http://worldnews.msnbc.msn.com/_new...-day-is-this-beginning-of-a-run-on-banks?lite Greeks withdraw $900 Million cash in 1 day. Confidence in currency is a potentially fickle thing.
Yes, and that might be putting it mildly. They withdrew another $600 million on Tuesday. This might not sound like alot by U.S. standards, but one has to remember that the GDP of Greece was around $280 billion BEFORE their current economic woes. Current numbers put it somewhere close to $250 billion. If the same thing were happening in the USA, then using the same numbers as this article, it would be the equivalent of US citizens withdrawing about $54 billion in one day, and then another $39 billion the very next day from ATM's all across the country... Worse yet, in total, Greeks have withdrawn about $5 billion (US) from their banks in the past 10 days. This is an astonishing amount of money, relative to their GDP. We're talking a country a little larger than New York City. Meanwhile, in Spain, citizens have withdrawn about $1.3 billion in less than one week. http://www.usatoday.com/money/world/story/2012-05-17/greece-spain-run-on-banks/55036614/1 This is what unbridled debt implosion looks like in 2012, despite sophisticated efforts to prevent it, and even in spite of all the lessons we've learned from previous depressions, runs on banks, and crisis of confidence. I can only assume the lack of reporting on this is Mainstream Media trying to act responsibly, and not drum up unnecessary hysteria. Greece and Spain will serve, if nothing else, as interesting case studies on the behavior of people- and the responses of the regulators / monetary governors.
Pretty mad stuff there and I hope it doesn't spread too far. This may sound like a bit naive, but they're withdrawing Euro, what happens if they leave the Euro (highly likely) and go back to drachma? As for a study in behaviour, the herd has panicked. With regulators, they weren't fast enough to limit the amounts that can be withdrawn. We all know something is up, but to what extent, no-one has really worked out what, or how bad.
This is the part of this whole thing that has me a little confused. If the Greeks are withdrawing all this money in Euros because they fear a return to the drachma as the Euro collapses, then what benefit is there to having a bunch of Euro in liquid form as opposed to bank form?
A run on banks isn't the same thing as a run on the Euro. There are (at least) two issues going on from the perspective of the Greek consumer- confidence in the Euro value (which has taken a tremendous hit against the dollar in the past 30 days), and crisis of confidence in Greek monetary policy / strength of banks. If the banks close with your money in them in an emergency atmosphere, you wouldn't be able to get it out. Consequently, they are panicking. Take a look at this headline: http://www.guardian.co.uk/business/2012/may/17/vince-cable-no-panic-greek-crisis?newsfeed=true Vince Cable: Bank Run Panic "Should Not Spread into U.K." Financial Firewalls "Should" Prevent Crisis
Back in 2011, this whole scenario appears to have been largely predicted by George Osborne, with a fair amount of accuracy. Furthermore, there are allusions in the article to "contingency plans" just in case this exact scenario plays out. http://www.guardian.co.uk/politics/wintour-and-watt/2011/nov/29/georgeosborne-autumn-statement-20111 What happens when the Greek run spreads to Spain, Portugal, and even Ireland- all of which are troubled these days? I know if I am a wealthy person sitting in an economically sound nation elsewhere in the Eurozone, and all of a sudden 2 or 3 large players bow out of the Euro altogether, the value of my (sound) money will change for the worse. A run on the banks in 2 or 3 nations equals a loss of wealth for others holding the Euro, and as a consequence, the threat of them wanting to divest themselves of the Euro as well (in favor of other holdings). It becomes easy to see how panic can spread rapidly, even when such panic is completely illogical.
They get a loan for the debt from another group that group now holds the loan and pays off the EU. The parasite country gets kicked out or opt out and the Euro goes up in value. I'm hedging my bets and holding a little pile of euros just to see what happens. The rest of the EU countries are raising the retirement age so their people can work longer to pay off the debts or pay longer. At the same time Greece wants to hold their retirement age down. Now some countries in the EU have separate additional taxes to support poorer nations in the EU. What sense does all this make? I think the UK were the smart ones, Yea were in but we won't change our currency. Now what about Turkey, wil they be allowed in? Spain and Portugal are now waiting in the wings for their drama to hit the papers...
The main problem with the Greeks is that their political system is absolute anarchy at the minute. All the talk of austerity to deal with their budgetary deficit, no real ruling party, no direction, ridiculous speculation about moving back to the Drachma etc. As you said, the Greek people are in a panic and it's starting to show.
Greece needs to fail. The Greeks have turned into a parasitic economy and the parasite needs to be excised. Greece failing will scare a few more people and allow additional measures to be taken. Hate to say it, but Spain and a few other countries need to go under before Europe as a whole reforms, and we can not reform until Europe fails, or starts to reform.
