic recovery they will repay most it not all of the amount that will be cut.
  4. This option results in a drastic reduction of public debt, makes it manageable and sustainable and relieves future generations from the burden of repayment.
  5. It saves provident and pension funds and avoids taking other tough measures such as wage and pension cuts that were put on the negotiations table.
  6. It avoids further recession and the risk of the vicious circle of a second memorandum.
We are not aiming to gloss over the situation. The solution chosen may be painful, but it was the only one that would allow us to continue our lives without adventures. It's a decision that leads to the historic and permanent rescue our economy.
In the next few hours we will all have to take responsibility. Tomorrow I will address the Cypriot people.

...

Already bank customers are gathering outside major and cooperative banks, Skai television reported on Saturday morning, as angry depositors demand their money.
...

This is the first time in the eurozone that a levy has been imposed not on the interest of bank accounts but on the capital itself. In addition to that there is a levy on interest, too, and an increase in the 10 percent corporate tax that has been one of the main driving forces behind Cyprus’s financial progress after the 1974 Turkish invasion, generating growth by attracting foreign direct investment.
Notably, the account haircut does not affect bank accounts in Cypriot bank branches based in Greece, according to sources from the Greek Finance Ministry.
Tax on interest will amount to between 20 and 25 percent.
...
Cyprus state broadcaster CyBC reported on Saturday that German Finance Minister actually entered the Eurogroup meeting on Friday proposing a 40 percent haircut on Cypriot bank accounts. Sarris stated on Saturday that this had also been the proposal of the International Monetary Fund.
Sarris stated in Brussels that in view of the threat from the European Central Bank for banks in Cyprus to shut down and chaos to ensue, the increase in interest taxation and the haircut to bank accounts became necessary. “A disorderly default, that was a genuine possibility, has been averted,”he said.
“It allows our economy to proceed decisively to a new beginning.”
...
Opposition leader Antros Kyprianou, the General Secretary of leftist AKEL, accused the government of not consulting the other parties, saying that"the government bears full responsibility for developments in the economy as instead of choosing the road of consensus it has decided to go it alone."

end

Bruce Krasting adds his two cents on the debate with his report on Saturday:

(courtesy Bruce Krasting)

Two Sides of Cyprus

Bruce Krasting's picture





Let me first (try to) give you a justification for the seizure of bank deposits in Cyprus.
Everybody who knows any thing about Cyprus also knows that the domestic banks were a parking lot for Russian hot money. I wrote about this back in 2011 (Link). There are a gazillion other articles saying the same thing.
That being the case, the seizure of some of the black Russian money as part of a bailout for Cyprus is not really a surprise. With dirty money flowing in, the stupid banks in Cyprus used the deposits to buy crappy assets like the sovereign bonds of Greece. To a significant extent, the hot money caused the problem – and therefore the E5.8b ($7.5b) hit to depositors is justified.
The folks in Berlin, Brussels and Paris all understood that Cyprus was a Russian front. To bailout Cyprus is one thing, but to bail out Russian Oligarchs is quite another. What else could the Euro Deciders do?
I struggle to come up with a valid comparison for what has happened in Cyprus. Think what the backlash would be if somehow the FDIC/Federal Reserve were forced to step in to bailout an entity that was a depository for the Mexican drug lords. If faced with a similar situation, America would do the same as the EU. Screw the hot money crowd.

And now the other side. This is a huge development, a potential game changer. If the seizure of accounts had happened in Greece (or the other PIGS) the European Monetary Union, as we know it today, would not exist. The EU would have imploded within months. This outcome would have resulted in some form of Euro break up, and a return to national currencies. That scenario has broad global implications.
The decision to clip depositors was not taken lightly. The ECB, and all the other Finance ministers contributed to the decision to take the depositors money. While making that decision, they had to have considered the consequences. Certainly there was recognition that this was an unprecedented step, and that it was extraordinarily hostile to bank depositors.

How are markets going to react to this? Will people care if some Russian money was stolen? Will they conclude that this was a unique event, and the depositors in Italy, Spain and France will never face the same losses that depositors in Cyprus have realized?
Given the significance of what has happened it would be logical to assume that a huge safe-haven trade could be the market’s response. If the Cyprus seizure had happened a year ago, the market would have reacted with:
- The Euro trades cheap against all crosses.
- The Yen strengthens against the Euro and the dollar.
-European bond spreads widen. Money moves to Germany, while Spanish and Italian bonds get crushed.
-The EURCHF comes under attack. The Swiss national Bank floor of 1.2000 is tested, and the SNB is forced to intervene to maintain the peg.
-US bonds trade rich.
-Money moves to the UK (where banks are ‘safe’) and Sterling strengthens.
-Money moves to gold, and other PMs.
-Stocks would take a beating globally.

While all of those things might have happened a year ago, I’m not sure that is the case today. As of Friday, the markets hated gold/PMs, Sterling, the Yen against everything (including the Euro), the EURCHF, US bonds and everyone loved stocks.
Is it possible that everything that was in the market on Friday is going to be reversed? I would think not, but these are very unusual circumstances. Nothing like the seizure of depositor’s money has ever happened before, so we are on uncharted ground.
Given the fact that the EU deciders were well aware of the potential consequences to financial stability within the EU, I wonder if some additional “market friendly” steps might be in the offing. (There must be a plan 'B" in place - that or the guys pulling the strings are idiots.)
Because of the Russian money angle, the step to seize deposits might be glossed over. On the other hand, there is a great risk that what has happened is a turning point in modern finance. I’m not aware of any precedent for what has occurred. I say again, if this had happened in any other country in Europe – the monetary union would be dead within months. That possibility still exists, even though it was just crooked Russian money that was stolen. We shall see the market’s reaction in a matter of hours – I can’t wait.

7909338140_27e00abe29_z

Sinclair – One Of The Most Important Events In History & Gold

Courtesy of KingWorldNews.com
Dear CIGAs,
Today legendary trader Jim Sinclair told King World News we have just witnessed one of the most important events in history and it will have a major impact on the gold market.  Below Sinclair, who’s father was business partners with legendary trader Jesse Livermore, had to say in this extraordinary and exclusive KWN interview:
“The wire reports on the Cyprus situation are working overtime to try to make the case that 80% of the deposits belong to the people of Cyprus, and only 20% of the deposits belong to the Russians.  That’s absolutely false.  After 1985, when the ‘Robber Barrons’ of Russia took over the general economics of Russia, that was the transformation from the KGB to private business.  The primary place for exported Russian funds was Cyprus. 
Now, there is one leader in the world that would be very dangerous to challenge, and that is Putin of Russia….
“What’s just happened is the IMF has backed up, lauded, supported, and publicized, as if it were a victory, the taking of 10% of what really turns out to be 80% of Russian ‘black money.’  Russian ‘black money’ is KGB money, now in business.  The leader of Russia (Putin) was a former KGB official.  Who’s money do you think they have taken?  This is the biggest mistake the IMF could possibly have ever made.”
Eric King:  “Jim, it’s unimaginable to me, but, incredibly, just ten days ago you warned that you don’t want to anger Russian leader Putin because he and Russia will punish the West in the gold market.  Can you talk about how this is going to impact the gold market beginning on Monday?”

end



The CEO of Saxo Bank in Germany comments negatively to the deal:

(courtesy zero hedge)

Saxo Bank CEO: "This Is Full-Blown Socialism And I Still Can't Believe It Happened"

