The Cyprus “bail-in” model of bank rescue, which seems to be gaining popularity, is simply frightening. Fractional reserve banking is built upon depositors trust in their banks, “for fractional-reserve banking can only exist for as long as the depositors have complete confidence”. Financial regulators are destroying their own system by making depositors fear for the safety of their money… they’re either that stupid or that desperate. Frightening.
Joseph T. Salerno sees the silver lining here arguing that Cyprus may bring about the unravelling of the current banking system and expose “the true nature of fractional-reserve banking for all to see.”