From a strong euro to a Bank of Cyprus failure, from Greek debtor prisons to gold somersaults, very little in 2013 is really a mystery.
Oleg Deripaska, that good friend of Lord Fondlebum and all-round keen metals negotiator, declares himself puzzled today at the level of the euro. “Why is it so high?” he wonders with feigned innocence, “it is holding back the European recovery”.
It’s not hard to hold back a dead horse, but it is very easy to increase the ‘value’ of a dead currency: you simply buy a lot of it. This is precisely what Mario Draghi is doing, because he has no other option: if he lets the eurine float naturally, it will head for the sewer. And that in turn will mean the current flight from eurozone investment will turn into a Calgary stampede.
We are, by the way, still waiting for the ECB’s website to give us a clue on how much investment has stayed in the eurozone, but Banco Draghi has no intention of doing that any time soon.
This much may be a mystery to some, but it is not to most people. Nor is it to Deripaska, but I don’t have the time or inclination to analyse his motives. Far more telling is to observe other mysteries and foretell what they might mean.
I was yesterday handed a confidential document – an independent report on why the Bank of Cyprus was until the end of 2009 selling Greek bonds as if they were radioactive excrement, but then abruptly changed course and began buying them in huge amounts.
Unsurprisingly – apart from concluding that the Bank’s directors must’ve been mad – the report can find no documentary evidence as to why BoC hitched its star to the Greek Titanic after it had hit the iceberg. But that there was clear deception involved is not in doubt. As the report states:
‘On 10 December 2009, Mr Kypri [the Chairman] informed the market that BoC had sold €1.7 billion of GGBS, stating that from the beginning of the year, the Bank had decreased its exposure of GGBs to €o.1 billion. On 10 December 2009 (ie, the same day), BoC began repurchasing GGBs, with a rapid increase in the Bank’s GGB portfolio to almost €2.4 billion by June 2010.’
Clearly Yiannis Kypri, he being not entirely dumb, lied to the markets in order to avoid a run-panic about buying Greek bonds. The big unknown here is WTF he bought them in the first place.
Two separate sources have told me over the last three months that Kypri was ordered to support Greece by person or persons as yet unsubstantiated. That belief is widespread among the business community here in Athens. As he had nothing personal to gain from this insanity, I can only conclude the sources are probably right. It might have been Venizelos, might have been Lagarde, might have been Schäuble, and probably was Trichet. But whatever: as a result of this patriotic hari-kiri, BoC lost just shy of a billion euros in the lender subordination later ordered by your friend and mine, Mario Draghi.
Within a short period of time after the Berlin-am-Brussels smash-and-grab raid on Nicosia, the Troika “terminated the services” of Kypri as well as the board of directors at the Bank of Cyprus, the country’s largest lender. The report cited sources who said the action is “necessary” due to the legislation approved by Cypriot lawmakers to restructure the country’s financial sector by having the Bank of Cyprus absorb the “good” assets of Laiki Popular Bank. These assets would not, however, have needed good ones without the forced purchase of Greek bonds in the first place.
As an explanation of why somebody got shot, on the whole I prefer the reason Jack Ruby gave for shooting Lee Harvey Oswald. The whole thing was a set-up in which Kypri became the fall-guy. I bet, however, that Mr Kypri has a nice little retirement fund to assuage sadness associated with the loss of his job.
But if you missed that mystery, never despair…there’ll be another one along in a minute. Take the odd case of Greece’s reinvention of Debtors’ Prison. Predicted some time back by the never-less-than-lively site Keep Talking Greece, it was confirmed in Parliament last week that everyone who owes the State tax system more than €5,000 will go to prison. As that’s almost all eleven million Greeks, one wonders how the “humane conditions” promised by deputy Justice minister Kostas Karagounis last Thursday for those thus incarcerated will be afforded.
Greece could yet become the first State in history to go bankrupt because it ran out of money to feed the imprisoned citizens who owe it money. Meanwhile, for many citizens this must surely be the miracle they’ve waited so long to see: rather than burning the furniture for warmth at home while subsisting on one teaspoon of Tsadziki a day, they can tell the taxman to go f**k himself, and live rent-free off the State. The Government will need to double police numbers in order to avoid people being crushed to death in the rush.
There’s little in the way of a mystery here either. This isn’t about money, it’s about playing on the personal pride of Greeks, and spreading the fear of servitude. Just as at the weekend I posted about the deliberate destruction of Greece’s SME merchant class, so too all Greeks must get accustomed to the idea of slavery. God help me, but I never thought I would one day write words like that outside of a doom-laden novel.
Finally, we couldn’t possibly end this meander through the murderous mystery of Mammon without noting that the Gold price – down in the $1300s doldrums last week, as we would of course all expect in a world replete with broken down Fiat Currencies – is leaping ahead again today at $1433.
Could it be that Central Bank troughers have imbibed their fill of the Amber Wine? Max Keiser thinks so….he is now predicting that the Gold v Yen gap will go to an all-time high. Well done there Max, but then this is a bit like predicting the safe return to Earth of Yuri Gagarin as he strides down the Red carpet in Red Square. I will be buying some gold in the near future, but purely on the basis of preferring exchangeable coinage to Fiat toilet tissue.
The huge volumes involved in last week’s gold heist nevertheless leave me wondering if the CBs have really finished with it yet. Let’s wait and see what the manipulators do when New York opens in four hours time.
Earlier at The Slog: is Greek democracy heading for the exit?