Hey, Have I got a deal for you! I just heard about this bank that is offering 7% interest on passbook accounts. The account is insured by the government so you can't lose. They take your money and invest it in government bonds. Would you like to know more? Follow me past the orange twists and turns to learn the rest of the story.
The bank is in Cyprus. The banksters take your money and invest in Greek government bonds that are paying maybe 15% interest. The banksters pay out maybe half in interest and keep half themselves. The investors in this scheme get to call themselves depositors. Who knows what the bank regulators call them. The deposits amount to 5 times the GPD of Cyprus. So 7.5% times 5 GDP's = 37.5% of GDP off the top. That's a pretty good business model.
At least it was until Greece had a partial default on its obligations last summer. There were a few rumblings at the time in CDO and CDS markets but there seems to be at least a 6 month lag for serious shit to hit the fan. They are looking for a bailout of about 1 GDP to cover shortfalls in this scheme but who knows what the market value of the underlying securities really is. Zero if the whole Euro thing falls apart. from the numbers I've seen I guess half of the five GDP is in accounts under the insured 100K limit so the Cyprus government is on the hook for half a GDP if they let the banks fail.
The ironic thing is in an effort to keep the whole scheme floating the financial masters of the universe have scared depositors everywhere into thinking their money isn't safe in the bank anymore. And the one thing that would bring a very quick end to the game they have been playing is for depositors to vote with their accounts.
Iceland is looking better and better.