Here's the picture: Greeks, justifiably, are pulling money out of Greek banks. They fear that the Greek government will not be able to raise the money necessary to stay afloat. If the government can't raise the money, the belief is that the IMF will be called in to, which means to depositors that the money will be tracked and taxed. Tracking where 25% of the economy is underground is a very bug deal. Thu, the run.
How do governments react to nationwide controls? With money controls, which Greece may now implement at any moment. This all, of course, fuels the bank run.
How severe is the situation? How much money has been pulled? WSJ quotes one private banker as saying:
"We estimate that €8 billion has moved out of Greece to accounts abroad since December. It's money from bank accounts, stock sales, property sales and other sources. This is pretty substantial considering that there is only €30 billion under management in private banks here."If these numbers are accurate, Greece is in much worse shape than even the debt situation indicates. Total Greek financial collapse is a very real possibility.
Here's a story of a country in decline, based on the writings of a Buffet protege. The author turned it toward America, but it could be Greece:
ReplyDeletehttp://finance.yahoo.com/banking-budgeting/article/108901/death-of-american-capitalism-the-10-final-scenes