Rumors, Denials, and Visions of Chaos

Wolf Richter's picture

Wolf Richter

While the G-8 leaders are schmoozing with President Obama during their slumber party at Camp David, and while the parallel NATO summit and its protests and rallies are wreaking havoc on the streets in Chicago, Europe is re-descending into rumor hell—where good rumors, as we found out last summer and fall, are head fakes that cause huge rallies in the markets, and where bad rumors, though passionately denied by all sides, turn out to be true.

The latest was that the European Central Bank and European Commission were preparing contingency plans for Greece’s exit from the Eurozone. Actually, it wasn’t even a rumor. EU Trade Commissioner Karel De Gucht declared it during an interview: “A year and a half ago, there may have been the danger of a domino effect,” he said, “but today there are, both within the European Central Bank and the European Commission, services that are working on emergency scenarios in case Greece doesn't make it.”

A momentous statement. The first time ever that an EU official admitted the existence of contingency plans—though everyone had long assumed that they existed. Clearly, Europe’s political power brokers, disparate as they are, have gotten tired of bending to Greece’s wily political elite and their threats. Read.... The Greek Extortion Racket in its Final Spasm.

Alas, within hours, the very European Commission where De Gucht serves as the Trade Commissioner stabbed him in the back: “We completely deny that we are working on any such emergency plans,” said a spokesperson for the Commission. “We are concentrating all our efforts on supporting Greece and keeping it in the Eurozone. That is the scenario we are working on.”

Indeed. And then there was the rumor about printing money. Not the kind that the Fed, the ECB, and other central banks are printing, but real money. De La Rue, a British company that prints currency for 150 countries, among other business activities, has apparently been asked some time ago to prepare contingency plans for printing Greek drachma notes, according to unconfirmed rumors that just surfaced. People who got wind of it earlier have driven up the stock (DLAR.L) 11% since mid-April—possibly a confirmation.

Greece’s return to the drachma can’t be done overnight. It would be a complex and costly transition that would require time. The day Greece switches to the drachma, it will have to have huge quantities of drachma notes on hand; and preparations are apparently underway to print them. The Bank of Greece has its own printing outfit that has been printing euros ever since it stopped printing drachmas. It would pick up much of the volume, but any demand beyond its capacity would have to be farmed out to other printers. Hence De La Rue.

Banks have already been preparing for the drachma. Turns out, some banks never actually removed their drachma capabilities, perhaps because they lacked confidence in Greece’s ability to keep the euro, or perhaps because they—the banks, not the Greeks—were simply too lazy. And they’d be able to switch from one moment to the next. But it would still be a complicated mess laced with capital controls and all the banking nightmares associated with them. It would be fraught with risks, legal issues, and uncertainties.

A return to the drachma—and its rapid devaluation—would, however, do wonders for Greece's tourism industry, the second largest industry after shipping. In 2011, the number of international visitors actually rose by 9.5% from the prior year, and they spent 9.3% more. The industry is hugely important to Greece: it provides 18.4% of the country’s jobs and makes up 16.5% of the economy.

But now reservations for the summer have collapsed by a stunning 50%! "Political instability," explains Georgios Drakopoulos Director General of the Association of Greek Tourism Enterprises (SETE). And bad publicity, strikes, demonstrations, and images of Athens on fire—the only things foreign media showed, Drakopoulos lamented, though in the rest of Greece, “the conditions are the exact opposite.” And once those issues disappear from the media, a devalued drachma would turn Greece into an irresistible and highly affordable paradise for tourists of all types, including waves of budget tourists—all of whom would bring in hard currency.

“The Greeks are still debt slaves, and will be until they tell Brussels to take a hike,” said David Stockman, Director of the Office of Management and Budget under President Reagan. With similarly pungent flourishes, he talked of a “paralyzed” Fed that is in its “final days,” hostage of Wall Street “robots” trading in markets that are “artificially medicated.” For his awesome interview, read.... The Emperor is Naked: David Stockman.

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el Gallinazo's picture

"a devalued drachma would turn Greece into an irresistible and highly affordable paradise for tourists of all types, including waves of budget tourists—all of whom would bring in hard currency."


Hard currency?????

W10321303's picture

How About? The Plutocrat blood-sucking vampire zombie SPECULATORS are getting their bluff called and not even GB, MR, and AM can save their worthless asses (not Paulson either)

andrewp111's picture

And once those issues disappear from the media, a devalued drachma would turn Greece into an irresistible and highly affordable paradise for tourists of all types, including waves of budget tourists—all of whom would bring in hard currency.

