# France and Greece Elections - Omens of Doom?



## wayneL (7 May 2012)

Ok I've been moderately bullish looking into the future, particularly on the States, with a caution on watching what happens in Europe.

My spirits have just taken a dive into bear territory after the election results in France and Greece. I think that the breakup of the EU is now more likely now with global ramifications. I think there is now huge potential for the whole Eurozone to turn into a very malodourous and non-solid shyte.

Thoughts?


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## CanOz (7 May 2012)

*Re: France and Greece Elections-Omens of Doom?*

There is some discussion on the Bloomy now of a two tiered currency for the EuroZone. The theory is that there will be a breakup but it will be orderly. 

I reckon there will be some short term volatility no matter what happens!

CanOz


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## Tyler Durden (7 May 2012)

I still can't understand why people think Greece leaving the Euro would be a bad thing?


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## CanOz (7 May 2012)

Tyler Durden said:


> I still can't understand why people think Greece leaving the Euro would be a bad thing?




I think its probably the fact that if that happened there would be a debt default associated with it. Who knows who is holding that debt, and who holds their debt. Then the sovereign debt of PI_S comes into further question...and so on and so on...

Contagion.

CanOz


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## Tyler Durden (7 May 2012)

CanOz said:


> I think its probably the fact that if that happened there would be a debt default associated with it. Who knows who is holding that debt, and who holds their debt. Then the sovereign debt of PI_S comes into further question...and so on and so on...
> 
> Contagion.
> 
> CanOz




But in a way, that's just clearing inefficiences in the world economy isn't it? That's how I see it anyway, I am not an expert :


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## CanOz (7 May 2012)

Tyler Durden said:


> But in a way, that's just clearing inefficiences in the world economy isn't it? That's how I see it anyway, I am not an expert :




Your not wrong Tyler, i know Jimmy Rogers would agree, he'd say let them default. I think the fear is for the short term chaos. 

One way or the other it all needs to be unwound, whether or not it happens quickly or they just 'kick the can down the road' some more, only time will tell.

CanOz


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## wayneL (7 May 2012)

Tyler Durden said:


> But in a way, that's just clearing inefficiences in the world economy isn't it? That's how I see it anyway, I am not an expert :




Yes

But the inefficiencies surfaced 12 years ago and came to a head in 2007-2008 having been propped up. Then they created massively more inefficiency subsequent to that.

Now we are at a point of potential cascading cross default, if a single domino goes over, the whole lot could go.


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## notting (7 May 2012)

wayneL said:


> Now we are at a point of potential cascading cross default, if a single domino goes over, the whole lot could go.



Is anyone really dumb enough to let that happen when the basic problem is a currency differentiation with with manufacturing Nations.  Printings much easier and appropriate.  Hidden wealth, China's got a problem!

The seasonal thing isn't helping.  

I'd just be a little bit wary of these lying scumbag politicians who will say anything to get into power then kind of water it down amidst international condemnation for even looking like they may do something independently of the Euro motherland *which feeds them!!*
They will start to say things like, "Well we are trying to put our promises/policies into action but the motherland conspirers are threatening to throw us out of the Euro which would be *catastrophic*, so we are doing our best but our hands are tied.  Those evil apponents got us into this mess in the first place, never vote for them again!  Whilst tsexting, "Oh Angela, I've never felt like this about a women before........................"


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## Trembling Hand (7 May 2012)

notting said:


> Those evil apponents got us into this mess in the first place, never vote for them again!  Whilst tsexting, "Oh Angela, I've never felt like this about a women before........................"




LOL!!!

Dax down 1 % The way this honey trap has been moving it wouldn't surprise me for Europe to finish green. Nothing here to see move on.


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## Starcraftmazter (7 May 2012)

wayneL said:


> My spirits have just taken a dive into bear territory after the election results in France and Greece. I think that the breakup of the EU is now more likely now with global ramifications. I think there is now huge potential for the whole Eurozone to turn into a very malodourous and non-solid shyte.




