Words Of Warning: Get Your Money Out Of European Banks

Words Of Warning: Get Your Money Out Of European Banks - Photo by Julien JorgeIf you still have money in European banks, you need to get it out.  This is particularly true if you have money in southern European banks.  As I write this, the final details of the Cyprus bailout are being worked out, but one thing has become abundantly clear: at least some depositors are going to lose a substantial amount of money.  Personally, I never dreamed that they would go after private bank accounts in Europe, but now that this precedent has been set it should be apparent to everyone that no bank account will ever be considered 100% safe ever again.  Without trust, a banking system simply cannot function, and right now there are prominent voices on both sides of the Atlantic that are loudly warning that trust in the European banking system has been shattered and that people need to get their money out of those banks as rapidly as they can.  Even if you don’t end up losing a significant chunk of your money, you could still end up dealing with very serious capital controls that greatly restrict what you are able to do with your money.  Just look at what is already happening in Cyprus.  Cash withdrawals through ATMs have now been limited to 100 euros per day, and when the banks finally do reopen there will be strict limits on financial transactions in order to prevent a full-blown bank run.  And of course anyone with half a brain will be trying to get as much of their money as they can out of those banks once they do reopen.  So the truth is that the problems for Cyprus banks are just beginning.  The size of the “bailout” that will be needed to keep those banks afloat will just keep getting larger and larger the more money that is withdrawn.  Cyprus is heading for a complete and total banking meltdown, and because the economy of the island is so dependent on banking that means that the economy of the entire nation is going to collapse.  Sadly, similar scenarios will soon start playing out all over Europe.

So if you hear that a “deal” has been reached to “bail out” Cyprus, please keep in mind that the economy of Cyprus is going to collapse no matter what happens.  It is just a matter of apportioning the pain at this point.

According to the New York Times, it looks like much of the pain is going to be placed on the backs of those with deposits of over 100,000 euros…

The revised terms under discussion would assess a one-time tax  of 20 percent on deposits above 100,000 euros at the Bank of Cyprus, which has the largest number of savings accounts on the island. Because the Bank of Cyprus suffered huge losses on bets that it took on Greek bonds, the government appears to be taking  depositors’ money to help plug the hole.

A separate tax of 4 percent would be assessed on uninsured deposits at all other banks, including the 26 foreign banks that operate in Cyprus.

Does that sound bad to you?

Well, if a deal is not reached, there is a possibility that those with uninsured deposits could lose everything.  According to Ekathimerini, EU officials are telling Cyprus to choose between a “bad scenario” and a “very bad scenario”…

The main question surrounds the future of the island’s largest lender, Bank of Cyprus. If unsecured deposits (above 100,000 euros) at all Cypriot banks are taxed then large savings at Bank of Cyprus are likely to be taxed between 20 and 25 percent. If the levy is not imposed on deposits at other lenders, the haircut for Bank of Cyprus customers will be much larger.

The option of a full bail in of Bank of Cyprus depositors is still on the table. As with the Popular Bank of Cyprus (Laiki), which is to go through a resolution process, the full bail in option could lead to deposits above 100,000 euros being lost. The only compensation for unsecured depositors will be shares in the “good” bank that will be created by a possible merger between the “healthy” Laiki and Bank of Cyprus entities.

When asked by Kathimerini how the Cypriot economy will survive if all company and personal deposits above 100,000 euros disappear from the country’s two biggest lenders, the EU official said: “Unfortunately, Cyprus’s choices are between a bad scenario and a very bad scenario.”

So what percentage of the deposits in Cyprus are uninsured deposits?

Well, nobody knows for sure, but according to JPMorgan close to half of the total amount of money on deposit in EU banks as a whole is uninsured.

Do you think that some of those people will start moving their money to safer locations after watching how things are going down in Cyprus?

They would be crazy if they didn’t.

And if you think that “deposit insurance” will keep you safe, you are just being delusional.

