After reading about what is happening in Cyprus over the weekend, the question naturally arises: are they handling this the right way? Why the Bank of Cyprus? Will this be a trend across Europe? Will the run on The Bank of Cyprus be a damning blow to a recession recovery already stunted by a slightly strengthening Euro?
Over the weekend it was announced that a percentage of all deposits in The Bank of Cyprus will be taxed. This so far has caused an uproar, and a run on the bank. People were given the incentive to pull their money and find a new safe haven, however many were unable to get their money when they needed it. Michael Gayed recommends rotating out of equities at this point, and migrating to precious metals or bonds to weather this storm. If your investment strategy is aimed more towards "timing" the market, then this strategy is for you.
Is this the start of a long depressing trend in Europe?
http://www.marketwatch.com/story/if-cyprus-is-the-butterfly-is-gold-the-pesticide-2013-03-18
4 comments:
I've been following an article about this on the New York Times and they make specific mention of Cyprus's government keeping all banks closed until at least Wednesday.
While the Cypriot banking association sais it would "instruct banks to load automated teller machines with cash while banks remained closed"
To me it sounds like the insiders in Cyprus's finances are predicting dire results. Them "keeping ATM's stocked" seems like a half-hearted gesture to keep citizens calm.
Also important is to mention Russians foreign deposit interests in Cyprus which make up almost 25% of total deposits in Cypriot banks.
This is going to be very interesting to follow this week. I'd check up daily...
-WF
Yeah, i cannot see how essentially "freezing" your economy could ever be the correct remedy for this situation. My hope is that domestic markets aren't hit too hard. Too much emotion, and too many fears.
Offshore accounts and the method for wealthy individuals and sneaky companies hiding their money might finally be catching up. I find it incredible that the government wanted to take a percentage of all savings accounts to start getting some money back and showing the EU they have some money and just need additional funding. This issue is a huge threat to them staying in the euro. I am curious to see if they leave the EU, if this will open the flood gates to other countries, especially if specific officials are elected - in Italy for example.
We now know only certain accounts are being taxed, accounts with over 100,000 euros will be the unlucky bunch. Too bad for those wealthy people - reportedly Russian oligarchs - who tried to hide it in Cyprus for tax purposes.
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