The reasons that the crises in Cyprus as well as Europe is already on our doorstep is that our Banks have purchased and continued to hold billions of dollars of bonds issued by these countries, promising to pay ultra high interest rates. If these countries default on their bonds (i.e, can't pay them as and when due), then the bonds become worthless and our Banks have to write them down to zero value on their balance sheets, resulting in our Banks becoming balance sheet insolvent. (i.e., their liabilities on their balance sheet exceed their debt). When this happens, they are required by law to be closeddown by the Federal Reserve, and the Fed is only responsible for paying out to the account holders the federally insured portion of their accounts.
As far as the long term effects of redistributing money, a wise man once said that you could take all of the money on the planet, divide it up equally among all of the people on the earth, and in ten years, it would basically all be back in the same hands that it started in.
Mannyrock
