Most of us have heard of Cyprus but do not know much about it unless you are a history buff. The entire world is now watching how this tiny country deals with the largest banking collapse in the history of the nation. Cyprus was seen as a tax haven for wealthy individuals who wanted to deposit their money into an account without having to worry about authorities asking them questions or paying high taxes. Cyprus was very good at finding banking clients that the banking sector has ballooned in size that it would consume all of the nations GDP.
Everything was fine until these banks started buying Greek bonds and as we all know Greece defaulted on their bonds which took a dramatic toll on the financial well being of the Cypriot banks. These banks were rendered insolvent so they went to the Cypriot government for assistance however the government did not have the means to come up with a 10 billion Euro bailout, the only option was to go directly to the EU.
While in the past the EU would issue bailouts and place restrictions on the bank in Cyprus there was a new condition, all depositors would lose anywhere from 10-50% of their deposits over a certain amount. (the actual amounts are still being discussed at this moment in time). The term is a deposit tax but it is actually theft since the bank customer has no way of preparing for this transfer of wealth.
These banks have clamped down and placed a limit on how much money a person can take out each day of 100 Euros and large transactions of five thousand Euros or more must be approved by the central bank. The reason there is so much interest in what is going on is never have private citizens had their wealth stolen to bail out private institutions who are suppose to have these deposits insured for up to one hundred thousand Euros. This is sending a clear message to consumers that the banking sector cannot be trusted and in the blink of an eye their life savings could b wiped out.
What people in Cyprus are now doing is reverting to old forms of money like gold,silver and other commodities which have real value beyond the fiat currency. Any person who is thinking about doing business in the European Union should think carefully given the instability of the currency and impending economic collapse. If citizens cannot trust that their money is safe with a bank they will not use that bank. It may be time for you to start taking your money out of the banks and putting them into assets that hold value regardless of the economic climate.