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Cyprus: Crumbling Property Rights
The endless EU Bank Stress Tests ALL Cleared Cypriot Banks - Why? How Could This Be? The problems have been clear for a long time as the charts reviewed in this video point out.
Two weeks ago there was no indication of the urgency of the problem, then suddenly Cyprus is in crisis? Why? What was the catalyst? The short answer is the EU's ELA was pressuring the Cypriot government and it 'leaked' that the government was considering a depositor tax. Was this a planned leak? The financial world is now thrust into a dilemma over the sanctity of property rights, due process of law, unlawful confiscation and the meaningless of deposit insurance. A perfectly executed media event if the goal was to weaken these impediments to the next stage of Financial Repression.
There is much more going on here than what the media is hyping and focused on.
- GERMANY & IMF Expect the Cypriot Contribution (of the €17.5B Total) to be:
- €5.8 Billion
- Equivalent to 30% of GDP,
- Equivalent to 40% of Bank Deposits
- Total Country Debt to GDP will then rise to 92.6% (from 48.9% in 2008)
Sequence of Solutions Offered:
PLAN A - Steal Cash from Depositors (Wealth Tax Versions 1 & 2)
PLAN B - Steal Cash from Pension Plans, Sell Sovereign Assets & Facilities to Russia
PLAN C - A Solidarity Fund (CCO- Collateralized Cypriot Obligations) to buy Good Bank/Bad Bank with associated Capital Controls implemented to guarantee investors.
- This fund was to be collateralized by state assets, possibly including natural gas revenues, church property, and social security fund reserves.
- Though some form of deposit tax was 'apparently' not ruled out, it seemed the next last best hope for Cyprus was begging the Russians to extend a loan and begging the world to fund more debt from a nation about to see huge capital outflows.
- The approach was, it appears, a 'solidarity' approach - rather than tax the current wealth of depositors (and hand it over to Troika), 'tax' the future possibility of wealth creation and sell that to the next greater fool sovereign wealth fund (or would it be the ECB that decided these CCOs are acceptable collateral?)
PLAN D - Double Dip on Large Depositors over €500,00 (12.2%) and €100,000 (9.46%).
- Shift bad assets to a bad bank (along with the large uninsured depositors) and wound down (meaning 20-40% losses) and still face the initial large-deposit-tax - leaving the Russians large depositors with 50%-plus losses.
PLAN E - FINAL PLAN (maybe)
- The final plan appears to protect insured depositors below €100,000 but stick it to the uninsured depositors.
- Uninsured depositors at the Bank of Cyprus are likely to get 40% 'haircuts' while Laiki depositors are most likely going to be wiped out.
- The fall out for Cyprus is going to be horrendous since the economy has become dependent on being an offshore banking center. That is over. Money has fled and all the business connected to this sector will experience a devastating shock. Expect the problem to not go away but to deteriorate further.
Cyprus should never have been allowed to have a banking sector that was 7 X times (below) the economy with low levels of equity and engaged in risk assets. The EU Bank Stress tests have been shown to be the fraud they were.
This suggests there are still major hidden problems across the entire EU.
30 Minutes, 30 Slides