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Guest Post: ECB Recommends Tight Limits On Greek Cash Transactions
Submitted by Toni Straka of The Prudent Investor
ECB Recommends Tight Limits on Greek Cash Transactions
Listening to ECB President Jean-Claude Trichet who said default is not
an option for Greece while the single currency attacked the $1.27
figure at the moment when he called it a safe store of value I cut my
observations of the ECB council meeting here. Mr. Market seems to have
a differing opinion. BTW, interest rates are on hold despite the latest
uptick in inflation to 1.4%.
I stumbled upon this ECB legal document that runs to the contrary and strangely has found no media attention.
While promoting the Euro as a safe store of value the ECB opts for
tight limits on cash transactions in Greece, limiting the role of cash
Euros as a medium of exchange, one of the fundamental functions of a
currency.
Stating the objective to limit tax evasion the ECB recommends that all
business transactions above €3,000 and all consumer expenses above
€1,500 Euros shall be paid for in all other forms than cash.
The most important excerpts from the document:
On 26 March 2010 the European Central
Bank (ECB) received a request from the Greek Ministry of Finance for an
opinion on a draft law on restoring fairness in taxation and addressing
tax evasion (hereinafter the ‘draft law’)...
Among
other things, the draft law is intended to progressively establish the
use of electronic invoices. Article 20 of the draft law introduces
specific restrictions on cash payments in favour of other means of
payment, in order to ensure the genuineness of transactions and
underlying documents and to enable direct cross-checking of such
transactions.
Article 20(2) of the draft law
states that, for transactions between businesses, invoices and
equivalent documents with a value exceeding EUR 3 000 shall be paid
through business bank accounts or by cheques drawn on and paid to such
accounts. These accounts will be connected to a secure electronic
database held by the Ministry of Finance’s General Secretariat for
Information Systems (GSIS). Banking secrecy is lifted for this purpose
and banks may not charge fees for the operation of such business
accounts.
Under Article 20(3) of the draft law,
invoices with a value exceeding EUR 1 500 for the sale of goods or
services to consumers shall be paid through a bank with debit cards,
credit cards or cheques, and the use of cash will not be allowed...
Whatever
the reason given, this is a clear writing on the wall that limitations
of the use of cash in the troubled Eurozone have become a central bank
tool, contrary to free market philosophy.
Ironically on Thursday US Vice President Joe Biden praised Brussels as
the capital of the free world. He could run into ATM problems on his
next Greece trip.
Flight From The Euro And A New Gold High
Such measures are usually taken by defaulting governments harboring a
desperate attack on citizens' wallets out of fear that they may flee
the Euro, depositing their savings elsewhere.
When Argentina defaulted in 2002
money withdrawals were limited to the equivalent of $100 per week for a
while. It probably will be similar in the case of a Greek default.
Currency controls do not go well with free-floating currencies, which are all only sinking at different speed vs. gold.
Speaking of gold it is worth of note that the yellow metal has
seemingly broken its inverse correlation with Federal Reserve Notes
(FRN), pushing the Euro price to a new record of 931 currency units per
ounce in the wake of Trichet's press conference.
Euro thinkers are probably in for a double bonanza from a rising gold
price and stronger FRNs where market expectations gradually slide
closer to EUR/USD parity as Greece is only one part of the PIIGS
disaster with the other troubled countries being an accident waiting to
happen.
DISCLOSURE: Long gold bullion.
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Anybody ever read the book Flatland? Euro Flatland is what's coming to Greece.
I read it a long time ago. Enjoyed it very much.
Will this remain in effect when a loaf of bread costs 1,501 Euro ?
Yikes. Starting to look pretty third-world over there.
Thanks Tyler
Rosie on Bloomberg radio now
http://www.bloomberg.com/streams/audio/radio_live.asx
did anyone see Ron Paul vs Bernanke?
http://www.youtube.com/watch?v=CtvHAqK8P14&feature=player_embedded
PI seems to think that Bernanke admits to monetizing the debt:
http://prudentinvestor.blogspot.com/2010/05/video-bernanke-concurs-with-...