According to CNBC, very strict capital controls are coming to Cyprus.  These rules will apply even to accounts that contain less than 100,000 euros…

Financial controls are coming. Depositors with less than 100,000 euros may not lose their money outright, but they won’t like the restrictions–no matter how much they have in the bank. Limits on withdrawals, limits on check cashing, and perhaps even outright conversion of checking accounts into fixed term deposits are coming (translation: you don’t have a checking account, you have a bond from the bank).

A lot of people are going to lose a lot of money in Cyprus banks, and a significant percentage of them are going to be Russian.

And as I wrote about the other day, you don’t want to have the Russians mad at you.

According to the Guardian, Moscow is already considering various ways that it might “punish” the EU…

However, with Russian investors having an estimated €30bn (£26bn) deposited in banks on the island, the growing optimism about a deal was accompanied by fears of retaliation from Moscow. Alexander Nekrassov, a former Kremlin adviser, said: “If it is the case that there will be a 25% levy on deposits greater than €100,000 then some Russians will suffer very badly.

“Then, of course, Moscow will be looking for ways to punish the EU. There are a number of large German companies operating in Russia. You could possibly look at freezing assets or taxing assets. The Kremlin is adopting a wait and see policy.”

Could this be the start of a bit of “economic warfare” between east and west?

One thing is for sure – the Russians simply do not allow people to walk all over them.

Meanwhile, things in Cyprus are getting more desperate with each passing day.  Because they cannot get money out of the banks, many retail stores find themselves running low on cash.  In a few more days many of them may not be able to function at all…

Retailers, facing cash-on-delivery demands from suppliers, warned stocks were running low. “At the moment, supplies will last another two or three days,” said Adamos Hadijadamou, head of Cyprus’s Association of Supermarkets. “We’ll have a problem if this is not resolved by next week.”

But do you know who was able to get their money out in time?

The insiders.

According to the Daily Mail, the President of Cyprus actually warned “close friends” about what was going to happen and told them to get their money out Cyprus…

Cypriot president Nikos Anastasiades ‘warned’ close friends of the financial crisis about to engulf his country so they could move their money abroad, it was claimed on Friday.

Overall, approximately 4.5 billion euros was moved out of Cyprus during the week just before the crisis struck.

Wouldn’t you like to get advance warning like that?

Well, at this point it does not take a genius to figure out what to do about any money that you may have in European banks.  The following is from a recent Forbes article by economist Laurence Kotlikoff…

Whatever happens, no one is going to trust or use Cypriot banks.  This will shut down the country’s financial highway and flip Cyprus’ economy to a truly awful equilibrium in a replay of our own country’s Great Depression, which was kicked off by the failure of one-in-three U.S. banks.

Cyprus is a small country.  Still, the failure of its banks could trigger massive bank runs in Greece.  After all, if the European Central Bank is abandoning Cypriot depositors, they may abandon Greek depositors next.  A run on Greek banks could then spread to Portugal, Ireland, Spain, and Italy and from there to Belgium and France and, you get the picture, to other countries around the globe, including, drum roll, the U.S.   Every bank in each of these countries has made promises they can’t keep were push come to shove, i.e., if all depositors demand their money back immediately.

We’ve seen this movie before.  And not just in real life.  Every Christmas our tellys show It’s a Wonderful Life in which banker Jimmy Stewart barely saves his small town from economic ruin arising from a banking panic.

Others are being even more blunt with their warnings.  For example, Nigel Farage, a member of the European Parliament, is warning everyone to get their money out of southern European banks while they still can…

The appalling events in Cyprus over the course of the past week have surpassed even my direst of predictions.

Even I didn’t think that they would stoop to stealing money from people’s bank accounts. I find that astonishing.

There are 750,000 British people who own properties, or who live, many of them in retirement down in Spain.

Our message to expats now that the EU has crossed this line, must be: Get your money out of there while you’ve still got a chance.

