-- Posted Wednesday, 27 March 2013 | | Disqus

Banks reopen in Cyprus tomorrow but only in the technical sense of the word. Thousands of depositors will still not be able to withdraw their money due to a raft of new capital controls to prevent a fresh run on the banks, and if Iceland is a precedent these restrictions could last for many years.

How can this happen inside the European Union? Is the free flow of capital and people not at the heart of the union? Could Texas impose capital controls against the union?

Democratic tyranny

What are the unfortunate depositors in Cyprus supposed to do? Mount a class action to challenge EU treaties? For the moment it looks as if the tyranny of the majority in the Cypriot parliament is sovereign and the rich guys have been beaten.

As Russian Prime Minister Demitry Medvedev commented: ‘they are continuing to steal what has already been stolen’. Give your money to thieves and they will always find a way to keep it.

However, this is not without consequences for confidence in the EU banking system. What happens in one nation can happen in another. Why would you keep more than 100,000 euros in any single bank within the EU now, or certainly not in any country with serious debt problems?

Even wider is the impact on confidence in holding money in any bank. How can you keep your wealth safe and secure if you can’t trust the banks?

Devaluing money

Stuffing it under a mattress is the traditional response. Then again can you rely on paper money as a store of value? It could be devalued out of existence by governments, and the value of the euro has shrunk this week in the wake of the Cyprus farce.

No you need to own hard assets and precious metals are the most obvious alternative to paper money in these troubled times. Cyprus is a defining moment for gold and silver, even if prices have only moved up a little thus far.

We really have not yet seen the final stage of the decade-long bull market in precious metals when the general public discovers the true value of gold and silver and rushes to buy. Cyprus may be that tipping point or certainly an important stage in getting there.

-- Posted Wednesday, 27 March 2013 | Digg This Article

About Peter Cooper:
Oxford University educated financial journalist Peter Cooper found himself made redundant by Emap plc in London in the mid-1990s and decided to rebuild his career in Dubai as launch editor of the pioneering magazine Gulf Business. He returned briefly to London in 1999 to complete his first book, a history of the Bovis construction group.

Then in 2000 he went back to Dubai to become an Internet entrepreneur, just as the dot-com market crashed. But he stumbled across the opportunity to become a partner in www.ameinfo.com, which later became the Middle East's leading English language business news website.

Over the course of the next seven years he had a ringside seat as editor-in-chief writing about the remarkable transformation of Dubai into a global business and financial hub city. At the same time www.ameinfo.com prospered and was sold in 2006 to Emap plc for $27 million, completing the career circle back to where it began a decade earlier.

He remains a lively commentator and columnist as a freelance journalist based in Dubai and travels extensively each summer with his wife Svetlana. His financial blog www.arabianmoney.net is attracting increasing attention with its focus on investment in gold and silver as a means of prospering during a time of great consumer price inflation and asset price deflation.

Order my book online from this link

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