Tyler Durden's picture




Authored by Lars Seier Christensen, CEO Saxo Bank; originally posted at his blog at TradingFloor.com,
It is difficult to describe the weekend bailout package to Cyprus in any other way. The confiscation of 6.75 percent of small depositors' money and 9.9 percent of big depositors' funds is without precedence that I can think of in a supposedly civilised and democratic society. But maybe the European Union (EU) is no longer a civilised democracy?
heard rumours about this when I visited Limassol last week, but dismissed them as completely outlandish. And yet, here we are. The consequences are unpredictable, but we are clearly looking at a significant paradigm shift.
This is a breach of fundamental property rights, dictated to a small country by foreign powers and it must make every bank depositor in Europe shiver. Although the representatives at the bailout press conference tried to present this as a one-off, they were not willing to rule out similar measures elsewhere - not that it would have mattered much as the trust is gone anyway. It is now difficult to expect any kind of limitation to what measures the Troika and EU might take when the crisis really starts to bite.
If you can do this once, you can do it again. if you can confiscate 10 percent of a bank customer's money, you can confiscate 25, 50 or even 100 percent. I now believe we will see worse as the panic increases, with politicians desperately trying to keep the EUR alive.
Depositors in other prospective bailout countries must be running scared - is it safe to keep money in an Italian, Spanish or Greek bank any more? I don't know, must be the answer. Is it prudent to take the risk? You decide. I fear this will lead to massive capital outflows from weak Eurozone countries, just about the last thing they need right now. Even from the EU as a whole, I suspect, as the banking union is in place in most countries already.
Another open question is what will happen to the huge number of brokerages based in Cyprus? There is about 100 or more FX and other brokers currently operating under the relatively light Cypriot regulation. How will this impact the trustworthiness of these many small institutions? What IS the exact impact on the client deposits they might be holding in Cyprus? Will anyone dare to do business with them going forward?
This is a major, MAJOR game changer and the fallout will be with us for a long time to come. I believe it could be the beginning of the end for the Eurozone as this is an unbelievable blow to the already challenged trust that might be left among investors. Talk about a possible own goal.
Market reaction? it must be very good for gold - and for safe-haven countries like Switzerland, Singapore and economically more healthy non-Euro countries in, for example, Scandinavia. I would think the EUR and associated markets will be undermined by increasing lack of confidence when the full implications become clear for investors.
This is full-blown socialism and I still cannot believe this really happened.
Be careful out there...

end

A very important discussion on what is next.  Study carefully the difference between the USA and Europe where the USA has an excess deposits over loans vs Europe which has more loans to deposits.  This is why Europe is in a very precarious position if bank runs occur as a result of the Cyprus affair:

(courtesy zero hedge)

After Cyprus, Who Is Next?

Tyler Durden's picture




Short answer: we don't know.
We do, however, know something we have been pointing out since early 2012 - when it comes to the funding structure of European banks, there is a dramatic difference between the US and Europe. In the US, as we showed most recently two months ago, the Big Three depositor banks (JPM, Wells and Bank of America, excluding the still pseudo-nationalized Citi), have a record $858 billion in excess deposits over loans.
Extending the above to cover the entire US financial system, shows more of the same: according to the Fed, in the latest week ended March 6, there was a total of $9,283 billion in consolidated deposits, covering just $7,255 billion in commercial bank loans, a record $2+ trillion in excess deposits over loans.
How is it possible that there is a record amount of deposits in the US financial system, while the notional outstanding of total commercial loans is less than at the time Lehman filed? Simple - the delta has been filled by the Fed's excess reserves, which amounts to... drumroll... just over $2 trillion, which via circuitous ways make its way back to the bank deposit ledger - this was explained in "A Record $2 Trillion In Deposits Over Loans - The Fed's Indirect Market Propping Pathway Exposed."
In other words, by becoming America's indirect "bad bank", the Fed has mitigated the concern of a deposit run, or at least within the US traditional banking system, however in the process making the US $14 trillion shadow banking system (where it was been soaking up safe collateral at an epic pace) breathtakingly fragile.
However, shadow banking is a topic for another day. For the time being, the take home message is that at least superficially, there is a record $2 trillion in deposits which are not encumbered by loans, and which incidentally are used by banks such as JPM to fund the operations of its prop trading desks, such as the CIO, and ramp stocks and risk in general, higher (as also explained previously) at least until these investments go horribly wrong and we get the usual theater of Senatorial hearings and the like.
So what about Europe? Here things get bad. Very bad. So bad in fact that we covered it all just one short year ago, in "A Few Quick Reminders Why NOTHING Has Been Fixed In Europe (And Why LTRO 3 Is Not Coming)."
Sure enough LTRO 3 didn't come (for the reasons we explained), and a year after the above post was penned, nothing has stillchanged in Europe, as Cyprus' bank depositors just learned to their humiliation and savings losses.
What is the reason for this? Well, as readers can surmise based on what just happened in Europe, it once again has to do withdeposits, and specifically the loan-to-deposit ratios of European banks. Because if the US has an excess of deposits over loans, Europe is and has always suffered from the inverse: a massive excess of loans (impaired assets) compared to the most critical of bank liabilities - deposits. This goes back to centuries of capital formation in Europe, which unlike the US has always relied far more on secured bank loans than on unsecured corporate debt as can be seen on the chart below.
One doesn't have to be a rocket scientist to figure out that in a world in which European loans are massively mismarked relative to fair value, and where bad and non-performing loans are an exponentially rising component of all "asset" exposure, it will be the liabilities that are ultimately impaired. Liabilities such as deposits.
This happened in Cyprus overnight, where the non-performing asset side of the consolidated bank balance sheet was just forced to collapse to allow the continued operation of the country's financial system, however with a far smaller corporate bond and loan liability matching (there was only €2 billion in bond outstanding in Cyprus which made any realistic bail-in impossible) the only way to shrink the liabilities of the consolidated balance sheet - inevitable when one is terminally impairing assets - was to impair the most sacrosanct of bank liabilities - deposits.
This is precisely what just happened. The reason it happened first in Cyprus was for two reasons: i) the primary bank liability was deposits, and ii) a key source of deposit funding was those "evil" oligarch Russians: after all they deserve to be taught a lesson, or so the populist thinking in Germany and the Netherlands goes. Well, that may be the case, but at least half of the impaired deposits ended up belonging to the local population, which was neither oligarchic, nor "evil", not stole (allegedly) to make their money.
Of course, those who had read Zero Hedge a year ago would have known all about this. This is what we said in March of 2012:
The chart below explains why not only is Europe's severely asset constrained, it is also running out of funding, in the form of depositor cash: the most critical bank liability. Remember: without incremental deposits, banks can not invest in new assets, unless they generate cash from operations, and thus grow shareholder equity. There is a problem: as the final chart below shows, Europe, and especially Scandinavia which has consistently remained off the radar, is literally off the charts when it comes to LTD ratios.

With banks such as Danske, SHB, Swebank, DnB, and Nordea literally at 200% Loan-to-Deposits, but most other European banks too, even the tiniest outflow in deposit cash (ala what is happening in the PIIGS) will send the system into yet another liquidity spasm. Only this time, since what little unencumbered assets remaining have already been pledged to the ECB, there will be no quick LTRO collateral-type fix this time.

One year after we warned Europe that it was only a matter of time before deposits become impaired to "grow into" the European bank balance sheet, Cyprus has drawn the short stick.
And yes: we don't know who will be next, but we do know that nothing has changed in the one year since we wrote our warning a year ago (because guarantees - not actions - of unlimited funding by the ECB not only do not help the actual underlying problems, they exacerbate them) and the last thing we want is to be accused by Europe of spreading the evil truth. But we do know that the unprecedented asset-liability mismatch in Europe is very unsustainable, and the lower the funding deposits in a given bank, the greater the eagerness will by management, regulators and politicians to impair, and confiscate said deposits, allowing a parallel collapse in bad assets and a gradual progression to a viable banking system. The only problem is said viability will be on the backs of savers and depositors once more who will have no choice but to lose much more than just 9.9% of their savings before it is all said and done.
So for those who really want to know who is next - look to the left side of the chart above: that's where the loan-to-deposit ratio among European banks is highest, and thus most unsustainable.

end

Then on Sunday:


Cyprus Parliament To Delay "Rescue" Vote Due To Lack Of Support, Despite ECB Pressure For Pre-Trade Open Decision

