I don't consider myself one, but I've owned physical gold and silver for almost 20 years (and I'm not all that old). If anyone had gone on CNBC (or Louis Rukeyser for those in the US who remember that gold bug hating public TV personality) four years ago and said this could happen in a European country (not Belize, Uganda, or Detroit) they would have been lampooned, harpooned or otherwise called a kook.
Cypriots were hunting for cash on Monday following an official announcement that banks would stay closed for two more days while parliament votes on a controversial levy on bank deposits.
Fears that the vote could fail have made account holders anxious about when – and even whether – they will regain access to their deposits.
Cash machines in Nicosia’s suburbs emptied quickly, but bigger bank branches in the centre of the capital were better supplied.
The central bank has instructed lenders to keep cashpoints open to avoid triggering panic among depositors. The Cyprus banks’ association urged customers to “stay calm”, saying the government and central bank were doing their utmost to maintain financial stability.
Yet the mood in Nicosia on Monday was tense.
“My mother had to drive to a central branch of Laiki bank to find money, so I went out too, and we will go again tomorrow,” said Eleni, a financial services worker. “You have to collect cash in order to feel safe.”
Aristo, a university student from Greece, said he was worried about running out of funds.
“I am not sure whether my parents will be able to make a transfer to Cyprus this week, so I’ll be really strapped for cash,” he said.
His friend Maria, an economics student, warned that restaurants in the old town had stopped accepting credit cards. “It seems it doesn’t take much to send us back to being a cash-based economy,” she said. “It’s getting a bit scary.”
An employee at a four-star hotel told guests that accounts should be settled in cash. “It’s just a precautionary measure,” she said.
Even if Cypriot lawmakers back the levy and banks open before the end of this week, the economy will take a hit, with local depositors now expected to stash money in safe deposit boxes and under mattresses. Fears are increasing of a massive flight of capital by Russian companies, which hold more than one-third of deposits in the system and may seek to transfer funds to another low-tax jurisdiction, such as Malta.
“All my Russian clients called over the weekend to discuss what has happened,” said an accountant who provides corporate services to foreign companies based in Cyprus. “I checked all their accounts to see what exposure they had here.”
“Confidence has been seriously affected,” said a Nicosia economist who declined to be identified. The economy could shrink by as much as 6 per cent this year, he added, compared with an earlier projection by international lenders of 3.5 per cent.
Fiona Mullen, director of Sapienta Economics, a consultancy, said the knock-on effect of the levy would be significant.
“About 8 per cent of the money supply will be taken out of the system [through the levy], so people will be even more cautious about spending,” she said.
The sense of uncertainty extends to immigrant workers, mainly from Asia, who provide domestic services on the island.
Dolores, a Filipina household helper, was contacting her family on Skype at an internet café. “I had to tell them I may not send any money this month because of what’s happening,” she said. “I’ve been in Cyprus for 12 years and I’ve never seen my employers looking so worried.”