Just now? What did you think was going to happen - people would continue electing the politicians that were screwing them up the ****? Come on man, I saw this coming a year away.

The sooner EMU goes away the sooner we can live without their constant bull****.



CanOz said:


> I think its probably the fact that if that happened there would be a debt default associated with it. Who knows who is holding that debt, and who holds their debt. Then the sovereign debt of PI_S comes into further question...and so on and so on...




That's already happened buddy - that was what the Greek default was for. Most of the debt has been absorbed by the EU governments, and they will absorb the rest. The key was to split it up into little pieces for the market to digest.



Trembling Hand said:


> Dax down 1 % The way this honey trap has been moving it wouldn't surprise me for Europe to finish green. Nothing here to see move on.




1%? Was down 2.8% or something like that just a few hours ago at open. This has been a highly profitable night for me.


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## Trembling Hand (7 May 2012)

Starcraftmazter said:


> 1%? Was down 2.8% or something like that just a few hours ago at open.




Errr yeah that's my point. Its been going up since the open thus the comment I wouldn't be surprised if it gets into the green.


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## sammy84 (7 May 2012)

Tyler Durden said:


> But in a way, that's just clearing inefficiences in the world economy isn't it? That's how I see it anyway, I am not an expert :




Agree that in the longer run it could possibly be a good thing. Greece should have been able to recover naturally by way of currency devaluation. This whole eurozone thing is unnatural when you have countries trading between each other and holding each others debt. 

Still would not want Greece to exit. I fear the sharp reaction it will cause. Much prefer the drawn out process we have been going through presently knowing full well it is stunting a longer term recovery.


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## Starcraftmazter (7 May 2012)

Trembling Hand said:


> Errr yeah that's my point. Its been going up since the open thus the comment I wouldn't be surprised if it gets into the green.




That would be funny indeed, I wonder what the news will say about that - "Markets initially don't like socialist governments, but they warm to them within the first day"


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## CanOz (7 May 2012)

The DAX has nearly filled the gap. I'll be interested to see if it can overcome the open. The markets were still reacting from Friday's US finish as well, closing on their low..

By the way, when did Greece default? I must have slept through that?

CanOz


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## Starcraftmazter (7 May 2012)

CanOz said:


> By the way, when did Greece default? I must have slept through that?




Must have been living under a rock! In fact their credit rating has just been upgraded from default in the last week or two if I am not mistaken.

http://www.cnbc.com/id/46683364/Greece_Default_Is_Official_Insurance_Payouts_Triggered


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## Trembling Hand (7 May 2012)

CanOz said:


> The DAX has nearly filled the gap. I'll be interested to see if it can overcome the open. The markets were still reacting from Friday's US finish as well, closing on their low..



 Standard gap play..... 



CanOz said:


> By the way, when did Greece default? I must have slept through that?



 Officially they did.


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## CanOz (7 May 2012)

Trembling Hand said:


> Officially they did.




Yes, i guess it was an 'orderly' default by Moodies standards. 

They are still heavily in debt and yet still no sniff of growth.

CanOz


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## wayneL (7 May 2012)

Starcraftmazter said:


> Just now? What did you think was going to happen - people would continue electing the politicians that were screwing them up the ****? Come on man, I saw this coming a year away..




Long has been the abiding trade in that year has it not?

The problem with Greece is not a change in government, but no clear result.

The problem with France is not a change in government, but the possible delinquency (from the EU point of view) of the new government.

Hence my comments.

I suppose you foretold these factors also?


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## Starcraftmazter (7 May 2012)

wayneL said:


> I suppose you foretold these factors also?




More or less - social instability caused by the austerity and depression leading to governmental instability, leading to EMU collapse.

So broadly speaking, yes. Simply put things cannot continue (the way they are), and what is happening now is the "normal course of events" that was always going to happen.