And they're rioting again over the most recent vote. Because the solution to not having shit... Is to torch the shit you DO have.
I'm half Greek. Almost my entire side of that family lives in Athens, and things there are just about as bad as it appears, if not worse. There's been something like 4,000 suicides during this disaster. In addition to that, over half of the country's population under the age of 25 are unemployed. Then, there's the cutbacks that retirees and government workers are feeling, with lots of them losing a third of their income. What's even more disturbing is that a lot of the Greek people blame Germany for the mess they're in. A good number even believe that Greece finds itself the victim of a German-lead conspiracy. Added to which, there's now a strong sentiment amongst the Greek people, and even the government itself, that Germany should pay reparations for war crimes dating back to the Nazi occupation. It's hard to imagine that kind of demand or sentiment having a positive impact on country relations when one country is already asking for, needing, and receiving so much financial help. A combination of over half of a country's youth being unemployed with even more hardships ahead plus blame being projected so heavily on to a foreign power is nothing short of a massive powder keg. Simply allowing Greece to fail may not be the easy solution people think it is. Keep in mind that Greece isn't alone in this, although it is obviously in worse shape at the moment than any of its European counterparts. Portugal, Ireland, Spain, and even Italy are all facing big cuts, with Spain still considering asking for external assistance. Obviously, Greece needs to be held accountable for the trouble it has gotten itself into, but simply excising a country from an interwoven, globalized economy-especially when you're talking the EU-- isn't a cut and dry solution. Given that Greece isn't the only severely indebted European nation, the concern here is that its exile from the EU could lead to a domino effect with the aforementioned countries.
What till the shoe drops in America. Once our debt is finally fully known and we fail as in the case of Greece it won't be pretty.
Im really concerned about the Golden Dawn party gaining prominence in Greek politics. Essentially, they're a revitalized Nazi party and the parallels to the German Nazi party's rise to power are really shocking.
Thanks for the insight, Doc. It did seem like there was a disporportionate level of vitriol toward Merkel when she visited. Any opinion on the austerity measures that have been put in place? It looks (from the outside) like they've got a concept that briefs well (we'll help keep you afloat on the assurance that you ARE tightening the belt and we're not funding extravagance). But it's hard to tell how it will actually play out on the ground (and most news reports I've read only cite the unemployment numbers or one or two anecdotes complaining about the government...)
So, a question: is it actually possible to overwhelm a Capitalistic Democratic Republic (like America) by simply expanding the welfare disbursement to such a great degree that eventually we can no longer meet our financial obligations? To me, nothing we are doing in this country makes a lick of sense. If you look at the Florida map from election day, basically the WHOLE STATE voted against Obama, except the inner city ghettos and places where they distribute the bulk of Federal funds for various welfare programs. Most of the country was the same way (except for ideologically liberal enclaves like the far Northeast and the West Coast, or places with extraordinarily high concentrations of homosexuals, or high populations of women concerned with women's health issues. As for me, I care NOTHING for these social issues, since they are so far down on my priority list. All of those issues- abortion, immigration, national security- NONE of it matters at all if our nation finally collapses by virtue of being simply unable to pay what is being demanded of our population. Promise after promise after promise. How are we going to pay for it all, and what happens when we can no longer pay for it all? Confiscation of property? Implosion? Greece? A revolution?
One thing worth noting is that Greece's parliament just barely approved the austerity package. From the article: As for the Greek people, the big reason they're rioting is that, basically, they feel that the government is slowly killing their livelihood, cut by cut. These austerity measures aren't the first reductions in government spending. They're wondering when enough will be enough, and they're angry at politicians who seem to hint at or say that, each time budget cuts are being made, this will be the one to fix things. Their anger is further compounded by the widely held notion that the government there is more concerned with protecting the wealthy elite(sounds familiar, huh?) than alleviating the suffering of the masses. Whether these things are true or not, I'm not sure. That's just what the general feeling is over there. I'd like to add that there's some debate over whether or not austerity really works. For example, some are concerned that the cuts in spending aren't enough to overcome the reduced tax revenues that accompany austerity measures. The IMF itself recently reversed its long-held stance on austerity, with an admission that they think that stimulus spending helps more than austerity measures. Unsurprisingly, the findings of that study are also up for debate and interpretation. At this point, I'm not schooled enough in economics to even begin to guess at what's going to happen. Hopefully, the rest of the EU and the U.S. learn some vital lessons from Greece's troubles.
I guess my first question in response to that is... what has the government been saying re: austerity? Not necessarily the latest-greatest, but what have they been saying all along? If you're going to start making adjustments to quality of life, expectation management needs to be a huge consideration.
The amount of support and momentum that Golden Dawn seem to be gathering in Greece is genuinely disturbing.
