It’s not lust. Nor greed nor hunger. Fear is the great motivator. It drives people from their logical path. Makes them believe the worst. Renders them impotent.

Since the news broke that depositors in little Cyprus would be taxed to finance a bank bailout, the value of Bitcoins, for example, has soared. The digital money (which is really a commodity) traded at five bucks a pop two years ago and is now near $140. This past week the market value of Bitcoins passed $1 billion, even though you can’t use them at Loblaws or Petro-Canada or the liquor store. But you can buy drugs and weapons online. Go figure.

Digital money, not issued by any country, backed by no government and unencumbered by interest rates, is hot these days among the young and mistrustful who last year botched the Occupy movement. It’s as much an anti-bank thing as a strategy to protect wealth. It’s cool, and like Psy, likely going nowhere.

But it’s the latest manifestation of a fear that runs right back to the meltdown of 2008. The same terror spawned the real estate rush in Canada. After all, houses always go up, right? Homer Simpson ran screaming from the bursting equity market bubble to create a new one with real estate. Now the very nature of money and bank accounts is being questioned, simply because human nature makes us devour bad news.

In the last few days, late to the meme as usual, the MSM has been rumping the Cyprus story with the new Canada twist. CBC did it. The Toronto Star did it. Expect more. The warning is simple and gripping: if authorities in little Cyprus can hollow out bank accounts to rescue a failing bank or a smashed economy, why can’t it happen here?

F walked right into that one. Days later the new budget came out, with a supplementary document describing a ‘bail-in’ rescue mechanism if a Canadian bank ever went assets-up. It talked about converting bank ‘liabilities’ into operating capital, instead of having taxpayers save a too-big-to-fail institution. The suspicious, mistrustful and naive among us (including those who hate banks, love gold or fall for Bitcoins) immediately interpreted ‘liabilities’ as being the savings of depositors. This, as Ottawa made clear two days ago, ain’t so. But why spoil a good fright?

In the last week realtors have used their Facebook pages to suggest that when (not if) the banks fail and your money is stolen, you’ll wish you’d bought a house. The silver-and-gold nuts have suggested if Ottawa thinks a bank can fail (it doesn’t) you need to put all your wealth into rocks. Said prime Canadian bullion-humper Eric Sprott, in a passage that pretty much finishes off his waning credibility:

Governments around the world are finally beginning to realize the gravity of the risk that exists in their banking sectors. The EU has decided to build upon the new template of the “bail-in” regime. The US, UK and Canada have all followed suit. This puts the onus squarely upon the depositor. The depositor is a lender to the financial institution that he banks with. However, most depositors naively assume that their deposits are 100% safe in their banks and trust them to safeguard their savings. Under the new “template” all lenders (including depositors) to the bank can be forced to “bail in” their respective banks. The Greek tragedy is now being played out in Cyprus with a new twist as depositors have been unwillingly turned into sacrificial lambs. We strongly believe that real assets trump a fiat currency in a “savings” account. It is not our intention to be alarmist here, merely to say, “caveat depositor”.

Added the CBC’s ace reporter Neil McDonald: “In the ever-more insecure world that has unfolded since the financial meltdown of 2008, it is also increasingly clear that nothing is safe anymore, not even blue-chip bank stocks and bonds or even, in the case of the Cyprus bail-in, private bank accounts. And now, Canada is making a bail-in official government policy, too…. if Ottawa is seriously contemplating the failure of a Canadian bank, ordinary Canadians might want to do the same, and govern themselves accordingly.”

Said the Star: “Be prepared. If you hold the wrong kind of bank accounts, Finance Minister Jim Flaherty may have your savings in his cross-hairs… The new rules would allow federal regulators to seize unspecified bank liabilities — including, perhaps, the savings of uninsured depositors — and use them to prop up a faltering institution. Which, as it turns out, is exactly what Cyprus’ government did to deal with its banking crisis.”

See what I mean? A fear fix.

What are the facts?

“The bail-in scenario described in the Budget has nothing to do with depositors’ accounts and they will in no way be used here,” says the Finance Department. “Those accounts will continue to remain insured through the Canada Deposit Insurance Corporation, as always. If a bank is having severe difficulties, the bail-in regime would force certain debt instruments to be converted into equity to recapitalize the bank.”

That seems clear enough. But what ‘certain debt instruments’ are they talking about?

As I outlined last weekend, not a cent of depositor money – insured or uninsured – would be eyed in the (incredibly unlikely) event of a big bank flop. Instead, banks will likely soon be required to set aside ‘contingent capital’, such as a special class of shares or ‘bail-in bonds’ which pay investors a heightened rate of interest. These could be quickly turned into cash to shore up a staggering bank in the event of a crisis. The main point is to stop any ‘systemically important’ bank from thinking it is so big and vital to the economy that taxpayer money will be there to save its ass. Instead, it has to save itself.

When that unsecured debt hits the market, you can be sure it’ll be gone in a flash, gobbled up by people who know what to fear. And it’s not losing money.