Cyprus Is Not So Much An Anomaly as the Template For the Next Financial Crisis

This is not so much anything new, but a concrete reminder of the breadth of systemic banking risks inherent in the Anglo-American banking structure in which depositor money is intermingled with the Bank's speculative interests. 

The repeal of Glass-Steagall stripped the average person of important and time-tested safeguards against loss.   Things are different now.

Any deposits you have at a bank in excess of 'insurance guarantees' are at risk in case of another financial crisis.

This exposure may include wealth you think that you own, but do not know exactly where and how it is being held. This may include 401k's and IRA's, pension plans, health insurance deposits, life insurance and annuities, and so forth.

MF Global was very instructive on how even cash deposits and physical assets backed by a certificate of ownership may be fair game for the banking system in the event of a crisis.

Nothing is perfect and foolproof, but there are degrees of safety.

And you may wish to consider that the next time something like Occupy Wall Street starts up and demands reform, don't stand by on the sidelines and join in with the orchestrated jeering from the one percent's water bearers.

Simplify, streamline, organize.

Demand serious, meaningful, and genuine reform and transparency in the banking and political system.

"The goal is to produce resolution strategies that could be implemented for the failure of one or more of the largest financial institutions with extensive activities in our respective jurisdictions. These resolution strategies should maintain systemically important operations and contain threats to financial stability.

They should also assign losses to shareholders and unsecured creditors in the group, thereby avoiding the need for a bailout by taxpayers. These strategies should be sufficiently robust to manage the challenges of cross-border implementation and to the operational challenges of execution...

But insofar as a bail-in provides for continuity in operations and preserves value, losses to a deposit guarantee scheme in a bail-in should be much lower than in liquidation. Insured depositors themselves would remain unaffected.

Uninsured deposits would be treated in line with other similarly ranked liabilities in the resolution process, with the expectation that they might be written down."

Bank of England and Federal Reserve Joint Statement on Resolving Globally Active, Systemically Important, Financial Institutions.

Related:
A Message From the Banking and Brokerage System
Lawmakers Must Heed the Wisdom of the 1930's
Why Has the Financial System Failed and What Are We Going To Do About It?
A Brilliant Warning on Robert Rubin's Proposal to Deregulate the Banks in 1995

Why Go After the Depositors To Save 'the Taxpayers?'

One thing that puzzled a couple of people is this.

Why go after depositors, in order to save the 'taxpayers.' Aren't they the same people?

Well, obviously in the case of the European Monetary Union this is not the case. And this is the great weakness of a single currency without more comprehensive provisions for fiscal union that makes it inherently unstable.   Wealthy Germans feel no kinship with Cypriots, Greeks, or Spaniards.

But what about New Zealand and Canada, countries that have their own sovereign currencies and are viable political entities? Are the taxpayers and the depositors there essentially the same constituent base? And isn't the government responsible for regulation and policing the banks which they allow to act with a lack of transparency?   Is this not the basis of trust that sustains the financial system?

And what about the rest of the G20 that seemingly has adopted the same template of sacrificing depositors to save the gambling bankers?  What are they thinking?

When a major financial institution gets into trouble it is not usually a sudden event for the most part, but plays out over a period of time. This is true from MF Global to the Popular Bank of Cyprus to Lehman Brothers.

The public does not see what is going on because the financial system is opaque. But wealthy insiders often know what is going on in their interconnected world of money.   Remember the stories of the uber-wealthy who managed to get their funds out of MF Global before it collapsed? I seem to recall those friends of the people, the Koch Brothers, being mentioned.

The monied interests and their political footmen have their funds safely parked in offshore tax havens, and can move the rest around at will based on the distribution of 'asymmetrical information.'

But to the extent that they are taxpayers, they are exposed to bank failures that they may even know about, if the bailout is financed by 'the taxpayers.'

And this is what really irked the wealthy who were caught up in MF Global and Cyprus bank. They thought they were insiders.

The G20 is a tale of two economies, with one set of rules for the one percent, and another set of rules for everyone else. This new template of confiscating the savings of common depositors is just another manifestation of the one percent looting the wealth of the rest.

It may be hard to accept, but the notion of everyone in a country pulling together for the common good is not a viable concept in a crony capital kleptocracy.

And as things get worse, and their schemes start falling apart, their antics may start becoming even more blatant and more brazen, and more incredibly 'unfair.' As you know, I said that MF Global was the 'watershed event' for me.

I don't blame people for being edgy for the reasons I have stated on many occasions. The enforcement of the law is almost incredibly uneven, and the government has hidden key information, and acted in very odd ways far too many times.

When one sees something like this how can one not feel uneasy? Don't Panic, Financial Reform Will Come - By Barney Frank.    Are you kidding me?  These jokers have publicly stated they don't enforce the laws they already have!

