"Russia's Long Game In Cyprus"

[neilgin1]

(what does this have to do with silver?....a lot imho....think the long game, and if you do, this is bad. Normally i blow off main stream financial press, this is remarkably well thought out.....thought ya'll would would read it and think)

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Russia's Long Game In Cyprus
WALL STREET, EUROPE, BUSINESS NEWS

CNBC.com | Monday, 25 Mar 2013 | 2:47 PM ET
The immediate banking crisis in Cyprus looks very close to reaching resolution but, as Felix Salmon notes, this isn't the end of Cyprus's troubles or the geopolitical contest over Cyprus's future.

Felix writes:


In the Europe vs Russia poker game, the Europeans have played the most aggressive move they can, essentially forcing Russian depositors to contribute maximally to the bailout against their will. If this is how the game ends, it's an unambiguous loss for Russia, and a win for the EU….


Of course, the game does not end here. It's unlikely that Russia will appear bearing a better deal at some point in the next 24 hours, but the hit to Cyprus's GDP is going to be so enormous that staying in the euro over the long term, absent another round or two of massive debt relief, is going to be extremely difficult.


This deserves more attention. In the first place, the Europeans may be playing poker but the Russians are not. The Russians are playing something closer to preferans, which was very nearly the Russian national card game in the 19th century and is still quite popular there. Preferans resembles bridge, in which players make bids or contracts for how many tricks they will take. The other players then try to win tricks away from the top bidder, hoping to make him come up short on his contract.

But sometimes in preferans every player passes during the bidding segment and no one claims the contract. The situation is known raspasy. At this point the goal of the game changes: players need to avoid tricks and try to force other to take them.


It seems to me that we have just gone through a round of raspasy in Cyprus. Neither the European Union nor the Russians really wanted to win this trick. But the Russians played their hand very carefully and the trick went to the Europeans.


What penalty will the Europeans pay for winning this trick? Well, for one thing, they may find themselves responsible if the financial health of Cyprus continues to deteriorate.


"By stepping back from the turmoil, Russia can now watch European leaders struggle with what promises to become an even bigger money pit. Having helped break the banking system in Cyprus, Europe now owns it," NBC's John Schoen writes.


The costs for Europe could be even more extreme than this. Because of the way the deal was structured, the Cyprian political class will largely be able to avoid taking responsibility for the deal. The Parliament is not even voting on it. But the European Union, through its various institutions, has put its stamp on it.


With some predicting the Cyprian GDP could drop by 23 percent or more in quite short order on the back of this deal, there's substantial room for political backlash against this deal. The Cypriots will be angry at the Europeans who they will, quite accurately, think foisted this deal upon them without their consent.


This will be the trick that Russia wants to win. A Cyprus in rebellion against the European Union would not doubt find an excellent friend in Russia, which wants a new strategic Mediterranean ally (Syria isn't cutting it these days) as well as a way to prevent the EU from supplying more of its own natural gas.


That's the long game for Russia. It didn't want this trick. And, fortunately for the Russians, the Europeans didn't even understand what game was being played.

Follow me on Twitter @Carney

© 2013 CNBC.com

[beauanderos]

good article, thanks for posting it Neil. There's a reason that the most readily expendable players in chess are referred to as mere pawns... a synonym for people? Depositors?

[68Camaro]

The Russians "only" lost 5-10 billion euros over this. They can cash out and walk away from it. The EU now owns the balance of the problem...

Yep, I think the Russians won the round.

[nabzy28]

Russia did well staying out of a majority of this incredible mess. At least this article's writer seems to understand that this event will not be contained for long. The long term ramifications are scary... and Russia will wait to take advantage.

[neilgin1]

good article, thanks for posting it Neil. There's a reason that the most readily expendable players in chess are referred to as mere pawns... a synonym for people? Depositors?

if THAT is how the new "paradigm" looks, then you can count on, a high degree of destabilization.