And of course it isn't just France of Greece - the same is happening in the Netherlands. And I reckon it will spread to more Euro countries as well.


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## wayneL (7 May 2012)

It has been a common theme. But I think you're being wise in hindsight there SCM. I agree social unrest was always on the cards, but the exact course of events is like mercury on a marble slab.


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## Starcraftmazter (7 May 2012)

If it helps my case, MacroBusiness has been saying the same for truly well over a year.

What will happen next? Well I don't really see Greece staying in the EMU even if they default on 100% of their deficit. I doubt that even if their politicians had the resolve to change, that they could. I have never seen a more inefficient and unproductive country.

France? Hollande's plan is a decade too late, there just isn't enough aggregate demand in the world to allow France (or anyone) to grow.

We're all in the same boat here, all the countries of Earth. China can continue with it's fake GDP growth through building ghost cities for a little longer maybe, but ultimately they will face the grim reality as well.

There is no more real, genuine growth to be had. Deficits will continue to rise until a breaking point of default and/or (hopefully) debt forgiveness.


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## IFocus (7 May 2012)

wayneL said:


> Ok I've been moderately bullish looking into the future, particularly on the States, with a caution on watching what happens in Europe.
> 
> My spirits have just taken a dive into bear territory after the election results in France and Greece. I think that the breakup of the EU is now more likely now with global ramifications. I think there is now huge potential for the whole Eurozone to turn into a very malodourous and non-solid shyte.
> 
> Thoughts?




Can only see a fair bit of Europe in flames as civil unrest explodes the pain in Spain 50% and rising youth unemployment and more austerity to come as GDP shrinks and debt ratios explode upwards. That's a revolution thats baked and ready to go. Remember Spain is to big to save and to big to fail.

With Italy and France inline for the same as their governments shy from seriously painful measures (conservative governments failed the test ), the incoming French president promises are fanciful, Germany stretched and furiously building firewalls to insulate again the Euro banks promises.................messy

1930's revisited perhaps


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## So_Cynical (7 May 2012)

Greece was always on the edge of Europe anyway so no big deal if they go, the average Greek has no interest in being a part of a broader Euro society...thinking about it the French are a little the same, very self interested and somewhat culturally isolated.

France and Germany have always been the main Euro drivers...if one of them does a u-turn then i suppose its all over....i cant see it happening thou.


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## Starcraftmazter (7 May 2012)

So_Cynical said:


> the average Greek has no interest in being a part of a broader Euro society




That's not at all true, poll after poll even to this day shows that most Greeks want to be in the EU and EMU.


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## McLovin (8 May 2012)

Tyler Durden said:


> I still can't understand why people think Greece leaving the Euro would be a bad thing?




In order for Greece to leave the Euro without Greek banks being essentially bled to death by savers trying to get their money out before conversion, it will have to be done Argentine style; you wake up one morning and the government has said that whatever you had in euros is now drachmas. Now, when that happens what do you think will happen in all those other periphery EZ economies? They'll need to build a new autostrada from Italy to Switzerland to deal with the flood of Italians trying to get their money out before it gets converted back to lira. Ditto Spain, Portugal etc. Those banks are already impaired, and bank runs on the news aren't good for governments.

Then you have to deal with the fact that leaving the EZ will create a private sector default on a scale which (perhaps outside of war) has never been seen in Europe. Pretty much every mortgage, credit card, business loan will fall into default.

I think, the reality is that they are all bound to each other now and will have to integrate further rather than disintegrate. Germany and France knew what they were getting themselves into. Greece produced fraudulent statistics, which were shown to be just that not long after they were admitted to the euro. They should have kicked them out then. They've made their bed, now they need to lie in it. And that means that Gunter will, sooner or later, see his tax dollars paying for Stavros.


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## Glen48 (8 May 2012)

What is worrying is the parties the voters went for which I assume will be a world wide trend. All the voters still want a free lunch and expect the feds to help them out so any party promising to give the voters what they want is in the running to be elected.  