Tyler Durden's picture




The painfully shortsighted Cyprus bail-out, pardon bail-in (also known as wealth tax to those who are actually doing the in-bailing), plan is going from bad to worse. Because in addition to all the previously discussed macro-implications, all of which are adverse and have the full potential of destabilizing the Eurozone once more and lead to bank runs across not only the periphery but the core as well, especially by offshore (read Russian) depositors, there is now a risk that the entire hurriedly-cobbled together "plan" may be on the verge of failure as it may not get a majority vote in domestic ratification.
Today, at 4pm local (2pm GMT) the Cypriot parliament was scheduled to meet to vote through and ratify the tax levy plan, presented as a fait accompli at least by the Eurozone FinMins. A few hours ago, this meeting was delayed until 4 pm local on Monday "after signs lawmakers could block the surprise move.... If [parliament fails to ratify the bail-in], President Nicos Anastasiades has warned, Cyprus's two largest banks will collapse." And so the late hour scramble to procure enough vote to pass the depositor impairment begins as the alternative is simply "or else." 
The problem is that while for Cyprus tomorrow is a national bank holiday (yes, ironic), the EUR opens for trading in a few hours, with the global equity futures markets, and Japan cash to follow shortly thereafter. And with absolutely no clarity on what the "pre-determined" outcome from the Cyprus bailout will be heading into Monday open, where one of the outcomes is the possible collapse of the country's entire banking system, which would certainly have contagious effects on all of the mainland, Europe is starting to freak out.
Bloomberg clarifies the precarious math situation which nobody in technocrat Europe apparently considered when they assumed that they have acquired some 10% of Cypriot sovereignty:
With his Disy party holding 20 seats in the 56-seat legislature, he needs at least nine more votes to secure approval and avoid the financial collapse of the region’s third- smallest economy. If he doesn’t get backing for the plan, the banks may stay shut starting March 19, state-run Cyprus Broadcasting Corp. said. Tomorrow is a bank holiday in Cyprus.

“If tomorrow Cyprus’s Parliament rejects the bill,Cyprus opens the road to chaos,” said Afxentis Afxentiou, who was governor of the Central Bank of Cyprus from 1982 until 2002, said on CYBC. If the bill is rejected, “Cyprus will turn into Libya. Even with the pain, we need to follow a normal course, with hope we’ll see better days.”
For now, said European pressure is only coming from the ECB, although expect chaos to break out and a full on media onslaught seeking to sooth and calm the markets to result if there is no movement, and no sign of a majority emerging before the first trades hit the EUR pairs. As ANA reports,
More from Bloomberg:
Anastasiades rejected pressure from an ECB representative to bring a vote on depositor losses to Parliament today, Greek state-run Athens News Agency reported, without saying how it got the information. An unnamed ECB representative pressured Anastasiades to open banks on March 19, the news agency said.

Anastasiades met with leaders of the nation’s political parties yesterday. While he may get support from the third- biggest party, Diko, which backed Anastasiades in the election, Diko’s eight seats won’t assure him a majority.
Yet even without a complete market collapse, the damage to Cyprus', and by implication Europe's banking system is done, as the question of who will keep their deposits in European banks after this stunning episode (especially for the Russian billionaire oligarchs who are booking flights into Zurich, Geneva and Basel to shut their accounts immediately) will remain unanswered until we get the March European deposit outflow data, some time in May.
George Perdikes, a lawmaker from the Green Party who sits on Parliament’s finance committee, said ways were being examined to soften the blow to depositors. These include giving them bonds linked to profits from the country’s gas reserves, he said in comments broadcast on CYBC after a meeting of the committee’s members with Anastasiades.

“This is a lose-lose situation,” he said. “Whatever happens there will be a massive outflow from Cypriot banks, with or without a haircut.”
Ironically, it was Cyprus' tiny position in the grand scheme of European things that allowed Europe to expose how it truly feels about all members- as it turns out everyone in Europe is equal, except for those deemed to be less important than others. So how high does the bar go: Athens next? Or Madrid? Or Rome?
Perhaps there is a very good reason why, contrary to the sell-side scrambling to assuage fears of a pan-European bank run, the new Dutch president of the Eurogroup Dijsselbloem declined to rule out further depositors haircuts in other Eurozone countries such as Greece, Spain or Italy.
And while readers contemplate that, we hope for the sake of Europe, that ATMs in the latter three countries are well-stocked, because all it will take is one photo of a cash dispensing machine in the periphery to be "temporarily out of service" to be the spark that reignites the European relapse into full outright contagion and panic.

end

Then later in the day on Sunday:

Cyprus Bank Holiday Extended Through Tuesday As Confusion Spreads

Tyler Durden's picture




For those who read the previous article on the topic of last minute chaos and confusion in Cyprus, and Europe, it will come as no surprise that the previously scheduled Monday bank holiday (aka Green Monday) has been extended into Tuesday. So prepare to not be surprised.
From Kathimerini:
The Cypriot cabinet has declared Tuesday a bank holiday, for fear of capital flight, and this may even be stretched to Wednesday, as depositors are certain to withdraw huge sums from the Cypriot banks after the haircut imposed.

Nicosia postponed from Sunday to Monday the tabling in Parliament of the bill including the measures for the Cypriot bailout – including a bank account haircut and a tax hike on interest and corporate earnings – but the European Central Bank insists on a rapid voting because there are already signs a domino effect will follow across European lenders and markets from Monday.

There is genuine fear of market unrest on Monday morning when stocks may crumble in the eurozone and bank accounts in other southern European bank may suffer.

Skai radio reported on Sunday that the Bank of Greece has sent between 4 and 5 billion euros to Cyprus in order to help Cypriot banks respond to cash requirements by their clients.
So, if the official name of the March 18 holiday was "Green Monday", will the March 19th ad hoc holiday be called "Red Tuesday"? Inquiring minds want to know.

end



 Monday (today), the Cypriot government announced that the Cypriot banks will remain closed until Thursday:

(courtesy zero hedge)


Cyprus "Bank Holiday" Gets Another Extension, Bank Reopening Now Set For Thursday

Tyler Durden's picture




What was initially a single-day Bank Holiday has now morphed into three days as the farce that is the wealth tax in Cyprus will now keep the citizenry from their money until Thursday according to the latest from the Central Bank...
  • *CYPRUS CENTRAL BANK SAYS BANKS TO BE CLOSED UNTIL THURSDAY: AP
Which begs the question "Which Thursday?"

Via AP,
Cypriot central bank: Banks will remain closed until Thursday amid talks on savings seizure.

end




Monday morning analysis on the Cyprus affair courtesy of Mark Grant:



The Rape Of Cyprus By The European Union & The IMF

Tyler Durden's picture





Submitted by Mark J. Grant, author of Out of the Box,
I have been watching articles pour forth about Cyprus all weekend. I am almost as aggravated with the majority of them as I am with what took place. People are dancing around the edges while the propaganda machines of Europe are churning out the usual bunk.

Let's get some things straight and look what has happened directly in the face. There was no tax on the bank accounts in Cyprus. There still is no tax; the Cyprus Parliament has not passed it and will not vote on it until tomorrow so whatever action takes place it is retroactive. Next, this was not enacted by Cyprus. The people from Nicosia did not go to the Summit and ask to have the bank accounts in their country minimized to help pay the bills. Far from it; the nations of Europe, Germany, France, the Netherlands and the rest, demanded that this take place, a "fait accompli," the President of Cyprus said and Europe annexes Cyprus. Let's be quite clear; the European Union has confiscated the private property of the citizens in Cyprus without debate, legislation or Parliamentary agreement.

A bank account is not a bond or a stock or any sort of investment. This seems to be lost on many people. A bank account is the private property of a citizen or a corporation and does not belong to the government or at least that was the supposition up until now in Europe.

Next there is deposit insurance in Europe. Every country has its own version but it is there. It guaranteed the bank accounts of citizens up to one hundred thousand Euros. So much for the meaning of any guarantee in Cyprus or any other country in Europe. Null and Void! If the European Union can dismantle deposit insurance in Cyprus they can damn well do it in whatever country they please and at any time.

Here’s the description of the Cypriot government deposit insurance plan:
"Participation in the DPS is compulsory for all banks authorized by the Central Bank of Cyprus, i.e. banks incorporated in the Republic of Cyprus, including their branches in other countries, and the Cyprus branches of foreign banks, incorporated outside the Republic of Cyprus or the Member-States of the European Union. The DPS does not cover deposits of branches of banks established in European Union Member States. These deposits are covered by the corresponding deposit protection scheme established in the country of incorporation.

