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article imageOp-Ed: Killing Cyprus, natural gas, crime and unmitigated stupidity

By Paul Wallis     Mar 25, 2013 in World
Sydney - You get tired of writing about nothing but human stupidity after a while. The Cyprus case, however, is exceptional in its sheer bastardry. A bailout with no specifics, a policy with no objectives and less economic planning, you name it, it’s all there.
Cyprus, very reluctantly, has been forced into a bottom line deal which it didn’t want. Consumers are being made to pay for the failures of financial institutions. The EU and IMF, supposed guardians of the public interest, are punishing the public. The Cyprian economy is poised to take advantage of natural gas reserves offshore, and is being crippled before it does.
If this sounds like a quick fix at the cash register, it is. What’s screamingly obvious is that the future isn’t being considered at all. Likely job losses will decimate the Cyprus economy, which in what may well be a Depression mode, is then expected to support itself. According to some sources, 70% of Cyprians work in the financial sector. Guess what’s going to happen to those jobs as the sector shrinks.
Double standards, there are many:
(a) Cyprus has been accused, in fact, of having a financial sector that’s “too big”. This means that Luxembourg, Switzerland, Monaco and other financial centres around the world are also too big?
(b) Russian money is a problem- For someone. People have been quick enough to accept Russian money around the world, but not Cyprus? If there are any irregularities with the Russian financial interests, why are the Cyprian people, not the Russians or apparently anyone else, paying for failure to enforce financial laws?
(c)The reasons cited for the crackdown on the Cyprian banks are “poorly performing assets”. The fix is to create a “bad” bank to manage those assets and transfer deposits to the Bank of Cyprus. This will be done after ripping off whatever’s available from the depositors who are supporting the economy.
(d) It’s also being done at the expense of the domestic economy which is paying the bread and butter for businesses with their savings. That means that the net amount of money in the Cyprus economy is being drastically reduced.
Meanwhile, the rumbles in a small island economy are affecting global “optimism” and stock prices, according to Bloomberg. Isn't that just too damn sad? They've even found another way for other people to lose money as a result of the crisis. The sheer genius never ends, does it?
Now a few questions:
1. How are Cyprians going to pay bills?
2. How does an economy keep working if people can’t pay their bills?
3. How is the small Cyprian economy expected to function with so much less cash in circulation?
4. How is the economy supposed to develop from this point?
There’s a typical finance sector situation in play here, too:
1. There’s a series of disasters, but absolutely nobody is held responsible. There's no suggestion that anyone will ever be held responsible.
2. The complexities of financial asset management are used as a smokescreen for various forms of corruption, money laundering etc., but that’s OK with the EU, just as it was with the US after the mortgage securities disaster.
3. The public are penalized. As in the US, the catastrophic failures of the finance sector in Greece and Spain have resulted in massive job losses and trashing the domestic economies.
4. Priorities are distorted. € 10 billion is peanuts to Europe. Why not come up with a workable long term fix, instead of a slash and burn exercise for such a small amount of money over say 20 years, not 2 weeks? Because someone obviously doesn’t want a rational solution.
One of the likely reasons for Cyprus going broke overnight is the natural gas field. It’s interesting how often small countries with massive natural resources suddenly find themselves deeply in debt. (Look at Africa. How many African countries have seen anything like a decent percentage of the billions of dollars’ worth of resources they have, let alone modern development and a decent standard of living?)
Cyprus obviously isn’t going to benefit much from its natural gas, if at all, even when that natural gas could easily raise that € 10 billion in a few years on royalties alone. Instead of planning for growth and a controlled management of the current issues, the EU has gone for instant destruction. As dismal excuses for thinking go, this one is truly unique in its bitchiness and short-sighted incomprehension of basic economics.
Some have said the financial system and its banks are too big to fail.
I say they’re too big to work.
They’re certainly too big to be scrutinized effectively. Bad lending inevitably leads to bad debts. That’s a pattern repeated endlessly around the world. The Third World loans were so ridiculously structured and priced that the nations involved couldn’t even pay the interest, let alone the loan capital. You can’t get a home loan like that, but you can lend to a nation like that?
Bad financial assets are rampant. The world is literally up to its neck in bad assets, if you assume that the various global panics in recent years are based on any kind of facts. The whole basis of the lending industry is to lend to good risks and accumulate good assets as a base for lending, and apparently nothing but the exact opposite has been happening for decades.
In Spain, the housing bubble was allowed to grow, rather than shutting down lending for inflated house prices far beyond the capacity of the domestic market to support. In Greece, an entire nation was allowed to accumulate debts for years before anything was done, and what was done was done at the expense of the public, not those responsible for bad financial practices.
The story so far is that the smug financial sector is literally getting away with the destruction of whole nations. The US was too timid/too stupid/too corrupt to crack down on widespread due diligence failures with mortgages, even when bad practices were fully documented. Europe is mugging EU economies, crashing entire nations, and not even looking at the fundamentals of a very nasty system based entirely on opportunism and criminal practices.
This is a combination of rewarding failure, corruption and crime while penalizing the victims both now and in the future.
1. Instead of solving problems, they just create more.
2. Instead of pulling apart bad assets or doing any of the other things they could be doing to defuse the issues, they come up with a single option.
3. This option is always the worst possible option for whichever lucky country is affected.
4. These are the consistent elements in “managing” financial crises to date.
Couldn’t run a dunghill, and these morons are being allowed to run the world, quite literally.
Now let me paint a little picture for you, from common knowledge:
The people responsible are doing very nicely. They get huge commissions for making and “consulting” those loans and other bad deals. They and their criminal and political friends literally just stick their hands out to make big money. They make money out of inflating assets. There’s a whole sector of the financial community which is paid specifically to find its way around regulations so those bad loans can go through and bad financial products can get on the market.
Are they in jail?
Are they starving?
Are they unemployed?
Are they even getting any sort of scrutiny?
No. They’re living in mansions and their main worry is what to do with all that money, thank you for asking.
This is management? This is a legitimate form of business? When?
This is why I get tired of writing about human stupidity. Dishonest morons lying their heads off and pretending they’re solving problems when they’re just creating more simply doesn’t cut it with me any more.
Wake me up when someone actually has the balls to deal with the real issues.
This opinion article was written by an independent writer. The opinions and views expressed herein are those of the author and are not necessarily intended to reflect those of
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