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Capital Controls Coming to Greece and Switzerland

Bruce Krasting's picture





 
Greece
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A few weeks ago I wrote about my conversation with a friend in Athens  (Link). At the time, he believed that the June 17 election would bring a different result than the May 6 election disaster - the catalyst for change being the fear of leaving the Euro. So far he has been proven right. So I called to get an update.

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BK – It seems you might be right. The polls from Greece this weekend have given the European markets a lift today. Do you still believe that the centrist parties will win sufficient votes to form a coalition government and avoid a catastrophe?

Athens – Only a fucking idiot would invest money based on these polls.

BK – Are the polls not correct?

Athens – The European leaders have scared the Greeks with their talk about throwing Greece to the wolves. So yes, I think that the fringe on the extreme left and right will not get as many votes as they did on May 6. But Syriza (anti-bailout) has gained votes. The election is a complete crapshoot.

It may not matter. It’s not certain that Greece can make it to June 17 without a crisis.

BK – Explain that.

Athens – There is no money left in Greece. In the first two weeks of June, the government and the banks will face a huge cash squeeze. Everyday more money leaves as depositors withdraw cash and transfer money out of the country.

It’s clear to everyone who lives here. Greeks are not stupid. Either exchange controls happen before the election, or they happen immediately after. The election will not change that either way.

BK – What do you mean by "exchange controls?"

Athens – A ban on money transfers out of the country. Limits on the amount of cash that can be withdrawn from a bank or ATM.

BK – What are the odds that this happens before June 17?

Athens – The election is now twenty days away. For Greece that is a very long time. If the Europeans wanted to send a message to Greece, they would stop the emergency lending. So I would say it's 50-50 that we see some measures before the election .

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Switzerland
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Last week there was a funny looking move in the EURCHF cross rate.

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We now know that this blip was an insider who bailed on a short EURCHF position after getting a call that the head of the Swiss National Bank (SNB), Thomas Jordan, would soon be publicly talking about exchange controls in Switzerland.

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The move in the direction of exchange controls is not just a matter for the SNB. The entire government is behind the effort to ring-fence the country from its neighbor’s troubles.

At the request of the Swiss Central bank, Switzerland’s National Bank Financial Market Authority (FINMA) has formed a “crisis committee”. The members include Federal Councillor Eveline Widmer-Schlumpf, SNB President Thomas Jordan, and FINMA President Anne Héritier Lachat.

This crisis group has the authority to do pretty much as it pleases. If it wanted to introduce exchange controls in Switzerland it could do it in an hour. I’m sure that a complete roadmap of policy actions has already been laid out. I’m also sure that benchmarks have been set that would trigger the introduction of exchange controls. Certainly one of those benchmarks would be if Greece establishes its own set of controls, or formally leaves the EU. We are very close on those triggers.

There is a very strong possibility that exchange controls are established in both the strongest and the weakest countries in Europe in less than a fortnight. If those two extremes establish capital barriers, the other countries of Europe will be forced to take similar actions in a matter of months.

Who will blink first? Will it be Switzerland or Greece that ignites the fires in Europe?  My guess is that Switzerland will force the issue onto the table. It will happen very soon.

Notes:

I have no positions in the CHF crosses. I think you would be nuts if you did. Don’t let the flat lined graph of the EURCHF at 1.2012 fool you. There is a ton of two-way risk in that cross these days.

There are nearly 10m homeowners in Eastern Europe (Hungary, Poland, the Czech Republic, Romania and Croatia) who have a mortgage in CHF. I think those folks have something to worry about. What happens in the FX market over the next month or so is not clear, what will happen to the EURCHF rate in the next few years is a clear as it gets.

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Tue, 05/29/2012 - 11:09 | Link to Comment savagegoose
savagegoose's picture

when i got my  gold coins from switzerland; in the mail, they where full of chocolate!

Tue, 05/29/2012 - 09:04 | Link to Comment Captain Willard
Captain Willard's picture

Now that the Greek oligarchy/kleptocracy has taken its money out, the call is sounded for capital controls. Perfect.

Tue, 05/29/2012 - 06:58 | Link to Comment DeltaDawn
DeltaDawn's picture

Bruce, what are your thoughts on UBS?

