As anyone with at least one eye on international news channels can tell you, the situation emerging from the European Union (EU) is filled with grave lessons for global investors to dwell on. In today's article, we'll try to unpack some of these problems to help those trying to make money in an increasingly more volatile economy make more-informed decisions about their portfolios.
At the heart of the current crisis is a lack of investor confidence in the ability of financial authorities to calmly resolve funding crises. As we've seen with Portugal, Ireland, Spain and, most importantly, Greece, EU officials have struggled to develop a comprehensive strategy for reducing the risk of these pressures, and as a result, risk spreads are prone to spiking, creating additional costs for governments trying to restructure or bail out troubled banks.
While previously, the EU, the European Central Bank and the International Monetary Fund targeted bondholders for haircuts while also putting taxpayers on the hook for liabilities, Cyprus has presented a new strategy: looking to uninsured depositors to help meet funding targets.
This creates a significant incentive for wealthy bank account-holders to reduce their exposure to banks that may be the subject of deposit taxes. As such, this presents challenges for investors looking for safe places to keep their money, especially when stock and equity markets are prone to instability. Investors need to locate income-producing assets that are spared from the impulses of financial authorities to "bail-in" countries or banks that are at risk of failure.
Here at GreatWealthStrategies.com, we focus on wealth preservation tactics that investors can use to avoid dealing with the issues described in this article. Whether it's cash flow real estate or another type of protective measure, there are a variety of tools available. To learn more, visit us today and download a "Free Game Plan Report."