Bank Run

"If banknotes are outlawed you will be forced to hold money that is a liability of a commercial bank (deposits) and refused access to money that is the liability of the central bank (bank notes)... In such a world, zero-yielding gold would be a high-yielding instrument. If the authorities ever sought to restrict access to banknotes, then gold would suddenly find itself enfranchised as money for the first time in many decades. So, given the scale of these competing forces, it is just too early to say what might happen to the gold price, but the allure of gold will grow the more it becomes clear that central bank fiat has failed and the age of government fiat is dawning."

Fiat Money May Be Junk ... But a Cashless Society Controlled by the TBTFs Is Dictatorship

"We think that, at the 10-year tenor, the spread between Spanish and Italian bonds yield versus Bunds yield could still widen to around 350-400bp before a policy response is enacted. We stress that the departure of a country from the ‘irrevocable’ monetary arrangements of the EMU would take us into unchartered waters and it is difficult to predict how negative the market reaction could be."

It has been a very disturbing 24 hours for Greece.

Instead of merely plugging the hole left from declining liabilities (deposits), what the ECB's ELA funding appears to also be doing is compensating for a rapid write down in bank assets (loans) as well, in the form of charged off Non-Performing Loans. According to Reuters, one of the leading Greek financial institutions, Piraeus Bank will write off credit cards and retail loans up to 20,000 euros ($21,484) for Greeks who qualify for help under a law the leftist government passed to provide relief to poverty-stricken borrowers, it said on Thursday.

In what seems like a coincidental retaliation for Greece's pivot to Russia (and following Greece's initiation of capital controls), the supposedly independent European Central Bank has decided suddenly that - after dishing out €74 billion of emergency liquidity to the Greek National Bank to fund its banks - as The NY Times reports, the value of the collateral that Greek banks post at their own central bank to secure these loans be reduced by as much as 50%, and the haircut scould increase if negotiations with Europe remain at an impasse. As we detailed earlier, this is about as worst-case-scenario for Greece as is 'diplomatically' possible currently, and highlights an increasingly hard line by The ECB toward The Greeks as the move will leave banks hard-pressed to survive.

On one hand, Bill Gross says that "German 10yr Bunds = The short of a lifetime." On the other, the ECB is about to run out of bonds to monetize at current prices as the Bund yield slides every lower to the ECB's hard floor of -0.20%. End result: someone will be very hurt...

Things for insolvent, cashless Greece are - not unexpectedly - getting worse by the day.

This may take you the entire weekend to digest, but if you are an unsecured creditor/lender (have a checking, savings or demand deposit account) to a euro zone bank, I would consider it your fiduciary responsibility to yourself to sit down and parse this piece with care and aplomb!

Today, to our dismay, we find that the ECB has not only considered a "parallel currency" alterantive but for Greece this may be a reality before long. According to Reuters, the ECB "has analyzed a scenario in which Greece runs out of money and starts paying civil servants with IOUs, creating a virtual second currency within the euro bloc, people with knowledge of the exercise told Reuters." "The fact is we are not seeing any progress... So we have to look at these scenarios."

Update: SCHAEUBLE: GREECE FREE TO SEEK RUSSIAN AID, MAY NOT GET MUCH

As Greeks take to the streets, Varoufakis calls predictions about Grexit reverberations delusional, and Bloomberg proposes a list of Greek default scenarios. Meanwhile, central banks move to ringfence Greek exposure and analysts scramble to outline the risk of bank runs, capital controls, and contagion. 

Late last year, Grexit "expert" Willem Buiter decided that he was a greater expert on the topic of monetary metals than on geopolitics by stating that "Gold Is A 6,000 Year Old Bubble." Now, he has decided that after gold, it is best to just do away with any physical currency altogether and the time to ban cash has arrived.

The rhetoric, threats, and promises continue to increase as Greece, its international creditors (i.e. Troika), and its potential pivot partners from Russia to China to Iran all vie for attention. With EU officials proclaiming "[the Greek] government cannot survive," suggesting Tsipras divorce himself from the extreme left of his party; and with 68% of Europeans polled believing Greece is a drag on the EU economy, Greece's last best hope perhaps remains with a pivot to another Troika (Russia, China, and Iran) as energy minister Panagiotis Lafazanis denounced Greece’s international creditors for treating the country with "unbelievable prejudice and as a colony." This all on the day when FinMin Varoufakis 'promises' Christine Lagarde that Greece will repay its IMF loan on April 9th (somehow?).

In the case of the U.S., which thanks to its pool of capital, political and military power, enjoys the exorbitant privilege of having the world's reserve currency, an expansive Fed will not even necessarily "throw seniors under the bus", as one of Bernanke's critics once mentioned, suggesting that monetary expansion erodes life savings of senior citizens. A lot of the monetary expansion results in investment bubbles all over the planet. Some even have "credited" Bernanke with triggering the Arab "Spring", as food prices in the Middle East rose from mid-2010 to an unsustainable level after quantitative easing was re-started. It looks like Bernanke, or at least the institution he presided, is more powerful than he seems to think.

Did stocks window dressing come one day early in this volatile, bipolar, stop-hunting, HFT-infested market? Looking at futures this morning, which are down about 12 points already on yet another surge in the USD which has sent the EURUSD just above 1.07, the lowest since March 20 , and the USDJPY back under 120 now that the "strong dollar is bad for stocks after all" algo seems to be back from vacation, all those hedge funds who chased risk higher yesterday because their peers did the same, may find they are all selling on the way down. It will be oddly ironic if all of yesterday's widely touted gains evaporate comparably in the first 10 minutes of trading today, and lead to an end in the longest streak of quarterly increases in two decades.