This is what happened pre WW11 in Germany.
USA  is worried so has FEMA on the job building re-education camps, ordering million's bullets, bullet proof toll booths and micro chipping their higher up service personal.
USA Feds know what coming and want to be ready.


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## McLovin (13 May 2012)

Interesting article, for anyone interested on the consequences of Greece leaving the Euro.



> The fallout from a Greek exit would quickly wipe 20% off Greece's GDP, send inflation soaring to 40%-50%, and see Greece's debt-to-GDP ratio soaring over 200%, say analysts at French bank BNP Paribas.




http://www.guardian.co.uk/business/2012/may/13/greece-leave-eurozone-five-difficult-steps


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## numbercruncher (13 May 2012)

I was reading that in the small print in a fairly non transparent way of the Greek deal is the provision for all of Greeces gold to be confiscated if there is default - I wonder who would physically enforce this if it came to that and Greece refused ? Greek Gold holdings arnt really that huge anyway , but interesting that its in there ....

Anyway moving on ...

Nearly all European banks are debt riddled so im guessing the grand plan of the Oligarchy is to get all of Debt fuelled Europe signed up under the ECB.

Then perhaps the rest of the debt ridden world can sign up under the World bank and IMF .....

Looking around its pretty easy to see that most folks will choose debt and low interest rates over the alternative

Then the leader of each of these organisations will meet in a secret locale , and the slickest one will pull out a revolver and shoot the other two dead - at this point two horns will sprout from his head and he will shout " the greatest trick I ever played was convincing you all I dont exist " 

Well the ending doesnt really matter - but world debt is looking more and more like a centralised control/conquering tool to me ...




Whaddya reckon ?


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## numbercruncher (13 May 2012)

When I wrote European banks Imeant to write European nations - but yes banks too ....


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## Glen48 (13 May 2012)

The thick plottens most of the world bank are run by Government Sacks  members whose aim is to take over the assets of as many countries as possible such as power, water ,rail, ports etc as well as natural assets like the Acropolis in Greece.

 Don't think any cafe in St Kilda is on the books with the same name.

The only think that could stop them is civil unrest and the net were civilians can tell and show others around the world what is going on. 
Gold will be the only thing of value once the tide goes out all this will take many years to achieve while the QE XX is in force.


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## noirua (13 May 2012)

Well, Germany gains from a low price conversion for the Euro and it may save them more to bail out the weak euro countries, though there has to be a point when it becomes unsustainable.

France's new President will gradually fall into line whilst blustering here and there. Greece will do the same and Germany can afford to adjust the terms with Greece dragging the Euro currency downwards -- thank you Greece.

Spain is a problem but Italy seem to be holding on fairly well.  So a loan to Spain should be OK as well after much punching the air by all sides.

So Germany gets a weaker and weaker Euro and France will be persuaded into agreeing to the wisdom in that.

Australia will eventually accept the situation for what it is and improve in leaps and bounds and realise trying to to leap and bound whilst wagging its tail at the same time, kinda leaves you going all over the place.


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## numbercruncher (15 May 2012)

Europe is becoming a very interesting place 




> My real enemy doesn't have a name or a face or a party, he'll never run as president, and so he'll never be elected, although he does govern - my enemy is the world of finance.
> 
> Incoming French president Francois Hollande






> I think the rise of the far right and the far left suggests that we are not that far away from that moment which is reminiscent of the 1930s.
> 
> International finance expert Satyajit Das




http://www.abc.net.au/news/2012-05-08/extremists-on-the-rise-in-europe/3997198


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## CanOz (15 May 2012)

Markets dropped like a lead balloon after news:



> Headlines crossing that Greek anti-bailout conservative leader Kammenos says there is no deal on government
> 
> Read more: http://www.briefing.com/InPlayEq/InPlay/InPlay.htm#ixzz1uwWt6se2




Cool...:hammer:

CanOz


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## notting (15 May 2012)

numbercruncher said:


> Europe is becoming a very interesting place



It's been interesting for some time.
It's just that we get board of focusing on things that are interesting after a while.
So the world seems to focus on something els that takes its interest, only to find the uninteresting interesting thing is in fact more interesting again.
Time for my pills.


