March 18, 2013
- It’s a “haircut”… It’s a “stability levy”… No, it’s raw theft: Everything you wanted to know about the mess in Cyprus (and a PRO-level way to play it)
- Meaningless gesture or a step toward sound money? Examining the “Centennial Monetary Commission”
- Military ships armed with Star Trek-style phaser arrays: Byron King on one company’s futuristic computer chips and what they’ll make possible
- A small victory for property rights… a prison break that reminds us of Patrick Cox’s “crime of the century”… a laughable claim about gold… and more!
What we’ve called “the longest, most boring financial crisis in history”... suddenly got a little more interesting.
And all because of an island country in the Mediterranean with a population barely larger than Rhode Island’s.
Anyone with a bank account in Cyprus woke up Saturday morning to learn they were involuntarily contributing an “upfront one-off stability levy” — i.e., an immediate confiscation of funds from their account. But only this one time. Of course…
The “stability levy” is a condition of 10 billion euros in new European Union bailout loans to Cyprus — a deal hashed out late Friday night on the nonsensical but stubborn theory you can always solve a debt problem by taking on more debt.
All depositors will feel the pain — not only Russian gazillionaires who’ve stashed their money in Cyprus in recent years. Accounts over 100,000 euros would see 9.9% of their funds vaporized. Accounts with any lesser amount, “only” 6.75%.
So much for the promise of eurozone deposit insurance — everything up to 100,000 euros was supposed to be solid as a rock. Heh…
“Cyprus allowed its banking system to grow far too large,” explains our macro strategist Dan Amoss by way of background. “The banks then lost their shirts speculating in Greek bonds. Now Cypriot politicians and EU overlords want bank depositors to pay for the long-delayed bailout of these past mistakes.” Thus, a bank holiday.
“It’s a game of musical chairs, and the music has stopped,” sums up the Laissez Faire Club’s Jeffrey Tucker. “The purpose of the ‘holiday’ is to tase people so they can’t find their chair.”
Cypriots reacted to their tasing in the way Doug Casey describes most Americans — like “whipped dogs.”
A march in front of the presidential palace on Saturday afternoon mustered all of 150 people.
One guy who owned a bulldozer drove it over to his bank…
Uh… OK, I’m here… Now what?
Maybe everyone was too busy lining up at ATMs to withdraw cash. Even with a 400-euro limit — about $520 — most of the machines were cleaned out by Saturday night.
But more likely, Stockholm syndrome has gripped the populace. “A one-time thing would be better than worse measures,” a woman named Stala Georgoudi told The New York Times. “Procrastinating and beating around the bush would be worse.”
Actually, “procrastinating and beating around the bush” is how affairs got to this state.
It’s tempting to think the suits at the European Union, European Central Bank and International Monetary Fund spent the last few weeks thoughtfully stroking their chins, trying to come up with a “just right” amount of money to confiscate — enough to send a big check to Cyprus’ creditors, but not so much to bring out the torches and pitchforks. Or to set off a bank run in bigger, but equally sickly eurozone countries — think Spain and Italy.
In reality, the deal appears to have been thrown together last minute in a panic. “Europe dragged its feet on Cyprus for so long,” says Reuters’ Felix Salmon, “that it effectively missed the deadline for doing a bond restructuring. It takes time to put that kind of a deal together, and there simply isn’t enough time between now and Cyprus’ next big coupon payment to do that.
“As a result, the EU found itself with a massively reduced menu of options: Either fund the bailout itself, in full — an option which the Germans were adamant would never happen — or force a haircut on Cyprus’ depositors.”
The “haircut” — shearing is more like it — was supposed to take effect over a three-day weekend, in time for when the banks reopen tomorrow.
Now it’s the Cypriot parliament’s turn to beat around the bush. A vote on the deal was supposed to take place today, but it’s been put off till tomorrow. Will the banks reopen before the vote? No one’s thought it through that far. (Whoops, this just in: Cyprus banks are closed through Wednesday…)
Meanwhile, the powers that be are borrowing from the 2008 playbook of U.S. Treasury Secretary Hank Paulson and threatening Armageddon: Without parliamentary approval, a former Cypriot central bank governor warns, “Cyprus will turn into Libya.”
With all the hemming and hawing, the “risk-on” trade of 2013 is finally in pause…
- Asian stock markets sold off 2-3% overnight. European indexes are down about 1% with an hour before the close. U.S. markets opened in the red, blue chips showing more resilience than small caps
- The euro slipped about 1%, currently $1.297. The dollar index is up to 82.7
- Gold has finally pushed through $1,600 — $1,608 at last check
- The rest of the commodity complex is selling off. Crude is down to $92.35 a barrel, copper off more than 2%, to $3.44 a pound
- Treasuries are rallying, the yield on the 10-year note down to 1.94%.
If the “stability levy” is supposed to teach a lesson, it’s an odd lesson, indeed…
“The levy,” writes BBC business editor Robert Peston, “serves as a caution to lenders to banks that they should take care where they place their funds and avoid banks which overstretch themselves — as Cypriot banks did.”
Seriously? So an American with an FDIC-insured account at JPMorgan Chase should view Cyprus as a “caution” because the Federal Reserve told JPM last week to shore up its capital cushion?
They really want you to put your cash in the First National Bank of Serta, instead?
Nah, didn’t think so…
In any event, “risky asset markets have rallied on the idea that the euro crisis is over; but the crisis is far from over,” concludes our Dan Amoss. And yes, it’s tradeable. Dan’s guidance follows in today’s 5 Min. Forecast PRO. If you haven’t gone PRO yet, you missed out last week on a dirt-cheap gold speculation that’s already up 30%. Sign up for access here…
“Game on,” said a short email this morning from Ralph Benko of the American Principles Project.
