Cyprus central bank limits cash withdrawals
We are likely seeing the beginning of the end of a major currency - the Euro.
Despite the currency's relative youth (it began in 1999), it appears to be on death's door.
How do we know this?
One of the things Cyprus officials are going to implement, whether they want to or not, is capital controls once the banks reopen later this week.
We can be confident that EU officials will force Cyprus into some kind of draconian compliance to reduce the size of its banking system and to punishment and warning Italy, Spain, Portugal, and even France.
Once currency controls are established in part of a currency union, it effectively kicks the nation out of the currency as flows of goods and services are hampered. It produces a highly deflationary situation in the nation without control its own currency as the supply of money and credit dwindles.
In fact, currency controls in only part of a monetary union equal the death of the union itself as the nation targeted will eventually be forced to return to its previous currency to pull out of the deflationary black hole.
So we can expect to see the end of the Euro evolve over the next two or three years and weaker nations forced into harsh austerity eventually exit.
As for Cyprus, the sooner they return to the pound the sooner they can face the chaos of a new currency and pull out of an economic slump.
It would be a mistake for them to stay in the Euro as the Greeks would likely attest today.
Look for a return to this soon:
The central bank in Cyprus imposed a 100-euros per day withdrawal limit at cash machines for all local banks on Sunday to avert a run on lenders.
A spokesman for second largest lender Cyprus Popular Bank, which had previously limited withdrawals to 260 euros, said the new measure began at 1 p.m. (1100 GMT) and would remain in place until the bank reopens, scheduled for TuesdayMy view:
We are likely seeing the beginning of the end of a major currency - the Euro.
Despite the currency's relative youth (it began in 1999), it appears to be on death's door.
How do we know this?
One of the things Cyprus officials are going to implement, whether they want to or not, is capital controls once the banks reopen later this week.
We can be confident that EU officials will force Cyprus into some kind of draconian compliance to reduce the size of its banking system and to punishment and warning Italy, Spain, Portugal, and even France.
Once currency controls are established in part of a currency union, it effectively kicks the nation out of the currency as flows of goods and services are hampered. It produces a highly deflationary situation in the nation without control its own currency as the supply of money and credit dwindles.
In fact, currency controls in only part of a monetary union equal the death of the union itself as the nation targeted will eventually be forced to return to its previous currency to pull out of the deflationary black hole.
So we can expect to see the end of the Euro evolve over the next two or three years and weaker nations forced into harsh austerity eventually exit.
As for Cyprus, the sooner they return to the pound the sooner they can face the chaos of a new currency and pull out of an economic slump.
It would be a mistake for them to stay in the Euro as the Greeks would likely attest today.
Look for a return to this soon:
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