Where did all of the money in Cyprus go during the Greek crisis?

Firstly, this is not a stupid question. I see most of the people including many smart ones asking this question. Value of money is nothing but the confidence people have in it. Let me explain it clearly with an example. Let us say I have 100k$ which I have kept on a property. After one year the property value rises to 110k$ and so my wealth is 110k$ now. Now an annoucement comes from the government that major companies are coming near the property. The demand rises for this property and so the price. After one more year the value of this property rises to 180k$ and so my wealth. Now another announcement comes from the government that there are no companies coming and that the project is cancelled. On top of that it also announces that there are no planned projects near that property in near future. Now panic prevails and nobody wants to buy that property and its value goes down to 80k$. My wealth is 80k$ now but I used to have 100k$. Where did the rest of 20k$ go. It did not go anywhere. People just lost confidence on the value my money bought. We hear the news of stock market crash daily. Where did the money in stock market go? It did not go anywhere. People lost their confidence on stocks and so they demand less for the stocks which reduces its value. If you have kept some money on the stock market they you could have lost it. To summarize if someone says he lost money or a nation lost money it means it has lost value of a good/investment he bought with his money which again is a measure of how much confidence people have on that good. And yeah you have to be damn careful on where you invest your money I have not read the blog post carefully but these can be one of the reasons on how Cyprus economy would have collapsed. If they have invested on Greece property market or stock market or any other market which got collapsed then yeah Cyprus lost the money in the sense that they lost the value of investment(Greece) bought with their money. Feel free to ask if you have any more doubts.

Imagine an artist who makes ten limited edition copies of a painting. He sells the first to Adam for $100. He sells the second to Beyonce for $100. He sells the third... ninth to Charlie, Davina, Edward ... Imelda for $100. Then he sells the final one to Jamie for, not $100, but $1000. Adam, Beyoncé, Charlie and so on feel pretty smug. They each tell their insurance companies that they have a painting worth $1000. As far as the insurance companies are concerned, there are now 10 paintings, each worth $1000... Or $10,000 worth of paintings. Beyonce needs a loan, so he goes to an art lender, who offers his a loan of $500 at 15% interest! but with a "security" that he gets the painting if Beyonce can't pay. Charlie does the same... So do Dave... and so on, up to Imelda. Adam, however has an issue - he gets laid off, and with no income, he can't get a loan from the art lender....he has to sell his painting, but the only buyer is Katy, who offers him $100, which, because he needs the money fast, he accepts. Suddenly, the paintings are only worth $100 each, not $1,000.... So $9,000 has just disappeared. Jamie, who never had a loan, takes a $900 loss, but the art gallery is looking at the wrong end of an $7,200 problem. Beyonce, Charlie, Dave and so then lose their jobs... Here's the problem. The art dealer is like the Russian - he's, on paper, owed the money, but doesn't have a hope of getting it back. Beyonce, Charlie and so on, aren't off the hook - they may have had the loans, but they still owe them, and will have to pay them back eventually... Or at least if they ever get jobs again. Then along comes a German, who offers the art gallery $200 in cash, for the loans... The German will, maybe, make a profit, if the loans ever get repaid.... .. But everyone made a loss because, a while ago, Jamie paid too much, and the art dealer believed that there'd be another Jamie along in the future whenever he needed one. ------------------------------- EDIT / NOTES: Following a comment / question from there's potential to misunderstand the way that secured loans work in Europe. When the art dealer takes the painting, that doesn't clear the loan. Instead, this is what happens: Beyonce owes $500. The art dealer takes the painting. The art dealer sells the painting for $100. The art dealer declares this sale of the security and applies it as a credit against the loan, so Beyonce now owes $400.

Governments like individuals and businesses borrow money from others to fund their public spending like healthcare/education/social support etc. When you borrow money, the rate at which you buy is dependent upon your credit worthiness. So Greece borrows money (debt) from Cyprus. We express the money borrowed in terms of debt/GDP ratio. GDP is the measure of total productivity of a country, much like an income for an individual. As long as a country's GDP is high or debt is low, the ratio remains in control and it can keep on borrowing more because it has the ability to pay back. Then 2008 recession happens and businesses shut down, people lose their jobs, and real estate goes down. Now Greece's GDP decreases and it realizes it has borrowed more than it can pay back. The interest on the debt itself seems huge. Now the only way it can pay back is by borrowing more. But the investors/lenders get wary of Greece and would only lend it money at a much higher interest rate, compounding the problems for Greece. So now Greece is at a risk of defaulting because it just does'nt have the money, It can get away with simply defaulting, but that would make future borrowing very-very costly. It's in a fix basically. As to where did all the money go, Greece spent it in its economy in programs like education and health, more than it should have without realizing it wouldn't have the ability to pay back if things go south like they did. And now because Cyprus had invested the same money it got from Russia in Greece, it cant pay back the Russians. So that leads to Cyprus collapse leaving the Russians worried. I might be wrong but that is what i think is the case.