Mr. Benko has been at the forefront of the movement to implement a 21st-century gold standard. He’s excited by the news that Rep. Kevin Brady (R-Texas) is proposing a Centennial Monetary Commission — i.e., a body that would survey the damage done by the Federal Reserve in its 100 years of existence.
“A monetary commission is the exactly right legislation at the exactly right time,” Benko writes at Forbes. “It is not an exercise in Fed-bashing. It has been meticulously crafted to be a credible and objective body to find and define the missing, monetary, key to job creation, equitable prosperity and, not incidentally, deficit reduction.”
Around here, we’re naturally suspicious of blue-ribbon panels. But even Reagan’s Gold Commission of 30 years ago — where Ron Paul was installed as the token gadfly — begat Gold and Silver Eagles and the good doctor’s “lost” gold bible. So we’ll be keeping tabs.
“Imagine,” suggests Byron King, “a military ship with a phased array radar that can lock onto a fast-moving object while a ‘smart skin’ on the hull literally weaponizes and emits laser light precisely onto the target.”
This Star Trek scenario is off in the distance… but it is within sight, thanks to the next generation of computer chips.
For decades, chips have been strictly electronic devices. Now comes the potential to marry the electronics with optics — light. “With conventional semiconductors, like silicon, you can move electrons, but not photons (light particles), which are much smaller,” Byron explains. “But by developing the ability to handle photons, you’re opening up entirely new capabilities.
“With photons, you can now move down truly to the level of quantum computing — literally at the atomic level. This is important, because modern computing is at the edge of capabilities with electrons and bulky old silicon.”
Think back to the breakthroughs made possible with the earliest silicon integrated circuits — like the first transistor radio in 1954. That’s what we’re on the cusp of all over again, “except now,” says Byron, “we see the improvement down at the atomic level, versus the much larger scales of silicon technology.”
The military is already at work figuring out how to put quantum computing to work. The technology, Byron says, “immediately addresses the requirements of numerous military development and procurement programs for improved sensors, faster and more secure communications, improved memory and storage and overall computing power.
“There’s no end to the transformation in computing power, imaging, target definition, signals intelligence and more that we could see from this.” Including ships armed with something like a Star Trek phaser array.
The company that holds 34 patents on this bleeding-edge tech is the first recommendation in Byron’s Military-Tech Alert. This premium advisory remains in beta-test mode… but it’s open to a select circle of readers.
You can be among them by cashing in the “loyalty rewards” on your account. Time is of the essence, though… These rewards expire tomorrow at midnight. Put them to work now, while you still can.
Russ Caswell can finally breathe easy; the motel that’s been in his family for two generations will remain his.
You might recall the feds have spent years trying to seize the Motel Caswell in Tewksbury, Mass. — on the theory that it’s a haven for druggies. Caswell himself stood accused of no wrongdoing, but the motel was deemed guilty as hell under the civil asset forfeiture laws, and Caswell — who owns the place free and clear — would have been out $1.5 million.
In January, a federal magistrate laughed the case out of court, accusing prosecutors of “gross exaggeration” in presenting a case “not supported by a scintilla of evidence.” Finally on Friday, the feds decided not to pursue an appeal.
Victory at last…
Still, forfeiture is big business for government. According to the Institute for Justice, the feds’ Asset Forfeiture Fund — which holds the proceeds of seized properties to be paid out to law enforcement agencies — holds more than $1.6 billion.
As jailbreaks go, it was spectacular… even if it ended in failure.
Yesterday afternoon, “two men posing as tourists,” according to CNN, “reportedly commandeered a helicopter from a Canadian tour company, ordered the pilot to fly over a detention center near Montreal, hoisted two inmates using cables or ropes into the hovering aircraft — and zipped away.”
In the daytime, no less.
By early this morning, a manhunt turned up both the inmates and the guys who seized the chopper. But during the escape itself, “The reaction time was probably too slow,” said a prison bureaucrat with typical Canadian understatement.
We bring up this case only because we’ve been thinking lately about another brazen crime enabled by a helicopter — the 2009 “Vastberga” robbery of a cash depot in Sweden netting tens of millions of dollars.
This, you may recall, was the first clue in Patrick Cox’s “crime of the century” video series last week. The final piece of the puzzle came last night. “This daring robbery,” Patrick says, “is responsible, in part, for creating — today — the most promising investment opportunity since the federal government passed the Sherman Anti-Trust Act 120 years ago — declaring monopolies illegal.”
That’s because it’s a government-granted monopoly. If you missed Patrick’s final email last night, you can watch him connect the dots here.
“Trying to weave together the three clues is a challenge,” writes a reader after seeing all three “crime of the century” videos from last week.
“Here is my best shot: The heist in Sweden was carried out to fund tech and pharmaceutical counterfeiters.”
“It seems to me,” writes another, “that the ‘crime of the century’ is having allowed the Federal Reserve to assume control of the U.S. in 1913, which led to the establishment of the fascist ‘military-industrial complex,’ the marriage of the government and ‘Big Pharma’ (including importation of the opium, etc.) and the largest wealth transfer in history from our middle class to the ‘banksters’ themselves.”
The 5: Ummm… nice try… but a little too symbolic. Once more, Patrick brings it all together right at this link.
Best regards,
Dave Gonigam
The 5 Min. Forecast
P.S. “China’s Gold Reserves Stand at 1,054 Tonnes” reads a ridiculous headline at china.org.cn.
If you’ve been with us for any amount of time, you know the officially stated gold holdings at the People’s Bank of China have been unchanged at 1,054 tonnes for nearly four years now… and that the real number is surely growing.
No one’s been able to put a definitive figure on China’s escalating and covert gold grab — until now. Byron King’s long-awaited expose — complete with eye-popping projections for the gold price — is now available. Check it out.