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## Glen48 (17 May 2012)

For the Greek people, the most alarming aspect of what's going on is that their life savings are at serious risk of a massive, overnight, non-voluntary devaluation. There are a lot of words for the magical process of turning one thing into something else: alchemy, transmutation, and transubstantiation come to mind. But to the Greeks it's going to look a lot like highway robbery.

You'll go to bed one night with your life savings denominated in euros. You'll wake up the next day with them denominated in drachma. And your euro savings will be automatically converted to drachma at an exchange rate not of your choosing. For example, your 1,000 euros will become 100 drachma...or even 10,000 drachma. The nominal amount won't matter. What matters is that the devaluation strips you of 70% or 80% of your purchasing power.

Most people would avoid that kind of value destruction if they could. Maybe that explains why â‚¬700 million was withdrawn from Greek banks on Monday, according to remarks made by Greek President Karolos Papoulias and reported in the Wall Street Journal. The Journal reports that between â‚¬2 and â‚¬3 billion in deposits have been withdrawn from the Greek banking system each month for the past two years. January was a high point, with â‚¬5 billion.

A bank run by any other name would look as desperate. And who wouldn't be desperate now? 

Leaving the euro, devaluing the drachma, and defaulting on debt owed to foreign creditors are Greece's best long-term economic survival strategy. But the unavoidable side-effect is to destroy the savings of the people, not to mention usher in a period of lower standards of living. 
That won't win you many votes. It may start a revolution.

And how do you prevent the Greek precedent from being imitated by the Spanish and the Italians? To be candid, we don't think it matters much now. Greece can't afford to stay in the euro. The Spanish and the Italians can't afford to leave it.

The economies and banking systems of Spain and Italy are indispensable to Europe. If they leave the euro, there is no euro. The Greeks can leave, devalue, default and use a weaker currency to claw their way back to economic competitiveness. If the Spanish and Italians leave, they lose access to private capital, they lose access to the ECB and they take down Europe's banking system. They can't leave. More importantly, they can't be allowed to leave.

This makes the task of the European Central Bank (ECB) much easier. It simply has to guarantee Greek debt owed to all non-Greek creditors. Or, it could simply buy that debt. This would solve the problem of anyone outside Greece taking losses on Greek debt.

This is what corporatism looks like, when the Big State and Big Finance become the Big Power in the economy. Losses cannot be tolerated. Any loss results in lower equity capital at a financial firm would require selling assets. Since everyone owns a piece of everyone else, and owes to everyone else, any major loss in one place results in losses everywhere.

Of course it's absurd that Europe is moving toward this kind of "extreme socialism". The people most responsible for the crisis are not accountable and the people who have saved get punished. The elite are enriched and everyone else is enslaved.

This is why the financial crisis could so quickly become a political and social crisis. When people don't think they can get justice from the courts or the cops, and when they think that cheating is the only way to get ahead in a system, the political and financial order is on borrowed time. The clock is ticking.

Regards,
Dan Denning
The Daily Reckoning Australia

 This is the shape of things to come for the rest of the indebted countries including USA any day now we should get news that Greece has gone under.


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## Gundini (17 May 2012)

notting said:


> It's been interesting for some time.
> It's just that we get board of focusing on things that are interesting after a while.
> So the world seems to focus on something els that takes its interest, only to find the uninteresting interesting thing is in fact more interesting again.
> Time for my pills.