Sift everything and look at the evidence, and draw your conclusions and actions accordingly.  Hysteria is contagious and has its dark attractions, but it is not helpful to you and your family's well being.  Trust in God, but make everyone else show their data.

Are All G20 Bank Depositors Exposed to a Cyprus Style Seizure of Deposits for a 'Bail-in?'

Dave from Golden Truth has let me know of an interesting quote from an article by Eric Sprott titled Caveat Depositor which *could* explain why countries like New Zealand and Canada are quietly tilting towards seizing bank deposits to recapitalize failed banks.

"If there is a risk in a bank, our first question should be: ‘Ok, what are you the bank going to do about that? What can you do to recapitalise yourself?’ If the bank can’t do it, then we’ll talk to the shareholders and the bondholders. We’ll ask them to contribute in recapitalising the bank. And if necessary the uninsured deposit holders: ‘What can you do in order to save your own banks?’”

Jeroen Dijsselbloem, March 26, 2013

Apparently this template has already been agreed to by the G20 according to Dave.

"Because the use of taxpayer-funded bailouts would likely no longer be tolerated by the public, a new bank rescue plan was needed. As it turns out, this new "bail-in" model is based on an agreement that was the result of a bank bail-out model that was drafted by a sub-committee of the BIS (Bank for International Settlement) and endorsed at a G20 summit in 2011.

For those of you who don't know, the BIS is the global "Central Bank" of Central Banks. As such it is the world's most powerful financial institution. I sourced a copy of this Agreement here: LINK...

...the agreement references specifically avoiding more taxpayer bailouts. It also refers to bank deposits in excess of Government insured amounts as "uninsured creditors." This is essentially the standard legal bankruptcy model which uses creditor hierarchy (secured lenders, unsecured lenders, preferred equity, equity) and applies to the rescuing of banks.

This is very important to know about and understand because what is commonly referred to as a "bail-in" in Cyprus is actually a global bank rescue model that was derived and ratified nearly two years ago. It also means that bank deposits in excess of Government insured amounts in any bank in any country will be treated like unsecured debt if the bank goes belly-up and is restructured in some form.

Because this is a legal Central Banking agreement that will be applied globally, it also means that U.S. bank depositors will not be immune to this rescue mechanism. It means that no one should keep any amount in any bank that exceeds the FDIC guarantee. In fact, I would recommend only keeping enough money in the bank to fund your monthly or quarterly bill paying requirements. Any amount in excess of FDIC deposit insurance will be exposed to the risk bankruptcy."

You may read the entire article at Dave's blog Golden Truth.

I would assume that if Dave's reading of this document is correct, unless there is a specific and unequivocal denial by your local government Administration, then this is the operative plan for another series of bank failures in the G20 countries, including the US, Germany, France, Italy, and the UK.  This would explain how these stealthy depositor seizure plans have been bubbling up from diverse countries.

I would not be satisfied if there was merely a dismissal of the possibility, that Cyprus was somehow a 'special case' because of the way in which their banks were capitalized, and so heavy with deposits.  In the event of a global derivatives meltdown, no capital structure will stand, and no bank can maintain a so-called 'fortress balance sheet' while they are gambling wildly with speculative leverage on the side.

I do not wish to seem to be an alarmist, but this additional information and some of the other events which are occurring has created a rather significant shift in my thinking.  Cash is not cash and deposits are no longer deposits as we once thought of them in this non-transparent, post-Glass Steagall financial world of ours. 

Congratulations. You may now be an unsecured creditor of your local TBTF bank if your and yours have any money on deposit there, either directly or indirectly.    You say you have money in a pension fund and an IRA at XYZ bank?  Oops, it is really on deposit in you-know-who's bank.  You say you have money in a brokerage account?  Oops, it is really being held overnight in their TBTF bank.  Remember MF Global? 

Who can say how far the entanglements go?  The current financial system and market structure is crazy with hidden risk, insider dealings, control frauds, and subtle dangers.  Jim Chanos says that the  cheating is so widespread and unpunished that it becomes almost a fiduciary responsibility to break the rules.

 No wonder people are so edgy.  I think the plutocrats have gone too far, but are so detached and out of touch that they have not figured it out yet.  And when the awaking comes, it will be quite a surprise to many.

To my correspondents who say they have spoken to their elected representatives about this and received assurances, I would not assume that they are aware of this international agreement which the US has presumably signed.  I was not.

And if you think they will stand up against any plans to take your deposits during a banking emergency, against a vociferous and overwhelming flood of objections from their constituents, remember how quickly the Congress caved on TARP and Cyprus' Parliament gave way to the EU and ECB.

Welcome to the abyss.