March 16, 2013
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Big News With Cyprus Banking Bailout that May Trigger Global Impact
As usual, this isn’t making headline news today in most areas, so you’ve likely missed this potential bombshell.
Apparently, the island of Cyprus needs to be bailed out financially as one of the many countries faring badly in the wake of the financial meltdown/recession that’s affecting so many countries. The fact they need help isn’t surprising news.
The EU has agreed to pump money into the Cyprus banks to help stabilize them – standard policy and again, nothing too surprising here.
However, the terms being applied this time marks a critical first, and a very dark one in my opinion.
Under the terms of the bail out, ALL bank depositors will be charged a levy based on their bank balance:
9.9% on balances over $100K euros
6.7% on balances under that amount.
The bombshell to this is that amounts under $100K euros were supposed to be government insured. It’s the equivalent to FDIC insurance for the US banks.
In other words, bank amounts that were insured as being “safe” to keep in the bank backed by the security of the Cyprus government is going to turn out to be one big fat lie. Cyprus has already acted in curtailing depositors fighting this by stopping all electronic transfers, and the policy will be put into effect on Monday, which is a bank holiday over there so no one will be able to access their accounts before the policy goes into effect and the money is extracted.
So, rather than just make the banks, ultra wealthy or corporations pay the price for the policies they backed that were largely responsible for their economic downturn, they are seeking to transfer the pain to even to lowliest depositor who had nothing to do with the financial crisis except being a victim to it. It also punishes folks of low income who are responsible enough to have an account with savings rather than be spendthrift.
Alright, so why is this BIG news? It’s huge because it undermines the integrity and confidence consumers have in banks. How can people trust their money in banks when so-called “government insurance” is nothing more than empty words that fail to deliver? This is liable to trigger bank runs all across Europe as people rush to take out their money before a similar fate happens to them. This will only make the other banks weaker and trigger more bank failures and a greater need for bailouts.
This new policy is backed by the EU, so the folks in change don’t seem to care about the banks or government honoring their obligations to their citizens. Of course I have no doubt that the uber wealthy got wind of this in advance and off shored their accounts leaving the less informed and less fortunate to carry the burden.
Will the Cyprus citizens accept this or will there be riots?
That also begs the question, could that type of policy eventually happen here?
Info: Link1
Info: Link2
They may not be announcing this news with big fanfare in the US this weekend, but it’s sure to make big headlines worldwide next week. This can’t be good news for economic stability going forward if people start losing faith in their banks. It moves the situation further from recession and closer to Depression.
Comments (3)
This was similar to the situation that we had in the US a couple of years back when the Bush Administration was installed – the Wall st. scandal, bail out and the burst of the real estate bubble. People were not advised about the potential problems that can result from borrowing money that may not be able pay back, which ended with wide spread foreclosures. The Wall St corporations like Merrill Lynch and AIG gets a bailout, loan money that apparently has an indefinite period of “repayment,” regardless of what the government has announced. But now, those very ones that needed government assistance revels in the loot of hard earned cash belonging to the working and middle class. But the sad thing about it is there is no alternative but to use the banking system because where else would they deposit their money? My company is the same, encouraging that all employees use direct deposit. In this situations, small banks don’t usually offer those options, but large chain of banks like Chase, Citibank, and HSBC are the only options you can utilize. Though you think there is suppose to be fair competition on the market, but it’s rather stiff, allowing a few to monopolize the banking market. That market will always be controlled by a few. If only our country with withdraw the FDIC to make banks more responsible for their services and actions.
Apparently, Cyprus is on the same boat as Greece, as far as the effects of the banking system goes. Britain is trying to impose stricter rules on bonuses given to people working at banks like CEOs, and administrators. However, I highly doubt that is going to happen.
Wow!! that is all i can really say.. people having levies imposed on their accounts.. so essentially they are paying to have their money in a bank. although I think in a way we all are as all these fees nickel and dime us out of our hard earned money. I am okay with charging me for a service (i.e. bill pay, and even that I find a bit ridiculous) but don’t charge me because i don’t have thousands of dollars to let sit in a bank!!
If the people of cypress don’t raise hell about this I will be really surprised and disappointed.
omg… so confused.