Think about this, Pensions and the lot, private and public are tied to?.....the stock market, equities, right? Hence we've seen that this monetization has "worked" vis-a-vis equity values, but IF depositors "feel" imperiled....outright theft in the form of a "one-off" tax?

this could lead, God forbid to a situation, where the depositor, feels imperiled.......to the degree of "nothing left to lose", then we have a dire situation. Say what we will about the whole EU structure, i think they've made a hash of this, but US structure?

in that avenue?...i dont believe, we are AS dysfuntional as the EU/ECB, meaning IF i was a big player, i might be tempted to be long USD, for this period. and you noticed Ray, that silver is in this narrow, narrow range, almost as if the perma-shorts CANNOT dislodge this market, beyond the 28.00 to 29.20 range?

i will continue to go with what i wrote before, everybody is looking for disaster yesterday, and its just not going to happen in the intermediate time frame. Europe....the EU...who knows?.....the US?...the "pucker factor" isnt there.

thats just my read...could be wrong. i think we are going to have a great growing season in 2013, new yield records will be accomplished, domestic energy produced will continue to climb....and we, this small group will be able to continue to stack. i've stopped for 2, if not 3 quarters, meaning to the end of 2013. Because?....well, if you dont own outright, you're a weak hand, right? i dont want to be a weak hand. fondly, lil bro, neil

[68Camaro]

Still looking at what is now 6 months to 3 years before things crumble.

I'm hoping for longer than shorter for the same reasons as you Neil. However I'm telling the people I know to try to have their personal minimums in place (if they don't already) by end of summer, then build from there.

TPTB are masters at keeping this going but there are growing signs of more and more plates starting to wobble, and them having more and more trouble keeping them re-spun. I expect to see major cracks by 2015 which be so unrepairable they will go unstable and grow despite continued efforts to correct.

Personally, if the full crisis can be delayed until mid-2016 then I will be able to pull my 401K, which I will then do. That's my last major asset over which I have some near-term semblance of eventual control, which I haven't yet acted on (or been able to). I'm stuck in that asset until then, without quiting my job to exit the 401K, which would make no sense. (It makes no sense to give up X amount of income to save X amount of 401K, and I can't even begin to find another replacement job that pays even a fraction of what I'm getting now.)

[neilgin1]

Still looking at what is now 6 months to 3 years before things crumble.

I'm hoping for longer than shorter for the same reasons as you Neil. However I'm telling the people I know to try to have their personal minimums in place (if they don't already) by end of summer, then build from there.

TPTB are masters at keeping this going but there are growing signs of more and more plates starting to wobble, and them having more and more trouble keeping them re-spun. I expect to see major cracks by 2015 which be so unrepairable they will go unstable and grow despite continued efforts to correct.

Personally, if the full crisis can be delayed until mid-2016 then I will be able to pull my 401K, which I will then do. That's my last major asset over which I have some near-term semblance of eventual control, which I haven't yet acted on (or been able to). I'm stuck in that asset until then, without quiting my job to exit the 401K, which would make no sense. (It makes no sense to give up X amount of income to save X amount of 401K, and I can't even begin to find another replacement job that pays even a fraction of what I'm getting now.)

may it be so, as you have written, amen

[SilverEye]

I really don't think things are inevitably going to crater. The situation we are in now is still very reversible; I'm banking on it because a huge part of net worth is in my (very diversified) 401k and IRA's. But things may get worse before they get better, or they might not get better. So I stack silver, buy guns and hoard ammo also.

[68Camaro]

I really don't think things are inevitably going to crater. The situation we are in now is still very reversible; I'm banking on it because a huge part of net worth is in my (very diversified) 401k and IRA's. But things may get worse before they get better, or they might not get better. So I stack silver, buy guns and hoard ammo also.

"better" will eventually happen... It always does. But what will happen in my lifetime, or that of my children?

I would love to see the decades-old trends reversed and never get "more bad" (far more bad than now). But rather than just hope, do you have an idea how 16+T in direct debt growing with no sign of stopping, 200T in current future obligations, and thousands of trillions in global obligations actually gets better? (That's just the financial issues, not including the many others.) I would love to have some of your optimism, so if you've got something that gives others of us hope please share.