The DPS is activated in the event a decision is reached that a member bank is unable to repay its deposits, or as a result of a Court’s order for the winding-up of a member bank. Where a bank is unable to pay its deposits, the relevant decision is adopted by the Central Bank of Cyprus or, where a member bank is incorporated in a country outside the Republic of Cyprus, by the competent supervisory authority of the country of incorporation.

The maximum level of compensation, per depositor, per bank, is €100.000."
Please note that until yesterday all depositors in Cypriot banks were insured up to the value of €100,000 with any one bank. Today that solemn governmental promise has been shown for what it is; a lie. Worse and actually far worse and quite scary in fact is that the European Union and the European Central Bank and the IMF has not just allowed violation of the deposit insurance but demanded it. One thing is certain here; if they can void deposit insurance in Cyprus then they can void it in any country in Europe. Further; if they can void deposit insurance then they can void bond covenants with the scratch of a pen on paper. Nothing now; Nothing is safe!

Pay attention please. The European Union and the European Central Bank and the IMF have just advocated the confiscation of private property for their own indulgence. Bank accounts are not bonds or stocks or some other form of investments. It is private property like your house or your car. Germany, France et al came in and said, "We want it and we are taking it and it is necessary for our government." These countries did not demand it, yet, from their own citizens though they might soon but they demanded it from the citizens of Cyprus in exchange for funds. This is not a European Union this is a European Fourth Reich!

"The moment the idea is admitted into society that property is not as sacred as the law of God, and that there is not a force of law and public justice to protect it, anarchy and tyranny commence."

          -John Adams
end



Lesson 1: Greece; Lesson 2: Cyprus - Pay Attention

Tyler Durden's picture





Submitted by Mark J. Grant, author of Out of the Box,
Lest We Forget

The main issue is not Cyprus. Cyprus just happens to be the nation where the confiscation is to be enacted. Cyprus is the scapegoat. The European Union, the ECB and the IMF are the villains. Cyprus is the mostly unwilling recipient. What has taken place in Cyprus is far less important than the larger issue which is a forfeiture of private property being demanded by the nations on the Continent and by an international organization headquartered in Washington D.C. That would be in America.

"The leading banker in Amsterdam is now the pastry chef in our kitchen."

                                  -Casablanca

In the case of the Greek default the country was told by the same organizations to retroactively change the covenants of their bond indenture. They did this. In the case of Cyprus, Europe has told this small nation to seize a portion of all of the bank accounts in the country so as to partially fund its debt. In both cases neither Greece nor Cyprus made the decisions; they were made by the European Union and forced upon the host countries by the threat of capital to be provided or not.

(AP) "Jean-Claude Juncker, head of the Eurogroup meeting of Eurozone finance ministers, has vowed that a Greek default was not an option and would be avoided even after Athens' admission that it would miss its deficit-reduction targets raised questions about whether it would receive its next bailout loan."

                                 -October 3, 2011

Right up until the day it happened the President of Cyprus claimed it would never happen. Then, faced with bankruptcy, the fellow folded. I do not take a position here upon his actions, he has been in office for three weeks, but I do take a position upon the tyranny of the governmental bodies in question; they have demanded and forced the forfeiture of private property for their own betterment. I state with authority; if they can do it in Greece and then again in Cyprus they can do it anywhere and under any guise they like. They can wield the army of their pen, of their money, as an effective armament on the battlefield, to change what they like, when they like, all for the good of the State.

"Every collectivist revolution rides in on a Trojan horse of ‘emergency’. It was the tactic of Lenin, Hitler, and Mussolini. In the collectivist sweep over a dozen minor countries of Europe, it was the cry of men striving to get on horseback. And ‘emergency’ became the justification of the subsequent steps. This technique of creating emergency is the greatest achievement that demagoguery attains."

                            -Herbert Hoover

Deposit Insurance at a bank, any bank in Europe, is now meaningless. A bond indenture, any clause, any paragraph, any promise or assurance; now meaningless. The notion of private property, land, cash, house; now meaningless. The European Union will take what they want as they deem it necessary and the IMF will follow along. The question has been asked, during the last few days, why the bond holders of Cyprus were not tagged along with the bank deposits. I can answer the question. Virtually all of the Cyprus sovereign debt is governed under British law and so the EU did not pursue this course.

I recall the movie, Casablanca, where the Germans stood up to sing their National Anthem and the French responded with the "Marseilles." It is too bad that the French have forgotten how to sing this song but then, apparently, all of the nations in the EU have forgotten how to sing their own songs.

Greece came first. Lesson one and "shame on you." Cyprus comes second and now "shame on me." What will come next? What will you tell your partners or your shareholders when they say, "You should have known." You will have no excuse! The Europeans will take what they want and when they want it and to have money invested there now only has one excuse; masochism. Neither you nor I have any idea of what they might do next. When a government changes an indenture retroactively as a condition of funding and then demands that private property be seized as a condition of funding then this government, the European Union, will stop at nothing, find no boundary or fence, to halt its ambitions.

When Lesson three comes, and it will, I will not be kind. I will say; "I told you so!"


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Sinclair – All Hell Is Breaking Loose After Cyprus Catastrophe

Courtesy of KingWorldNews.com
Dear CIGAs,
Today legendary trader Jim Sinclair told King World News that all hell is breaking loose after the Cyprus catastrophe.  Sinclair, who’s father was business partners with another legendary trader, Jesse Livermore, had this to say in this extraordinary and exclusive KWN interview:
Eric King:  “Jim, your comments over the weekend on King World News regarding the Cyprus disaster have electrified the world.  But it also seems to have frightened a great many people.”
Sinclair:  “Well, it should have frightened many of the players involved, and served as a wake-up call.  There was a great miscalculation made with regards to Cyprus, and the situation has quickly turned into a catastrophe.  There was no real understanding of the entities that were behind the Russian corporations which have money in Cyprus, and the effect of what is in reality the confiscation of Russian ex-KGB money. 
The people at the IMF, which have spearheaded this disaster, never expected the ‘Cyprus Solution’ to blow up in their face the way it has….
“This has quickly turned into a PR nightmare because it is not a ‘tax,’ but instead a ‘confiscation.’  They have stolen KGB money in order to meet the liabilities of the banks.  Up to this point, bank depositors have been held whole in this most serious Western, and by consequence international financial meltdown. 


end



First, let us see how early market sentiment from Asia and Europe affected our markets:


Your early morning market sentiment.

Major points:

1,  Voting on the Cyprus agreement has been delayed and it looks like voting will not occur until Friday.
This caused markets in Europe/Asia to tumble as well as the Euro/USA currency cross.

2. Strange comments on ECB official Asmusssen, who said that the ECB did not insist on the bank confiscation.  Interesting Schauble blames the ECB, the commission,  and the Cypriot government for the "bail in". They  did not ask for this, then who did?  Russia?

3.Russia may reconsider her role in the Cyprus rescue following the bank tax.

4,  You can kiss oligarch Russian capital goodbye as they seek other havens.

5/ Bloomberg and Deutsche Bank provide details:

(courtesy zero hedge/overnight market sentiment)




News Russia May Reconsider Cyprus Bailout Role, Bailout Vote Delay Crushes Overnight Ramp Attempt

