Yes, Cyprus is a small island nation off the coast of Italy. And yes, you’re forgiving if you don’t really care what’ going on there. But, you should. What happens on this little island over the next week can affect not only the banks in Europe but the rest of the world. You see, the banks on Cyprus are bankrupt just like many banks in Europe. And like other countries like Greece and Ireland they went to the Eurozone for a bail out. But for the first time, the Eurozone powers insisted that the bank’s customers pay part of the tab. Under the offer, a bank customer can have up to 9.9% of their deposits seized without notice to help pay back the debt the banks owe. Since this offer came to light, all the ATM’s on the island have been shut down and all bank branches have closed to prevent a run on the banks. If this goes through, no one will feel safe having their money in a bank. In the US we have the FDIC to protect accounts, but what if the Fed’s quit funding the program as part of the new budget? We could be open to the same worry as the banks in Europe.
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