And Martin Sibileau is proclaiming that if you still have an unsecured deposit in a eurozone bank that you should have your head examined…

What are depositors of Euros faced with today? Anything but a clean bet! They don’t know what the expected loss on their capital will be, because it will be decided over a weekend by politicians who don’t even represent them.  They don’t really know where their deposits went to and they also ignore what jurisdiction they really belong to. Finally, depositors are paid mere basis points for their trust in the system vs. the 20% p.a. Argentina offered in 2001 (thanks to the zero-interest rate policies of the 21st century). In light of all this, I can only conclude that anyone still having an unsecured deposit in a Euro zone bank should get his/her head examined!

So where should you put your money?

I don’t know that there is anywhere that is 100% safe at this point.  But many are pointing to hard assets such as gold and silver.  The following is what trends forecaster Gerald Celente had to say during one recent interview

“People always say to me, ‘Mr. Celente you are always talking about gold.  What are you going to do with gold when everything collapses and there is no money?’  Well, let’s say you are a Cypriot and all of the ATM machines are out of money and the banks are closed?  Do you think those pieces of silver are going to buy you what you need?  Do you think that ounce of gold is going to get you what you want?

That’s the real money.  There is no other money.  When it all comes down, gold and silver are the only things you have to buy what you need, get what you want, or even get out if you need to.”

I used to tell people that putting their money in U.S. banks was safer than putting it other places because U.S. bank deposits are covered by deposit insurance up to a certain amount.

But now we see that deposit insurance means absolutely nothing.  If they decide to “tax” (i.e. steal) your money from your bank accounts they will just go ahead and do it.

So what should we all do?

Personally, I think that not having all of your eggs in one basket is a wise approach.  If you have your wealth a bunch of different places and in several different forms, I think that will help.

But as the global financial system falls apart, there will be no such thing as 100% safety.  So if you are looking for that you can stop trying.

Our world is becoming a very unstable place, and things are going to get a lot worse.  We are all going to have to adjust to this new paradigm and do the best that we can.

The Euro Is Falling

Mass Panic In Cyprus: The Banks Are Collapsing And ATMs Are Running Out Of Money

Cyprus ATM - Photo Via @ImeldaflatteryEuropean officials are openly admitting that the two largest banks in Cyprus are “insolvent“, and it is now being reported that Cyprus Popular Bank only has “enough liquidity to cover the next few hours“.  Of course all banks in Cyprus are officially closed until Tuesday at the earliest, but there have been long lines at ATMs all over Cyprus as people scramble to get whatever money they can out of the banks.  Unfortunately, some ATMs appear to be “malfunctioning” and others appear to have already run out of cash.  You can see some photos of huge lines at one ATM in Cyprus right here.  Some businesses are now even refusing to take credit card payments.  This is creating an atmosphere of panic on the streets of Cyprus.  Meanwhile, the EU is holding a gun to the head of the Cyprus financial system.  Either Cyprus meets EU demands by Monday, or liquidity for the banks will be totally cut off and Cyprus will be forced out of the euro.  It is being reported that European officials believe that the “economy is going to tank in Cyprus no matter what“, and that it would be okay to let the financial system of Cyprus crash and burn if politicians in Cyprus are not willing to do what they have been ordered to do.  Apparently European officials are very confident that the situation in Cyprus can be contained and that it will not spread to other European nations.

Unfortunately, European officials are losing sight of the bigger picture.  If the largest banks in Cyprus are allowed to fail, it will be another “Lehman Brothers moment“.  The faith that people have in banks all over Europe will be called into question, and everyone will be wondering what major European banks will be allowed to fail next.

Meanwhile, European officials have already completely shattered confidence in deposit insurance at this point.  Everyone now knows that when there is a major bank failure that depositors will be expected to share in the pain.  Expect to see “bank jogs” all over southern Europe over the coming weeks.

The banks in Cyprus had been scheduled to reopen on Tuesday, but very few people expect that to actually happen at this point.  In fact, Bloomberg is reporting that EU officials are actually thinking about shutting down the two biggest banks in Cyprus and freezing their assets…

Finance ministers for the 17 euro countries are considering a plan to shutter the two biggest banks in Cyprus and freeze the assets of uninsured depositors, said the four officials, who asked not to be named because the talks are ongoing. The ministers are holding a teleconference tonight.

