What will happen now?

[Sir John]

It will be fascinating to watch history unfold, if that is the trigger it could well be.

The Cyprus 'Bank Holiday' has been extended, and will very possibly be extended even further. And even then with a low rate of authorised withdrawals applying.

"Cash Only" in the shops, and I wonder how the business bank accounts will fare in the coming weeks. A major company with its dividend account frozen would not be a pretty sight. The negative possibilies are almost endless.

SJ

[Deleted]

I was under the impression that Cyprus had worked out some sort of loan garunette of $13 billion who with I don't recall .

[Sir John]

The Cyprus 'Plan A' was rejected by the Cyprus Parliament, so the Politburo in Berlin and Brussels decided to rewrite the thing without reference to the people.

'Plan B' was a lot more severe on the bank customers with a bit of money, and they will probably forfeit most of their balances.

If I had a bank account, anywhere in the EU, with even less than E100,000 I would empty it ASABP.

This is going to get VERY nasty!

[mcnoch]

The split of the Laiki-Bank into a bad bank and the transfer of the good accounts to the Bank of Cyprus need more time; that is why they are closed until Thursday. The inter-banking control rules have to be applied too. To modify the software takes some days. So nobody really could have thought that the banks could open only hours after the deal were signed.

More interesting is that Jeroen Dijsselbloem, head of the Euro-group, said in public that this might be the way to go in the future when banks come into trouble. The bank stocks didn't like that. The safe haven of "being system-relevant" is gone and the bank managers now know that they face destruction if they go back and take up very risky business again. This might cause some problems not only for high-risk investments but also for small Start-ups. And Malta, Luxembourg and Slovenia will take notice; they are the other states with an out-of-proportion banking-system that could kill the state.

[Sir John]

"More interesting is that Jeroen Dijsselbloem, head of the Euro-group, said in public that this might be the way to go in the future when banks come into trouble"



Best not to look for sympathy if the EU customers lose all their money. This is the way the politburo is thinking, grab the easy money first.

Get yours OUT!



SJ

[Sir John]

I wonder what the Chief Financial Officer of a major EU corporation (Mr M Noch?) will do with the companies main bank accounts in Spain, Italy, France, or even Germany?

Will he leave them and wait until they are stolen, or will he close them and transfer the balance out of the EU altogether? Will he be sure, or will he be sorry?

I know what i would do!


SJ

[mcnoch]

The big companies are not the problem. No big company has x millions laying around on their bank accounts, the money is normally parked in cash-stocks, etc.. No good CFO would have brought his money to a bank that is offering only questionable services. But if he had invested in high-risk bank-business most likely he will be gone soon.

Some of the biggest companies have their own banks, which are managing their bank activities. As these banks are open for private customers since a couple of years, we saw in the recent months a migration of private money away from not so well off smaller, new banks which are based mainly on the eBanking business toward these company banks. Those people in Spain and Italy who have lost their trust in their local banks are moving their money to Germany, many are buying real estate objects here, paying in cash, what is very strange in Germany and causing an insane real-estate bubble in German cities. So I would presume that a big part of the money not needed by Italian, Greek and Spanish owners is already in Germany. At least the German banks are reporting that they have so much money that they have no idea what to do with it as the demand for credits is much smaller.

Interestingly enough the big European banks have welcomed the decisions regarding the banks in Cyprus. They think it is good that the EU stops interfering with the self-sanitation of the free markets in the banking sector by rescuing banks that should have perished because of bad business decisions. They think the EU shouldn’t have rescued all those banks, the head of the Business Management of the Deutsche Bank told that he thinks that in total there have been only 14 banks that were system relevant and needed to be rescued, the rest should have been merged and split into a good bank and a bad bank. The owners and investors into banks should have carried a much higher burden of the disaster.

[Sir John]

mcnoch,

I am far from an expert in EU banks but some basic things come to mind. one is your quote,


"At least the German banks are reporting that they have so much money that they have no idea what to do with it as the demand for credits is much smaller."

Now if an EU bank has deposits it is paying interest on, no matter how low that rate is, they MUST earn interest at a greater level, or they will go broke! If they are not lending it out to business or to home buyers, then all that is left is Bonds.

Greek, Spanish, Italian, French, Cypriot, Bonds perhaps. Most of those are sitting in EU banks balance sheets at face value, which is a fairy story.

Now I know that both companies and banks have a thing called "Float", which is the spare cash left over at the end of the days transactions, and much of that goes to the Short Term Money Market overnight.

But not all!

In many companies, there is a lot of money waiting for a (dividend?) cheque to be presented and so on. Those funds will be at risk in a 'confiscation'.

SJ

[mcnoch]

The banks here in Germany pay you at the moment about 0,1 or 0,15 % interest. So close to nothing. They ask you to buy a new car or furniture instead.

The confiscation is a bank assets tax. He still have such taxation in many European countries on real-estate and other values too. Especially the Scandinavian countries are big here. And I think property tax is nothing unknown in the anglo-american world too.

[boxcar]

Cyprus bail-out: savers will be raided to save euro in future crises, says eurozone chief
Savings accounts in Spain, Italy and other European countries will be raided if needed to preserve Europe's single currency by propping up failing banks, a senior eurozone official has announced.

The new policy will alarm hundreds of thousands of British expatriates who live and have transferred their savings, proceeds from house sales and other assets to eurozone bank accounts in countries such as France, Spain and Italy.

The euro fell on global markets after Jeroen Dijsselbloem, the Dutch chairman of the eurozone, told the FT and Reuters that the heavy losses inflicted on depositors in Cyprus would be the template for future banking crises across Europe.


(Why print money when you can steal it?)

[Swampy]

My impression is that there are $10 trillion in cash available to companies, and perhaps individuals have a few trillion more. These are in American banks, so much so Americans don't want the deposits anymore.

The problem is, if the European banks go down, they'll bring the American ones with them.

[boxcar]

>The problem is, if the European banks go down, they'll bring the American ones with them. <

No, I think we'll see the cash flow from Europe to North America and Asia.

[Sir John]

"The problem is, if the European banks go down, they'll bring the American ones with them."



Very true! The economies of the top 20 nations are all now fully interdependent and interrelated. Government and Corporate Bonds are sold and bought every day. Much of the sovereign bonds flogged off over the past 20 years have been bought by the world's banks, and if a string of PIFIGGS Bonds go bad, then it will be the worlds biggest game of Dominoes.

'Haircuts' will settle at a constant 100%.

SJ

[Sir John]

Just to be specific, I will give my long? range forecast for the next few months, or at best, a year.

I think it is very possible that the FED and the ECB will agree to act in unison to print US$10 Trillion and EURO 10 Trllion, and exchange all that for the others Bonds.

Just a gut feeling that in the end, that is the only option available to them. Stealing bank deposits will NOT work. It will destroy the European economy overnight.

We shall see. (soon)

JMO


SJ

[Deleted]

Americans have a motto when in a recession go to war , doesn't matter with who just so thats its a long dragged out winless war , keeps the economy going everytime .