I was wondering how a small island-state of just over a million people can get itself in such a parlous financial state - and then it dawned on me: about 80% of its inhabitants are Greeks!
Enough said?
Anyway, as of today, the entire population of Cyprus is fully employed for the foreseeable future. Their jobs?
QUEUEING AT THE BANK FOR THEIR DAILY CASH ALLOCATION!!
Just don't feel too smug about your own bank deposit - read this. Confiscating bank deposits is now on the table in any future crisis. That’s toothpaste that’s not going back in the tube. Commerzbank chief economist Jörg Krämer has already suggested “a one-time property tax levy” for Italy and “a tax rate of 15 percent on financial assets.” And adding fuel to the fire, the Leader of the UK Independence Party has urged expats in the periphery countries, in particular the 750,000 British in Spain to “Get your money out of there while you’ve still got a chance.”
The willingness of the Cypriot authorities to seize money from anybody in any bank in Cyprus – even healthy banks – was an act of state madness. The EMU has gone off the rails, is a danger to stability, and should be dismantled before it destroys Europe’s post-War order.
If you can't trust the banks any longer, what do you do with your money now? Suddenly, stuffing it under the mattress seems a lot less ridiculous. There are all sorts of other answers floating around. To be honest, I'm not sure whose ideas are best. But what is clear is that you need to sit up and take notice of your options.
Financial guru Marc Faber often points out that quality shares preserve wealth during tough times. After Germany's world wars, occupations and hyperinflation, shareholders in companies like Siemens came out with something of value. Sure, the shares may not have been worth as much after the economy was decimated, but at least some wealth survived. Most other assets were trashed. Cash devalued, property bombed, valuables confiscated.
Governments are much better at confiscating financial wealth than physical wealth. Also, financial wealth is reliant on a stable currency. Thus, tangible assets have an inherent, or intrinsic, value. A house is a house, whether its valued at $100,000 or $1,000,000. But it's tough to hide your house from the government. In Europe, many countries are looking to bring in property taxes to fill up government coffers.
Even so-called safe haven countries aren't safe anymore. Switzerland, Norway, the Caribbean and many tax havens will struggle financially themselves eventually. At some point, their locals will want in on all the wealth parked in their back yard by foreigners. And the government will be happy to claim it for them.
We live in interesting times!
