Cyprus deal shock sends shares tumbling, gold up

LONDON (Reuters) - The surprise decision by euro zone leaders to part-fund a bailout of Cyprus by taxing bank deposits sent shockwaves through financial markets on Monday, with shares and the bonds of struggling euro zone governments tumbling.

The bloc struck a deal on Saturday to hand Cyprus rescue loans worth 10 billion euros ($13 billion), but defied warnings - including from the European Central Bank - and imposed a levy that would see those with cash in the island's banks lose between 6.75 and 9.9 percent of their money.

http://finance.yahoo.com/news/yen-firms-asia-shares-fall-001926588.html

The Botching of the Cyprus Bailout: Worse Than Lehman Brothers

Everyone now agrees that Treasury Secretary Hank Paulson badly botched the Lehman Brothers crisis of 2009. But at least he had an excuse. Panicked by the speed of Lehman’s meltdown, he had no time for second thoughts. By comparison the German-led group of EU officials who  engineered this weekend’s Cyprus bank bailout don’t have a leg to stand on. Although they had years to consider their options (Cyprus’s problems are closely related to those of Greece and have long been almost as obvious), they have opted for a “solution” that amounts to probably the single most inexplicably irresponsible decision in banking supervision in the advanced world since the 1930s.

http://www.forbes.com/sites/eamonnfingleton/2013/03/17/the-botching-of-the-cyprus-bailout-worse-than-lehman-brothers/

ATMs drained as bailout tax triggers run on bank deposits

Panic: people queued to withdraw money after it was determined that part of the Greek bailout would come from the bank accounts of savers. Photo: Reuters

In a move that could set off new fears of contagion across the eurozone, anxious depositors drained cash from ATMs in Cyprus on Saturday, hours after European officials in Brussels required that part of a new €10 billion ($12.6 billion) bailout must be paid for directly from the bank accounts of savers.

The move - a first in the three-year-old European financial crisis - raised questions over whether bank runs could be set off elsewhere.

Jeroen Dijsselbloem, president of the group of euro-area ministers, on Saturday declined to rule out taxes on depositors in countries beyond Cyprus, although he said such a measure was not currently being considered. Although banks placed withdrawal limits of €400 on ATMs, most of them had run out of cash by early evening. People around the country reacted with disbelief and anger.

Read more: http://www.theage.com.au/world/atms-drained-as-bailout-tax-triggers-run-on-bank-deposits-20130317-2g8rx.html#ixzz2Noo2hqwq

Cyprus bank account seizure just the beginning, says report

Today, lots of people woke up in shock and horror to what happened in Cyprus: a forced capital reallocation mandated by political elites under the guise of an "equity investment" in insolvent banks, which is really code for a "coercive, mandatory wealth tax." If less concerned about political correctness, one could say that what just happened was daylight robbery from savers to banks and the status quo. These same people may be even more shocked to learn that today's Cypriot "resolution" is merely the first of many such coercive interventions into personal wealth, first in Europe, and then everywhere else.

For the benefit of those people, we wish to point them to our article from September 2011, "The "Muddle Through" Has Failed: BCG Says "There May Be Only Painful Ways Out Of The Crisis [11]", which predicted and explained all of this and much more. What else did the September BCG study conclude? Simply that such mandatory, coercive wealth tax is merely the beginning for a world in which there was some $21 trillion in excess debt as of 2009, a number which has since ballooned to over $30 trillion. And with inflation woefully late in appearing and "inflating away" said debt overhang, Europe first is finally moving to Plan B, and is using Cyrprus as its Guniea Pig.

For those who missed it the first time, here it is again. Somehow we think many more people will listen this time around:

Restructuring the debt overhang in the euro zone would require financing and would be a daunting task. In order to finance controlled restructuring, politicians could well conclude that it was necessary to tax the existing wealth of the private sector. Many politicians would see taxing financial assets as the fairest way of resolving the problem. Taxing existing financial assets would acknowledge one fact: these investments are not as valuable as their owners think, as the debtors (governments, households, and corporations) will be unable to meet their commitments. Exhibit 3 shows the one-time tax on financial assets required to provide the necessary funds for an orderly restructuring.

http://www.zerohedge.com/print/471520 

BCG Back to Mesopotamia

World Gold Council suggests central banks diversify away from US Dollar

Central banks may start favoring currencies from China, Japan and Australia as the dollar fall out of favor.