Cyprus Popular Bank Pcl (CPB) and the Bank of Cyprus Plc would be split to create a so-called bad bank, one of the officials said. Insured deposits — below the European Union ceiling of 100,000 euros ($129,000) — would go into a so-called good bank and not sustain any losses, while uninsured deposits would go into the bad bank and be frozen until assets could be sold, said the four officials.

Losses to unsecured creditors, including uninsured depositors, could reach 40 percent under the plan, which has support from the International Monetary Fund and the European Central Bank. The proposal, a version of which was rejected last week, is considered a better option than taxing insured deposits or allowing Cypriot banks to collapse in a disorderly fashion if they lose access to ECB aid, the officials said.

Such a scenario would be an utter disaster.

How would you feel if you woke up someday and 40 percent of your life savings was suddenly gone?

According to Greek newspaper Kathimerini, European officials are also openly discussing the possibility of a Cyprus exit from the eurozone if a suitable bailout agreement is not worked out…

The possibility of Cyprus exiting the eurozone was discussed during teleconference involving technocrats from the Euro Working Group on Wednesday, Kathimerini understands.

A reliable source told Kathimerini that the technical implications of a euro exit, as well as the adoption of capital controls were debated by the Euro Working Group officials during the teleconference.

As I mentioned above, European officials seemed resigned to the fact that there will be an economic collapse in Cyprus “no matter what”, and so letting Cyprus leave the euro would not make that much of a difference.  Either way, the banks are going to have to be “reorganized” and capital controls will be imposed…

In detailed notes of the call seen by Reuters, the group’s chair Austria’s Thomas Wieser said: “The economy is going to tank in Cyprus no matter what. Restrictions on capital will probably be imposed.”

Never before have we seen European officials impose such a harsh ultimatum with such a short deadline.  It is almost as if they want to boot Cyprus out of the euro.  The following comes from a recent CNBC report…

In stark twin warnings on Thursday, the European Central Bank said it would cut off liquidity to Cypriot banks and a senior EU official made clear to Reuters that the bloc was ready to see the bankrupt island banished from the euro in the belief it could then contain damage to the wider European economy.

And European officials are even publicly talking about the possibility that Cyprus will soon need to start using “their own currency”…

In Brussels, a senior European Union official told Reuters that an ECB withdrawal would mean Cyprus’s biggest banks being wound up, wiping out the large deposits it has sought to protect, and probably forcing the country to abandon the euro.

“If the financial sector collapses, then they simply have to face a very significant devaluation and faced with that situation, they would have no other way but to start having their own currency,” the EU official said.

This is absolutely shocking.  Everyone always thought that Greece would be the first to leave the euro, but now it looks like it might be Cyprus.

However, there is still a chance that Cyprus may find a way to comply with EU demands.  Politicians in Cyprus are frantically searching for a way to raise the needed cash without raiding private bank accounts.  The following is what CNN is saying about the latest efforts…

Leaders of Cyprus’ political parties agreed Thursday to create an “investment solidarity fund,” which would issue bonds backed by state and church assets.

The plan was due to be discussed by the Cypriot government and parliament on Thursday evening, but few details were available and it was not clear how much the fund would be worth.

According to Reuters, other proposals have been under consideration as well…

The government said a “Plan B” was in the works.

Officials said it could include: an option to nationalize pension funds of semi-government corporations, which hold between 2 billion and 3 billion euros; issuing an emergency bond linked to future natural gas revenues; and possibly reviving the levy on bank deposits, though at a lower level than originally planned and maybe excluding savers with less than 100,000 euros.

At this point it is unclear whether any of those proposals will turn out to be acceptable to European officials.

In fact, the tone of European officials has noticeably changed from previous bailout efforts.  They now seem much more willing to play hardball.  For example, just check out what German Finance Minister Wolfgang Schaeuble is saying about the situation in Cyprus…

German finance minister Wolfgang Schaeuble told the ZDF public broadcaster on Tuesday night (19 March) he “took note with regret” of the Cypriot parliament’s rejection of the bailout deal, but insisted that the terms will stay the same.