FTSE MIB down 6.2 % ... that's quite ugly
Soros, Moore, Tudor Jones, Brevan Howard, Caxton, all making a killing while the ECB and European politicians sit there like deer caught in headlights. What a fucking disaster!
Honest question... do you *know* what's on their sheets, or is this just speculation?
Are they short the euro, GGBs?
I don't begrudge anyone their profits, long or short side. If inept people are in charge of their own accounts, they lose their asses and no one does anything but laugh at them.
If inept politicians and CBs are in charge of their currency, they also have a chance of losing their asses. I don't see why one should feel any differently. No morality attaches to long or short positions.
None of those hedgies had anything to do with euro nations' decades of deficit spending. The same will happen here, too, eventually.
Sounds like a "barter economy" to me.
Greeks need to turn some of those swimming pools into hydroponic truck gardens
Like the US proposal for tax reporting for every transaction over some amount, it will be ignored by both gov and population.
Except that it makes everyone a criminal and the gov can pick and choose who they will put in jail.
'The job before Congress is to bring the fear of God back to Wall Street. '
-James Grant
'Statutory directors, board members, and controlling shareholders of Brazilian banks have their entire net worth at stake if their banks fail. All their personal assets are frozen for the duration of the liquidation process and may be used to cover any shortfall.'
Bruno Rocha, Dynamo Capital
'Clowns to the left of me, Jokers to the right'
- Gerry Rafferty
Don't know what to make of the financial reform bill.
All things being equal though my empirical thesis until proven wrong is that its' not merely a matter of 'fool me once, don't fool me twice', its' more accurately described by can we please please stop the f$%&*g 'serial fool machine' and resultant perpetual enabling of the 'greater fool' pablum narrative?
Consumer protection looks like it will be treated like witness protection...squirreled from sight.
Fed Audit? Will probably qualify for a social security retirement benefit that won't exist by the time we see the 'fraudulent conveyance' of the Eccles ledgers. Sure that the assemblage of tribes, our noble plutocracy, will fight it all the way to the Supremes... wonder how that will turn out...
Once upon a time we had leaders, yes they had their draw backs, they objectified and subjectified their brother because of melanin production ( and treated the sisters poorly too regardless of same) and if it wasn't for a burdensome tax rate they probably would have remained a British territory ad infinitum, but still they provided some intellectual heft to the rights of the individual versus the state and the role of each within society.
Who are their progenitors? Who will advocate sense over the senseless?
As an example of what would make sense please consider this plan from Wilbur Ross:
"My proposal is that lenders who agree to downsize a mortgage to today's values be given the following deal, regardless of whether the mortgage was in default or not:
• First, the federal government would guarantee one third of the reduced mortgage. This would give the lender an asset [that can be sold] at par and therefore provide liquidity to the mortgage market.
• Second, the lender -- in return for reducing the mortgage principal amount -- would get one-half of the appreciation on the first resale, until the lender had recouped the forgiven principal, without interest.
• The government would get one-fourth of the appreciation up to the same cap, on the first resale, as a form of insurance premium.
• And the homeowner would get one-fourth of the appreciation back to the original principal amount -- and 100 percent of any further appreciation."
Seems pretty simple doesn't it? 'Twould be a few paragraph attachment to the title. Not saying the plan is perfect, but it is a step in the sensible direction of risk-takin' not risk-fakin'.
Let me guess though what would happen if this made it to the Hill. Repubs would decry the nanny state, lobbyists would say it would curtail bank lending, and Libs would trumpet it and than negotiate all the teeth away with the Repubs...
Any financial reform that constitutes public risk-fakin less private risk-takin' equals history ingeminatin' and crisis reanimatin'.
Consider the 'resolution authority' being bandied about. Here's another common-sense idea, apply the Brazilian solution (see quote above). The left and right would spout the same Kabuki but Brazil came through the 'What Just Happened Crisis' fairly well didn't they?
