As Murray Rothbard pointed out many times, the fractional-reserve banking system is inherently bankrupt. It is only protected by the fact that central banks can print money to bail out weak banks in the system. That the elite have chosen, for whatever reason, not to protect some banks via money printing has resulted in a new element of confusion throughout the banking system. When will the ruling elite determine that a bank in trouble should be protected by newly printed money, and when will depositors be forced to absorb a part of the cost? The decisions on this seem to be made in ad hoc manner.
Thus, everyone needs to be on alert about their money at all times. The Cyprus crisis, and how depositors were treated, is certainly an object lesson for the observant that some money must be kept outside the banking system. Further, even money that is kept within the system should be diversified between various banks. Since rules appear to change almost randomly, it is never known what rules will apply to what financial institutions and when.
The ultimate lesson of Cyprus is not to trust the current banking system. It can surprise you at any time, but especially on long weekends.
Read the complete article at The Mises Institute here.
Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.