The Cypriot parliament is going to vote tomorrow on whether or not to make this money grab "legal". I hope they don't allow it, but if they do, then it shakes the foundation of banking to it's core.

That's because the only reason why we don't all get up early tomorrow morning and go to our banks to get our money out is because we've got confidence that they'll give it back any time we want it. That's because the whole idea behind a bank is that it's a safer place to keep your money than under your mattress or stuffed into a mouse hole in your wall.

But, banks don't keep your money in a safe. Most of the deposits a bank has are invested in long term investments like mortgages and loans. So, everyone wanting their money back at the same time would force any bank into immediate bankruptcy. It's really the trust that our banks will give us our money back if and when we want it that keeps the whole system afloat. Without that trust, the whole system collapses, and we can have a global collapse of the world's banking system tomorrow if everyone wanted their money back tomorrow. And, this Cypriot money grab is exactly the kind of thing that can destory that trust that keeps the banking system afloat.

IF, after tomorrow, anyone ever hears rumour of a similar "Tax on Savings" to be implemented in Greece or Italy or Ireland to finance another bail out for those governments, then every European outside of Germany will be lining up to get their money out of their bank. And, that will cause a run on the European banks, and the near economic collapse of 2008 will be repeated, only this time starting in Europe and spreading to North America instead. North American banks hold bonds issued by other banks, including large European banks like ING and the Royal Bank of Scotland. So if those European banks go bankrupt, their bonds become nearly worthless, and that causes the asset value of North American banks to collapse. That's the way the economic collapse spreads.

I think this Cypriot money grab goes way too far in that it shakes people's confidence in keeping their money "safe", by keeping it in the bank, and breaking that trust is playing with fire. I just hope the Cypriot parliament will realize that when they vote tomorrow.