Today legendary trader Jim Sinclair warned King World News that Putin’s decisive victory in Cyprus over the IMF has left the IMF one misstep away from destabilizing and creating massive bank runs throughout the entire Western world. Sinclair, who was once called on by former Fed Chairman Paul Volcker to assist during a Wall Street crisis, had this to say in this extraordinary and exclusive KWN interview:
Sinclair: “The concept that our financial leaders are in some sense geniuses that foresee the future and calculate every move based on their ability to divine what will be the result of their actions, is absolutely false. The IMF made a massive mistake here.
The IMF has now put itself into a very difficult position. The IMF must now support Cyprus, even in the face of the rejection of the attempted confiscation of partial bank deposits, or let the Cyprus banking system seek its own solutions to its banking problems, which would be Russian Corporations, or Russia itself.
If Russia was to save the Cyprus banking institutions, then, basically, a sovereign nation has trumped the IMF….
“I believe this is unacceptable to the IMF because it would mean that the IMF would not carry the clout which it has carried over the years as a group of many nations. If one nation can turn the switch ‘off’ against the IMF, it’s going to be very hard to turn that switch back ‘on’ at the IMF.
This now rejected proposal of a tax on depositors was a total shift in strategy that had existed so far in the rescue operations of banks. If you change your strategy, you break a promise because you have acted in a certain way where all other major nations are concerned.
If continually over years you have a strategy, and then all of the sudden decide that, well, Cyprus is too small or that the Russians are not in your league socially, and you let Cyprus go on its own and Russia makes the repair, the IMF loses by having broken a promise.
You create promises with nations not necessarily by your word, but most certainly by your actions. The actions up to now have been consistent in that no depositors would be injured. The central banks have worked together, either through swaps or through direct actions in order to meet any and all contingencies. That simply cannot stop now, especially in light of what’s just happened in Cyprus.
If there is a spread to other smaller countries of the fear of confiscation from the depositors in order to meet the obligations of their errant banks, you will begin bank runs everywhere.”