Thursday, May 24, 2012

Misunderstanding the Bank Run in Greece (and Why Every Single Euro Could Be Pulled Out of Greek Banks)

CNBC reports:
Greek depositors have been pulling hundreds of millions of euros from banks, with the fear being that a run would occur if the political situation fails to stabilize.
This is simply not true.

Greeks are pulling their money from banks, but not necessarily because they fear that Greek banks will not have the cash on hand. The European Central Banks has been providing the euros to meet demand.

What the Greeks really fear is that one morning they will wake up and be told that they no longer have euros in their accounts at the banks but newly devalued drachma.

That's what this run is all about and it could continue until every last euro is removed from Greek banks.

This means this type of run may force the Greek government to act more hastily, if they plan to reintroduce the drachma, since the longer they wait the less money they will be able to capture in any conversion.

NOTE: Any such conversion will come by surprise and will be denied by officials until the day of the conversion. Greeks will just wake up and learn they have new drachma in their accounts not euros. Those who left money in the banks will be in shock:

A 1st century BC Greek theater mask. 


  1. In my humble opinion sir you are correct. They want to be holding Euros in their hands, not drachmas when "it happens".

  2. "A 1st century BC Greek theater mask." is so appropriate.

  3. If a Greek bank run is going on, why is not panic spreading to Italy, Spain, etc. and why Euro and equities are not crashing?

    1. The sheeple are not at the shearing station yet...

  4. Robert, just getting Euro's out of the bank is one step but don't forget that they are most likely getting Greek issued Euro's and not German or French ones. So all the government has to do is turn Greek euro's into Drachmas or worse, Geuros. I have heard that many European's will not carry Greek issued Euro's just because of this fear.

    1. Since 1 January 2002, the national central banks (NCBs) and the ECB have issued euro banknotes on a joint basis. Euro banknotes do not show which central bank issued them.

    2. Anon 7:31, you are wrong. Here are the codes that are in front of the serial numbers on every Euro note:

      Belgium Z
      Germany X
      Estonia D
      Ireland T
      Greece Y
      Spain V
      France U
      Italy S
      Cyprus G
      Luxembourg 1
      Malta F
      Netherlands P
      Austria N
      Portugal M
      Slovenia H
      Slovakia E
      Finland L

    3. In either case, that wouldn't be possible.

      Imagine the uproar of other citizens who happen to be holding Geuros.

  5. NagyGa1 - not at all... the banks in other countries will exchange Geuros to euros, provided that the holder is not a Greek national.

    ...that'd create a nice earning opportunity for non-Greeks, a prohibition on carrying significant amounts of cash across the Greek border, US-style, and restoration of the old Greek art of smuggling.

    Of course, the smarter Greeks won't be caught holding Geuros.

    I don't think the stupid euro-socialists managed to master the Soviet art of unannounced and sudden currency shenanigans.

  6. Has anyone heard what sort of premiums physical gold & silver are going for in Greece?

    Have to think they'd be sky-high right now?

  7. Your picture is miss-labeled. It is actually, the look on the average American's face as his government gives him multiple involuntary ass reamings...

  8. Sounds like some kind of variant of Gresham's Law...

  9. With the exception of deposits shrinking due to cash withdrawals in individual banks(failure to have sufficient capital in the Vault), would there be any other reason that the Greeks would have to reintroduce the Drachma faster?

    Wouldn't the Central Bank simply shovel more cash into individual banks or by start adjusting minimum reserve ratios?

  10. The issue is far less about Greeks pulling Euros out of the ATM, but they are transferring their savings from Greek banks to accounts of banks in other Eurozone countries.

    When Greece will introduce a New Drachma, it will operate as a parallel currency, but the government will accept the payment of taxes in New Drachma. Euros will continue to circulate in Greece and probably accepted by merchants too.

    Accepting hard foreign currency in shops etc. in holiday resorts was a standard practice, before the Euro arrived.