…Europe has hammered out a 10bn euro “bailout” of Cyprus…the key feature of this deal is the bail-in of Cypriot depositors to the tune of 5.8bn euros, about a third of Cyprus’ GDP. This means that depositors went to sleep on Friday night and woke up Saturday to find that their money, deposited safely in Cypriot banks, had been seized and used to “bail out” the country.
It appears the depositors money was seized, and the shareholders and bondholders protected. This is inferred because there are comments that the Cypriot Banks could not be allowed to fail, blah, blah, blah (insert reports of massive civil unrest and martial law here because of this apparently unfair action).
The result of seizing depositors money, was in Cyprus, a bank run. The ATMs were drained of cash. The Eurozone also appears to have erected Capital Controls.
Now a government has seized money in the Eurozone, there will be a massive pressure to move money out of the Eurozone on Monday, into the Dollar, Gold, Silver and all other commodities (where else is a safe haven?) The outflow could be so large trading in the Euro could be halted, possibly never to return (The end of the Euro).
In the meantime I also expect smaller depositors (aka: Joe Sixpack in US vernacular) with a bank account in the Eurozone will decide their mattress is a better place for their cash (in gold coins) than a bank, because if one government is going to size deposits, then others cannot be trusted not to copy the idea.
So there will be bank runs in many countries. I doubt there are enough Euros printed to cover the run, so the banks will close. Chaos will be upon us. Political Leaders will rise upon their hind legs to assure their populace they are “in control” of the situation, which will be untrue.
No one knows how to restart a continental banking system (The Eurozone’s), with such a loss of confidence. We face a massive depression.
It is now nearly 11pm in CA, where I live, and as there is nothing I can do, I shall drink some wine and go to bed.
I hope and pray the situation will not be as bad as I imagine. We shall see on Monday morning, when the Japan and China markets open.
I hope MarkFromIreland with all his assets is not heavily leveraged (geared) and well hedged. /s
Photo from currybet licensed under Creative Commons