Are Cypriots Being Robbed?

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Though we do not know the final numbers, customers with more $128,000 in Cypriot banks will be lucky to get 40% of anything over that amount. But is that actually an injustice? Perhaps not. Indeed, it’s probably a subsidy. But we could only know for sure if these bankrupt, fractional-reserve institutions (to repeat myself) were allowed to go out of existence–no bailouts of other people’s money–with their creditors getting whatever is left over, as in a normal bankruptcy proceeding. That remaining amount might be zero, and certainly less than 40%. Note that depositors do not own their deposits. They have, in effect, loaned their money to the bank.

Other nation states like Canada plan to seize deposits to subsidize the big, bankrupt banks, too. Who can doubt the US will do so as well? The Western world is a bankocracy. But you are not responsible for the banking cartel, the central bank, so-called deposit insurance, vast bailouts, and other banco-crimes. So don’t put too much of your money in a bank. And note one other lesson from Cyprus: physical cash is far more valuable than digital. Keep some dollars outside of the US banking system, which has about 12% of your money on hand in case of a bank run. (Thanks to Bill Sardi)

8:33 am on April 1, 2013