When the Great Depression unfolded in the 1930’s, many people lost their trust in the banking sector and stock markets and instead chose to store their money in a mattress or any other place they felt it was safe. For most discouraged investors, it seemed like their only viable option at the time. It took many years before the investment community began to trust the banking system and stock markets. Nowadays the average citizen, particularly in Europe and the United States, has again lost their trust in the banks and the stock markets; but at least now they have viable investment alternatives to turn to.
What has occurred in Cyprus in the past, with the banks seizing innocent depositor’s money, amounts to nothing less than stealing from the poor to give to the rich. While they may have succeeded this time, investors expect that there will be serious consequences in the future, as a result. Leaders in the European Union have already widely acknowledged that this “formula” could be instituted in other weak EU countries, that demonstrate they are unable to manage their own financial affairs. In other words, the average citizen will be expected to help pay the bailout bill, even if they cannot afford to do so. This precedent set in Cyprus will no doubt cripple the country’s economy and cause serious hardship in people’s lives.
Although there are restrictions put in place for depositors on how much they can take out daily, the banks should realize that these traditional investments seem risky and it will be a long time before many people in Cyprus are going to put their money back into the banks for fear of having it confiscated. This policy by the EU leaders will result in many European citizens from other countries pulling out their money from the banks and seek other options where they feel their money will not be “stolen” from them. The European banks will ultimately feel the biggest losses, when this becomes a stark reality in the coming months and years, and rightfully so. Why should they profit from their own mistakes? In the business world if you make mistakes that bankrupt your company why would investors be interested in supporting such massive mismanagement? They would simply look to more profitable and safer opportunities.
Nowadays, there are many more profitable alternatives that investors can invest in, instead of putting their money into untrustworthy banks or stocks. In fact, many of the options that have emerged have proven to deliver consistent returns even during the last five years, when the markets were exposed to economic and political turmoil. It is expected that in Europe, many investors will abandon the banks and the stock markets in favor of investing in alternative investments, that will protect their money and grow it steadily; without any fear of having it lost or confiscated.