Sunday, March 17, 2013

Why Cyprus matters

Don Dickinson sent me his thoughts on the developing situation in Cyprus, and why Americans should be watching how this plays out:
It has long amazed me how slow the dumb masses are to pick up on trends even after they have been clear for months if not years. 
Most news outlets are still reporting on this as if it is obviously limited to Cyprus, its Russian off-shore investors, and maybe somewhat the Eurozone in general. 
But wait, there are clear signs of direct connections to American finance and "banking." 
- Years ago, we had those multi-interconnected octopus charts of how all the banks and nations of Europe and American and even some Asian are linked inextricably in a birds nest network of loans and deposits. 
- Since his first election and with increasing vehemence, BHO has been lecturing Americans about how the only real problem is that the evil rich are not paying their fair share. At this point it is a very small step as far as the poor masses are concerned from talking about the evil rich to exacting "a contribution to save America." The interesting trick when it goes down will be that huge numbers of people who never thought they were in the rich category will find their assets also gone in the levy. 
- For at least the past year, there has been talk by the American leftist wonks of a "one time levy on pensions and retirements." This is vague enough that any kind of such deposit or guarantee could be included in some way.  
Just before writing this I read that the Cyprus bank holiday associated with this confiscation has already been extended to Tuesday. One wonders how long a bank holiday would need to be to preclude a run after the holiday? 
Without access to cash, how long before Cyprus descends into anarchy?
Some other random thoughts: 
- Could this be what triggers the big run up in real assets? Jim Sinclair thinks so and also thinks that Putin in particular and the Russians in general are not going to take this lying down. 
- If this does not trigger runs outside Cyprus on Monday, I will be amazed. I think at first, they may be only in the countries closest to Cyprus in banking situation and arrangements and/or closest geographically. If that happens, I can see the runs spreading, at first like ripples on a pond, and then very suddenly going global. 
- I cannot fathom the American reaction. Most Americans have never heard of Cyprus and will tend to disregard any possible connection to America. On the other hand, significant numbers of Americans have on-going experience with reacting too slowly to the developing ammo run. If even a few thousand Americans start a bank run, could it go the way of the .22 LR run on steroids? 
- I am stunned that the plutocrats have taken this step instead of just more printing of whatever funds they thought were needed at the moment. Monetization has been proven to have few immediate impacts and not to generate panic in the dumb masses. So, why change now? Sure, informed people know about the long term theft that is monetization but the dumb masses are oblivious. Why panic the masses by denying them access to their meager funds? Is there some big important reason that we are not yet aware of?

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