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Keith Fitz-Gerald: Cyprus is "The First of the Dominoes to Fall"
With guards outside Cyprus banks Friday and depositors reeling after suffering huge losses, the nation's central bank reassured residents they wouldn't face restrictions on using their debit and credit cards.
But according to Money Morning Chief Investment Strategist Keith Fitz-Gerald, the reverberations and possible implications of the Cyprus bailout extend well beyond the island nation.
Appearing on the FOX Business Network, Fitz-Gerald said Cyprus had "achieved every central banker's dream. They have privatized gains and socialized losses, and this is the first of the dominoes to fall."
He said "any nation in the world is subject to this now that politicians have figured out they've gotten away with it."
To see why it matters and what else Keith had to say, check out the video below.
After the Cyprus Bailout, Here's Where You Should Keep Your Savings Now
Now that the dust has begun to settle in Cyprus, the battered principle of deposit insurance seems to be safe-for now at least.
In the big stare-down with the European Union the final Cyprus settlement did not zap the small depositors.
Instead it simply shifted the burden further up chain. The final deal increased the "haircut" on large depositors in the Bank of Cyprus and Laika Bank from an originally proposed 9.9% to an astounding 40%.
To me, that's highway robbery — even if the Russian Mafia has to bear a big share of the brunt.
As strange as it may seem, even the Russian Mafia has rights!
The lessons here are quite clear…
Cyprus Bailout Plan: Reaction from the Front Lines
As Money Morning Chief Investment Strategist Keith Fitz-Gerald warned last week, the Cyprus bailout plan is a breach of trust that could derail the entire Eurozone.
Not only does the plan fail to fix the country's economy, it has the potential to seriously damage people's trust in the banking system, making a bad situation even worse.
"Individuals deposit money in banks instead of stuffing it in their mattresses because they believe that their money will be safe there," explained Fitz-Gerald. "Once they realize, or even suspect, that the money they put in the bank is anything but safe, they will take whatever's left and run – and the bank will collapse in spite of the "bailout.'"
To get an idea of what life on the ground in Cyprus is really like right now, Fitz-Gerald recently talked to FOX Business Network's Washington Correspondent Rich Edson. Edson has been reporting from Cyprus as the controversial bailout plan unfolds.
Is the Latest Ultimatum in Cyprus About to Derail the Eurozone?
You probably know the story by now.
Following riots in the streets and a run on local banks, Cypriot lawmakers voted down a key element of the European Central Bank's (ECB) bailout proposal that would have required the country to impose a one-time 9.9% tax on bank deposits of more than 100,000 euros and a 6.75% tax on bank deposits under that amount.
I can understand why people took to the street – the "tax" was little more than organized robbery under the guise of keeping that country afloat.
Why should you care about what happens in Cyprus?…
Cyprus is not Las Vegas. What happens in Cyprus cannot possibly stay in Cyprus. The world's financial markets are too interlinked. Ultimately, it is a move intended to keep the euro afloat at any cost.
The Cyprus Bailout Exposes a World of Thieves, Cheats, and Liars
Let's talk about the Cyprus bailout, the International Monetary Fund, and the European Central Bank.
Let's call what the IMF and ECB are doing what it really is. After all, it is the ultimate institutional goal. It's thieving.
So let's start with the thieves…
The IMF, on behalf of the big global banks it serves, and the ECB, on behalf of the big European banks it serves, is stealing, without any authority whatsoever (other than under cover of the European Commission, which they jointly own) depositors' money in all the banks in Cyprus.
Because all the banks that lent to the Cypriot banks to keep them in business are now about to get shafted.
The Cyprus Bailout Sets a "Very, Very Dangerous Precedent"
The Cyprus Parliament appeared poised Tuesday to reject the $13 billion international bailout that would force bank depositors to pay a levy.
So what happens now?
Will Russia step up to offer money in exchange for oil and gas? Will China offer a similar deal to Cyprus?
Will those with money in Cyprus banks withdraw it and deposit it elsewhere, leading to a run on the banks?
Will investors flock to gold as a safe-haven investment?
Money Morning Chief Investment Strategist Keith Fitz-Gerald appeared Tuesday on Fox Business to talk about the fast-developing story in Cyprus and the potential fallout in Europe and well beyond, including in the United States.
Fitz-Gerald said a vote in the Cyprus Parliament to reject the bailout "is a big deal because it sets the stage for a very, very dangerous precedent."
Check out this video to hear Fitz-Gerald's perspective on the Cyprus situation – and whether the U.S. government could come after your bank deposits.
Can Kuroda's New Round of "Easy Money" Finally Revive Japan?
[Kyoto, Japan] – I think I hear the sounds of helicopter engines warming up in Tokyo.
Newly elected 2nd time Prime Minister Shinzo Abe has officially tapped Haruhiko Kuroda as the next head of the Bank of Japan and the financial markets here seem quite pleased.
Since rumors of his nomination surfaced in conjunction with Shinzo Abe's election campaign last November, the Nikkei has risen nearly 30%. But the Nikkei's rise is based on little more than hope and "Abenomics" – which is not unlike U.S. markets that have risen with each new infusion of Bernanke Bucks.
Unfortunately, disappointment is the more likely outcome when reality sets in.
It's not that there is anything wrong with Kuroda-san. He's aggressive and has a solid track record as president of the Asian Development Bank. Like many here he wants to ease monetary policy even further to stimulate the economy out of the hole it's dug for itself over the past 23 years.
I just question what "else" he possibly can do to fix it.
The Eurozone Hangs On By a Whisker
Four days after the Italian elections only one thing is clear: A majority of Italian voters have rejected austerity.
The problem is their victory came up short by the slimmest of margins.
0.36%. That's the difference between a firm new government that could move Italy out of the Eurozone and the constitutional logjam Italian voters woke up to the next day.
As it is, they could roll the dice on a new election, but that could also make matters worse.
Since Italy's a big country with a chunky economy, that's likely bad news for us all.
Italian Elections: Split Vote "Worst-Case" for Eurozone
If preliminary results prove accurate, the Italian elections will result in a "hung" parliament, meaning no party will have enough seats to form a government.
The lack of a definitive result could temporarily paralyze the Eurozone's third-largest economy and revive fears that Italian voters will ultimately reject austerity and the euro itself.
Such a development would threaten to reignite the Eurozone debt crisis, setting off an economic shock that would ripple out to markets around the world.
As of Monday afternoon, the center-left forces of Pier Luigi Bersani appeared set to win Italy's lower house, while the center-right party of former Premier Silvio Berlusconi looked headed for victory in the Italian Senate.
In the Italian political system, a prime minister must have a majority coalition in both legislative houses in order to form a government. Unless one of the leading parties can form a majority in both houses by partnering with one or more other parties, a new round of Italian elections will be needed.
"A hung parliament would be a guarantee of stillness both in terms of economic program and structural reforms," Annalisa Piazza, a fixed-income analyst at Newedge Group in London, told Bloomberg News. "Such a scenario would be the worst-case outlook."
Italian and European markets, which rose on early reports that Bersani's group was ahead in both houses, fell later on the news that Berlusconi would probably prevail in the Senate. The reports also helped turn U.S. markets negative.
Exactly how all this will play out won't be known for certain for days.