Europeans get their savings stolen, are you next?
In Cyprus this weekend, everyone got a little surprise. They were having their savings stolen!
Not by bank robbers, not by pickpockets, but by the European finance ministers in league with their own government!
As background, Cyprus is a tiny island country in the Mediterranean that I'm absolutely certain has wonderful cuisine. However, the government of Cyprus got into financial trouble by doing the only thing that can lead to financial trouble; having more money going out than coming in.
So they begged the folks at the European Central Bank for some money. However, given that Cyprus was in deep trouble, the ECB wanted collateral. So, having no money of their own, the government of Cyprus secretly volunteered 6.7 to 9.9% of the savings of everyone keeping their money in a Cyprus-based bank. The money wasn't the property of the bank, nor the government; it was the private property of the people that had entrusted it to the bank.
No matter! They would freeze everyone's assets, and take only what they "needed", just this once. They promise!
Cynics say that "possession is 90% of the law", and in this case they are absolutely right. Anyone in Cyprus with advanced notice would have pulled their savings immediately, and the ECB would have zero legal leverage in taking their cash.
This is a small stunt, in a small country, but it tells you just exactly who controls your money no matter where you live. It's the Golden Rule; he who has the gold makes the rules.
A traditional reason for holding your cash in a bank is the security they offer and the interest they pay, but with 0.25% interest paid on savings (at best), is it really worth the risk of having your assets frozen? Does a guy with $2000 in savings have much to lose by keeping his money hidden in a few envelopes around the house?
At a time when thousand dollars gets $2.50 in interest, the cheapest insurance policy you can "take out" might just be a little pile of cash from your local bank. Skeptics will say that it can't happen here (regardless of where that is), and I'm guessing it probably won't. However, there are 1.1 million Cypriots that probably felt the same way last week that would argue with you.