Sorry off topic I know but that is one funny post whatever it means haha 

Interesting though, the first supplimentary comment on the Greeks repairing the Pantheon some 30 years ago. I remember back then all the scafolding around it, using Government money to repair this great asset, and yet today it looks identical to how it looked back then.

http://www.guardian.co.uk/business/2...ifficult-steps


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## young-gun (17 May 2012)

CanOz said:


> Markets dropped like a lead balloon after news:
> 
> 
> 
> ...




I am enjoying your use of emoticons CanOz, please keep it up.


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## CanOz (17 May 2012)

young-gun said:


> I am enjoying your use of emoticons CanOz, please keep it up.




LOL! I'm not as good as TH and SKC. SKC cracked me up with the popcorncorn:, watching the market tank last week...ROTFLMAO!

CanOz


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## young-gun (17 May 2012)

CanOz said:


> LOL! I'm not as good as TH and SKC. SKC cracked me up with the popcorncorn:, watching the market tank last week...ROTFLMAO!
> 
> CanOz




haha I'm thinking I'm gonna try and jump on the emoticon bandwagon.


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## Garpal Gumnut (17 May 2012)

Greek rulers have not had an original thought for nigh on 2500 years.

The Greeks will do as they are told by their popular media and by europe, when they vote in June.

They will stay in europe should they have any sense.

Otherwise they will be dispersed, clutching their mouldy drachmas for a winter of discontent.

gg


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## skc (17 May 2012)

CanOz said:


> LOL! I'm not as good as TH and SKC. SKC cracked me up with the popcorncorn:, watching the market tank last week...ROTFLMAO!
> 
> CanOz




I don't remember eating popcorns last week?!

Seriously... I am trying to lose weight.


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## disarray (17 May 2012)

there is definately NOT a bank run happening on the recently nationalised spanish bankia bank (whose share price has tanked 25% in a day)



> Spain's economy secretary has just denied that Bankia is suffering a bank run, Reuters reports from Madrid.
> 
> Asked about today's reports that Bankia customers had withdrawn more â‚¬1bn since it was nationalised last week, Fernando Jimenez Latorre replied: "It's not true that there is an exit of deposits at this moment from Bankia."
> 
> According to news flashes from Madrid, Jimenez Latorre also said that Bankia has everything it needs for succes, and should be given time....




carry on citizen


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## Starcraftmazter (17 May 2012)

Jim Rickards was on RT's Capital Account last night, and he was asked about bank runs in Europe.

What he said was I thought was quite interesting; if people (or anyone in general) pulls their money out of a bank, they will ultimately deposit it at a different bank, which can then re-lend it to the bank having the run on it through the interbank lending market (broadly speaking). And so in the case of Europe, so long as the ECB keeps the liquidity going, there is nothing to worry about in terms of bank runs on various banks in the periphery.

I'm not sure if news had come out by then that the ECB stopped lending to some undisclosed Greek banks, but nevertheless interesting stuff.

www.youtube.com/watch?v=SnSDjZVA4yU


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## Glen48 (17 May 2012)

I think the Greeks would be taking their loot and digging a hole in the back yard or have a lump in the mattress.
 After if one lot of banks are tanking who knows which is next.


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## Glen48 (18 May 2012)

The problem with bank runs is that once they start, they don't stop. And while the world was conveniently distracted by events in Greece, debating whether or not people were withdrawing money in droves (they were), the real bank run happened elsewhere, namely in Spain, where just nationalized bank Bankia moments ago plunged 30% and was halted following an El Mundo report that "customers had withdrawn â‚¬1 billion over the past week." In other words -  a bank run (but whatever you do, don't call it that - it's not the politically correct and accepted nomenclature) which has sent shockwaves through Europe, pushed the EURUSD under 1.27, and bond yields in their traditional "Europe is open" direction - wider.

From FT:

Shares in Bankia, the Spanish bank which was part-nationalised last week, plunged by over a quarter on Thursday morning, after a report that customers had withdrawn â‚¬1bn from the bank over the past week.

