Stand by for further wealth transfer to Asia
The Slog: Some of the unresolved questions about the Cyprus episode seem to be sorting themselves out – if you’re prepared to join up the dots. At the link in that last sentence, I tried to explain the likelihood of what the Cyprus bank heist was really about, and I’ve seen nothing since to change my mind. But the one dimension I couldn’t bottom out concerns why Russia seemed happy to let a lifetime opportunity to get into to Med with bases at the trifling cost of €18 billion euros wither away.
The sky may well be clearing on that one. Zero Hedge
had an interesting piece last night confirming what I’d been told: that
most of the Russian money quietly seeped away over the last week –
prior to haircuts and capital controls. ZH reports:‘While ordinary Cypriots queued at ATM machines to withdraw a few hundred euros as credit card transactions stopped, other depositors used an array of techniques to access their money. No one knows exactly how much money has left Cyprus’ banks, or where it has gone. The two banks at the centre of the crisis – Cyprus Popular Bank, also known as Laiki, and Bank of Cyprus – have units in London which remained open throughout the week and placed no limits on withdrawals. Bank of Cyprus also owns 80 percent of Russia’s Uniastrum Bank, which put no restrictions on withdrawals in Russia. So while one could not withdraw from Bank of Cyprus or Laiki, one could withdraw without limitations from subsidiary and OpCo banks, and other affiliates. Just brilliant.’
Once again, it seems likely that Schäuble was lying his considerable balls off when he said that most of the victims would be Russian crooks. Pointedly, when asked about capital flight from Cyprus thus far, he declined to give figures. Well, he would, wouldn’t he?
Where I differ from Zero Hedge on this is their final conclusion:
‘…if there was any doubt that the entire process of destroying one entire nation was simply to punish Cyprus, it can be completely cleared away now….an entire nation becomes collateral when pursuing a wealthy group of people. And the “wealthy group” is victorious in the end despite everything….’
If I may say so, that strikes me as The View from America. I don’t think Brussels-am-Berlin was remotely interested in pursuing wealthy individuals: Schäuble almost certainly knew last Thursday that much of the Oligarcash had been leaking out for the previous two days – even before the overseas withdrawals scam was used by the late runners. I think Obama, Putin, Merkel, Erdogan and probably Hollande knew precisely what was going to happen. Given our base in Cyprus, I’d imagine Cameron was also informed early.
The ‘warning to Latvian officials’ not to help Russian money get away was, conveniently, not given until yesterday. The Moscow talks – as some of us felt almost immediately – were never ‘on’. When Medvedev said yesterday “All that’s been stolen here is stolen money” he was unconsciously acknowledging his willingness to toe the Big Power line. Going into this disgraceful episode, everybody had an agenda….and everyone but Cyprus and Greece left the deal very happy indeed.
The EC and Berlin prefer monopolies and rules to real market competition: the economic model of Cyprus had first to be rubbished, and then destroyed…and the markets shown that they were in control. Recep Erdogan wanted a weak Nicosia, and payback for his help on the Syrian spin-fest: he pointedly got the Turkish press to publish a ridiculous map of ‘total Turkiye’ as the Cyprus rape unfolded. Putin wanted to poke some enemies in the eye: the assumption that all the Russian money on the island was crooked is rubbish – much of it belonged to the Russian Opposition. The Americans wanted status quo and firm action to calm the markets – which they got on the whole: a Cypriot default would’ve blown everything sky-high. And the British kept the military presence unique….albeit offering Washington use of their runways whenever required. So even NATO is a happy little gun-bunny this morning.
The truth (as so often in these bailout dramas) is that Nicosia would’ve been far better off defaulting – and the world would’ve been a better place afterwards. While an array of Slog contacts around the world heartened me somewhat yesterday by overcoming their usual cold-heartedness to express disgust at what B-am-B did, the fact is that the mobsters got away with it again.
The problem the Euromafia now face, however, is that the 90% absent trust element in their words and actions just went up to 100%. Call me wacky, but I am absolutely certain most of the Mob are underestimating how much money will leak away to safe places over the next few weeks. I’m guessing here, but my hunch is that by next Christmas, currency and capital controls will be near universal in the West and the Anglosphere. I think folks will move to the least vulnerably currency - and those banking centres least prone to the thieving hands of a bankrupt West. Looting will go global in the end: but not just yet.
On that basis, for once I find myself disagreeing with Greek blogger Yanis Varoufakis when he writes that one ‘good’ part of the Cyprus finale was ‘Unlike the Eurogroup’s original decision, deposit insurance for accounts up to €100,000 will be respected. The reversal of the decision to ‘tax’ insured depositors constitutes a last minute restoration of common sense’. I don’t think it restored either the Rule of Law or common sense: moderately wealthy savers and bondholders have been wiped out by this ‘deal’. All B-am-B did was change the description from ‘levy’ to ‘reconstruction’. In the Orwellian world we have entered, terms like Open Bank Reconciliation (OBR) are becoming as commonplace as QE, Zirp, and all the other methods used by those at the top when tilting the game in their favour.
I’m sending lots of my dwindling pile to Asia. What you do my friends is your business: the Lady isn’t even fat yet, let alone singing. But she might still be for turning. Stay tuned.
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The Longest Bank Closures Ever
Submitted by Tyler Durden: With news this evening that the Cypriot banks will not now be re-opening tomorrow (as perhaps - as we noted earlier - a little more of those precious deposits leaked away during the closures than expected):- CYPRUS BANKS TO REMAIN CLOSED THROUGH MARCH 27: CENTRAL BANK
(h/t @faisalislam via Nomura)
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