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As expected, it is all about Cyprus this morning, and overnight, and just as naturally it wouldn't be a centrally-planned market without the generic BTFD overnight ramp attempt, which we got from the EURUSD, as the pair rose from sub 1.29 to 1.2973, which also pushed the US futures up to nearly fill half the overnight gap lower. Citi explained this, observing the "EUR/USD squeezed higher on reports Cyprus bailout terms may be eased, CitiFX Wire says", but it did add that "selling was likely to materialize; flow has 60% bias in favor of downside, Seeing heavy net selling, mainly from leveraged funds." Naturally, the market does what it does best - clutches at straws, although not even this centrally-planned market could ignore news that today's Cyprus parliament vote has been cancelled, that banks will likely remain closed tomorrow, and that a vote may not happen until Friday, which likely means the bank holiday is about to stretch to one week, and possibly much longer as Cyprus is terrified to open its banks to the fury of scrambling "bank-runners."
As for Cyprus, the absolute confusion deepens following comments from the ECB's Asmussen that the ECB did not insist on a Cyprus bank levy structure. This is confusing, and comes on the heels of last night's comments from German FinMin Schauble in which he blamed the ECB, Commission and Cypriot government for the wide bail in. So if the ECB, Germany, and the Cypriot government all did not want a deposit confiscation, who did? Russia?
And speaking of the Russian wildcard, things are starting to get interesting: first the country reported, via RIA, that it sees no impact on capital movement from Cyprus tax, which is interesting considering all bank transfers in and out of the island have been frozen.
But then things started to get interesting following another RIA report citing finance minister Siluanov, that Russia may reconsider its role in the Cyprus rescue following the bank tax. Siluanov added that the bank tax breaks the plan for joint steps on Cyprus and that the decision was made without Russia (which is expected since Russia is not part of the Eurozone).
Russia concluded the overnight headlines after deputy economy minister Sergei Belyakov told reporters in Moscow that the Cyprus decision casts doubts on the EU banking system. Here is why all of Europe can kiss Russian oligarch savings goodbye: risks to safety of retail and corporate bank deposits “cast doubt on the principles of the banking system not just in Cyprus, but in the countries of the EU,” Belaykov says. Cyprus deposit losses won’t influence Russia’s attempts at "de-offshoreization" of economy, Belyakov added.
Forget trade and currency wars - is this the weekend we just launched the second part of the Cold war? Because if memory serves, the last time Russia and Germany were openly at each other's throats, things in Europe did not end too well...
Finally, for those who missed the news frenzy of the weekend, here is DB's Jim Reid summarizing it:
I had a strange dream that night that a European country had seized a portion of insured depositors money to fund a bail-out while senior bondholders of the banks and the Sovereign survived unscathed. I think it took until yesterday and the effects of the medicines to wear off to realise that this was what actually happened. Although EU leaders have made it clear that the shock resolution in Cyprus is a one-off it has surely changed the landscape in Europe and now provides a template that will be at least on the table, even as a bargaining chip only, in the years ahead.
The real damage here is going back on the Government's pledge to honour all deposits up to Euro 100k - one that now exists EU wide. It’s clear that the Cypriot Government was given the alternative of a chaotic default where arguably much more would have been lost for many. But could the authorities not have taxed the uninsured depositors more than the 9.9% and kept those with under 100k whole as opposed to a 6.75% levy? Overnight reports have suggested that this is one area that might be up for internal negotiations within Cyprus before the banks reopen tomorrow after today's holiday. Indeed, The FT is reporting that deposits over 100k could see an increased rate of 12.5% while smaller deposits would be levied at 3.5% in an effort by President Anastasiades to scrape together a parliamentary majority to approve the bailout. Martin Schulz, head of the European parliament, while agreeing that savers should bear some of the bailout costs, called for changes to exempt those with savings under €25,000 (The Guardian).
If the smaller depositors are hit at all, one can't help thinking that this move has crossed a sacred line and that any depositors in any bank domiciled in a country reliant on the largesse of the EU should in theory now think very carefully about alternative places to store money whatever the size of their holdings. For now one would suspect that markets are calm enough that the contagion will be limited but such a move could easily amplify any future crisis in Europe as the spectre of deposit losses will now be on the table whatever politicians say in advance or whatever insurance scheme is on the table. So this is perhaps more of a slow burning issue than the start of the immediate resumption of stress. It is however worrying that little consistency has been used relative to previous bail-outs and that smaller seemingly insured savers have been brought into the solution.
The reality though is this move is the latest (but by no means the last) manifestation of financial repression -albeit one which is a bit less subtle than say inflation or devaluation but one that has a similar impact. Indeed those of us with money in a UK bank account have seen the international value of these deposits fall notably in 2013 so far and a fair bit more since 2008. In international terms, as it stands, the smaller Cypriot deposits will have lost similar amounts to UK depositors in 2013 but clearly in a manner that will provoke much more anger. It perhaps shows how the options become more limited when you don't have your own currency to use as part of the solution.
For the record, further measures of the deal include a bail-in of junior bondholders and increases of taxes on capital income. Corporate tax rates will also be lifted to 12.5% from 10%.
According to the Eurogroup, these measures, combined with the deposit levies will reduce the size of the Cyprus bailout from around EUR 17bn to EUR 10bn and lead to an improvement in the Cypriot public debt trajectory with debt/GDP falling to 100% by 2020. So what's next? Cypriot finance minister Michalis Sarris has said that his government had already moved to ensure deposit holders could not make large withdrawals electronically before Tuesday’s open. ECB's Jörg Asmussen also said a portion of deposits equivalent to the levies would likely be frozen immediately. In terms of the legislative process, Cyprus' parliament will not be convened until 4pm Cypriot (2pm London) time today with a vote on the levy expected before tomorrow. The current ruling party's lack of majority may just complicate things here. Indeed the parliament is composed of 56 MPs and legislation requires a simple majority of 29 votes. DB’s George Saravelos noted that the opposition already stating that they will vote against so the ratification hinges on all of the ruling party's (DISI, 20 MPs) and the smaller coalition partner's DIKO (9 MPs) votes. That said, George’s baseline scenario is that the levy will pass, not least because there is now little alternative left but he also highlighted that the approval would be a close call and the risk is that decisions are delayed. A delay or failure to approve the bailout may put Cyprus banks' liquidity profile at risk. For instance, the UK Telegraph noted that Cyprus Popular Bank could have its emergency liquidity assistance funding removed by the ECB by 21 March. Interestingly, approval of the levy would also have consequences on the approximately EU2bn of British deposits held in Cyprus but George Osborne on Sunday said that British troops and Government staff's savings that are threatened by the bailout will be compensated with the details to be worked out over the next few days.
Taking a look at the market reaction thus far, the EUR took a dive against the Dollar overnight to 1.2885 (vs 1.3076 close on Friday) but is off the intra-session lows for now. Asian equities are lower across the board with losses seen on the Hang Seng (-2.1%) and ASX200 (-2.05%). Most other Asian indices are down between half to one percent but are off the early lows.
S&P 500 Futures are down -1.7% overnight. Credit spreads gapped wider with the Australia and Asia iTraxx indices 4-5bp wider as we type. European Financials Snr and Sub indices are 24bp and 36bp off their recent wides but we can perhaps expect a weak day ahead given the focus on Cyprus. Reflecting the greater demand for so-called safe haven assets, gold is up 0.3% and 10yr UST yields have rallied 9bp overnight.
Aside from the events in Cyprus, the other news of note over the weekend was the election of presidents (speakers) in the Italian parliament’s two houses. As DB’s Marco Stringa writes, both speakers are newcomers in the Italian parliament. In the senate, Pietro Grasso, an antimafia prosecutor, won in a run-off vote. Grasso obtained 13 votes more than the number of centre-left senators with the additional support more likely coming from a minority of the Five Star Movement senators than Monti’s centre. However, this should not be read as an opening of the 5SM to an alliance with the centre-left. The great majority of the 54 5SM Senators followed the party’s line even in the run-off. Indeed, Marco continues to sees little hope for cooperation among the parties to form a government.
Turning to the day ahead, the immediate focus will be on the parliamentary session in Cyprus beginning this afternoon. There is little data scheduled for today with the US NAHB housing index the main release of note.
Beyond today, the FOMC’s policy announcement and Bernanke's press conference on Thursday will take centre-stage. Our US economists do not expect any imminent changes in Fed policy. Thursday’s flash European PMIs will be the focus data-wise following the mixed readings last month. In China, the HSBC flash manufacturing PMI (also on Thursday) will be watched for any bounce back after February’s fall - which many blamed the timing of new year for. A busy week for the UK is scheduled with the government's 2013 budget (Wednesday) as well as jobless/inflation/retail/government borrowing reports and BoE minutes through the week. In the US we get the latest round of housing data with housing starts and building permits on Tuesday; and existing home sales/house prices on Thursday. Outside of housing, Thursday's Markit PMI and Philly Fed surveys are worth watching.

