Cyprus Crisis Explained in 8 Minutes

Today I want to discuss the Cyprus banking debacle, its consequences for Cyprus, the EU, Russia and the rest of the world. You can watch video report on YT or read the article below.

Watch full video report:

Note: If the volume in this one seems low, please boost it in your computer or use speakers. It sounds fine on my end, but I’ll be working on increasing it in future vids. Unfortunately, what’s done cannot be changed as YT won’t allow it. I’d have to redo the whole thing.

 

Read article:

Cyprus is tiny, and its economy only constitutes 0.2% of the EU economy, however, the Cyprus banking disaster has long-ranging implications for the country, the EU and the entire world. How?

These are the most important points to remember:

First, this is a test case implemented by the EU to see how far they can go in their capital controls and in “reshaping” (read “destroying”) various economies to their specifications. Put simply, we are observing a test case for the controlled demolition of weaker economies. A good past example of controlled demolition to keep in mind is the Argentinian default. Presently, there is a number of the EU economies that are standing in line for various “interventions” by Brussels, IMF and ECB. These are the EU periphery countries: Italy, Spain, Portugal, Ireland, Greece, Hungary and others. Cyprus is a great test case due to how small it is. The theory is that it wouldn’t send any significant shock-waves through the EU economy, unlike say a much larger country, like Spain or Italy. Additionally, it’s an offshore tax haven within the EU, which is something Brussels and Berlin are itching to close down. Finally, much of the foreign money in Cyprus is Russian, or non-EU, and based on the current EU propaganda, those funds deserve to be taxed. According to those who pull the strings in the EU, this is a simple and full-proof scenario, but that’s where they are dead wrong! Here’s why.

Cyprus is a self-professed offshore banking haven. More specifically, it WAS an offshore banking haven – no more, because as a result of this debacle, the Cyprus banking haven status is gone, and that’s a guarantee. Any banking in the world is based on trust and faith in the institution to which you are entrusting your money. Trust is two-fold: solvency + a consistent delivery on promises. If you promise that the money in your bank will be kept in segregated, private accounts and that these accounts will be tax free, you better keep your word, if you want to keep your customers.

There is obviously no trust left for the Cyprus banking sector. I listened to an interview by a Russian billionaire Lebedev, who said that he kept a certain amount of money in a Cyprus bank, most of which was invested back in Russia. But whatever was left in the Cyprus account, he would withdraw immediately once he’s allowed access to his acocunt because he no longer trusted the Cyprus banking system. There are lots of private and corporate jets currently sitting in Cyprus airports, waiting for the first opportunity to get their capital out and leave forever. The capital flight from Cyprus started last year, when it had first surfaced that the country was in dire financial straits. It is estimated that 1/2 of the foreign capital left the country way before this crisis. After the present crisis, Cypriot banks will be lucky to have any capital left on their shores.

Trends Research Institute’s Gerald Celente believes that this is a deliberate financial attack against Russia. Incidentally, that’s true, there’s a lot of Russian capital in Cyprus, estimated before this crisis at $15bln. I get asked a lot about the situation with Russian capital, its nature and Russia’s role in this scenario.  This is a complex issue and I intend to cover it in a separate segment. Part of the issue here is whether it’s clean or dirty money, and if so, isn’t it “okay” to tax “dirty Russian money?” For now, I’ll just note that any laundered Russian money domiciled in Cyprus is an issue between Russia and Cyprus, and it has nothing to do with the EU. As Vladimir Putin has noted, “the EU is stealing what has already been stolen” – from the Russian people, I might add. I’ll do a separate video about the Russian side of the Cyprus debacle soon, so stay tuned.

For now, back to the Cyprus issue.

It’s also very important to remember that Chancellor Angela Merkel of  Germany is seeking re-election this year. Germans are unhappy about having to contribute a large percentage to the bailout of various EU countries, therefore, Merkel needs to show how tough she is with the EU periphery in order to get re-elected. This is why she is especially hard and unbending with Cyprus. Let’s remember that a Cyprus delegation went to Russia trying to negotiate a rescue package outside the EU clutches, which infuriated Angela Merkel. The EU sent a parallel delegation to Moscow to convince Russia not to contribute, while Cyprus was given an ultimatum that if they seek money outside the ECB and IMF, the EU would cut all liquidity to the island. As a result of this arm twisting, Cyprus had to agree to taxing of its private accounts.

Why did the EU go specifically after private Cyprus bank accounts? The short answer is: because that’s where the money is. Cyprus economy consists of the overblown private banking sector, which dwarfs the rest of the economy, sort of like Iceland 2.0; and in addition to that, tourism and real estate. Much of tourism and real estate are related to offshore banking. Many who come to Cyprus for banking also buy second homes there. Incidentally, in addition to Russians, many Brits traditionally bank in Cyprus. Also, I am pretty confident, some Germans and other northern Europeans keep their money there as well. It shouldn’t be underestimated how interested Germany and other EU countries are in squashing this offshore haven.

What is going to happen next? With the liquidation of the tax heaven status, Cyprus economy will be finished. Tourism will dry out, and real estate prices will crash, as foreigners rush to sell their Cyprus homes. This will adversely impact all kinds of local businesses. Sorry to say, but however you look at it, the Cyprus future is bleak.

The banks have reopened a couple of days ago, but to this moment, people can only get no more than a 300 euros daily allowance out. How long will capital controls last? The authorities are promising only four weeks. However, historical indications are not good. In Iceland, for instance, capital controls have not ceased since the banking crisis and near-default two years ago.

How does this impact the rest of the EU and who’s next? As I mentioned before, this impacts everyone very directly as this is only a test case. I’m watching Italy, Spain and other PIIGS, as well as offshore havens like Luxembourg.

How does it impact you and me, and the rest of the world? The nature of banking is changing, trust in Western political, banking and economic system is evaporating, and what has happened in Cyprus can happen anywhere in the world. Are all countries equally at risk? What to avoid and how to protect yourself? I’ll discuss these topics in the upcoming videos. Specifically, I’ll discuss the situation in the USA with the IMF Global and PFG Best/Peregrine Financial debacles.

 

4/1/13 Urgent update! Watch new, live video CYPRUS DEBACLE IS GETTING WORSE!

Watch a shortened video version: CYPRUS BANKING CRISIS in 5 Minutes

 

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