If you put money in a U.S based bank, the Federal government insures it up to $250,000 -- if the bank gambles your money on worthless paper, gives it to its CEO, or otherwise fails, you get paid back up to $250,000 by the FDIC. Nobody would trust banks without this guarantee. It would make more sense to hide your money under a mattress which would lead to a very different and impoverished world. (This is how banking worked before the Great Depression; 4000 U.S. banks failed leaving their depositors without recourse in 1933.)
The present government of Cyrus promised people who put money in its banks that their deposits were insured up to 100,000 Euros (about $130,000). The Cypriot banks gambled and lost, like so many under-regulated financial institutions all around us. If they are to stay in business, they need a bail out. And they are getting one -- one third of which will be financed by grabbing a percentage of individual deposits from the banks. Many of the big depositors are Russian oligarchs who were using Cypriot banks as a place to stash money in Euros. But Cypriot depositors, ordinary people with less than $130,000 mostly middle class families, are getting hit for 6.75 percent of what they thought was safe government-insured savings. It is not as if Cypriots are even getting anything tangible for this tax: this is cash the European Central Bank (ECB) demands to be used to pay off bank investors -- mostly richer European countries like Germany.
I don't usually write about this sort of thing, but the ill-omens are too strong to ignor. I'll pass it to someone who knows what he is talking about: Felix Salmon, Reuters' finance blogger.
People have been known to go mad with rage when they experience broken promises on this scale. The promise that their vote and their well-being matter is being exposed as a fraud. If we don't want to find ourselves in this fix someday, we need to make sure our democracy has the capacity to impose limits on capitalist greed. The many have to rein in the few, ultimately in the interest of all of us, even the plutocrats.