If Your Country’s Broke, Don’t Hold All Of Your Savings There
by Simon Black via SovereignMan.com,
ZeroHedge.com
03/25/2016
On Friday March 15, 2013–just over three years ago–people across the entire nation of Cyprus went to bed believing that everything was OK.
The next morning they woke up to a different reality.
It turned out that their banking system was totally broke. After suffering enormous losses, banks no longer had sufficient liquidity or capital to maintain customer account balances.
People realized immediately that just because you can log in to a bank’s website and see an account balance printed on the screen that doesn’t actually mean that the money is there.
To make matters worse for depositors, the government was insolvent and unable to lift a finger to support the banks.
Plus the deposit guarantee from Cyprus’s central bank wasn’t worth the paper it was printed on.
So in order to save the banking system, Cypriot politicians resorted to the unthinkable– freezing every bank account in the country. It all happened overnight.
This is precisely the sort of thing that happens when a poorly structured banking system meets an insolvent government.
And we should expect more of it. Because three years later, much of the West looks like Cyprus did back then.
Western banking systems are extremely illiquid, and many banks are very thinly capitalized with minimal reserves.
Deposit insurance funds are woefully undercapitalized and lack the financial capacity to guarantee the system.
And the governments who stand behind it all are themselves completely insolvent.
Bear in mind, all of these assertions are backed by publicly available data.
The Rest…HERE