Shares fell 27 per cent to â‚¬1.21 after El Mundo, a national Spanish newspaper, reported customers had withdrawn â‚¬1bn from the bank over the past week, citing information from a recent board meeting.

The self-styled “the leader of the new banks” was formed from seven cajas last year and has now shed nearly 70 per cent of its market capitalisation since its shares were listed in July of last year.

The fall helped to drive the broader IBEX 35 index down 2 per cent to 6,480.7.
The news has started to spill over to other PIIGS banks, and very soon all Italian banks will resume being suspended limit down on fear that the bank run contagion, pardon, the withdrawal meme (h/t William Banzai), because in this fake, artificially supported world, one is never allowed to call a spade a spade, has commenced.

In th meantime don't panic: after all, just recall the Bank of Spain statement which promised that despite the Bankia nationalization, that "BFA-Bankia is a solvent entity that continues to function quite normally and customers and depositors should have no concern."

Turns out depositors had a few concerns...


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## doctorj (18 May 2012)

Starcraftmazter said:


> Jim Rickards was on RT's Capital Account last night, and he was asked about bank runs in Europe.
> What he said was I thought was quite interesting; if people (or anyone in general) pulls their money out of a bank, they will ultimately deposit it at a different bank, which can then re-lend it to the bank having the run on it through the interbank lending market (broadly speaking).



I'm not sure I agree. If I was a bank with liquidity and I was worried about a bank run, I'd be holding onto any liquidity I could get my hands on. And if I wasn't worried about a bank run, but I knew that another bank operated in a market where there were bank runs, I certainly wouldn't lend it to them, even over night. 



Glen48 said:


> The problem with bank runs is that once they start, they don't stop. And while the world was conveniently distracted by events in Greece, debating whether or not people were withdrawing money in droves (they were), the real bank run happened elsewhere, namely in Spain, where just nationalized bank Bankia moments ago plunged 30% and was halted following an El Mundo report that "customers had withdrawn â‚¬1 billion over the past week." ….
> 
> In th meantime don't panic: after all, just recall the Bank of Spain statement which promised that despite the Bankia nationalization, that "BFA-Bankia is a solvent entity that continues to function quite normally and customers and depositors should have no concern."
> 
> Turns out depositors had a few concerns...



I'm curious, do you know what percentage of deposits was withdrawn from Bankia? The usual protection for bank runs is deposit insurance, but deposit insurance schemes are designed to deal with failures of specific, non-system banks, to prevent one isolated bank failure from becoming systemic as people panic and withdraw cash. If it’s a large bank or a fundamental systemic problem, the government will ALWAYS step in to implicitly guarantee depositors. Therefore, a bank run on Bankia says more about depositor's perceptions of Spain and their ability to stay within the euro because as long as they stay in the euro, the EFSF (*this may not be the correct vehicle, but the point stands) and others would provide the government euro liquidity to protect depositors and the banking system. However, if Spain were to leave the euro, it wouldn’t have such access to euro liquidity to protect euro deposits…

Anyway, the rumour is Moody's will downgrade most Spanish banks very soon, possibly even tonight. Greece is a different matter. I think the writing is on the wall now and it's only a matter of time before Greece leaves as its too small for the euro to fuss around with any longer (Spain now must be the focus). The only question is how long they hold on; my guess is probably until after the Greek elections. Spain is much more fundamental to the euro and it will be interesting to see what happens next.


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## Aussiejeff (18 May 2012)

doctorj said:


> Anyway, the rumour is Moody's will downgrade most Spanish banks very soon, possibly even tonight.




Rumour confirmed.  

http://www.bloomberg.com/news/2012-...-spanish-banks-cut-by-moody-s-on-economy.html

Also, Fitch cut Greece overnight to CCC from B-

Oh, what fun times ahead...


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## doctorj (18 May 2012)

Aussiejeff said:


> Rumour confirmed.
> 
> http://www.bloomberg.com/news/2012-...-spanish-banks-cut-by-moody-s-on-economy.html
> 
> ...