"Hope for the best, prepare for the worst" is my overall motto, but my hope for the best can't be a blind hope - I have to have a reason to hope that man has the ability to improve things.

I believe God is in ultimate control so I put my faith in that; with that I consider that I may have to wait for the afterlife to see "better".

[AGgressive Metal]

It gets better. Many Bank of Cyprus branches are in Russia. They are not closed right now, only the ones in Cyprus. Big boys are getting their money out just fine; its the common man in Cyprus who gets the shaft.

[68Camaro]

Ooh that's interesting! Yeah, I saw that the leading bank had more branches in Russia than Cyprus, but hadn't heard they had stayed open!

[SilverEye]

Not hard to imagine why the Russian branches stayed open. Russia has more nukes than Cyprus..

[shinnosuke]

Ooh that's interesting! Yeah, I saw that the leading bank had more branches in Russia than Cyprus, but hadn't heard they had stayed open!

Same for the London branches of Bank of Cyprus (#1 in terms of deposits and bad assets) and Laiki (#2). This exercise is merely prologue. The rule of law is gone, as if we needed any more reminders of this since Corzine's vaporization trick. Depositor haircuts...coming soon to a JPMChaseBoAWellsFargoHSBCCitibank near you.

[beauanderos]

Ooh that's interesting! Yeah, I saw that the leading bank had more branches in Russia than Cyprus, but hadn't heard they had stayed open!

Same for the London branches of Bank of Cyprus (#1 in terms of deposits and bad assets) and Laiki (#2). This exercise is merely prologue. The rule of law is gone, as if we needed any more reminders of this since Corzine's vaporization trick. Depositor haircuts...coming soon to a JPMChaseBoAWellsFargoHSBCCitibank near you.

And 401K nationalizations... and home mortgage deduction loss, and, and, and

[Engineer]

And 401K nationalizations... and home mortgage deduction loss, and, and, and

I wouldn't cry over the home mortgage deduction loss. For the typical family, it only helps on the portion of your mortgage above $200K and helps to prop up the price of homes in expensive parts of the country.

[SilverDragon72]

I've been watching this story unfold for a while now. Scary to think that one day you wake up and find up to 40 percent of your deposit savings GONE!

I sure wish I could close my 457 account right now, but I cannot without quitting my job, and that's not going to happen anytime soon. I've considered
moving a substantial portion of my assets out of the market altogether and putting it into a conservative investment. I know that won't really pay much, but
I'd rather have it grow slowly than see it's value crash again. While I have at least 2 decades until retirement, I cannot help but think that the political and
economic landscape will have changed drastically and I worry about the idea of having the banking cartels steal what I have worked for so far. While I usually
don't let fear dictate how I invest in the future, I look at our own country's economic struggles and the ever rising national debt that will never be paid for.

I feel better that I'm saving in ounces, rather than fiat at this point. The market is at an all time "high"....but yet I know that it is just an illusion created
by the banksters. This house of cards will fall, and take the dollar with it. It may take a while longer, but I believe it WILL happen and many people will be
ruined or wiped out.

[Cent1225]

For those of you in 401k's and 457's, the only thing you are saving right now is the taxes on the money you put in there. Eventually you have to pay the taxes on the money in there when you withdraw it. You cant do much about the money you have already put in there without quitting your jobs, BUT you can do something about your current and future income. The answer is to STOP putting the money in these. Pay the taxes on your income now, and put it in your pocket in your control. You can then put it into PM's, fiat currency, Roth IRA's (if you trust these, but at least you can get your money out with no penalty on the principle) or someplace you can access your $$$(the tube buried in the garden). There is the solution.

[SilverDragon72]

That story keeps on getting worse! But I'm sure the big players got their Euros out in time....the little people will be the ones to take a massive haircut!

I've been saving in ounces for quite some time now, and will continue to do so. No question about it. Screw the banksters!