This is just a short post regarding the charlatans at the FED who so proudly puffed up the margin borrowing to what appears to be all time highs…just in front of the obvious tail risks that always accompany it. Instead of moderating QE they continued the force feed liquidity into a system designed to get people to make ever riskier bets…and people overwhelmingly have complied. Now, however, the FED has to deal with something much bigger and much more dangerous…all eyes and resources will go to managing a global bank run.
Is CYPRUS a cover for JP Morgan and Goldman Sachs etal counter party risks? It is my view that CYPRUS is a little problem that could have easily been solved in ways that made the EU, the ECB and IMF look like the good guys or at least better guys…they could have demanded a haircut on deposits in private but strong armed the Cypriot officials to take the fall for inventing and implementing the actual tax (theft/haircut whatever you want to call it) - and instead they could have come out swinging pontificating how unethical and counter productive the idea was. Then they could have pretended to take Cyprus to task publicly and legally, meanwhile making no serious effort to hamper or impede the plan…they could have at least gotten better PR out of it. Too much here just does not make sense at all! It just defies logic entriely…that the only thing these guys were unwilling to compromise, sanctity of bank deposits was sacrificed in this type of public display.
Additionally, all the ECB needed to do was a little insider trading to create magical funding - and next to the abortion they created - insider trading is a walk in the park…short a few billion of the EURO…in a Cypriot account, announce some bad news cash out and bingo…CYPRUS 17 billion EUR - problem is solved.
Or they could have just written the little check (for them these days), demanded anonymity and quietly let Cyprus disappear into white noise. That certainly wild have it less than their current choice. Heck BURNanke would have given them the money in less than a few seconds flat since he's so very interested in liquefying banks - especially foreign ones. (I hear he carries that much in his satchel every day on his way to his daily pitstop at dunkin donuts before work)
The thing is, this is a much easier problem to solve than $700 trillion of derivatives ready to blow up because counter party risks are now significantly greater than they were in 2007…and aberrant narcissistic behavior by the big banks is more impetuous too since they have proven they are above the rest of us…and that depsite a public agenda against too big to fail…nearly every big bank is now bigger than ever.
So, is Cyprus a test case and even more significantly, is it a cover for a blow up of derivatives counterparties.
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