FINANCIAL SYSTEM ON THE EDGE! Bank Runs Are Imminent In Greece, Italy, & Spain And The Chance Of Sparking Much Broader Deposit Outflows Across The Union Are Rising Quickly!
Eric Dubin & The Doc break down the trading action in gold and silver and preview next week’s options expiration in the metals.
We discuss the implications of the Cyprus bail-in, whether bank runs are imminent in Greece, Italy, & Spain, and the likelihood that a full-blown contagion has been triggered due to the loss of confidence in the banking system.
SD Weekly Metals & Markets is below:
Cyprus Is Doomed: Greece to take over bank branches; Cyprus passes bills for EU bailout, issuing bonds using future gas revenues as collateral, impose capital controls,and looks to take up to 70% from bank accounts of wealthy!
TICK, TICK … BOOM! The European Project Is Crashing To Earth: IMF BLOCKS TROIKA DEAL!!! Every Half Hour, New Demands Are Made! CYPRUS CHURCH CLAIMS IMMEDIATE EURO EXIT – SPIEGEL! A Potential Bankruptcy Just 48 Hours Away!
With the Cypriot government still ‘undecided’ about what to ‘take’ and the European leaders very much ‘decided’ about what to ‘give’, the fact of the matter is, as JPMorgan explains in this excellent summary of the state of affairs in Europe, that because ELA funding facility is limited by the availability of collateral (and the haircuts applied to those by the central bank), and cutting the Cypriot banking system completely from ELA access is equivalent to cutting it from the Eurosystem making an exit from the euro a matter of time. This makes it inevitable that capital controls and a capital freeze will be imposed, in their view, but it is not only bank deposits that are at risk. A broader retrenchment in funding markets is possible given the confusion and inconsistencylast weekend’s decision created for investors relative to previous policy decisions. Add to this the move by Spain, which announced this week a tax or bank levy (probably 0.2%) to be imposed on bank deposits, without details on which deposits will be affected or timing, and the chance of sparking much broader deposit outflows across the union are rising quickly.
Capital Control Risks
What was widely viewed as an ill-conceived Cyprus deal last weekend renewed fears of a re-escalation of the euro debt crisis. The original proposal to hit insured depositors below €100k caused a bank run and set a new precedent in the course of the Euro area debt crisis, with potential negative consequences for bank deposits not only in Cyprus but also in other peripheral countries. Once again, as it happened with the Greek crisis last May, the Cyprus crisis exposes the fragmentation of the deposit guarantee schemes in the Euro area and its inconsistency with a monetary union.
Even if the original deal is eventually revised and the guarantee for depositors with less than €100k is respected, the damage from the original proposal will be difficult to undo, in our view.
Top economist warns of Imminent Bank Runs troughout Europe! Links:
Sinclair, Farage, Roberts – Cyprus May Dwarf 2008 Collapse
Click on the Portola Group logo for an mp3 file.
Saturday March 23 – Gerald Celente:
Britain’s credit rating faces another downgrade in the next month after Fitch warned it is reviewing the country’s “AAA” status in the wake of the Budget.
by Richard Blackden, The Telegraph:
The agency warned that there is a “heightened probability of a downgrade” as it conducts a review of the rating by the end of April.
The move prompted foreign-exchange traders to sell the pound in late trading in the City and caps a torrid week for Chancellor George Osborne.
There has been some expectation that the credit rating would come under renewed scrutiny after a Budget in which the official growth forecast for this year was slashed from 1.2pc to 0.6pc.
In a way, Europe should be thrilled by the week that was because financial markets barely batted an eye at the crisis in Cyprus.
But Europe has a problem on its hands that’s bigger than Cyprus: The economy stinks.
This week we got fresh proof that things are bad or getting worse.
In France, the Flash PMI report (which is a mid-month look at the combined services and manufacturing sectors of the economy) came in dismal, with the output index falling to a four year low.
Meanwhile, Germany’s economy is the envy of Europe, but even they are not immune to trouble.
Alex welcomes American economist and renowned columnist Paul Craig Roberts to examine the Cyprus bank crisis situation and America’s own crumbling economy.
The major market tops I have left out include 2007 and 2000 because they bore little resemblance to the current setup technically – though they provide very similar lessons once the top was in place – i.e., in the nature of the subsequent sell-off. In 2000, almost all focus was on bubble tech stock indices rather than the broader S&P500 (in fact – while tech crashed, does anyone realise there was a massive rally in neglected value stocks for most of 2000 and even 2001?) As well, the 2007 was unlike any of the scenarios discussed here because bond yields were falling steeply once the top was forming.
Rollover 1981… world economic collapse