Now their system certainly is far from perfect, the state takes much too much of a heavy hand, yet they do have a thriving banking sector, per heritage.org, the 10 largest domestic banks account for more than 60 percent of total assets. Three of the top 10 banks are foreign-owned. The two largest state-owned banks control about 25 percent of total assets.The government currently is allowed to take shares in struggling banks through the two largest state-owned banks, and a Credit Guarantee Fund introduced in March 2009 provides state guarantees on bank certificates of deposit.
Again not perfect but too big too bail and too big too fail becomes less germane when its' you lose you booze.
When its' your skin in the game its' blame mio not Rio.
And speaking of blame, looks like this weekend will be focusing on public versus private risk as the Germans choose between Mark it Gyro or Cough up Euro. Per a commentary from Adam Tooze in yesterday's FT, the May 9th North Rhine-Westphalia election may result in legislative gridlock.
He notes that as a share of local GDP, the debts of German states such as Berlin, Bremen or Sachsen-Anhalt are four to six times worse than California!
Can you imagine California voting to bail out Greece?
Per Reuters, the many potential triggers for an expanded crisis include ...any signs that Athens or donor nations are backing away.
Pair Merkel saying the European Project itself is at risk with an oft-quoted gem (on this blog at least) from Martin Armstrong :
'It was the financial war between European nations attacking each other's bond markets openly shorting them that led to all of Europe defaulting on their debt. Even Britain went into a moratorium suspending debt payments. This is what put the pressure on capital flows sending waves of capital to the United States that to some degree was kind of like the capital flow to Japan into 1989. This put tremendous pressure upon the dollar driving it to new record highs that were misread by the politicians who did not understand capital flow. They responded with Smoot-Hawley misreading the entire set of facts.'
How does one say ingeminate in German?
'The job before Congress is to bring the fear of God back to Wall Street. ' -James Grant
God we fear, Congress not so much... -Anon Bankster
Greece is the word..fersure. But the seeming aloofness of the US may come back to haunt since interconnectedness is greater than what appears to be the case. Such was the lesson of 2008. If dollar liquidity is strained, if large EuroBanks lose counterparties, if volatility increases in derivative land there can be all kinds of unforseen consequences which all threaten capital markets.
But for now Uncle Ben is playing the game of "Me BIG economy, you LITTLE economy".
Greek Gvnt is totally incompetend. This was a measure 3 months old. If I want to buy a car cash, I must use a credit card. If I want to buy a house a credit card also.
Every transaction in Greece over 1500 euros must be done through a Bank. They said they wanted to control illegal money laundry.
Is that true? What is happening?
We in Greece don't trust our Socialist Gvnt because of the lies they said.
The Russians will be eager to help you set up a "Black Market" for anything you need.
http://www.blackmarketdata.com
The Russians????? Is that a conspiracy theory?
Well, The Bulgarians have a $4.6 Billion + black market $700 Billion in cigarettes alone and another $Billion in Russian gasoline which represents upwards of 25 percent of GDP.
http://www.havocscope.com/regions-main/europe/bulgaria
Of course Greece's reported Black Market was only$384 Million last year but that will change dramatically.
NPR reports that Greek families already pay and average of $2,500 in bribes to public officials each year. That of course will change too.
http://www.npr.org/templates/story/story.php?storyId=123234869
If you want social security, retirements, roads, bridges, healthcare and stupid politicians around, you need to pay your taxes or reduce what you are getting, you cant get it all.
What is the problem with doing the transaction through a bank if you have the cash? there shouldnt be any if that cash is clean. (other than the comission they might charge, if any)
Why can't I dispose of my money without you overseeing it?
Because you might have something to hide. Especially if you want to use cash for big transactions.
Not my favourite argument, but.. if you have nothing to hide, why would you bother?
It's not your favorite argument because you know instinctively that it is very bad. That's why you post anonymously.
Do you see it now?
So now I'm guilty of money laundering before proven innocent?!
What happed to due process?