A Greece running on Drachma would be a Mecca for German sexual tourists of all types - gay, straight, and simply depraved.

q99x2's picture

Can't they like pass a banker imprisonment law and arrest them, throw them into prison and then begin negotiations. What's all this pussyfooting around for? Everyone would like them to arrest the bankers. They would have support and something to negotiate with. Or are they like out of weapons like the American Indians and are being put onto a reservation in their own land. Nope they are Greeks and gonna get the banksters. I hope they do.

Zero Govt's picture

takes 2 to tango

..the politicians (who ran up debts without any plan to repay) are as culpable as the bankers who loanded them the money without a plan for repayment

so they should jail BOTH parties... and therein lies the answer to why nobody is being jailed for this collosal Euro-wide mess and nation-wrecking

Winston Churchill's picture

The Grexit is already in progress.

ECB admitted yesterday that nearly all Y series euros (Greek)

have been removed from the monetary system and replaced with

X series(German) euros.

Game over.Greek euros are now a collector item.


falak pema's picture

greek euros are neither Y or X, they are Z...didn't u see that film?

falak pema's picture

u know de-la-rue means street vendor. He'll sell u anything. But Z notes are sexy for sure. Wait till its time to print Z files. 

Bagbalm's picture

"- in case Greece doesn't make it.”  He makes it sound like a death. Greece will still be there guy just not the debt. Shows they think account numbers are the whole of reality.

sunny's picture

Iceland is looking better and better.


TraitorsHang's picture

Can we please have an agreement to stop referring to Obama as "President"? He cannot legally be the president:

May I suggest "Biden's Seat Warmer" in place of "President Obama"?
Maybe "Bill Clinton's Proxy"?

Cruel Aid's picture

President Biden would be the icing on the cake of history.

SNL/Onion comes true! It would surely be a teachable moment.

The Alarmist's picture

Yeah, right up there with a horse being appointed to the Roman Senate ... at least the horse had been a war hero.

The Alarmist's picture

Call him what you like, but that won't stop the Hellfire from taking out your citizen ass when he says the word.

TraitorsHang's picture

I don't give a fuck. Of course they might kill any of us. But to cower is to hand them the thing they are trying to steal. Stand up and call fraud what it is.

11b40's picture

Call fraud what it is? OK. Romney. How's that for a fraud?

TraitorsHang's picture

If you think I'm pulling for Romney, you're daft.
Romney isn't claiming to be the president.

11b40's picture

Give it up, already.  Obammy is not CLAIMING to be the President.  He IS the President, and the 'birthers' can bich & moan all they want, but nothing will change & the birthers just look and sound stupid.

Niether he nor Romney can/will do much to improve things, but with an Obummer second term, he just might turn populist and go after the Banksters.  There is zero chance of that happening with Romney.  I somehow feel that he would be the worst of all possible outcomes - Wall Street Zombies on the loose, so-called Christians fanatics rooting for Holy War in the ME, multi-national outsourcing gone wild, and a bigger eraser the wipe away the remaining middle classes.

Creepy Lurker's picture

That will do fine. They are all frauds.

falak pema's picture

broad; broad....i cry broad....big, big broads...I see them all over the place...Broads! broads, broads...all of them abroad. All of them at Cannes! 

The Reich's picture

An official and hasty denial makes me confident that the opposite is true!

falak pema's picture

rumour hell; that rings a bell when Lous XV was a dying corpse and all prepared to sing the song "the king is dead long live...they forgot the sequence; instead of singing, "the people", they sang "the king"...and it led to the guillotine.

So let them sing "long live the king" once again, as we come into the hot summer leading up to november election time. But back at the WS factory its pump and dump play with Facebook of Madame du Barry-- the greatest head giver of the century, her reputation would have made Apple go horny on the Nasdaq corn cob-- our global mark suckerberger merry now her legitimate son. And as sure as hell we prepare the reign of MArie Antoinette in DC from 2013 onwards. Where's her pearl necklace, where's her locksmith husband, where oh where is the Bastille trumpet?

Rumours, damn rumours and media bloomers. 

I'm sure WB7 could use the allegory! 

Zero Govt's picture

"Greece’s return to the drachma can’t be done overnight."

If you were Greek would you cling onto Euros, backed by (some) stable countries or would you welcome new Drachma's, backed by, er, Greece!!!