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Currency discussion courtesy of Marc to Market:


(courtesy Marc to Market)



Cyprus and other Market Movers

Marc To Market's picture





The main driver of the global capital markets has been the response to the weekend developments in Cyprus.  The knee-jerk reaction was to buy dollars and yen and sell most other currencies.  Equities markets tumbled, with the MSCI Asia-Pacific Index losing almost 2%.  European bourses gapped lower.   Core bond markets have rallied, with 10-year benchmark yields off 3-5 bp, while peripheral bond yields are sharply higher. 
The immediate reaction in Asia was exaggerated and the market spent the Tokyo afternoon and the European morning retracing the initial moves.  The euro held key support near $1.2880 and recouped a cent by the middle of the European morning.  The key level to watch is $1.30, Friday's low, which is where the opening gap extends.
The dollar fell to just below JPY93.50 in the knee-jerk response, but has climbed steadily back to fill the opening gap in early Europe.  Sterling has fared well, giving rise to some talking about its re-found safe haven status.  Sterling briefly traded below Friday's lows, but half above $1.5060 and recovered a cent to trade near the pre-weekend high (~$1.5175).  The dollar-bloc was sold off, with the Australian dollar hit the hardest initially, but they have all stabilized around a third of a cent lower.  That is generally the pattern with the other major and emerging market currencies.
In Cyprus, parliament is expected to vote, starting around 14:00 GMT (10:00 EDT) on a new proposal that will have a more progressive tax on depositors.  Instead of taking 6.75% from the first 100k euros, the rate may fall to 3%.  On deposits up to 500k, a 10% tax may be charged and in excess of 500k euros, 15% may be taken.  This modification is likely to prove sufficient to get parliamentary support.  Local press reports indicate that today's planned bank holiday will carry over tomorrow as well. 
The deterioration of a large Cyprus bank had prompted the ECB to threaten to cut off access to ELA (emergency lending assistance provided by the national central bank at their risk, but with the permission of the ECB).  This would have set off a cascading sent of events that would have realistically led to the collapse of the entire banking system in Cyprus and left the government facing 30 bln euro bill to cover the depositors, which it could not afford.  Although Germany balked at keeping large depositors whole, reports indicate it was the ECB, EU and Cyprus itself that insisted on taking from small depositors as well.  The IMF, which had in recent weeks been signaling that depositors were vulnerable, also would have kept small depositors whole, according to reports.
The revised measures, however, continue to tax small depositors.  Indeed by calling it a tax, the deposit insurance does not get triggered.  The most biting criticism of the Cyprus package is about the principle not simply the amount of the tax on small depositors.   Nevertheless, press report suggest that there is not a run on other peripheral banks that some had feared as depositors across Europe would see Cyprus as a precedent.   As we have noted, there was precedent for Cyprus as well in Europe.  Italy imposed a one-off tax on all depositors (and other savings) to reduce its debt in order to join EMU in the first place.
While the price action is dominated by the immediate reaction to the new from Cyprus, there were some positive developments in Italy.  Both chambers managed to elect speakers without much fanfare. It helped, of course, that some from the 5-Star Movement and Monti's allies turned in blank (or invalid) ballots.  In the Senate, the country's top Mafia prosecutor, Grasso will be the speaker of the Senate.  In the Chamber of Deputies, Laura Boldrini, a journalist and former spokesperson for the UN refugee program will be the new speaker.  We continue to expect that a government will be cobbled together on a limited agenda that will include selecting a new president, electoral reform and some pro-growth measures.  The tightening of credit conditions in Italy, which is choking many businesses will also have to be addressed before the new government.
Another observation worth of consideration is that Grillo may have helped launch a movement, but he, a 60-something millionaire who has been found guilty of involuntary manslaughter is an unlikely leader of a political party.  A party's discipline is enforced by punishing one's enemies and rewarding one's friends and Grillo's inability to do so means, his control over those that ran under his banner is not clear.   We have argued that as the 5-Star Movement addresses specific issues with finite choices it will become less cohesive.
The UK commands attention this week.  Tuesday's CPI is a warm up before the midweek flurry of the employment report, BOE minutes and Chancellor Osborne's budget.   We know that the BOE to did not resume the gilt purchase program, but we don't know the vote.  We suspect that Governor King was again joined by Fisher and Miles, as he was in February, in favor of new gilt purchases.  If a fourth member joined, the market will conclude the move will likely take place in April.  Some observers suspect that given the poor data, the IMF and Lib Dem calls to ease up on the austerity drive will get the Tory government to capitulate.  We think this is a mis-reading of UK politics and does not appreciate the political capital the Cameron government has invested in its current policies.   The UK will continue to pursue a course of tight fiscal policy and loose monetary policy.
The FOMC meets this week and the Fed will update its forecasts.   The recent string of US economic data confirms our belief that the world's largest economy will prove resilient to the tax increases and spending cuts implemented here in Q1.  The housing market continues its gradual recovery.  Weekly initial jobless claims, one of the best high frequency metrics of the economy (and stock market), have fallen to five year lows.  Industrial production rose 0.7% in Feb, led by a 0.8% rise in factory output.  Retail sales posted its largest five in months in Feb and the GDP measure rose 0.4% after increasing by 0.3% in Jan.    Nevertheless, we expect the FOMC to continue to buy $85 bln of long-term securities a month.  While there may be a dissent, we see the leadership and the majority still committed to QE.  Evaluation of the operation and the exit strategy of course will be discussed, but we do not expect the purchases to be tapered off until late in the year at the earliest.
The new BOJ management team takes office this week and an emergency meeting can be called for late in the week, though if it is to come, we suspect next week is more likely.  Governor Kuroda may want gain the initiative by meeting earlier, even though on substantive grounds a week or two one way or the other does not make much of a difference.  He does appear to have lost an element of surprise as it seems that buying more long-term government bonds is widely expected.  There does not seem to be any concrete ideas of how much he will purchase in total or per month, so there is an element of uncertainty still. 
 Separately, over the weekend Prime Minister Abe used some of his political capital to indicate that Japan was going to join the Trans-Pacific Partnership (trade bloc) over the objections of some of his (powerful) supporters in the agriculture sector and some industries.  To the extent that the TPP leads to some restructuring of the Japanese economy, it may be consistent with Abe's economic strategy.  His public support ratings are high and the LDP are in a good position heading into the upper house elections late in Q2.

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Due to the rapid drop in the Euro value, Switzerland may introduce negative interest rates
which is really a creeping confiscation:

(courtesy zero hedge)

"Depositor Repression" May Spread To Swizterland, EURCHF Spikes

Tyler Durden's picture





Moments ago we got news that the same kind of "depositor repression" aka wealth tax just implemented in Cyprus over the weekend, may spread to other stability and deposit havens. Such as Switzerland. Just before 7 am Eastern, the SNB's Moder, who is an alternative board member, said on the wires that the SNB will not exclude negative interest rates, which followed earlier comments from the IMF that the SNB should have negative rates if there is a renewed surge in the Swissie, and a plunge in the EURCHF, as has happened as the Euro has tumbled. Sure enough, the EURCHF soared on news that even Europe's last remaining deposit bastion is about to be impaired, because all negative rates are is an ongoing deposit confiscation, instead of a one-time "levy" as per Cyprus.
Bottom line: it is becoming increasingly clear that "your" money is not welcome anywhere, and the the authorities would rather you withdrew it, and injected it into the economy, in a desperate attempt to raise the velocity of money.
That what will happen instead is the parking of said money into deposits and other truly safe venues, not to mention conversion into precious metals and other relatively safe stores of wealth, will merely be chalked off to yet more "unintended consequences" when the chips finally fall.
In the meantime, it sucks to be a Russian billionaire oligarch: suddenly your money isn't welcome anywhere (unless of course that triplex in CPW is finally a bid, sight unseen). Well, except for Singapore...  and Japan of course. One wonders what happens to the Yen exchange rate after all the marginal wealth in the world starts buying up JPY and parking its cash in this last true bastion of depositors safety.

end

Late Monday night:

(courtesy zero hedge)

Majority Of Cypriot Parties Refuse To Support Deposit-Loss Law

Tyler Durden's picture




Update: Just as we predicted - Cyprus president Anastasiades to tell Eurogroup he lacks support and votes to pass levy - Antenna
Moments ago the state-run CYBC media reported perhaps the most material news ahead of tomorrow's Cyprus parliamentary vote, which at this point will likely be rescheduled once more, for the simple reason that yet another key Cypriot party, DIKO, has come out and decided to vote against the depositor-loss law on the Parliament's docket tomorrow. This is notable because while yesterday JPM, in its "bazooka" assessment speculated that DIKO would vote for the law which made sense previously as DIKO had supported president Anastasiades in his election bid, which gave a pro-bailout vote a one vote margin. As a result of today's flip, the party's 9 votes will now be aligned with the "anti" votes of AKEL  and EDEK, whose combined 33 votes mean the proposed bailout law has no chance of passing as they have the needed 29 votes to block any bail-in out proposal! The Eurogroup better come up with some very convincing adjustments to the deposit haircut scheme in its ongoing conference, or else tomorrow's vote will be quite painful for the Fed's "wealth effect creation vehicle", once upon a time known as the S&P 500.

