This sounds like something that you'd hear on late night AM radio when driving across central Pennsylvania (that's a topic for another day, btw). The news that Cyprus would impose a mandatory bank bailout tax on bank accounts has caused more than a minor stir in Europe on an otherwise quiet Saturday.
Here are the details of the $10 billion bailout announced last night...
* A one-time tax of 9.9% of deposits in excess of 100,000 Euros.
* A one-time tax of 6.75% of deposits under 100,000 Euros.
So far, Cyprus has been just a bit player in European Debt drama, but the nature of this story is scarier than the size of this deal. The fact that Russian billionaires like to park their money in Cyprus is going to further complicate matters. The drama in Cyprus has been pretty intense. People standing outside of banks waiting for them to open on Monday. Even one picture of a guy that drove a bulldozer down to the local branch to request his money :)
Again, this isn't an income tax, or a capital gains tax, this is a tax to save the banks where your deposited your money. The concern will not be what this means for tiny little Cyprus but what if this sparks minor (or major) bank runs in Greece, Italy or Spain. I view this as highly unlikely to cause widespread panic, but this is one of those wild card "Black swan" style events that needs to be watched very closely. I didn't expect one guy lighting himself on fire in Tunisia to cause more upheaval in the Middle East than we'd seen in 50 years, but it did. In the era of Twitter, rumors of bank runs can spread like wildfire.
Once talk radio in the US gets wind of it, there will be no stopping the conspiracy theories. So please try to tune this out and focus on reality.
Tune in tomorrow as the world turns....