March, 2013

Cyprus Forced Into Bailout Deal

Do you think that depositors in Cyprus are being taxed? That their money is being taken from them to go to the government in Cyprus or to Europe? Most analysis of the Cyprus bailout is wrong on this point. Cypriot banks are like all banks in one respect. They raise capital to buy assets that […]

Why Duration Mismatch Will Always Fail

I have written a number of pieces on fractional reserve banking and duration mismatch.  I have argued that the former is perfectly fine, both morally and economically, but the latter is not fine.  I have dissected the arguments made against fractional reserve banking, and pointed out that it is nothing more than a bank lending […]

Monetary Metals Supply and Demand Report: March 24, 2013

The Last Contango Basis Report All the major currencies fell this week, with the dollar down about 0.2mg, (graphs of the currencies priced in gold are here). Cyprus continued to dominate the financial news this week, with one plan after another proposed and rejected. Meanwhile depositors can’t withdraw euros from their bank accounts in the […]

BitFlashCrash

A flash crash occurs when the bid is either very thin or disappears altogether. Under any selling pressure, the cleared price can fall to any level at least temporarily. By definition and by nature, money is not subject to flash crashes.  

BitTulip

In the 17th century, the price of Dutch tulips ran up to incredible levels before collapsing, ruining many who participated in the first well-documented bubble. We are not knowledgable about horticulture, but we are sure that those Dutch tulips were fine specimens and produced wonderful flowers. And this is where bubbles generally begin. There is […]

Euro Backwardation

Not too long ago, I wrote dollar backwardation. It’s happening, not in the dollar, but in the euro in Cyprus. Zero Hedge writes the following. Banks have been closed all week, the threat of loss of part of one’s deposits is still there, it is at best uncertain when banks will reopen, and capital controls […]

Bank Deposits – The Final Backstop

Put this in perspective. The government of Cyprus borrowed money it had neither means nor intent to repay. Borrowing, for a government, means selling bonds. The Cyprus banks borrowed money, which for a bank means taking in deposits (among other sources of funds). They used that money they borrowed from their depositors to buy Cyprus […]

Cyprus Targets Its Savers in Bailout Agreement: Part II

There is nothing like the pain of real losses to impress a principle deeply into people’s psyches. In Cyprus (and likely in other similarly situated countries) a lesson is now clearer to more people and businesses than it has yet been. The Euro-banking system cannot be trusted. Below are our analysis and predictions. We expect […]

Cyprus Targets Its Savers in Bailout Agreement: Part I

After markets closed on Friday, it was announced that Cyprus worked out a deal with the European Central Bank, European Commission, and the International Monetary Fund (“the Troika”). Here is a typical article reporting on the story. Cyrpus has been in desperate need of a bailout, and was in discussions as early as June last […]

Monetary Metals Supply and Demand Report: March 17, 2013

The Last Contango Basis Report The dollar went down almost 1%, from 19.71mg to 19.53mg (gold), graphs of the currencies priced in gold here (from now on, in milligrams). The big news after markets closed on Friday was the default in Cyprus. The euro is down against the dollar and against gold in early trading […]