Why the Cyprus Bailout Could Set Banking Back 300 Years
- SPOILER: Samuel Pepys in 1666 (misremembered a bit) as a possible precursor of present-day southern-tier Europeans
Written on 20 March 2013 by Martin Hutchinson
Even by the standards of the EU bureaucracy, raiding the private deposits of Cyprus’ banks is spectacularly foolish.
For a measly €5.8 billion, the EU has now put the entire Eurozone on edge – not to mention the entire global economy.
It revolves around something as simple as trust. And as a former banker, I can tell you that there’s no substitute for the belief that your deposits are safe and sound.
It’s a thin line, and once it’s been crossed it’s nearly impossible to repair.
Now savers in Spain, Italy and elsewhere in the Eurozone are left to wonder about the safety of their own accounts.
Here’s why savers everywhere should be concerned…
If these worries become really serious, it will be devastating for the world economy. Small savers will take their money out of banks and resort to household safes and a shotgun.
If savers no longer have a solid place in which to put their money, we will have undone the financial revolution of the last 300 years, and returned to a world in which Samuel Pepys didn’t trust the local goldsmith, so buried most of his wealth in the back garden. Needless to say, that won’t do much for small business – the entire flow of finance will seize up altogether.