Today legendary trader Jim Sinclair told King World News why Lagarde’s IMF Cyprus disaster may cause far more damage than the frightening turmoil the world witnessed during the collapse of 2008. Sinclair, who was once called on by former Fed Chairman Paul Volcker to assist during a Wall Street crisis, was also joined in this interview by Britain’s very popular MEP Nigel Farage, and former US Treasury Official, Dr. Paul Craig Roberts.
Sinclair: “The propaganda being put out in the mainstream media is a message that things are moving along in Cyprus, and there will be a positive conclusion. The mainstream media is saying this is a banking problem of minor significance.
This is Joseph Geobbels style propaganda at its finest because Cyprus will ultimately be seen as a defining event in history. The term ‘Bail-In’ really doesn’t define what it is, which is confiscation. It’s the removal of part of your deposit.
Sure, they have agreed on everything such as currency controls because if you have a banking problem and you don’t control the flows, there is no way to be able to produce enough cash to meet the demands that would come in on a Monday morning....
“What they haven’t decided on is whether or not a depositor in a bank is a lender to the bank. This would then define that the lender should assume the risk of the solvency of the bank. This would then mean that depositors should be contributors to the solvency of that bank when it is under great stress, such as what we are seeing right now in Cyprus.
The other alternative is whether the depositor has retained the services of a fiduciary when he places money with a bank. This would mean it is the banks responsibility at a all costs to protect the depositor against losses. If the bank runs into trouble, the depositor would have no legal obligation whatsoever to finance the bank.”
King World News continues speaking with legendary trader Jim Sinclair below, but first KWN turned to Britain’s very popullar MEP Nigel Farage today to ask him specifically about deposits in banks.
Eric King: “Nigel, when you deposit your money into a bank are you putting it in there ‘for safekeeping,’ or by the eurocrat technical definition, are you in fact a lender to a bank?”
MEP Nigel Farage: “No, I don’t by that definition at all that you are a lender to a bank. In fact, for centuries now, the reason that people have deposited money in a bank, rather than keeping it under the mattress, is you are putting it there for safekeeping.
The fact that the bank may then use the money to lend on elsewhere is their business, not yours. Banks are supposed to be safe, and one of the remarkable things about this Cyprus tragedy that is unfolding, particularly for smaller depositors, is that we had a deposit guarantee scheme.
This stated that everything up to 100,000 euros was supposed to be insured. And yet they tried last week to take 7% off of these people’s money (small depositors) too. But what is really happening here is the European Commission is redefining the rules of banking in the European Union, in yet another desperate attempt to keep propped-up the failing euro.”
King World News then reached out today to former US Treasury Official, Dr. Paul Craig Roberts, to ask him about the bank deposits. Here is what Dr. Roberts had to say about this unfolding drama:
Dr. Paul Craig Roberts: “The reason that the EU is redefining depositors in banks as lenders is so their deposit is seen as an investment and is subject to risk in the same way as the banks. So if a depositor is reclassified as a lender, it means they cannot expect to receive back the full value of their deposits in case the bank experiences difficulties.”
Eric King: “This attempt to redefine the nature of bank deposits, isn’t this being done so that the governments can engage in outright theft of bank deposits?”
Dr. Paul Craig Roberts: “They don’t want to call it theft. But they do want to make the depositors have their capital at risk as an investor would. Of course it comes down to theft, given the traditional nature of a depositor. But they are trying to get around that so that the cost can be imposed on depositors. So, yes, it is theft.”
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Eric King: “You have warned recently that the IMF cannot afford to make a misstep or the West would be faced with unprecedented financial destruction and massive bank runs.”
Sinclair: “If Lagarde and the IMF sustain their position that the Troika has the right to tax, confiscate, or haircut the depositor, whatever you want to call it, then what the Troika has announced to the world is that the sacrosanct nature of deposits no longer exists.
This puts the entire concept of ‘insurance’ on deposits in question. This will mean that deposits of size in banks will move to seek other areas of safekeeping because the banking institutions will purely be seen as houses of confiscation.
The dream that no depositor would be hurt by the collapse of the financial world, based on fraudulent over-the-counter-derivatives, triggered by the flushing of Lehman, will be exposed as an absolute and total lie. This will trigger tremendous runs on banks any time that a bank or that system has any financial pressure.
This has the potential to create a revolution. A misstep by Lagarde and the IMF here could do far more damage than what the world witnessed after the collapse and liquidation of Lehman. That is what is at stake here.
The seriousness of this upcoming decision by the IMF, should they in fact decide to steal from depositors, I firmly believe that Mrs. Lagarde and the IMF will go down in history as causing far more financial devastation than the flushing of Lehman.
The story in Cyprus right now is not about capital controls, that was an obvious side effect of this disaster, the story will be this upcoming decision by the IMF. God help us if Mrs. Lagarde and the IMF make one of the greatest mistakes in history.”