NEW YORK (CNNMoney)

The World Gold Council had some words of advice for central banks around the world: It may be time to diversify away from the U.S. dollar.

While the dollar remains the world's main reserve currency, the WGC said in a research report that its "optimal" strategy would involve, what else, but gold.

Along with the dollar and the euro, gold is one of the traditional reserve assets that central banks hold.

But the WGC said central bankers should also consider a number of alternative assets, including those priced in the currencies of Canada, Australia and China.

Central banks in emerging markets have been diversifying away from the U.S. dollar for some time, as the outlook for the currency remains uncertain. According to the International Monetary Fund, the dollar's share of total central bank reserves has decreased to 54% from 62% over the past 12 years.

http://money.cnn.com/2013/03/14/investing/central-banks-dollar/index.html?iid=HP_LN 

On the Brink in Italy

GUIDONIA, Italy — Emanuele Tedeschi wiped  sawdust from his hands and gestured around the cavernous woodworking factory that has been in his family for two  generations. The big machines, which used to run overtime carving  custom furnishings for private homes, Roman palazzi  and even the  Vatican,  sat idle on a shop floor nearly devoid of workers.

'‘A year and a half ago, the noise from production was so loud that  you had to shout to be heard,’' said Mr. Tedeschi, walking amid  pallets of cherry and other fine woods stacked up and waiting for a purpose.

Since a government austerity plan designed to shield Italy from  Europe’s debt crisis took hold last year, the economy has tumbled  into one of worst recessions of any euro zone country, and Mr.  Tedeschi’s orders have all but dried up.  His company, Temeca, is still in business. For now.

But among Italy’s estimated six  million companies, businesses of all  sizes have been going belly up at the rate of 1,000 a day over the  last year, especially among the small and midsize companies that  represent the backbone of Italy’s 1.5 trillion euro, or $2 trillion, economy.

The situation has become more urgent after inconclusive elections  in February that left politics in Rome gridlocked. '‘With no one  governing the country, there will be more paralysis, so things will get worse,’' said Mr. Tedeschi, 49, casting a worried glance at his wife and their 23-year-old son. They help fill the trickle of orders, now that Mr. Tedeschi has had to lay off 6 of the 11 full-time employees he had in mid-2011.

http://www.nytimes.com/2013/03/12/business/global/12iht-euitaly12.html

Paulson Said to Explore Puerto Rico as Home With Low Tax

Ten wealthy Americans have already taken advantage of the year-old Puerto Rican law that lets new residents pay no local or U.S. federal taxes on capital gains, according to Alberto Baco Bague, Secretary of Economic Development and Commerce of Puerto Rico. The marginal tax rate for affluent New Yorkers can exceed 50 percent on ordinary income.

Paulson, 57, recently looked at real estate in the exclusive Condado neighborhood of San Juan, where an 8,379- square-foot penthouse, complete with six underground parking spaces, lists for $5 million. The area is home to St. John’s School, a private English-language academy where he and his wife could send their two children, said the people, who asked not to be named because the discussions were private.

http://www.bloomberg.com/news/2013-03-11/paulson-said-to-explore-puerto-rico-as-home-with-low-tax.html

Dow Stock Market High, Is It Really 2007 Again?

We all know the headline unemployment rate is a farce. So fraudulent is the headline rate in fact that the not-so-US Fed has decided to peg its overnight interest rate policy decisions to whatever number the BLS happens to crank out. Go below the target of the day and up go rates and into the meat grinder goes what is left of the US Economy.

http://www.marketoracle.co.uk/Article39395.html

Dow and Silver in Gold Terms

The Dow on Gold's terms:

• During January 2000 gold traded at an average price of $284.32
• January 2000 the Dow was 10,900
• 10,900/$284.32 per ounce = 38.33 gold ounces to buy the Dow

Today gold is trading at $1570.90 while the Dow Jones (DJIA) continues to break records, up another 30 points as I write to 14,284.