Tue, 05/29/2012 - 08:35 | Link to Comment Bruce Krasting
Bruce Krasting's picture

Don't buy the common shares. I think the Pref and sub debt is okay.

 

Tue, 05/29/2012 - 07:26 | Link to Comment falak pema
falak pema's picture

U bull shit, I bull shit, we all bull shit. Happy family of rich who live in one country and keep their assets in five others and carry AT LEAST TWO PASSPORTS. 

Tue, 05/29/2012 - 04:06 | Link to Comment Strange-Currencies
Strange-Currencies's picture

EURCHF August '12 call and put options, slightly out-of-the-money.

Tue, 05/29/2012 - 10:54 | Link to Comment MeelionDollerBogus
MeelionDollerBogus's picture

hm, how's the volume on that trade?

Tue, 05/29/2012 - 03:57 | Link to Comment V4Vendeta
V4Vendeta's picture

MERKEL FLYS INTO GREECE

CUSTOM OFFICIAL ASKS HER NATIONALITY

'GERMAN' SHE REPLIES

'OCCUPATION?' HE ASKS

'NO, ONLY HERE FOR A FEW DAYS.'

 

Tue, 05/29/2012 - 09:14 | Link to Comment Toolshed
Toolshed's picture

Now that is funny! For obvious historical reasons. +1

 

Tue, 05/29/2012 - 05:10 | Link to Comment HungrySeagull
HungrySeagull's picture

A Greek flies to Germany.

CUSTOM OFFICIAL ASKS NATIONALITY

Greek.

OCCUPATION?' HE ASKS

None. Only here for some Money.

Tue, 05/29/2012 - 09:15 | Link to Comment Toolshed
Toolshed's picture

This, however, is not funny. You are trying hard to be funny, when in fact, you are not. -1

Tue, 05/29/2012 - 08:05 | Link to Comment Mitzibitzi
Mitzibitzi's picture

Or alternatively...

No thanks, you still owe us all that gold from the last time!

Tue, 05/29/2012 - 04:16 | Link to Comment falak pema
falak pema's picture

Currency control is part of Oligarchy control to dampen the mad speculative flows of money as the people move the furniture on the Titanic deck all the while knowing the gaping hole gets bigger; can't have that, the music has to play on. We are a civilized world and the Oligarchs like the Vanderbilts of old have to keep up a semblance of appearance as the ship's nose tilts forward.

Freeze the markets and pretend 'alles ist gut'. No more shenanigans, we are in total control and in total denial; nothing wrong with this ship! Play on musicians. 

Here is BI's take on more Greek bullying by the Troika :

GOLDMAN SACHS: 'It May Be Necessary To Take Greece To The Edge Of The Abyss' - Business Insider

Tue, 05/29/2012 - 01:44 | Link to Comment pissing_excellence
pissing_excellence's picture

BK IS EL BARTO....

Tue, 05/29/2012 - 01:25 | Link to Comment chump666
chump666's picture

The 'outflow' will be human, as in economic refugees, should be massive.  Cue America, Canada and Australia.  The Greeks will bail the ship if a pro-EU government is formed.  Most Greeks have family in the mentioned countries, they DO NOT need to be in their country, same with the Italians.  The idiot EU and the insane officials who want to impose capital control fail to understand that the money is probably flooding out of Greece and going to the families overseas - readying them for the mass exodus. The Greeks and Italians can do this, as for the Spanish and Portuguese.  No such luck, they never really immigrated to other countries in the last 100 years sans their failed and collapsed colonies.

The doomsday is Spain, as in en masse bank runs, riots and probably total economic collapse.  They will drag Germany down into the sh*t.  Merkel better boot Hollande in the nut sack and tell that french commie to suck it, then prepare Germany to leave the EU. When China goes into a major crash, Germany will be hammered, with an albatross attached to it's neck - that being Spain.

Tue, 05/29/2012 - 08:06 | Link to Comment Arnold Ziffel
Arnold Ziffel's picture

Did you mention refugees?

 

Israelis attack African migrants during protest against refugees

 

http://www.guardian.co.uk/world/2012/may/24/israelis-attack-african-migr...

