Why?
Because, as I wrote here on Sunday, Cyprus is dancing at the end of fiscal strings pulled by the EU. Today, according to Reuters:
(Reuters) – Banks in Cyprus will be shut on Tuesday and Wednesday pending a decision by parliament to approve a levy on bank depositors, a government source told Reuters.
Cyprus taxpayers began making ATM runs when they learned their savings accounts were to be raided by the government to the tune of roughly 10%.
As a result today, Monday, the Euro has tumbled and our DOW was shaky. Not unforseeable.
The FinancialTimes.com indicates:
Europe is risking a bank run
Creditor nations will now insist bank rescues must be co-funded by depositors
Oh goodie. It’s insufficient that the taxpayers of the affected countries are bent over once; it’s now thought to be a good idea that their individual and personal bank accounts are raided due to mismanagement of their governments.
LONDON (Reuters) – The surprise decision by euro zone leaders to part-fund a bailout of Cyprus by taxing bank deposits sent shockwaves through financial markets on Monday, with shares and the bonds of struggling euro zone governments tumbling.
The bloc struck a deal on Saturday to hand Cyprus rescue loans worth 10 billion euros ($13 billion), but defied warnings – including from the European Central Bank – and imposed a levy that would see those with cash in the island’s banks lose between 6.75 and 9.9 percent of their money.
People are theorizing: is Italy next — to the tune of 15%?
Let me get back to a fundamental building block of finance: a given country’s monetary unit is worth precisely what people think it is. Money is no longer backed by gold but by emotion.
These are very emotional times, and the wholesale raiding of the accounts of taxpayers is emotive in the extreme.
It is not impossible for bank runs to go viral across Europe, and for those emotions to cross the Atlantic.
Again, incompetent governments turning their taxpaying citizens upside down, pulling their pockets inside-out, and then smacking them in the backs of their heads.
“Silly,” you say. “It can’t happen here.”
BZ
P.S.
And don’t think that Mr Obama isn’t salivating at the thought of doing this in the United States, just on general principles.
