What happens in European banks stays in European...oh wait, nevermind

Cyprus-style deposit tax now possible in New Zealand?

New Zealand savers could see a Cyprus-style tax on their bank accounts, the Green Party is warning, accusing the Government of planning similar solutions for the country.

Canadian "bail-ins" possible should certain "systemically important banks" fail (pages 144-145, h/t www.silverdoctors.com)?

The Government proposes to implement a bail-in regime for systemically important banks. This regime will be designed to ensure that, in the unlikely event that a systemically important bank depletes its capital, the bank can be recapitalized and returned to viability through the very rapid conversion of certain bank liabilities into regulatory capital. This will reduce risks for taxpayers. The Government will consult stakeholders on how best to implement a bail-in regime in Canada.

Not every precedent becomes a trend, but given how the unthinkable has become both thinkable and predictable, it doesn't hurt to be paranoid. If Canada, the "model for global banking," the financial system that was celebrated for being far less reckless than those in the US and Europe, is using bail-in language reminiscent of what was heard during that "one-off" event in Cyprus, it is definitely time to contemplate the risk of having your savings cut and pasted from your bank account.

When authorities cross a line and it doesn't trigger revolt, they keep moving until they cross the next line, and the one after that. I would be a bit suprised if we didn't see more Cyprus-like "solutions." The European Union is the world's largest economy, and is a place that seems to fancy itself the supreme repository of all things moral and just, so if such a thing can happen there (and in front of the world, no less), my guess is that other countries will at least attempt similar measures; under the guise that depositor haircuts are now part of "international law."

Those who dream of international law delivering the world from giant villians never consider that it can just as easily be used against puny non-villians. In fact, it is more likely to be used against puny non-villians because puny non-villians can't push back. 

Ah well, there is probably some cosmic lesson in the fact that the originator of the word "utopia" wound up getting beheaded.

You can withdraw more than 300 euros per day from: https://twitter.com/greatMikePayne

Ladies and Gentlemen! Introducing...A NEW ECONOMIC TERM!

I've coined a new term for unstable, one trick pony financial economies like Iceland and Cyprus: A Bank Branch Republic.

And how about that Malta? From Wikipedia:

Lombard Bank is one of Malta's major banks. Today, Cyprus Popular Bank of Cyprus is the largest shareholder with an equity stake of about 49%. Over 1,200 shareholders, including investment funds, hold the remaining shares. The Bank has a 60% stake in Maltapost plc., the Maltese postal service.


Yowsa!


Now that banks no longer offer interest OR security, they have basically just become mattresses with fees...

Maximum Wages and Minimal Prospects

This week Ray Dalio of Bridgewater, the world's largest hedge fund, talked of a "lost decade" for the economies of Southern Europe.

This dovetails with a piece published last week by Deutsche Bank (h/t Zerohedge) on "Why the PIGS are Out of Luck." Says Zerohedge:

There are three key factors to modeling trade flows - or relevance - in a post-globalization world. While competitiveness is important, countries gain from being generally 'Technology-rich', 'Labor-rich', and/or 'Resource-rich'.

Analysis of Global Competitive Advantages

 

Among those in the "no particular advantage" category: The PIGS: Portugal, Italy, Greece, and Spain.

Normally in times of collapse, we think of countries becoming havens of cheap labor (which helps their recovery). But because of the PIGS's harsh union laws and pools of regulatory quicksand, Portugal, Italy, Greece, and Spain cannot become competitive with a LABOR RICH country like Vietnam without a marked adjustment of their labor laws; actually, of their entire societies. That is likely to take years (if it happens at all), so the process whereby the PIGSs become competitive relative to Vietnam probably isn't even a medium term prospect.

Also, a country like Greece has little manufacturing. The infrastructure and labor force with the appropriate skills to manufacture is already in place in Vietnam, where the labor is much cheaper. Which country would you choose?

A standard way of becoming more competitive is to devalue your currency. As long as the PIGSs remain velcroed to the euro, they will be stuck with a strongish currency (at least relative to a hypothetical lira or peseta) which combined with their labor laws and regulation will keep them extremely uncompetitive.

The old argument in favor of countries like Italy or Spain was that they were more stable than the emerging world, as they had the "rule of law" (kind of). Now that that too seems to be breaking down, exactly what do those countries have to offer?

A Monetary History of the European Union

When the smoke clears, here is what the “World Is Flat” droids will say about the failed European experiment…

It will be said that the European Union fell apart because we didn't have enough "political integration." That is, we had monetary union without fiscal union. In other words, this grand experiment in democracy failed because the individual nations had too much democracy.

They will blame Trichet for not easing soon enough or for not printing enough money. The collective wisdom will be that he made the same "mistakes" (insufficient money printing) the Fed made in the 1930s. They will say he gave in to the inflation hawks. They will blame Germany’s “irrational” memory of the Weimar hyperinflation for preventing Trichet from becoming Helicopter Trichet (should the Reichsbank President who oversaw that hyperinflation be nicknamed Dirigible Havenstein?).

Ireland, one of the darlings of the European experiment, is now among its worst off. That "Celtic Tiger" is now a paper tiger, paper as in debt. It has incurred unconscionable liabilities because it jumped headfirst into the modern blarney of “growth” through skyhigh leverage. Remember, modern economies run on paper shuffling and asset bubbles, and anyone who questions this just doesn’t “get it.” Well, those who expected to be made whole on Irish debt aren’t going to “get it” either.

For all their worship of progress through psychiatry, one thing these brain trusters don’t do is self-actualize.

The world is round. Greece isn't Germany. Technocratic global democracy is a scam.