You have to feel for the people of Cyprus. The tiny European country may have avoided bankruptcy, but is staring at a very deep and very long depression.
The details of the country's 'rescue' make grim reading for any saver.
Cyprus' second biggest bank, Laiki, will be closed. Deposits of less than €100,000 move to the Bank of Cyprus. Those with more would become creditors, facing massive losses as Laiki is dismantled.
For now, the banks remain closed. A run on the banks is not out of the question. What would you do? I'd be queuing up to grab my remaining euros and stick them under the mattress. After all, it's not as if I'd be earning masses in interest anyway.
World stock markets blinked. Here in Australia, in morning trade, the S&P/ASX 200 fell 34 points to 4956. Losses are spread across the board, of the majors, AMP (ASX: AMP) and Rio Tinto (ASX: RIO) being the hardest hit, both falling a relatively modest 1% or more.
Last year, world markets would have crashed. A recovering US economy, and continued low interest rates across the globe have made investors immune to panic…for now.
According to Fairfax, many of the investors in Cyprus who will suffer most from what is being called the "bail-in" are Russian businessmen, who were exploiting the country's low business tax rate.
As usual, if it sounds too good to be true, it usually is. Those who play with fire end up getting burnt. Investors in Banksia, Storm Financial, Opes Prime and the like will know the awful feeling.
If you want to keep your financial affairs simple, and keep them in Australia, click here now to get The Motley Fool's special FREE report, "3 Stocks For the Great Dividend Boom". The report lists the names, stock symbols, and full research for our three favourite income ideas, all completely free!
More reading
Why Cyprus matters for investors
The Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Motley Fool General Manager Bruce Jackson does not have an interest in any stocks mentioned above.
