France and Greece Elections - Omens of Doom?

[skc]

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.

 

[disarray]

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Asked about today's reports that Bankia customers had withdrawn more €1bn since it was nationalised last week, Fernando Jimenez Latorre replied: "It's not true that there is an exit of deposits at this moment from Bankia."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

 

[Starcraftmazter]

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

 

[Glen48]

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.

 

[Glen48]

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just nationalized bank Bankia moments ago plunged 30% and was halted following an El Mundo report that "customers had withdrawn €1 billion over the past week."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 €1bn from the bank over the past week.

Shares fell 27 per cent to €1.21 after El Mundo, a national Spanish newspaper, reported customers had withdrawn €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...

 

[doctorj]

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.

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 €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.

 

[Aussiejeff]

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...

 

[doctorj]

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...

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.

 

[awg]

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

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.

 

[basilio]

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.

 

[McLovin]

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.

 

[Tyler Durden]

 

[Joules MM1]

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/

 

[Joules MM1]

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:

 

[Glen48]

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.

 

[nulla nulla]

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.

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.

 

[Trembling Hand]

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!

 

[qldfrog]

Time to resurrect this thread..as i follow my native country economy:
French debt is now viewed as more risky than Greece, with debt interest rates needed to be higher than Greece..
No real government and a cloen WEF puppet at the head.Canada in worse, within the EU and under invasion

 

[TimeISmoney]

Time to resurrect this thread..as i follow my native country economy:
French debt is now viewed as more risky than Greece, with debt interest rates needed to be higher than Greece..
No real government and a cloen WEF puppet at the head.Canada in worse, within the EU and under invasion

I don't think anyone is doing well in Europe, Germany is taking a bit of a hit to the economy ATM. Trump might finish everyone off by adding further inflation.

 

[Dona Ferentes]

I don't think anyone is doing well in Europe, Germany is taking a bit of a hit to the economy ATM. Trump might finish everyone off by adding further inflation.

.

.
The services and the manufacturing sectors in France, Germany and the eurozone are all in contraction.

It is a diffusion index, so a number above 50 indicates expansion, and conversely a number below 50 indicates a contraction.