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Reactions on Cypriot citizens as they trample the German flag.
I would not want to be a German travelling in Cyprus:

(courtesy zero hedge)


The Sun Just Set On The German Empire In Cyprus As Locals Tear Down German Flag

Tyler Durden's picture




While images of burning flags in the middle-east are not unusual and we have become numb to visions of angry mobs stomping over Western flags, the sight in the clip below of the typically calm and serene Mediterraneans turned Cypriot mob climbing atop the German Embassy in Cyprus and tearing down the German flag may well be a glimpse of what is to come in the next few days as the government nears their voting deadline and banks near their re-opening...

Via ekathimerini,
Protesters took down the flag at the German embassy

Many people have gathered outside the presidential palace, in which a protest on the agreement between the government and the haircut Eurogroup for deposits.

Protesters hold banners and shout slogans against the Troika and the Memorandum. Earlier, demonstrators portion en route to the Presidential Palace, went to the German Embassy.

Protester climbed on the roof of the building pulled down the German flag from the mast and threw it on the road. The other protesters tried to get the flag, but police who were lined outside the embassy and collected. The police presence in the area is important, but discreet.


end

Late Monday night:  Supposedly, now depositors under 100,000 euros will not have to pay.
Problem:  the Russian mob just got angrier:

(courtesy zero hedge)


Eurogroup Folds: Tells Cyprus To "Safeguard" Depositors Under €100,000 Euros; Angry Russians To Get Even Angrier

Tyler Durden's picture




Reuters headlines crossing the closing tape, supposedly out of a (very credible) Greek source, according to whom the Eurogroup will give Cyprus more flexibility on bank levy, and that Cyprus should safeguard depositors under €100,000, even as the full €5.8 billion deposit goal must still be hit. Well, at least they were not kidding with the whole plan. This was not unexpected - as we tweeted last night:
And while after all this, it is perfectly obvious that ordinary Cypriots just can't wait to start depositing money again with their local friendly bank, there are two very key questions which remain woefully unanswered:
i) how will Europe restore the confidence it has lost by even contemplating insured deposit impairments, and
ii) a deposit haircut is still a deposit haircut, and as noted earlier, the majority of Cypriot parties have announced they would vote against any bank levy, not just that which is determined to be "fair" by 10 European bureaucrats, and supposedly only hurts those evil, evilRussian billionaires.
In other words, the final word still remains with the Cypriot parties. Let the horse trading begin.
Finally, the Russian response to the discovery that haircuts on big deposits just rose from 9.9% to over 15.6% will hardly be warm and cuddly. Now may be a good time to ban gun (and plutonium) sales to angry Russian billionaire oligarchs.
P.S. All of this coming from a Greek finance minister source (speaking on behalf of Europe) means it is all 100% accurate, credible and true. We can't wait for the refutation.
P.P.S for Cypriot banks, if you see this man coming to make a withdrawal, it may be a good idea to run.


end

And finally this came out at 6:30  est this evening:

(courtesy zero hedge)



Cyprus President To Rehn: "I Told You Tax Wouldn't Pass. Regards To Mrs Merkel"

Tyler Durden's picture




To say that the tensions within the European "Union" are getting unbearable would be an understatement.
First, courtesy of Reuters, we get a detailed narrative of what happened before this Saturday's announcement of a deposit levy, where we learn that the deposit confiscation was initially Joerg Asmussen's idea, and we also learn that Atanasiades stormed out in anger when he learned what was about to happen.
Under a promise which still appears on the website of the Central Bank of Cyprus, deposits in its banks are insured up to 100,000 euros. Cyprus has about 30 billion euros in insured deposits, a large amount for a country of just 1 million people.

But because of its status as an offshore financial hub for foreigners - including large numbers of rich Russians - it also has 38 billion euros in uninsured deposits in bigger accounts.

Cyprus could have offered full protection to those with insured deposits up to 100,000 euros and still reached the 5.8 billion euro target by taxing uninsured deposits at a rate above 15 percent

According to three sources, European Central Bank board member Joerg Asmussen and euro zone finance ministers' representative Thomas Wieser had worked on a plan that would require just that - a high levy on only uninsured deposits.

But when the plans were presented to Anastasiades, several participants said, he balked at any suggestion that uninsured depositors should pay more than 10 percent.

Since his limit meant uninsured depositors would pay no more than 3.8 billion euros, those with small savings would have to pony up the other 2 billion euros.

The meeting was contentious, participants say. Schaeuble, Dutch Finance Minister Jeroen Dijsselbloem and negotiators for the ECB, EU and International Monetary Fund broke off several times to talk separately with the Cypriots. Other ministers hung around in the corridors, playing games on their mobile phones.

In the early hours of Saturday morning, Dijsselbloem, who serves as head of the euro zone minister's group, proposed that uninsured depositors pay 12.5 percent, a level which would require insured depositors to pay only 3.5 percent or so.

Anastasiades stormed out of the meeting in anger. He returned only when senior negotiators told him that if he left, Cyprus would have to default and shut its banks altogether.

Finally he agreed to the levy, but insisted on capping the fee for uninsured depositors at no more than 9.9 percent.

Exhausted officials did the sums. To raise the other 2 billion, insured Cypriot depositors with small accounts would have to pay a 6.75 percent levy on their savings. The deal was done.
Turns out it wasn't. Moments ago Kathimerini reported what happened later today, after as we first reported it became clear that the Cypriot parliamentary majority had swung against the deal, and shows that the bad blood between the Cypriot leader and Germany's Merkel is now boiling:
Cypriot President Nicos Anastasiades held a telephone conversation with European Economic and Monetary Affairs Commissioner Olli Rehn on Monday night to inform him that there might not be enough parliamentary support for a deposit tax on the island.

Cypriot MPs were due to debate on Tuesday a tax on deposits but it looks like Anastasiades will not be able to get enough votes to approve the one-off levy, which was decided at Eurogroup meeting in the early hours of Saturday.

Anastasiades is also reported to have spoken to German MEP Elmar Brok, a member of Chancellor Angela Merkel’s CDU party who is close to the German leader.

According to Mega TV, Anastasiades is reported to have said to Rehn and Brok: “When I warned you that there would not be a parliamentary majority to pass the agreement, you didn’t want to listen. Give my regards to Mrs Merkel.”
We eagerly wait to hear back what message Frau Merkel has for the Cypriot leader now that the entire plan to punish Russian billionaires and generate political brownie points for Angie come September, while in the process using innocent Cypriot savers as collateral damage, is about to fall apart.
Incidentally, why is any of this happening? Because a few rich eurocrats have decided that this is what is "fair." They know best...



And now a bit of news other than Cyprus:

(zero hedge)

Where 'Channel-Stuffed' German Cars Go To Die

Tyler Durden's picture





With the collapse of Europe's auto market, and the channel-stuffing that is rife in every car manufacturer in the world, it is no surprise that at the end of their brief lease periods,European cars (Audi in this case) are being led to this 'graveyard' in Germany (70 miles north of Munich). This car park of chaos is full of nearly-new cars meant for destruction so as never to enter the car market as a cheap alternative and to maintain a high-priced spare parts market. It seems the Keynesian profligacy or digging a hole to fill it in has progressed in the 21st century to building a car and crushing that car as the engine of growth for our economies.
The site can be found here...

(h/t H.M.H.)