"
Send to a friend
The War on Cash and Privacy
by Donald S. McAlvany, March 1994
In the former Soviet Union, if the government wanted to apprehend and imprison someone who had committed no crime, they charged him with the catchall crime of "hooliganism." In America, the catchall crime used against organized crime figures or other Americans has for years been RICO statutes or simply "conspiracy." But in recent years the government has created a new catchall crime, punishable by imprisonment, confiscation of property, heavy fines, or all of them. It is called "money laundering."
Most Americans suppose "money laundering" refers primarily to the hidden, laundered, movement of cash profits from drug deals. Wrong! It refers today to almost any "financial crime," broken financial regulation, use of cash, avoidance of government cash-reporting laws, unreported foreign bank accounts, unreported transfer of funds, or virtually anything the government bureaucrats want it to mean. The definition is vague and ever expanding.
IRS agents are greatly accelerating money-laundering cases in situations where there is obviously no criminal intent, and certainly no involvement whatsoever with drugs or drug money. Remember, the IRS considers money laundering to be any effort you make to disguise your assets or avoid completing a federal currency transaction or border-crossing form.
If a tax case can be called "money laundering," it is no longer civil, but criminal, with large potential criminal sentences and fines. The government's growing and expanding money-laundering laws are becoming the basis for a total financial dictatorship in America — all under the guise of fighting the drug war. The first thing the Nazis did in the 1930s to establish control over their population was to establish "money crimes" that were punishable by forfeiture and imprisonment. Half a century later, the same thing is happening here. The war on drugs is a classic government power grab.
The Treasury Department has published a booklet entitled, "Money Laundering: A Banker's Guide to Avoiding Problems," which contains a list of suspicious activities that the Treasury Department says fit the profile of a "money launderer." These activities include: 1) Paying off a delinquent loan all at once; 2) Changing currency from small to large denominations; 3) Buying cashier's checks, money orders, or traveler's checks for less than the reporting limit (i.e., under $10,000); 4) Acting nervous while making large transactions with cash or monetary instruments; 5) Opening an account and using it as collateral for a loan; 6) Presenting a transaction that involves a large number of $50 and $100 bills; and 7) Presenting a transaction without counting the cash first. . . .
"Structuring" is defined by the IRS as any effort to avoid reporting cash or other monetary transactions over $10,000 by breaking them down into smaller "related" transactions over any 12-month period (defined by USC 31, Sec. 5322-5324-Money Laundering Control Act of 1986, as amended). A structuring violation carries with it a criminal penalty with a mandatory prison term, heavy fines, and confiscation of structured funds and money "connected" to them. (A civil penalty of a $25,000 fine with confiscation of structured funds also exists.) Monetary instruments included in structuring are cash, cashier's checks, money orders, and traveler's checks.
"Structuring" is now defined as money laundering, and is a criminal offense. You can now go to jail for dealing in cash to protect your financial privacy, if the IRS thinks you're trying to hide or structure your transactions or monetary instruments. Furthermore, it's against the law for a bank or merchant to tell you that you might be violating the law. This can get him prosecuted as part of your structuring "conspiracy." If they think your behavior is suspicious, they may fill out a form on you without telling you and file it with the IRS, which will promptly audit you, or begin a criminal investigation. . . .
The average person might say, "Well, the government would never come after anyone who was totally innocent." But that's not true — he misses the point. The IRS admits that 85% of the people accused of "structuring" committed no other crime than seeking to protect their privacy. The courts have upheld numerous criminal structuring convictions for violations that concealed no criminal activity. If the government wins the conviction, the judge must sentence the criminal "to a mandatory prison sentence."
This gives the lie to the argument that money laundering/structuring laws are enforced to get drug dealers and fight the war on drugs. The fact is that it is far easier to convict an honest law-abiding citizen and confiscate his property than to go after a real drug dealer who has a battery of high-priced lawyers and accountants, and who might even shoot back. . . .
In conclusion, money laundering and "structuring" laws have little if anything to do with the war on drugs. That is simply the excuse. They are a legal way for the socialist government bureaucrats to plunder and confiscate the peoples' assets (as in Nazi Germany or Russia); they are a way to enrich the government's debt-ridden coffers; they are a way to drive us toward the cashless society, and they are a way to place Orwellian-type controls on the American people. . . ."
