"Good evening, Ladies and Gentlemen, it's so good to see a packed house at Ye Olde Timber Theater tonight, and now that we're all in, let me say ...
...
...
FIRE!!!!!!!!!!!!!!!!!!!!!!!"
The short version is that some banks in Cyprus are in trouble, a bail out is needed, and that bailout is partly coming from seizing from 6.75% up to 10% of the savings of regular depositors.
Why is this bad? [Grandpa voice] Back in the start of the great depression, there was no deposit insurance, and when a bank went belly-up, Mom and Pop lost out. This led to runs on banks - as soon as a rumour went around that a certain bank was short of cash, everyone would try to pull their money out, thus causing the bank to collapse. Pick a new bank, repeat.
Eventually we wised up and provided deposit insurance for smaller account holders. This is a crucial foundation of modern banking.
So imagine you were a Cypriot, or Greek, or even Spanish or Italian citizen with your modest savings in the bank. It's earning sod all interest, but at least it is safe, right.
RIGHT?
Senors and senoras, please stampede in an orderly fashion.
Of all the crazy financial shenanigans we have seen, this might just be number one. For it to be a simple mistake would require a staggering ignorance of history and ignoring of human nature.
Forbes describes it as
The Botching of the Cyprus Bailout: Worse than Lehman Bros
The guardian reports
Cyprus bailout: 'people are panicking, they're afraid of losing their money'
Business Insider warns T
his Crazy Cyprus Deal Could Screw Up A Lot More Than Cyprus...
This could be interesting.
