atomic_fungus (atomic_fungus) wrote,
atomic_fungus
atomic_fungus

#3792: If Cyprus does not fail, it will be the last time the EU manages to save such a situation.

That's how it's starting to look to me.

Start at the bottom and work your way up. The gestalt I get from looking this over says that things are not improving, and that those in charge (both of Cyprus and the EU) are losing control of the situation.

So I've started thinking that there might be an 11th-hour solution to this that barely pulls our collective chestnuts out of the fire...but the next crisis--whatever it is and wherever it comes from--will not be solvable. And when we get there, it's all gonna come tumbling down and the world will have to admit that we're in a depression that started in 2008.

But that's the optimistic outcome. That's if everything goes right, or if the bureaucrats in Cyprus and the EU bend the rules (again) to make things work out.

One of the things that leads me to think things are not going to turn out well is that some people are starting to talk about how small the Cypriot economy is compared to the rest of the EU, and how it might be fine to let the country fail since it's such a minor fraction.

People are already refusing to honor checks from one of the country's two largest banks, and talk seems to indicate that the other bank isn't much better off.

So let's look at Karl Denninger's take, shall we?
The latest tidbit is that capital controls are tightening and withdrawl limits on ATMs are being cranked down materially.

One of their banks is reported to have just "hours" of liquidity left (how many hours, may I ask?)

There were demonstrations that looked a lot like a riot to me, with attempts to come after members of the Parliament (you're getting warmer folks.)
Denninger is confident that the Cyprus crisis is not going to be the thing that sets off economic armageddon, though:
With a formal "drop dead" date of Monday things are going to heat up a bit over the weekend, I suspect. You might want to think about protection from a market perspective, although I remain convinced that this is not the domino that sets off the mess -- we're playing the "Bear Stearns" game here, and this is the warning flag that despite the claims of all those pumpers in the market all is not well and the excessive leverage problems are starting to leak to the surface once again.
I hope he's right. But I'm going to say again that if Cyprus doesn't knock us all off the cliff, the next crisis certainly will.
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