Tue, 05/29/2012 - 11:18 | Link to Comment MeelionDollerBogus
MeelionDollerBogus's picture

Ya, real nice. Israel bombs thousands of Palestinians on their own land while occupying more of that same land, all for allegations of rockets fired at their children ... while using Molotov coctails to burn out the kindergarten children in Israel who are black.

Ya, nice one, that is.

Sounds Netanyahu is very happy to see final solution genocide by his own people and to turn his back on any genocide upon innocent children elsewhere, like Sudan and Eritrea.

Tue, 05/29/2012 - 07:35 | Link to Comment HungrySeagull
HungrySeagull's picture

When the Deutschmark is brought back into circulation and priced with the rest of the major currencies... I would for one not mind owning a few along with some pounds.

I have heard hearsay that they make those in gold.

Tue, 05/29/2012 - 00:45 | Link to Comment Arnold Ziffel
Arnold Ziffel's picture

What kind of currency controls, Bruce?

Tue, 05/29/2012 - 08:42 | Link to Comment Bruce Krasting
Bruce Krasting's picture

Negative interest rates for bank accounts of non-residents. A ban on new accounts. The SNB will squeeze short dates and make it very expensive to own CHF via the swaps markets.

I think the Swiss will beef up their efforts at the borders and airports. They want to stop the Euros from coming over the border.

If you're interested in this, go to this link and watch the video. Gold and cash are pouring into Switzerland from Italy. They can't stop it.

http://www.swissinfo.ch/eng/politics/foreign_affairs/How_Italian_assets_...

Tue, 05/29/2012 - 09:54 | Link to Comment etresoi
etresoi's picture

you are somewhat correct but your head is screwed into the USA view.  It is Italy, France, Geermany, and Austria, who are attempting to stop the flow at the borders.  Can you believe cash sniffing dogs!

Under the Schengen treaty  France can not stop anyone but French, at the borders.  Italy Itallians, Germany , Germans, etc.  I keep a car registered in Ireland for cross border transactions.  Under Schengen, it is untouchable.

Any thing governments can devise can be circumvented by individuals, quite easily.

Tue, 05/29/2012 - 11:01 | Link to Comment Zeroexperience2010
Zeroexperience2010's picture

A customs official can stop any car (except certain cars registered under diplomatic licence plates) under the Schengen treaty, the only thing the Schengen treaty does is forbidding permanent controls and checks.

You are as liable to being stopped (and searched) with CH, F, IRL, IT or other plates when crossing FR/CH border. I cross various CH/FR CH/D borders regularly, including with CH, BE and D plates (non diplo), I am not stopped very often, but it happens mostly from Swiss customs when entering CH with CH plates (looking for butter and raw beef) and EU customs when travelling with EU plates.

Tue, 05/29/2012 - 12:03 | Link to Comment etresoi
etresoi's picture

Agreed.  However there is a difference (de jure vs. de facto) between what can be don e and what is done.  I never transport beef or butter.

Tue, 05/29/2012 - 10:05 | Link to Comment the tower
the tower's picture

@etresoi - You are somewhat correct, both sides want to stop the flow of money into switzerland. Bruce is right on top of what happens in Switzerland. I know cause I live there and know the people who take these decisions. Banks WILL stop the influx of Euros in any way they can, this is in full swing. Only the very very rich can do business as usual by buying property, buying recidency etc.

Tue, 05/29/2012 - 10:30 | Link to Comment etresoi
etresoi's picture

The Swiss will try anything to stop the flow of euros, I agree and they would like to have never heard of the USD.  They are both currencies with no tangible value.

But, I am not a government.  I am an individual who needs to actively protect myself from the financial depradations of both US and European politicians.

Tue, 05/29/2012 - 20:24 | Link to Comment malek
malek's picture

Well currently they are selling out CHF to other Europeans on the cheap, with their peg.

Tue, 05/29/2012 - 10:51 | Link to Comment the tower
the tower's picture

... and you can because you are a Swiss national. Foreigners on the other hand will be blocked from bringing money in.

A year or 4 ago UBS kicked out all American account holders with less than $1mm in their account. Then they lowered the limit to $300.000. Now they are way back up in the $10's mm. 

Tue, 05/29/2012 - 08:48 | Link to Comment disabledvet
disabledvet's picture

"pouring in"? Yeah, right. The Swiss franc goes where the euro goes. PERIOD! Move along sheeple!