Mr. McAlvany
"Once their is a shred of doubt (over the AAA rating of US debt) it is too late" - Tom Honig of KC Fed. It's already too late. A world awash in debt and no solutions. Aooogahhhh. We're going down!
Okay, I meant "there". Once there is a shred of doubt . . . and it is not just theirs, but ours too.
more "fiscal consolidation" for the street, while Moody's, S&P provide the muscle to open up the floodgates so ECB and IMF money can be pumped into the hedge funds and large specs. As TD spelled out yesterday, the CDS is already moving on to the bigger players. Greece is a done deal. Let's move on here, nothing more to be seen. the only question remains is how long Gpap and GCon can tread water and how long before the kids run out of gasoline.
Just another warning to the populace to store your wealth in other mediums other than digital currency and cash. In this case, even with cash limitations on transactions - you can still distribute cash relatively easy. The worst is would be having no cash combined with a limit on the amount of cash you can remove from your bank account.
You can withdraw or deposit as much money as you can in Greece from your bank account yet. No need to panic.
If you go to ATM you can withdraw 700 euros daily.
It's gonna be awesome when this Eurozone monster is dissolved.
+ 400,000,000 there.
+ 330,000,000 here.
I think it makes sense, and should help. Let the greeks pay the bill. They will never pay their taxes otherwise, very few people pay taxes just because of the greater good, and how can you blame them.
They either need to get out of the euro, devaluing and restructure to become "competitive again" or they will have to get a good dose of deflation, probably some debt restructuring and a lot of pain.
1.27 tested...fails.
Greek parliament passes austerity bill in preliminary NON-binding vote.
I suggest a head fake in hopes Germans vote in favor too. Then Greeks fail to follow through.
If they dont follow through, the money will not reach them, even if the Germans approve.. Every 3 months, the deal can be cancelled, that is why 1 and 2 year paper is trading where it is.
The law for austerity measures passed, but Socialists lost 3 seats on Parliament. Another one member of the Socialist party was hidding.
The Socialist Party of G-Pap is not going to be in power in less than a month.
The tsunami of social erruption is going to destroy all thw Socialist spectrum.
Is the title "Guest Post: ECB Recommends Tight Limits On Greek Cash Transactions" accurate?
My understanding of the document is that Greece wishes to implement the 3,000/1,500 Euro limits to businesses/consumers and the document is only "a request from the Greek Ministry of Finance for an opinion on a draft law"
This is NOT a law recommended by the ECB, but a law proposed within Greece. The ECB is only issuing feedback. Further, the ECB does not specifically endorse the law but suggests such a law is not inconsistent with existing EU and legal tender laws.
Not sure that it is the only flaw.
What about the connection between currency as a medium of exchange, the purpose of the Euro and restriction in cash transactions?
A "euro" is not necessarily paper cash. Restrictions on euro-cash transactions does not invalidate the euro as money. The Greek proposal is simply saying that electronic-euros/bank-transfers will be required for high-value transactions. And there is nothing wrong with such restrictions. Many countries have them. For instance, money-laundering and know-your-customer laws generally prohibit payments in large amounts of cash. As an alternative example, coins are often legal tender only up to a certain value.
In fact, even if paper euros were phased out entirely and all payments were electronic, this does not change the fact that a euro is still money (a medium of exchange, store of value, unit of account).
My point is that the headline is making this seem like a new ECB rule -- which it is not. This is a Greek proposal to fight tax evasion.
Would the Greeks be able to track transactions on non- EU credit cards? ... seems like there might be a market here...
Even if a non-EU credit card is used, the point-of-sale and payment processing will be at a Greek, or at the very least a Euro, bank. So not quite as easy as that.
MAY 1st:
"The weekly DOW chart shows an expanding wedge indicating a significant move is probable... this remains an overbought bear market rally and the uptrend could falter at any time.
http://www.zerohedge.com/forum/latest-market-outlook-0#comment-326767