"At first, the drop in the dollar simply offset the apparent rise in home prices, and prices in gold worked sideways until 2006. But when home prices began to fall in dollar terms, and dollars were themselves falling in value, the double-whammy pushed true home prices down to levels not seen since the late 1980s. In fact, they set a new record, the lowest level since the index was first published. This means that most homes purchased in the last 20 years are now worth less than the original purchase price, even if they show gains of 100%, 200%, or more, in dollar terms." ~ pricedingold.com

http://www.marketoracle.co.uk/Article39400.html

Fugitive Fund Manager Stuffed Underwear With Cash, Fled

The German fugitive hedge fund manager who more than five years ago fled the Spanish island of Mallorca with $500,000 hidden in his underwear and luggage faces U.S. charges after his arrest at the Uffizi Gallery in Florence.

Florian Homm, 53, was taken into custody by Italian police at 12:30 p.m. on March 8 at the world-famous museum that houses Sandro Botticelli’s Birth of Venus and Leonardo da Vinci’s Annunciation.

The arrest, by Homm’s own account as well as that of U.S. prosecutors, followed his 2007 decision to leave behind a life of wealth, castles and “bimbos.” During his escape, he held a Liberian diplomatic passport as well as German and Irish passports, according to the Federal Bureau of Investigation.

http://www.bloomberg.com/news/2013-03-08/fugitive-hedge-fund-manager-homm-arrested-at-gallery.html

Wealth Inequality in America

http://economy.money.cnn.com/2013/03/08/wealth-video/?iid=HP_LN

BRICS agree to use credit in local currencies

The BRICS - Brazil, Russia, India, China and South Africa - have agreed to provide credit to each other in local currencies. Officials say the deal will facilitate economic growth in times of crisis.

The currency swap deal is aimed at promoting trade and investment in local currencies as well as to cut transaction costs.  It’s also seen as a step to replace the dollar as a reserve currency in trade between BRICS.

http://rt.com/business/brics-currencies-credit-deal-755/

Fed is failing to boost lending

A new study, which was published on Monday by the National Bureau of Economic Research, suggests that the Federal Reserve's policy of using ultra-low interest rates in order to encourage lending, might be doing the opposite...

http://finance.fortune.cnn.com/2013/03/05/federal-reserve-bernanke-lending/?iid=HP_LN

China "fully prepared" for currency war: banker

AFP - A top Chinese banker said Beijing is "fully prepared" for a currency war as he urged the world to abide by a consensus reached by the G20 to avert confrontation, state media reported on Saturday.

Yi Gang, deputy governor of China's central bank, issued the call after G20 finance ministers last month moved to calm fears of a looming war on the currency markets at a meeting in Moscow.

Those fears have largely been fuelled by the recent steep decline in the Japanese yen, which critics have accused Tokyo of manipulating to give its manufacturers a competitive edge in key export markets over Asian rivals.

Yi said a currency war could be avoided if major countries observed the G20 consensus that monetary policy should primarily serve as a tool for domestic economy, the Xinhua report said.

But China "is fully prepared", he added.

"In terms of both monetary policies and other mechanism arrangement, China will take into full account the quantitative easing policies implemented by central banks of foreign countries."

South Korea's incoming president Park Geun-Hye has also signalled her willingness to step in to stabilise the won and protect exporters battling a stronger Korean currency and a weaker yen.

China "fully prepared" for currency war: banker - FRANCE 24

Tax bills for rich families approach 30-year high

WASHINGTON (AP) -- The poor rich.

With Washington gridlocked again over whether to raise their taxes, it turns out wealthy families already are paying some of their biggest federal tax bills in decades even as the rest of the population continues to pay at historically low rates.

President Barack Obama and Democratic leaders in Congress say the wealthy must pay their fair share if the federal government is ever going to fix its finances and reduce the budget deficit to a manageable level.

A new analysis, however, shows that average tax bills for high-income families rarely have been higher since the Congressional Budget Office began tracking the data in 1979. Middle- and low-income families aren't paying as much as they used to.

For 2013, families with incomes in the top 20 percent of the nation will pay an average of 27.2 percent of their income in federal taxes, according to projections by the Tax Policy Center, a research organization based in Washington. The top 1 percent of households, those with incomes averaging $1.4 million, will pay an average of 35.5 percent.

http://hosted.ap.org/dynamic/stories/U/US_TAXING_THE_RICH?SITE=CAOAK&SECTION=HOME&TEMPLATE=DEFAULT