Tue, 05/29/2012 - 09:58 | Link to Comment etresoi
etresoi's picture

... and this can be changed in an instant.  I am moving $30mmUSD into CHF (PostFinance) this week, we'll see.

Tue, 05/29/2012 - 10:25 | Link to Comment the tower
the tower's picture

... and you can do this because you are a Swiss national. The discussion here is about foreigners bringing money in.

Tue, 05/29/2012 - 06:16 | Link to Comment the tower
the tower's picture

There will be a tax on bringing money into the country. Could be in place in a matter of weeks.

Tue, 05/29/2012 - 09:59 | Link to Comment etresoi
etresoi's picture

... which means the money already in the country becomes more valuable.

Tue, 05/29/2012 - 10:13 | Link to Comment the tower
the tower's picture

I don't follow that logic. It means the govt will make money on your money coming in.

Tue, 05/29/2012 - 02:16 | Link to Comment ConfederateH
ConfederateH's picture

An interesting question.  Greece would have to institute currency controls to keep Euro's from leaving the country, Switzerland would have to institute currency controls to prevent Euro's from coming in.  Greece would be worried about little transactions (cash) too while Switzerland would mostly have to worry about large electronic transfers.

Switzerland could have troubles with her neighbors if she violated Schengen set up border controls, another reason why Swiss capital controls would mostly affect banks.   The Swiss export industries that export all over Europe could have lots of problems if they couldn't accept payment in Euro's. 

Tue, 05/29/2012 - 03:07 | Link to Comment etresoi
etresoi's picture

you have not been to a Swiss border, recently.  I drove over the France/Swiss border twice over the weekend.  As usual, the French gestapo was stopping and searching.

Tue, 05/29/2012 - 08:10 | Link to Comment Anton LaVey
Anton LaVey's picture

Because that's the French/Swiss border, you dumbass.

French Gestapo my ass, if you are so worried wbout your precious money, just take it to Jersey - never had any problem with border controls there.

You are seriously taliking out of your ass, "etresoi", or whatever - I suspect you have never ever been to France (or any other country in Europe for that matter).

Tue, 05/29/2012 - 12:28 | Link to Comment etresoi
etresoi's picture

I am not accustomed to being called a dumb ass, nor calling another person a dumb ass.

So, I had to think about it as I spread fumier in the vegetable garden.  Perhaps I am a dumb ass, for I choose to live in France, which I call the Nigeria of Europe.  Both are very wealthy countries where nothing ever functions in the manner one would expect and the common attitude of the citizens can be summed up in "It is not my fault; it is someone else's responsibility and I am entitled to...."

But, the area in which I live is geographically in a mountainous region of France but demographically not very French. Think of us as living in the Appalachia of Europe. My wife and I are the only French speakers in our village. We live here because we agree with the local sense of anarchy. Our neighbors speak a Celtic patois, which we have had to learn.  The French language was imposed upon the people by Charles DeGaulle and our departed friend and business partner, his sister Genvieve always laughed at this as the most stupid thing he ever did.

I can only assume that our friend, Anton, lives in a city with a two or three hour commute twice each workday, which is very, very French.

Tue, 05/29/2012 - 10:08 | Link to Comment etresoi
etresoi's picture

Thank you for your informed opinion.  I am a Swiss national with permanent French residency.

I also possess legal residency  in Cambodia,Togo and Nigeria, as well as citizenship in Argentina, Mexico and Ireland.  I have legal residency in process for Mongolia.

From what ghetto in the fascist states of amerika do you creep?

Tue, 05/29/2012 - 08:31 | Link to Comment WmMcK
WmMcK's picture

just take it to Jersey ...
By bridge or tunnel?

Tue, 05/29/2012 - 09:46 | Link to Comment HungrySeagull
HungrySeagull's picture

Neither, overland via Columbia.

On second thought, being sandwiched between a river and a mountain ridge... it's SOOO easy to interdict.

Tue, 05/29/2012 - 05:29 | Link to Comment Zeroexperience2010
Zeroexperience2010's picture

I also drove over the Swiss/French border, small town (not highway) crossing: Swiss patrols on both sides (up to now they were mostly controling who are coming into CH, not leaving!) and French patrols on France>CH side (so controling people entering CH). It was around lunch time so understandably French did not check who was leaving CH :)

Tue, 05/29/2012 - 07:12 | Link to Comment etresoi
etresoi's picture

yes, if one ever needs to do something without being noticed by French "authorities," do it during the two hour lunch time.  This is the only  time that the French are punctual.

