Cyprus: The sock under the mattress bank would have been better…

Here’s something to ponder when you make your next ATM run: How safe is your money in the bank? In order to get bailed out by the EU, Cyprus is essentially confiscating large quantities of it’s citizens cashola. Folks in Cyprus woke up yesterday to discover that the govt is taking 6.75% of the money of bank account holders who’ve got under 100,000 and 9.9% of the money in accounts having above 100,000. Not surprisingly, that sparked a mass rush on the ATMs by folks wanting to get their money out before the govt got it out of them –alas to no avail. The ATMs no longer seem to be functioning and Cypriot banks have frozen all bank transfers to banks outside the country. They’ve turned the idea of a savings account on its head and the folks who do banking in Cyprus now all have losing accounts.

More troubling, folks who have major accounts in other failing EU countries are starting to quietly take their money out of those banks on hearing this news, fearing that places like Spain and Italy may be next in line for similar action. That, in itself, may push those countries to need to take that action. Personally, though, if I lived in Spain or one of the other on-the-edge countries, I’d be pulling my piddly little 3,000 sheks out of the bank and putting it in the proverbial sock under the mattress.

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7 responses to “Cyprus: The sock under the mattress bank would have been better…”

  1. tddpirate says :

    Extremely stupid and shortsighted of the Cypriot government and the EU organs. It would have been just as effective to devalue the Cypriot currency, but without the psychological impact of losing money deposited in the bank.

    It would have been much smarter had they frozen those monies in compulsory bonds to the government – bonds which would eventually be repaid with a modest interest.
    The Israeli government went through this route of compulsory bonds.
    After the War of Independence, the government confiscated all stocks and bonds redeemable for foreign currency held by Israelis, and issued bonds in lieu of them. Those bonds were eventually repaid (but inflation was not kind to their values).
    In subsequent years, some of the money paid from salaries was not in the form of taxes but in the form of compulsory purchase of bonds. Last time was to finance the first Lebanon War at 1982 and afterwards. Those bonds were finally redeemed at the 1990’s.

  2. SirJohn says :

    Well, this serves as a reminder to the truth that sometimes the gravest danger to your money does not come from robbers and thieves, but from your own government.

    While there is no absolute safety in this world, it definitely pays to diversify your wealth, even if it is a small amount. Don’t keep all your eggs in one basket. A friend of mine has, since graduating from high school over 30 years ago, put away some of his money every year into gold. Many people thought he was weird, but he always said he wants to be sure to have something when money becomes worthless. By now he has become pretty rich and he kept faithful to this attitude, he owns several homes and the land they are on, stocks, cash etc. but also still a quite considerable amount of gold.

    When I look at my own retirement savings I feel uncomfortable. They basically only exist in some computers in some banks. That will have to change.

    • israeliminx says :

      Sir John — I look at my retirement savings and find it very depressing as they are nearly non-existent! I’ve got more here in Israel than I do from the years I worked in the U.S. but that isn’t saying much at all. The two combined, if I could take them out in totality, are not even as much as the average middle-income person expends in a two-year period of time — I’ve already determined it is best not to live more than a couple of years past earliest retirement age or to keep working long past so that, at least something, can be passed along to other family members.

  3. Lynne says :

    Sir John, I think that I will save your comment and give it to my grand-daughter as soon as she starts her first piggy bank!

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