The stereotypical ultra risk-averse move, in terms of handling savings, is to “stuff money under the mattress”. It’s there, under your control, and not subject to anything crazy happening. Of course, when people could simply put money in a federally insured bank account, why would anyone stuff money under the mattress?
While the rates today at banks aren’t exciting too many people, they’re at least a bit higher than keeping money in cash at home. At least you’ll lose money relative to inflation at a slower rate! Chalk one up for the banks versus the mattress.
However, based on what has been happening with the Cyprus deposit tax controversy, perhaps banks in some places might not offer better rates of return. With potential deposit taxes having discussed as quite high for owners of high deposit amounts, it seems like that would be a low ROI situation. Chalk one up for the mattress versus the banks.
Now, the idea of taxing deposits is one that may be alarming a lot of people across the globe. Just thinking about the idea of hard-earned money just being taken from a bank in the form of a tax, to bail out a larger entity, is enough to cause great concern to many people. Of course, those of us here in the U.S. (and Canada, I would think) aren’t likely to immediately view this as something that will happen here. Rather, it just seems like a desperate attempt to help a desperate situation elsewhere across the world.
That being said, could it ever happen here? What are the chances?
Hard to say, and who knows what would ultimately happen there. Regardless, this turn of events overseas is one to pay a little bit of attention to. Thinking about it, if money is needed for bailout purposes, what is to stop a percentage being taxed in this way? Or, in reality, taken away from the person who earned it? It seems like a crazy and dangerous notion today might eventually seem more “normal”. Maybe we just haven’t been sensitized to this yet.
So, if there are assets that are traceable and recorded, they could be taken away in this type of scenario. It gets me thinking about whether or not hard assets such as gold and silver may maintain some extra importance in this type of future. I’ve asked before if gold is overrated, and if silver is a good investment. The thing is, the notion of a world where a member of the European Union was a part of deposit taxes wasn’t in mind the time I wrote those pieces
What Does This All Mean? Well, there might not be any reason at all to overreact. Perhaps it’s just something to be aware of, that tough circumstances can lead to bad things like this becoming possible.
Oh, and maybe we can still laugh at the notion at stuffing money under the mattress – but just not laugh quite as much as we once did.
My Questions for You
What are your thoughts about the idea of a deposit tax?
Do you think this is something that could actually happen where you live?
Would this development at least get you to think about the possibility of defensive measures with money?