People before me already gave good answers but this video sums it all up, pay attention from 0:25 to 0:38,

Money were overpaid. That is one very obvious concept the debt economies are struggling to understand. Those of the receiving side of the over-payment won. You are a banker. A Russian R. deposited $500,000 into your bank. You paid yourself $100,000 bonus, and loaned $400,000 to Mr. X. Mr. X spend $200,000 on a block of land, and paid another $200,000 to the Builder B. to erect a nice house. Builder B. paid himself $100,000 for work and spent the rest on materials. Economy is booming. You and the B. are well paid and happy. Mr. X is moving into his new house. You ask for interest payments. Mr. X realized he cannot pay, and tries to sell the house. It is a badly built house in the wrong part of town, it cannot fetch more than $250,000. Mr. X is trying to earn interest payment some other way, but his low qualification and poor job experience work against him. Mr X. is bankrupt and his house is repossessed, you bank is under liquidation, and R. will be lucky to recover $250,000 out of his deposit of $500,000. Where did the other $250,000 go? You paid $100,000 to yourself - you massively overpaid for your own effort, you are a crappy banker who should not be employed in that capacity at all. Mr. X, competing with other new home owners, overpaid for the land and hired a poorly qualified builder. The lot cannot fetch its purchase price, and the house fetches less than the materials that went into it. Builder B. was definitely overpaid. And in some sense you overpaid for Mr. X debt, by the virtue of loaning him the cash on lower interest than the risks associated with him commanded. So the money of gullible R paid for running the economy beyond its real capability. You, B. and the guy who sold the land were paid for lazy, crappy work.

Almost all the money of the Eurozone crisis (There is no Greek or Italian or Cypriot crisis, as there is no Greek or Spanish Euro...), went to Germany. More than the 60% of the "Greek" dept was posessed in Greek bonds by the Bundesbank and the Deuchebank, who got rid of it, charging all the European countries by doubling the "Greek" dept. For comunicatio policy reasons the "partners" of the Eurozone Group blamed Greece who's portion of the dept was 300 billions for the total Eurozone dept which is more than 11 trillions!!! (Only Italy's portion is 2 trillion euros!). I think the best answer is given by Peter Casey, an Irish economist: "Then,  when the euro was introduced, Germany exploited a flaw in the  introduction of the currency that allowed countries such as Ireland,  Greece, and Spain to quickly amass huge debt in order to purchase German  exports. (For Greece especially, German weapons) Over the past decade or so, Germany persisted in lending  to countries it knew could not pay back their ballooning debt. Germany  made as much as it could from these economic boosts, and then used its  own austerity as a means of achieving dominance among nations. By  building its economy via an extreme imbalance of exports versus imports,  Germany transformed itself into Europe's dominant lender and,  conversely, transformed Ireland and other EU countries into its abject  debtors."  - See more at: http://www.independent.ie/business/when-it-comes-to-austerity-germans-want-it-both-ways-30512128.html#sthash.6bOQ4z1k.dpuf

I would disagree with 's ethereal stock market/painting analogy. The Cyprus situation here is different and very simple. Russians deposited money into Cyprus banks. Cyprus banks used that money to invest in Greek government bonds thinking it was safe. It wasn't. Greek government defaulted and bond holders had to take a huge haircut. This made Cyprus banks insolvent. Since they're banks, they still have cash to process their day to day operations and withdrawals and can borrow to make up the shortfall. However the fact remains their balance book is majorly in the red. Russians still see that 100€ in their bank balance at that point, however the real money has already went to Greece. Some government official probably splurged on a greek salad. Then March 2013. That's when Cyprus banks decided to "restructure". They changed that 100€ in your account name to a lesser number that will make them solvent again. They took a chunk out of your account depending on how much you have in it. By the way your link is wrong, for accounts over 100k they took 60% not only 12%. At the end of day, trying to say this money somehow just "disappears" makes it sound like noone is at fault. This is not true. The Greeks are the winners here. They borrowed money from Cyprus, EU banks and other creditors then refused to pay it back. Cyprus banks then passed on losses on their investments onto depositors. Justifying it by saying they're Russian money launderers (this is debatable). Seeing as how Greek yields are at 6% below crisis levels again, I would say crime pays more often than not.