After the Cyprus Bailout, Here's Where You Should Keep Your Savings Now
Now that the dust has begun to settle in Cyprus, the battered principle of deposit insurance seems to be safe-for now at least.
In the big stare-down with the European Union the final Cyprus settlement did not zap the small depositors.
Instead it simply shifted the burden further up chain. The final deal increased the "haircut" on large depositors in the Bank of Cyprus and Laika Bank from an originally proposed 9.9% to an astounding 40%.
To me, that's highway robbery -- even if the Russian Mafia has to bear a big share of the brunt.
As strange as it may seem, even the Russian Mafia has rights!
The lessons here are quite clear...
Cyprus Bailout Plan: Reaction from the Front Lines
As Money Morning Chief Investment Strategist Keith Fitz-Gerald warned last week, the Cyprus bailout plan is a breach of trust that could derail the entire Eurozone.
Not only does the plan fail to fix the country's economy, it has the potential to seriously damage people's trust in the banking system, making a bad situation even worse.
"Individuals deposit money in banks instead of stuffing it in their mattresses because they believe that their money will be safe there," explained Fitz-Gerald. "Once they realize, or even suspect, that the money they put in the bank is anything but safe, they will take whatever's left and run - and the bank will collapse in spite of the "bailout.'"
To get an idea of what life on the ground in Cyprus is really like right now, Fitz-Gerald recently talked to FOX Business Network's Washington Correspondent Rich Edson. Edson has been reporting from Cyprus as the controversial bailout plan unfolds.
Is the Latest Ultimatum in Cyprus About to Derail the Eurozone?
You probably know the story by now.
Following riots in the streets and a run on local banks, Cypriot lawmakers voted down a key element of the European Central Bank's (ECB) bailout proposal that would have required the country to impose a one-time 9.9% tax on bank deposits of more than 100,000 euros and a 6.75% tax on bank deposits under that amount.
I can understand why people took to the street - the "tax" was little more than organized robbery under the guise of keeping that country afloat.
Why should you care about what happens in Cyprus?...
Cyprus is not Las Vegas. What happens in Cyprus cannot possibly stay in Cyprus. The world's financial markets are too interlinked. Ultimately, it is a move intended to keep the euro afloat at any cost.
The Cyprus Bailout Exposes a World of Thieves, Cheats, and Liars
Let's talk about the Cyprus bailout, the International Monetary Fund, and the European Central Bank.
Let's call what the IMF and ECB are doing what it really is. After all, it is the ultimate institutional goal. It's thieving.
So let's start with the thieves...
The IMF, on behalf of the big global banks it serves, and the ECB, on behalf of the big European banks it serves, is stealing, without any authority whatsoever (other than under cover of the European Commission, which they jointly own) depositors' money in all the banks in Cyprus.
Because all the banks that lent to the Cypriot banks to keep them in business are now about to get shafted.
The Cyprus Bailout Sets a "Very, Very Dangerous Precedent"
The Cyprus Parliament appeared poised Tuesday to reject the $13 billion international bailout that would force bank depositors to pay a levy.
So what happens now?
Will Russia step up to offer money in exchange for oil and gas? Will China offer a similar deal to Cyprus?
Will those with money in Cyprus banks withdraw it and deposit it elsewhere, leading to a run on the banks?
Will investors flock to gold as a safe-haven investment?
Money Morning Chief Investment Strategist Keith Fitz-Gerald appeared Tuesday on Fox Business to talk about the fast-developing story in Cyprus and the potential fallout in Europe and well beyond, including in the United States.
Fitz-Gerald said a vote in the Cyprus Parliament to reject the bailout "is a big deal because it sets the stage for a very, very dangerous precedent."
Check out this video to hear Fitz-Gerald's perspective on the Cyprus situation - and whether the U.S. government could come after your bank deposits.
Why the Cyprus Bailout Could Set Banking Back 300 Years
Even by the standards of the EU bureaucracy, raiding the private deposits of Cyprus' banks is spectacularly foolish.
For a measly $5.8 billion euros, the EU has now put the entire Eurozone on edge-not to mention the entire global economy.
It revolves around something as simple as trust. And as a former banker, I can tell you that there's no substitute for the belief that your deposits are safe and sound.
It's a thin line and once it's been crossed it's nearly impossible to repair.
Now savers in Spain, Italy and elsewhere in the Eurozone are left to wonder about the safety of their own accounts.
Here's why savers everywhere should be concerned...
Eurozone Debt Crisis: Why Cyprus Needed the Fifth Bailout
U.S. stocks were rattled Monday as two more countries asked for bailout packages in the ongoing Eurozone debt crisis.
Shortly after word came that Spain had formally requested a bailout package for its ailing banks, Cyprus chimed in and also asked for aid.
The Mediterranean country has become the fifth Eurozone nation to hold out its hand for an international rescue. While the smallest of the bunch to seek relief, Cyprus highlights the European Union's increasingly stressed resources as it wrestles with weakening economic conditions.
The aid request followed Fitch's downgrade Monday of the island's stressed banks to "junk" status. The credit cut means the country has lost it investment status with the trio of the largest and most influential rating agencies.
Fitch said in a statement, "Cypriot banks will require substantial injections of capital in order to secure confidence in their financial viability."
Cyprus, saddled with Greek private sector debt, could need as much as 10 billion euros ($12 billion) in bailout funds.
"Classic contagion, "BBC's chief economics correspondent Hugh Pym said of Cyprus' troubles.
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