Tue, 05/29/2012 - 00:21 | Link to Comment etresoi
etresoi's picture

Exchange controls - no big deal.  Spain has exchange controls for months.  France has exchange controls forevr.  800€ is the max cash withrawal and possession of 10,000€ is a crime in France, where the border guards search for cash, and a large wire transfer triggers investigation.

Tue, 05/29/2012 - 08:05 | Link to Comment Anton LaVey
Anton LaVey's picture

ORLY?

Funny, I have been through French customs a hundred times or more and none of the "Doauniers" ever searched for cash.

And, FWIW, I routinely take up to 1500 Euros out of French ATMs.

Oh, and I have quite a lot of cash either at home or at work. I know a lot of bakeries and wine shops around my neighbourhood also keep quite a lot of cash in their cash register.

And one more thing: you are a moron.

 

Tue, 05/29/2012 - 10:12 | Link to Comment etresoi
etresoi's picture

French are typicaly French, especially when their nose is tweaked.  When one lives in France, it is a constant source of amusement, when they can only  fall back on insults to counter fact.

Tue, 05/29/2012 - 01:05 | Link to Comment RoadKill
RoadKill's picture

Not the same thing... In the US you cant take more then $500 out of an atm and any withdraw over $10,000 gets flagged to Treasury. However you can transfer as much as you want to another bank account in your name.

Real exchange controls BAN electronic transfers and cap Atm and over the counter withdaws. You cant even get a large cashier check or money order. The point is to prevent capital from leaving. Go look at what Argentuna did or Venezuela. Once they lower the gate, your money is GONE.

The fear of capital controls alone should start a bank run as everyone tries to beat the date.

But I read elsewhere that 75%-80% of the deposits are already gone. Its been replaced by ECB cash. They just injected another €22bbn yesterday.

Tue, 05/29/2012 - 02:37 | Link to Comment etresoi
etresoi's picture

To be more specific and real...  ATM is capped, large wire transfers trigger investigation.  Cashier checks or money orders are hassled and are extremely expensive and take weeks to clear.

Money flows to where it is easiest to use.  The higher the velocity of funds, the higher the prosperity.

For me, I keep negative balances in my French accounts, which are used for day to day expenses and top up the balance in cash, once each month.  Any real amounts of money never enter Europe and never, never in the USA.

I have been doing this for more than thirty years following the maxim of having citizenship in one country, residence in a second and assets in third, fourth and fifth.  I know I am not alone in this regard.

 

Tue, 05/29/2012 - 05:08 | Link to Comment HungrySeagull
HungrySeagull's picture

Let's see, we don't use ATM's and everything else is electronic.

Cash? What is that? Oh, for those who are not part of the banking system.

Sorry.

Now...

I hear the drumbeat of war and other things louder by the day.

Make ready and that is necessary.

Tue, 05/29/2012 - 04:43 | Link to Comment bank guy in Brussels
bank guy in Brussels's picture

Classic principle you wrote,

« ... the maxim of having citizenship in one country, residence in a second and assets in third ... »

This the great advice of financial newsletter pioneer, Harry Schultz, now in his 80s living happily in tax-free Monaco ... and himself one of the people most respected by the great Jim Sinclair.

There are rare public words from Harry Schultz today, but some very interesting thoughts of his just appeared via Jim Sinclair, article here ... Schultz says the US and IMF have joined in a giant money-printing plan to bail out the EU banks, in the hope of giving the global Ponzi another 6 months or so, and probably with keeping Greece inside the euro as the view is that contagion cannot be controlled:

http://www.jsmineset.com/2012/05/27/behind-the-scenes-with-harry-schultz/

Tue, 05/29/2012 - 00:18 | Link to Comment General Debility
General Debility's picture

My prediction is June 15 for the entire rancid bilge to be flushed down the toilet. Then there will be revolution and anarchy; chaos and carnage, not that that cheers me up, and then who knows? I doubt there will be a shift of consciousness in homo sapiens any time soon.

 

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