Just when they had you believing that the eurozone crisis was finally under control, a stark reminder comes out of Cyprus that we are nowhere near out of one of the most severe financial turmoils of our time. Cyprus is now the latest Southern European nation to face bankruptcy, after its banks lost 4.5 billion euros on their written off Greek bond holdings. This time the Troika (the tripartite committee led by the European Commission with the European Central Bank and the International Monetary Fund) decided it was upping the requirements necessary to receive a bailout.
In order to receive its $13 billion bailout, a deal was struck that would impose a one time ‘tax’ of 6.75% on those holding 100,000 euros and under and 9.9 percent on those holding over 100,000 euros, that would help contribute $6 billion to pay for the deal. This, in plain English, means that the government has essentially stolen depositor money in order to pay for the unwise bets of the banks. Bank transfers were frozen and ATMs across the nation has been bled dry by citizens in a frantic rush to salvage any amount of money they could before the cuts come into effect this week.
Comic reads “Bank robbery in Cyprus”.
As expected, Cypriot citizens didn’t take this news very lightly, making a run on banks and showing widespread displeasure at this historic action in which prudent savers had to pay for the foolish actions of others. Bank shares were offered to those forced to make these payments and the deal could be voted down by Cyprus parliament or altered in some form, but regardless of what happens from this point on-wards the damage has been done.
The act of storing one’s money under a mattress or storing it in gold has often been looked down by the general populace as a foolish and overly-cautious act that serves no place in our current economic and financial ecosystem. Yet, it is clear now for anyone willing to open their eyes that banks and governments can not be blindly trusted. This bailout of Cyprus’ banks could be the first of many such undertakings across the troubled eurozone, and those who viewed banks as pillars of safety have been served a cold dose of reality.
What you choose to do with your money and perhaps where and how you decide to store it has become a real point of concern that everyone should think over in light of recent events. Physical gold is not subject to devaluation via printing (and resulting inflation) and can not simply be taken from your hands and thus provides the highest level of safety in our unstable economic state.