Ok, so the main Spanish banks are still investment grade. Not a disaster and probably still behind the curve. CDS on Spanish sovereign only went up 5bps. The interesting thing to watch is US treasuries... 10 yr down another 7bps to below 169

Interesting that Greece is now the lowest rated country that Fitch rate.


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## awg (18 May 2012)

Garpal Gumnut said:


> Greek rulers have not had an original thought for nigh on 2500 years.
> 
> The Greeks will do as they are told by their popular media and by europe, when they vote in June.
> 
> ...




I personally doubt that Greeks will vote for "austerity".

My view is that Greece will become politically paralysed, and suffer a liquidity crisis within a few weeks.

Within a few days of Civil Service, Pension and MILITARY wages not being paid, I would expect a military coup in Greece, due to civil disorder, and bearing in mind that they have a history of coups.

I do not know what "state" the military is in, or what would be the economic outcome of this action.


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## basilio (18 May 2012)

There is *never *enough money in banks to pay the depositers.  They only hold around 10% deposits as cash. That is why trust in the banking system is critical to their survival regardless of how good their fundamentals might be.

The assets of banks are it's debts. The fact that banks issue far more debt than actual deposits made into the bank means that only a small proportion of defaulting loans is sufficient to destroy the banks capitalization. If  even 15%  of these debts can't be paid then the bank goes bankrupt. It is not hard to see where more than 15% of teh banks debts are no longer collectible.

This is all stating the obvious  of course.


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## McLovin (18 May 2012)

doctorj said:


> I'm not sure I agree. If I was a bank with liquidity and I was worried about a bank run, I'd be holding onto any liquidity I could get my hands on. And if I wasn't worried about a bank run, but I knew that another bank operated in a market where there were bank runs, I certainly wouldn't lend it to them, even over night.




That's why we have central banks. They backstop the system and can lend an unlimited amount during a liquidity crisis.

The Greeks are acting like spoilt children, they want to remain in the euro but they don't want to pay their debts.

I see it looks like the bank runs are starting, which pose the biggest risk to the whole thing. I can see capital controls on the way.


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## Tyler Durden (20 May 2012)




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## Joules MM1 (20 May 2012)

*A Rational Bank Run*


> Ireland goes to the polls in a few weeks.
> 
> * Spain already has Greek-like 25% unemployment.* The frustration that Spain and the other countries feel with their own austerities is very real and getting worse, and the Troika knows it.




http://www.ritholtz.com/blog/2012/05/dr-frankensteins-europe/


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## Joules MM1 (21 May 2012)

http://allstarcharts.com/greek-stock-market-worse-than-great-depression/



> It’s pretty unbelievable to say that. But the Athens Stock Exchange has now fallen more than 88% from its 2007 highs. This outrageous number slightly beats out the 85% correction in US Stocks during the Great Depression.
> 
> Today’s chart comes from The Atlantic and shows the Athens Stock Exchange (in blue) with the S&P500 (in red) from their cyclical highs:


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## Glen48 (21 May 2012)

Down to below $1,440 in gold
Down to below $26 in silver, to as low as $21
Down to below $85 in oil
Down to below 12,000 in the Dow Industrials

 Some bargains coming up soon and Greece has bond sale soon and bills to pay so it could be all over very soon.
Unless China beats them.


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## nulla nulla (22 May 2012)

Glen48 said:


> Down to below $1,440 in gold
> Down to below $26 in silver, to as low as $21
> Down to below $85 in oil
> Down to below 12,000 in the Dow Industrials
> ...




LOL  sounds like an add for coles, down, down, down. Unfortunately you are pretty close to the mark. This is what we are looking at if the fiasco of europe is not sorted quickly.


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## Trembling Hand (23 May 2012)

Good story about how a retreat from the euro would go,

http://www.bloomberg.com/news/2012-...it-highlights-hazards-in-46-hour-weekend.html

or Not!


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