The recent crisis of Cyprus has brought to light two things. One is the obvious part that the crisis in Europe has not yet eased off. Second is using the deposit money to bail out the banks. Cyprus has decided to charge a levy on deposits which would help it raise funds required to meet the bailout conditions. This has been a worrisome factor. Till now the bailouts were funded by richer and more stable countries. But with Cyprus there is a new trend that has started. The biggest worry is that deposits are of banks which are in trouble. So if the levy is charged, the country would be saved. But the bank would still go on to become bankrupt. Such things have happened in the past. That banks that have been bailed out have still gone bankr upt. In such an event the depositors would become bankrupt too. First they lose money to bail out the bankrupt bank. And second they would lose whatever deposit they have with the bank.

Unfortunately this is a crisis that seems to be spreading. As per Azizonomics, banks that are capable of charging such levies and which are in terrible financial condition can be found in many other areas of the world as well. Spain is one of the most noteworthy names that the blog has mentioned. Other countries like New Zealand, UK and US are not far behind either. If such a trend of charging a levy on deposits were to take grip of the world, the financial system would come crashing down like a stack of dominoes. And this time around, the smaller depositors would go down along with the big banks.