...and you'd know whatever their official value will be devalued by a good 30% probably within hours of going 'on sale'

DeadFred's picture

If I were Greek right now I would move or convert any larger accounts into safer currency or investments, gold, silver, art even stocks and bonds then switch them back to drachmas when the dust settles. If the Greeks are like Americans most of them live paycheck to paycheck and this the currency switch is worrying them, they only want the paycheckss to continue. Any Greek who hasn't safeguarded assets by now is pretty foolish. If they believe the propaganda that's been sent their way they probably don't have much cash because they already used it to buy the Brooklyn Bridge, or the Greek equivalent.

falak pema's picture

most of those who haven't already run with money to swiss land are all broke; this is now time for the heretic to burn as Euro Orthodoxy needs a scapegoat to sacrifice, to hide its own sham exercise in Oligarchy protection of banksta cabal.

ebworthen's picture

Politicians, supported by bankers, meet to see how they are going to fool and defraud their citizens for global banker bailout #2; under the guise of "saving their countries" etc., etc.

Nobody For President's picture

And the old saw applies: Never believe a rumor until it is officially denied:

“We completely deny that we are working on any such emergency plans,” said a spokesperson for the Commission. “We are concentrating all our efforts on supporting Greece and keeping it in the Eurozone. That is the scenario we are working on.”

Wonder if this spokesperson was hired for their acting ability - i.e. keeping a straight face as they read that crap of the telelprompter.

Zero Govt's picture

the Commissions spokesman was probably using yesterdays official PR Release

when the other revealed the Commission has drawn up 'contingency plans' he was referring to todays planning

..because as we all know politicians don't plan anything, from any plans to pay any debt back to plans on what happens next. It's all done on the hoof by clowns who are nothing but bluffers and windbags and a complete shambles 

that is Govt ...that is why we need to bin it's a very sick joke on all of us we put up with these cretins

Augustus's picture



The top dog pols already have body guards.  So do Rosie, Oprah, Puff Duddy, and many others.  Game over on the bet.

RockyRacoon's picture

Who said Oprah was a probable target?

I'm talking about calloused hands with dirt under the nails, not manicured TV personalities anyhow.

General Debility's picture

What a mess! What incompetence! I am feeling acropalyptic! ;(

Where is Diogenes when you need him? He used to live in a barrel. He would masturbate (presumably out of the barrel) in the market place to SHOCK the masses out of their torpor.

And it was he who wandered around (in daylight) with a lamp saying "I am looking for an honest man."

Bennie Noakes's picture

If I were selling goods to someone in Greece I would refuse to ship until their check had cleared, particularly if it was drawn against a Greek bank. Someone might send you a check for 100 euros, and before the check clears that person's account might get converted from euros to drachmas (which would be worth a lot less than euros). So does my 100 euro check suddenly become a 100 drachma check? Or maybe it doesn't even clear at all.

Mitzibitzi's picture

Not if the cheque is written as a Euro value, no. The bank account the funds are derived from might now contain drachmas, but if the cheque says 100 Euro then the originating bank would simply convert whatever number of drachmas into 100 Euros at the prevailing exchange rate (probably a humorously large conversion factor) and pay them to you as 100 Euros. 

We are assuming, of course, that international banking regulations are being followed here. And we all know how good banksters are at ignoring inconvenient regulations. Sometimes even actual laws.

Nussi34's picture

We do not sell to Greece. But I can tell you that even for operations from our Italian branches within Italy we have moved most cusotmers to prepayments. Too many defaults made that necessary.

disabledvet's picture

that sounds like ECB failure to me...

RockyRacoon's picture

So much for the "paralyzed Fed".  I wish Stockman were correct.  We should have a ZH pool on which constituency of the U. S. citizens will be the first to hit the streets armed.  I ain't talking about silly-assed signs and chanting  Hey-hey, ho-ho.... blah, blah crap.

disabledvet's picture

Absolutely and without a doubt...Florida.

Cloud9.5's picture

Florida is more Balkanized than the Balkans.  We are filled with refugees that have fled failed regimes from all over the world who strive every waking hour to replicate here the very same conditions that brought about their original exodus. In a collapse, we will be the poster child of race riots and the resulting ethnic cleansing.

bigkahuna's picture

I suspect this is typical of many parts of the US.

Mitzibitzi's picture

I'll take North Dakota. If only because it looks pretty in the 'Illustrated Atlas of North America'