Mainland China's First Default Raises Specter Of China's Credit Bubble Collapse

Tyler Durden's picture




For the first time, a mainland Chinese company has defaulted on its bonds. SunTech Power Holdings has been clinging on by its teeth but after failing to repay $541mm of notes due on March 15th - and following four consecutive quarters of losses through the first quarter of 2012 and since then having failed to report quarterly earnings - owed to Chinese domestic lenders, the firm is restructuring. As Bloomberg reports, Chinese solar companies are struggling after taking on debt to expand supply, leading to a glut that forced down prices and squeezed profits - and most notably were unable to renegotiate its liabilities and obtain “additional flexibility” from creditors. This is highly unusual and perhaps is the beginning of a trend for Chinese firms. We already know the little discussedbut gargantuan size of China's corporate bond market(which dwarves the US relative to GDP) as the mis-allocated credit tsunami of the last few years begins to hit its lending limit - just as Chinese corporate leverage is surging. If Suntech, the world’s largest solar-panel maker as recently as 2011, could not renegotiate its loans, we humbly suggest there are more problem firms out there about to find their friendly local banker a little less enthusiastic - just as Marc Faber warned recently.

STP's 168% rally of 'hope' all gone now...

Suntech Power Holdings Co. Ltd. (STP) became the first company from mainland China to default on its bonds after failing to repay $541 million of notes due March 15, breaching terms of other outstanding loans.

The move pushes what was once the world’s biggest solar panel maker into default on credit lines it has with International Finance Corp. and Chinese domestic lenders, Suntech said today in a statement from its headquarters in Wuxi. China Development Bank Corp (SDBZ). has loans to Suntech.

The move opens the way for Suntech noteholders to sue the company in the U.S., where its shares and bonds trade. Last week, Suntech obtained an agreement of holders of 63 percent of the notes to delay exercising their rights until May 15, allowing executives to press ahead with restructuring payments. Some noteholders not involved in those talks are organizing a rival group and have threatened to sue.

Suntech is seeking “a way forward that will take into account the rights and interests of all of its constituents, including shareholders, noteholders, lenders, customers, suppliers and employees,” Chief Executive Officer David King said in the statement. “We are currently exploring strategic alternatives with lenders and potential investors, which could help to set us on a path towards longer term success.”

...
end

our early Monday morning currency crosses;  (8 am)

 
Monday morning we  see huge euro weakness  against the dollar   from the close on Friday, trading below  the key 1.30 mark at 12955. The yen this the morning  is a touch stronger  against  the dollar,   at 95.03 yen to the dollar.  This will eventually cause problems as Japanese citizens bail out of their bond/yen holdings because of inflation.    The pound, this morning is weaker against the USA dollar touching the 1.51 barrier at  1.5105. The Canadian dollar is weaker  against the dollar at 1.0232.   We have a  risk is off  situation  this morning with the major European bourses in the red  Gold and silver are higher  in the early morning, with gold trading at $1604.10 (up $11.20) and silver is $28.83 up 6 cents in early morning European trading.

The USA index is up 24 cents at 82.62.



Euro/USA    1.2955  down .0123
USA/yen  95.03 down .249
GBP/USA     1.5105 down .0007
USA/Can      1.0232 up .0033

end





And now your closing Spanish 10 year bond yield:


a very big rise of .04 in yield: 





SPANISH GOVERNMENT GENERIC BONDS - 10 YR NOTE

GSPG10YR:IND

4.960.04 0.85%
As of 12:59:44 ET on 03/18/2013.




yesterday's yield









 




SPANISH GOVERNMENT GENERIC BONDS - 10 YR NOTE

GSPG10YR:IND

4.920.04 1.97%
As of 12:59:56 ET on 03/14/2013.



And now our Italian 10 year bond yield:  (a rise of .03%)


Italy Govt Bonds 10 Year Gross Yield

 + Add to Watchlist

GBTPGR10:IND

4.630.04 0.76%
As of 12:59:57 ET on 03/18/2013.



yesterday's yield





ITALY GOVT BONDS 10 YEAR GROSS YIELD

GBTPGR10:IND

4.600.05 1.03%
As of 12:59:38 ET on 03/15/2013.

Your 5:00 pm closing Monday currency crosses:


The Euro remained constant on this afternoon at 1.2954 (closing). The yen weakened a bit co this afternoon  to finish at 95.273 . The pound remained constant  finishing at 1.5103.  The Canadian dollar strengthened a little more against the dollar closing at 1.0215.


The USA index remained constant from the morning session with the final index number up 22 cents to 82.64. 


Euro/USA    1.2954 down  .0124
USA/Yen  95.273 down .0140
GBP/USA     1.5106  down  .0007
USA/Can      1.0215  up  0024







end.




Your closing figures from Europe and the USA:

red ink



i) England/FTSE down 31.73  or 0.49%

ii) Paris/CAC down 18.56 or 0.48% 

iii) German DAX:  down 32.15 or .40%

iv) Spanish ibex down 111.3 points  or  1.29%

v) Italian bourse (MIB) down  137/02  points or .85%


and the Dow down 62.05(.43%)



end.



And now for some USA stories:  
+30.5B: Federal Spending Up, Not Down, in First 5 Months of FY13



March 15, 2013




(CNSNews.com) - Federal spending was up $30.5 billion in the first five months of fiscal 2013 compared to the first five months of fiscal 2012, according to newly released data from the U.S. Treasury.The federal fiscal year begins on Oct. 1 and runs through Sept. 30. In the first five months of fiscal 2012 (October through February), according to the Monthly Treasury Statement, total federal spending was approximately $1,473,999,000,000.00. In the first five months of fiscal 2013, total federal spending was $1,504,547,000,000.00.
Thus, federal spending was $30,548,000,000.00 more in the first five months of fiscal 2013 than it was during the first five months of fiscal 2012.
The federal government is also spending at a much faster pace this year than it did before President Barack Obama took office.
In the first five months of fiscal 2008 (the last full fiscal year before Obama took office), the federal government spent $1,230,412,000,000.00. That is $274,315,000,000.00 less than the $1,504,547,000,000.00 that the federal government spent in the first five months of this fiscal year.
So far this fiscal year, the federal government is spending an average of about $300,909,400,000.00 per month. If the government maintained that average pace for all 12 months of the fiscal year, it would spend a total of $3,610,912,800,000.00.Through all of fiscal 2008, before Obama took office, the federal government spent a total 2,978,440,000,000.00. Adjusted for inflation, that equals $3,211,717,910,000.00 in 2013 dollars. So, were the government to continue on its pace to spend $3,610,912,800,000.00 this year, then real federal spending in fiscal 2013 would be $399,194,890,000.00 more than it was in the last full fiscal year before Obama became president.
Congress would need to cut $399 billion this year to bring inflation-adjusted federal spending back to the level it was before Obama.According to the CBO, the sequester that has now taken effect will cut only $44 billion from the money that was expected to be spent through the remainder of this fiscal year.

end.

Today, even though gold rose nicely, silver was rather subdued coupled with the languish trading in our gold and silver equities.  The bankers do not like to see gold and silver rise on two consecutive trading days, so please be careful of a potential raid tomorrow.

Well that about does it for tonight.

I will see you tomorrow night.

Harvey.

4 comments:

Dirk Jan Kop said...

In all their extremely loud indignation about Cyprus, commentators seem to forget that along with the minor haircut for Russian depositors, the provenance of whose money is shady to say the least, the taxpayers of the northern EU-memberstates are again forking out the major share (over 10 billion euros) in saving the island. It seems fair to me that the Russians do their bit. When they stop to think even Cypriot citizens would probably prefer losing 6.75% of their savings to seeing their whole island going bankrupt and lose them all.

DUH said...

Ur funny.
So the savers are supposed to be happy that they are only robbed of a portion of their savings. Don't think that is how psychology works.
And if this goes through it breaks at least two laws; property rights and the 100K bank guarantee.
Independently of whether this goes through or not, how do you think savers will react around Europe knowing draconian acts like this can happen at any time?
The case for converting fiat to physical metal held outside the banking system just became infinitely stronger.

Jack Lee said...

Cypus is an amazing and scary story. Thank you Harvey for keeping us all informed.

vivek sinha said...

Thanks for your great information, the contents are quiet interesting.I will be waiting for your next post.
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