Italy has now joined the “bail-in” crowd.
In this particular case, the bail-in will use bondholders’ money. But depositors will be on the hook in future cases in Europe.
Those who are shocked by this development are not paying attention. The template for this manner of dealing with financial issues was first laid out in Cyprus in 2012-2013.
Anyone who wants to understand how the next global banking crisis will unfold should take heed.
The quick timeline for what happened in Cyprus is as follows:
Cypriot banks formally requested a bailout back in June 2012. The bailout talks took months to perform. And then the entire system came unhinged in one weekend.
One weekend. The process was not gradual. It was sudden and it was total: once it began in earnest, the banks were closed and you couldn’t get your money out (more on this in a moment).
There were no warnings that this was coming because everyone at the top of the