A lot of ink has been spilled on the Cyprus crisis this week. And my colleague Tom Essaye did a great job covering many of the particulars. He also discussed the very real possibility of contagion selling and bank runs spreading to other parts of Europe.
But to me, the single most important fact about the crisis is that it reveals the sorry fundamental state of so many banks both here and abroad. It also confirms what many of us have suspected all along …
Specifically, by moving to raid the bank accounts of Cypriots rich and poor, European policymakers have proven that they can — and will — stick it to even bank depositors in an attempt to maintain the status quo and prop up failing institutions. And THAT is a huge new precedent you need to be aware of, and take steps to avoid becoming the next victim!
“Sacrosanct” depositor money tapped,
setting a very dangerous precedent!
Let’s stop pretending what happened in Cyprus is anything but attempted government confiscation of the people’s money. Cypriot policymakers were told by the International Monetary Fund, the European Union, and the European Central Bank (the so-called “troika”) that they needed to raise 5.8 billion euros on their own. In return, the troika would cough up 10 billion to bail the country and its banking system out.
Since Cyprus didn’t have that kind of money laying around, it was forced to cook up a plan to raid depositor funds. One idea was to grab 6.75 percent of all depositor balances between 20,001 and 100,000 euros, and 9.9 percent of all funds above the 100,000-euro threshold. That plan was rejected, and a whole host of other solutions — from “good bank/bad bank” splits, to pension fund raiding, to a last-minute bailout from Russia — have been proposed as alternatives.
But you simply can’t put a genie this big back in the bottle! Up until this point in the European debt crisis, depositor funds were generally considered sacrosanct. One reason is that Europe ostensibly has a 100,000-euro deposit insurance scheme, similar to FDIC insurance here in the U.S.
But it’s not a pan-European guarantee program — it’s at the national level. That means if your country’s government is broke or under pressure because of a lousy economy, troubled banking sector, huge debts and deficits, and so on (Cyprus … Greece … Spain … Italy, etc.), that guarantee isn’t worth the paper it’s printed on!
Why anyone agreed to keep their money in Cypriot banks up until last weekend — knowing what they did about the banking system’s problems — is beyond me. And why anyone would keep money in OTHER weak European banks … or own their shares, preferred stock, or bonds … is also beyond me.
|The Bank of Cyprus was first rated weak by Weiss Ratings on 4/10/2012 and was given an “E-” on 12/6/2012.|
I mean, isn’t it clear by now that European policymakers — just like our policymakers a few years ago — will basically bend any rule, grab any cash they can, devalue any currency they have the power to devalue, and otherwise shaft their citizens to prop up their banker buddies?
How to take action to protect YOUR funds —
even profit as this crisis unfolds!
The good news is, you don’t have to be at the mercy of capricious policymakers. You don’t have to keep your money in lousy banks, either abroad or here at home. You can identify at-risk institutions by using tools such as those provided by our Weiss Ratings division! Our
ratings arm grades more than 7,100 domestic banks currently, and began publishing ratings on 498 international banks in April 2012.
Each and every institution is ranked on a simple-to-understand scale of A-to-E. The lower the letter grade, the worse shape the bank is in, based on an objective analysis of its stability, earnings, capital level, asset quality, and more.
How on-target are the ratings? Well, consider that I urged you just a few weeks ago to consider snapping up your copy of my blockbuster new report — “Winners and Losers in the Great Global Banking Crisis of 2013-2014.”
That report specifically named Bank of Cyprus and Cyprus Popular Bank as extremely weak, with “E-” ratings!
Meanwhile, I explained how to profit from declines in the shares of three European banks that trade right here in the U.S. I said these banks were vulnerable if the European bank crisis were to flare up again because they were fundamentally weak.
Sure enough, shares of two of those banks just plunged to their lowest levels since mid-November. Shares of another one appear to be rolling over right on schedule. And what about my suggested “buys”? One targeted bank stock just hit its highest level since September, while another just hit its highest level since it started trading here in the U.S. in 1995!
Bottom line: If you own banking shares or bonds, or have your money deposited in weak banks here or abroad, I believe you’re taking significant risks with your money. To get a better handle on that risk, I urge you to consider my latest report.
Better yet: I’ve arranged with my publisher to cut the price of that report in HALF given the urgency of the current situation. That means the report, normally $299, will set you back just $149. All you have to do is click here or call my customer service staff at 1-800-291-8545 to get your hands on it — before more governments come gunning for their citizens’ money!
Until next time,