Thursday, July 16, 2015

It's Official: Greece Has Run Out of Other People's Money UPDATED and BUMPED

[orig post 6.28 4:30pm]

NPR:  Greece To Close Banks, Impose Capital Controls Amid Looming Default
Greece's Prime Minister Alexis Tsipras announced Sunday that banks will be closed and capital controls imposed in order to stave off a run on the euro after negotiations with the country's international lenders broke down.

He said the Athens stock market would also be closed.

But not to worry.  Socialist prime minister Tsipras has assured the masses that their bank deposits are safe.

Frankly, if anyone has anything over $5 is a Greek bank, they deserve what they get.

My first reaction to the photos (ZH) of Greeks lining up at ATM machines over the weekend was, "look at those idiots."

But I've come around in my thinking.  I would be in line too.

As a Greek I would, of course, have protected my assets after the Cyprus 40% theft in 2013.  But I'd leave just enough cash in the bank so I could join my fellow neighbors in the ATM lines.  They would see me there and think I was just as surprised as they that Tsipras couldn't find the courage to cut pensions by 1% and instead decided to lead the country into default and Euro exile.  Clearly I wouldn't be seen as a "hoarder" or a "prepper" if I were seen in an ATM line.  Right?

They voted for Tsipras who was clear about his intentions: milk the rest of Europe for every drop and never cut costs at home.  Europe has been milked, and not a cent has been cut.

Tuesday is the new judgement day, however I suspect it'll drag out for a while longer.  The two things I've learned from these financial crises over the years: they are more of a process than an event, and there is almost always an out that delays the day of reckoning.

But I do have questions.  Why are so many resources devoted to negotiating with losers?  Why doesn't the IMF and Germany and others devote all these resources to the best-managed economies, and let the likes of Greece collapse fast and hard?  One, they'd draw attention to, and reinforce, good financial responsibility.  Second, those making bad decisions would get the healing benefits of immediate feedback.

I'll be watching for two events in Greece in the coming days:
1)  Bail-In. How much of the citizen deposits will be confiscated by the state?  (At this moment in Cyprus - when it was announced banks would not open - the bail-in was said to be 6-10%.  A week later when the dust settled, it was 40% of all accounts with balances over $100k.)
2) Tyranny.  Tsipras is a socialist.  That means he A) makes decisions that increase despair, lead to desperate times and reduce the quality of living, and B) blames others for bad times leading to a doubling-down on bad policies and less freedom (restricting travel, limiting financial activity (capital controls), limiting the press and citizen speech, etc.).
Unlike Cyprus 2013, every Greek citizen had the warning signs.  And most voted for this exact outcome.  And as promised, Greek pensions will not be cut by 1%, but oh boy. . . .

. . . Greek pensions will be cut.

For these reasons, I will watch with dispassionate interest.

Hey, remember this joke?
What is the difference between Greece and the US?

About ten years.

UPDATED 6.30.15 10am:

Cavuto sums it up.

UPDATED 7.3.15 4pm:

ZH reports the bail-in estimate is currently 30% of all deposits over 8k Euros.

UPDATED 7.6.15 6am:

Greece voted in favor of their lets-hit-rock-bottom referendum yesterday.  Or is it the lets-vote-for-our-dignity referendum?

They are now fully on record as expecting someone else to pay their bills.  This is like applying for am unsecured loan in between calls from collectors.

The 61% who voted for the referendum clearly do not have 8k euros to their name and who thus think they will not be impacted by the bail-in.  This is a clear sign to the government that they could have - or still may - lower the bail-in target or increase the bail-in amount.  The Tsipras commissars know that, like Cyprus, the bail-in is a one-time event.  For some reason, people only lay down once and let their wealth be stolen.  The money won't be there next time.

Here is Tsipras' victory speech, and his happy patriots who, today, have full bellies:

Good luck with that whole 'dignity' thing.

UPDATED and BUMPED 7.6.15 8:30pm:

I found two excellent blog posts on this subject.  Click them both - your time will not be wasted!

Captain Capitalism with a novel idea, and
Total Survivalist with the best analogy yet.

UPDATED 7.8.15:

Via WSRA, Hershal Smith shares some opinions.  I appreciate his comments debunking the oft-used bankers-as-scapegoats crap.  The finger-pointing is already at crescendo levels, but Mr. Smith is keeping his perspective. 
Banks cannot make fractional reserve banking legal – only politicians do that.  Banks cannot create debt-based economies – only politicians can do that.  Banks cannot create money-printing – only politicians can do that.  The entire crumbling edifice upon which Keynesian economics is built requires the willing participation of politicians who couple with bankers to fleece the people.
. . . the people elected communists to office because they want a state-run system.  They got what they asked for.  It’s unimpressive to argue now that the poor Greeks are victims of either the government or the bankers.  The Greeks are victims of the choices they made.
Oh, and Greece extended the Capital Controls through Friday.   Anyone want to bet a Commie Obama Hat that banks won't open Monday either?

UPDATED and BUMPED 7.16.15 Noon:

Greek banks have been closed a full three weeks now.  They re-re-announced to a likely skeptical citizenry that they will open this coming Monday.  The status of the proposed bail-in is still unknown.

ZH asks some tough questions about how the Greek account holders will behave once the banks reopen: Greek Banks To Reopen On Monday, But Do Greeks Have Any Faith Left In Their Banks?

What a cluster. 


OregonGuy said...

"Banks cannot make fractional reserve banking legal – only politicians do that."


Arguments, like stools, rely upon their legs for their ability to stand.

Wish I had more time to reply in greater depth, but I've got to leave the office now. This is not an attempt to simply snark, and I believe the totality for the argument deserves more comment. No time now.

Karl said...

OregonGuy- coming back?