In Dante’s Inferno, the poet is guided in the underworld by the great Roman poet Virgil. As he enters the gate of Hell (Inferno) the inscription reads “Lasciate ogne speranza, voi ch’intrate” i.e. “abandon all hope those who enter”. It seems that the EU leaders in the early hours of last Saturday (March 16), not only did they cross a red line and broke the cardinal rule of banking, but they also crossed their own Rubicon in an effort to test another circle of the inferno they have started with their new math where additions take place through subtractions.
Dante’s poem is called Divine Comedy and portrays the soul’s journey toward redemption. The poem that the EU leaders are drafting (especially since the bailouts schemes started) might be called Hellish Tragedy. In Dante’s Inferno the author himself experiences the nine circles of Hell (limbo, lust, gluttony, greed, anger, heresy, violence, fraud, and treachery).
In the Hellish Tragedy of the EU it seems that we have to experience nine circles too. The experience in 1992 (when the European Monetary System was tested) was the limbo period. Then lust took over in the 1995-2000 period. Lust turned to gluttony in the 2001-2004 period, which was converted into greed in the 2005-2008 period. The hellish circle of anger followed when the sins of the Southern frontier (Greece, Spain, Portugal, and Italy) were revealed.
The circle of anger was followed by the circle of heresy by the ECB (European Central Bank) with its unprecedented commitment to save the dysfunctional Euro “at all costs”, i.e. when it confused means and ends, making the survival of the Euro the fetish that Euro zone members must bow to and worship.
Last Saturday’s decision to confiscate deposits in the Cypriot banking system is the violence phase of this Hellish Tragedy. It violates faith and the basic principles of how credit markets have used the anchor called banking deposits. When the anchor is abandoned, we are abandoning hope (recall Inferno’s inscription). On January 26 of this year, we published a commentary (http://stage.blacksummitfg.com/1589) where we discussed the existential risks in the EU. Among them we listed Cyprus and Italy. Unfortunately, the unfolding events seem to justify our concerns.
Here is a preliminary list of concerns that we have with such an unprecedented decision to confiscate deposits:
- No one can guarantee that another round of deposits’ confiscations will not occur again. Given the Greek experience that it has gone through three rounds of austerity measures, the normal thing to expect is that more confiscations are forthcoming
- When you violate the cardinal rule of banking, fear increases and thus a relapse to the EU debt crisis may take place
- Contagion in the banking systems of Italy, Spain, Greece, and Portugal may shake the foundations of the already shaky banks in the EU
- Capital flight from Cypriot banks (reports as of yesterday talk of demands of more than $15 billion to be transferred out of Cypriot banks when the GDP of the island-country is just $22 billion)
- The shock in the Cypriot banking system may create a tsunami of capital flight away from Cyprus and thus destroy the competitive advantage that Cyprus has built in its service sector. Along with its banks, its accounting, trust, and insurance businesses will suffer
- As Cyprus follows Greece into a depression, its debt problems will worsen and as the latter takes place it will turn out to be unsustainable, something that was tried to be avoided with the confiscation scheme
- Rather than using Cyprus as the basis (pilot program) for the much advertised EU-wide Banking Union (where Cypriot banks would have borrowed directly from the stabilization fund and thus the local government would not be burden with more debt) the EU leaders chose a path that may destabilize the Euro zone while destroying a member-country
- The expected drop on government revenues and local GDP will increase unemployment and discourage foreign investments at a time when the economy needs them the most
- As the Cypriot banks are being destroyed the economy will only have its energy sector to rely upon, and the government may be forced to sell its rights to it pretty cheap
- Geostrategically the country is weakened at a time when it could have played a vital role in the greater Mediterranean developments (see our March 6 commentary). Some locals described to me the confiscation as another invasion (recalling the invasion they suffered in 1974)
When the gods created Pandora they endowed her with an “all-giving” jar that contained all kinds of evils, plagues, and diseases. The Greek poet Hesiod says that all gods contributed to her creation by giving her a unique gift to be released to mankind. When Pandora finally closed the jar she only left hope inside it. The EU-schemes/bailouts are labeled as hopes.
Let’s trust but also question whether such hopes are real and do not affirm Nietzsche’s fears in his Human, All Too Human where he says “Zeus did not want man to throw his life away, no matter how much the other evils might torment him, but rather to go on letting himself be tormented anew. To that end, he gives man hope. In truth, it is the most evil of evils because it prolongs man’s torment.”
We will be waiting for the next two circles of this Hellish Tragedy to unfold. It would be interesting to see how fraud (circle #8) and treachery (circle #9) will look like.
Lasciate Ogne Speranza, Voi Ch’intrate: Dante Meets Pandora in Aphrodite’s Island a.k.a. Cyprus
Author : John E. Charalambakis
Date : March 17, 2013
In Dante’s Inferno, the poet is guided in the underworld by the great Roman poet Virgil. As he enters the gate of Hell (Inferno) the inscription reads “Lasciate ogne speranza, voi ch’intrate” i.e. “abandon all hope those who enter”. It seems that the EU leaders in the early hours of last Saturday (March 16), not only did they cross a red line and broke the cardinal rule of banking, but they also crossed their own Rubicon in an effort to test another circle of the inferno they have started with their new math where additions take place through subtractions.
Dante’s poem is called Divine Comedy and portrays the soul’s journey toward redemption. The poem that the EU leaders are drafting (especially since the bailouts schemes started) might be called Hellish Tragedy. In Dante’s Inferno the author himself experiences the nine circles of Hell (limbo, lust, gluttony, greed, anger, heresy, violence, fraud, and treachery).
In the Hellish Tragedy of the EU it seems that we have to experience nine circles too. The experience in 1992 (when the European Monetary System was tested) was the limbo period. Then lust took over in the 1995-2000 period. Lust turned to gluttony in the 2001-2004 period, which was converted into greed in the 2005-2008 period. The hellish circle of anger followed when the sins of the Southern frontier (Greece, Spain, Portugal, and Italy) were revealed.
The circle of anger was followed by the circle of heresy by the ECB (European Central Bank) with its unprecedented commitment to save the dysfunctional Euro “at all costs”, i.e. when it confused means and ends, making the survival of the Euro the fetish that Euro zone members must bow to and worship.
Last Saturday’s decision to confiscate deposits in the Cypriot banking system is the violence phase of this Hellish Tragedy. It violates faith and the basic principles of how credit markets have used the anchor called banking deposits. When the anchor is abandoned, we are abandoning hope (recall Inferno’s inscription). On January 26 of this year, we published a commentary (http://stage.blacksummitfg.com/1589) where we discussed the existential risks in the EU. Among them we listed Cyprus and Italy. Unfortunately, the unfolding events seem to justify our concerns.
Here is a preliminary list of concerns that we have with such an unprecedented decision to confiscate deposits:
When the gods created Pandora they endowed her with an “all-giving” jar that contained all kinds of evils, plagues, and diseases. The Greek poet Hesiod says that all gods contributed to her creation by giving her a unique gift to be released to mankind. When Pandora finally closed the jar she only left hope inside it. The EU-schemes/bailouts are labeled as hopes.
Let’s trust but also question whether such hopes are real and do not affirm Nietzsche’s fears in his Human, All Too Human where he says “Zeus did not want man to throw his life away, no matter how much the other evils might torment him, but rather to go on letting himself be tormented anew. To that end, he gives man hope. In truth, it is the most evil of evils because it prolongs man’s torment.”
We will be waiting for the next two circles of this Hellish Tragedy to unfold. It would be interesting to see how fraud (circle #8) and treachery (circle #9) will look like.