EARLY in the crisis, a wise ex-colleague wrote to say that "Savers will pay for the mess. They are the only ones that have any money left." No doubt, he will be nodding his head at the terms of the Cypriot bail-out deal. Schumpeter carried a very effective dissection of the plan yesterday and it is always possible that the deal might collapse; the parliamentary debate has been postponed.

One has some sympathy for those trying to organise a rescue for a country where the banks are many times the size of its GDP, and where a lot of the depositors are foreign nationals. Cyprus's problems are not new, and the upper limit on insured deposits is common knowledge, so it is possible to justify a levy on deposits above the insured level. Taxing deposits below that level, however, is much harder to justify especially as it seems that senior bank bondholders will not lose out.

What incentives does this create for savers elsewhere? Cyprus will be described by the authorities as a one-off, to try and reassure the depositors of Portugal or Spain. But will Europeans believe that the authorities do not have sufficient money to make whole the depositors of tiny Cyprus but do have enough to bail out banks elsewhere?

People who don't trust banks, and keep their money under the proverbial mattress, will not be touched by this levy; in the past, such people have been regarded as eccentrics. Not any more. The same applies to people who keep their money in the form of gold, and store it in a vault. Gold's price is, of course, variable; the price fall since October in dollar terms is more than 8%, the average of the two Cypriot levies. Still, there was a pick-up in retail demand for gold in the wake of 2008's banking crisis and there may be so again.

Finally, it is worth remembering the blog's underlying thesis that the developed world's debt will not be repaid in real terms, and will thus be defaulted on or inflated away. Our bank deposits are, of course, debt as far as the banking system is concerned. If the authorities hold real interest rates negative, as they are in Britain, for example, then the effect on the after-tax purchasing power of savers after two to three years, may be as big as the Cypriot levy.