By now most of you have heard the news concerning Cyprus. If you haven't, I'll give you the skinny on it. In list form:
- Cyprus is bankrupt.
- Their banks are on the verge of failure.
- They needed to come up with X-billion euros to avoid financial collapse.
- They decided to raid bank accounts and make depositors take a haircut- all based on the idea that all depositors in Cyprus are Russian oligarchs
- Surprise, surprise - most Cypriots are not Russian oligarchs
- Bank Holiday - now citizens can't get to their money for over a week and counting
Cyprus took these actions to save their banks. This will ultimately kill their banks, and fast! If you were a citizen of Cyprus, would you:
- Put money in the bank or rip all of it out as soon as possible?
- Trust the banks or the politicians with anything ever again?
- Invest your money in any way that puts a 3rd party between you and your money, a 3rd party who can confiscate your private property at a whim?
Unless you are severely brain damaged, your money is headed under your mattress and floorboards. Earning a whopping .01% interest on your account, why would you risk a 10% confiscation? Why would you put money into anything that is going to end in a loss of your private property? What good are deposit guarantees or government promises from a government who has already tried to take them?
No good at all.
This will create a lack of confidence which will result in bank runs and keep depositors away from banks. Congratulations Cyprus. You just killed your banking sector. Once that confidence is gone, it takes ages to win it back. This current generation of depositors may never trust banks again.
Which brings me to the biggest bit of news for the rest of the world: YOU ARE NEXT!
Countries all around the world have adopted this as the official bank bailout policy. Countries like the USA, UK, Canada, and the rest of the G20. Go figure. They are going to try to take everything from their people. Expect bank runs. Expect bank holidays. The next bank failure will result in loss of deposits. Considering how things are structured, this will effect multiple banks at once.
Ok, so what can you as a depositor do to prepare? Here is a list:
- Remove your savings from the bank
- Buy a safe and keep your cash someplace hidden (never speak of it)
- Move assets into gold, silver, and anything else real
- Make sure you have first access to everything you own. No 3rd parties. This means physical metals and no future contracts on the metals.
- Bitcoin is a possibility
- Buy supplies in preparation for a market in which supplies are hard to come by
Or you know, do nothing and hope the Government doesn't try to screw you like the Cypriot Government and the EU ACTUALLY SCREWED OVER THE PEOPLE OF CYPRUS.
My bet: most people will do nothing. Just don't come crying to me when your money is stolen from you.
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