Asked if the eurozone was willing to let Cyprus go bust, he answered: “Well, we are much more stable in the eurozone – we took measures to protect ourselves from the risks of contagion … but I don’t want to have any of this.”

He added: “It is a serious situation, but this cannot lead to a decision that makes absolutely no sense, to rescue a business model that has failed. Cyprus has a banking sector that is totally oversized and this made Cyprus insolvent. And nobody outside Cyprus is to blame for it.”

Schaeuble knows that the EU is holding all of the cards and that Cyprus is doomed without their help…

“The Cypriot state cannot fund itself on the markets. Its two largest banks are insolvent and are being kept afloat with emergency funding from the ECB, but only on the condition that there will be a long-term rescue programme. If this condition is no longer met, Cyprus will no longer be solvent and this is something Cypriot decision makers must know”

But the truth is that the EU can’t really afford to allow major banks to fail or for a single member to leave the eurozone.  If either of those things happen, the confidence game that has been holding the European financial system together will begin to rapidly evaporate.

If the EU thinks that they can abandon Cyprus without the crisis spreading to the rest of southern Europe they are just being delusional.

At least there are a few politicians in Europe that understand what is happening.  Nigel Farage, a very outspoken member of the European Parliament, is telling people to get their money out of banks in southern Europe as quickly as they can.  He is warning that a great collapse of the European financial system is coming and that people need to get prepared for it…

So what do you think?

Do you believe that we are on the verge of a major financial collapse in Europe?

Please feel free to post a comment with your thoughts below…

Cyprus Bank Run - Photo Via @jkozakou

After The Banksters Steal Money From Bank Accounts In Cyprus They Will Start Doing It EVERYWHERE

If The Banksters Will Steal Money From Bank Accounts In Cyprus Then They Will Do It ANYWHERECyprus is a beta test.  The banksters are trying to commit bank robbery in broad daylight, and they are eager to see if the rest of the world will let them get away with it.  Cyprus was probably chosen because it is very small (therefore nobody will care too much about it) and because there is a lot of foreign (i.e. Russian) money parked there.  The IMF and the EU could have easily bailed out Cyprus without any trouble whatsoever, but they purposely decided not to do that.  Instead, they decided that this would be a great time to test the idea of a “wealth tax”.  The government of Cyprus was given two options by the IMF and the EU – either they could confiscate money from private bank accounts or they could leave the eurozone.  Apparently this was presented as a “take it or leave it” proposition, and many are using the world “blackmail” to describe what has happened.  Sadly, this decision is going to set a very ominous precedent for the future and it is going to have ripple effects far beyond Cyprus.  After the banksters steal money from bank accounts in Cyprus they will start doing it everywhere.  If this “bank robbery” goes well, it will only be a matter of time before depositors in nations such as Greece, Italy, Spain and Portugal are asked to take “haircuts” as well.  And what will happen one day when the U.S. financial system collapses?  Will U.S. bank accounts also be hit with a “one time” wealth tax?  That is very frightening to think about.

Cyprus is a very small nation, so it is not the amount of money involved that is such a big deal.  Rather, the reason why this is all so troubling is that this “wealth tax” is shattering confidence in the European banking system.  Never before have the banksters come directly after bank accounts.

If everything goes according to plan, every bank account in Cyprus will be hit with a “one time fee” this week.  Accounts with less than 100,000 euros will be hit with a 6.75% tax, and accounts with more than 100,000 euros will be hit with a 9.9% tax.

How would you feel if something like this happened where you live?

How would you feel if the banksters suddenly demanded that you hand over 10 percent of all the money that you had in the bank?

And why would anyone want to still put money into the bank in nations such as Greece, Italy, Spain or Portugal after all of this?

One writer for Forbes has called this “probably the single most inexplicably irresponsible decision in banking supervision in the advanced world since the 1930s.”  And I would agree with that statement.  I certainly did not expect to see anything like this in Europe.  This is going to cause people to pull money out of banks all over the continent.  If I was living in Europe (and especially if I was living in one of the more financially-troubled countries) that is exactly what I would be doing.

The bank runs that we witnessed in Cyprus over the weekend may just be a preview of what is coming.  When this “wealth tax” was announced, it triggered a run on the ATMs and many of them ran out of cash very rapidly.  A bank holiday was declared for Monday, and all electronic transfers of money were banned.

Needless to say, the people of Cyprus were not too pleased about all of this.  In fact, one very angry man actually parked his bulldozer outside of one bank branch and threatened to physically bulldoze his way inside.

But this robbery by the banksters has not been completed yet.  First, the Cypriot Parliament must approve the new law authorizing this wealth confiscation on Monday.  If it is approved, then the actually wealth confiscation will take place on Tuesday morning.

According to Reuters, the new president of Cyprus is warning that if the bank account tax is not approved the two largest banks in Cyprus will collapse and there will be complete and total financial chaos in his country…

President Nicos Anastasiades, elected three weeks ago with a pledge to negotiate a swift bailout, said refusal to agree to terms would have led to the collapse of the two largest banks.

“On Tuesday … We would either choose the catastrophic scenario of disorderly bankruptcy or the scenario of a painful but controlled management of the crisis,” Anastasiades said in written statement.

In several statements since his election, he had previously categorically ruled out a deposit haircut.

The fact that the new president had previously ruled out any kind of a wealth tax has a lot of people very, very upset.  They feel like they were flat out lied to

“I’m furious,” said Chris Drake, a former Middle East correspondent for the BBC who lives in Cyprus. “There were plenty of opportunities to take our money out; we didn’t because we were promised it was a red line which would not be crossed.”

But apparently the wealth confiscation could actually have been far worse.  According to one report, the IMF and the EU were originally demanding a 40% wealth tax on bank account holders in Cyprus…

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.

Could you imagine?

How would you feel if you woke up someday and 40% of all your money had been taken out of your bank accounts?

At this point, there is still some doubt about whether this plan will actually be adopted or not.

Right now the new president of Cyprus does not have the votes that he needs, but you can be sure that there is some high level arm twisting going on.

Originally the vote was supposed to happen on Sunday, but it was delayed until Monday to allow for some extra “persuading” to be done.

And of course the people of Cyprus are overwhelmingly against this wealth tax.  In fact, one poll found that 71 percent of the entire population of Cyprus wants this plan to be voted down.

The funny thing is that Cyprus is not even in that bad of shape.

The unemployment rate is around 12 percent, but in other European nations such as Greece and Spain the unemployment rate is more than double that.

Cyprus has a debt to GDP ratio of about 87 percent, but the United States has a debt to GDP ratio of well over 100 percent.

So if they will go directly after bank accounts in Cyprus, what will stop them from going after bank accounts in larger nations when the time comes?

In the final analysis, this is a game changer.  No longer will any bank account in the western world be considered to be 100 percent safe.

Trust is a funny thing.  It takes a long time to build, but it can be destroyed in a single moment.

Trust in European banks has now been severely damaged, and that damage is not going to be undone any time soon.

A recent blog post by the CEO of Saxo Bank, Lars Christensen, did a great job of explaining how incredibly damaging this move by the IMF and the EU truly is…

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 dont 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.

This is the biggest moment that we have witnessed since the beginning of the European financial crisis.

Financial authorities in Europe could try to calm nerves by at least pretending that this will never happen again in any other country, but so far  they are refusing to do that

Jeroen Dijsselbloem, president of the group of euro-area ministers, on Saturday declined to rule out taxes on depositors in countries beyond Cyprus, although he said such a measure was not currently being considered.

Such a measure is “not currently being considered” for other members of the eurozone?

Yeah, that sure is going to make people feel a lot more confident in what is coming next.

I have insisted over and over that the next wave of the economic collapse would originate in Europe, and we may have just witnessed the decision that will cause the dominoes to start to fall.

The banksters have sent a very clear message.  When the chips are down, they are going to come after YOUR money.

So what do you think about the bank robbery that is taking place in Cyprus?  Please feel free to post a comment with your thoughts below…

Bank Robbery In Progress - Photo by PAVA

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