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Bail-Ins Of "Big Deposits" In Greece Would Be "Extraordinarily Counter-Productive"
Bail-Ins Of "Big Deposits" In Greece Would Be "Extraordinarily Counter-Productive"
- Bail-ins are a risk facing Greek savers and businesses
- 'The Economist' warns bail-ins in Greece would be "extraordinarily counter-productive"
- Capital controls choking small and medium size businesses
- Greek liquidity crisis now a solvency crisis
- ELA now provides more liquidity to the Greek banking sector than deposits do
- Greece households and especially businesses worry about a “bail-in” of big deposits - above €100,000
- Financial interests of banks placed over those of small and medium businesses and taxpayers
“Bailing-in” of larger deposits would have a very detrimental effect on Greece, The Economist has warned. The magazine points out that such an action would “destroy the working capital” of small and medium size businesses, which it describes as the “backbone” of Greece’s economy.
The risk that bail-ins pose to companies, trade, commerce, employment and entire economies is something at which we have looked frequently in recent months. Indeed, we think we are largely alone in focussing in detail on the risk that bail-ins pose not just to individual savers but also to millions of small and medium size enterprises throughout the world.
See Fallout From Bail-ins More Negative than Many Realise (Irish Times, Dec 2013)
See From Bail-Outs To Bail-Ins: Risks and Ramifications – Includes 60 Safest Banks In World (Nov, 2013)
See Protecting Your Savings In The Coming Bail-In Era (Nov, 2013)
There has been little or no debate by commentators or in the media about the risks posed by bail-ins.
The cosy consensus is that bail-ins are good as they allegedly protect the taxpayers from bailing out banks. As if it is a fait accompli that banks should be bailed out by anybody - taxpayers or depositors - in the first place.
The better option of winding down failed banks is verboten in our banker-captured financial and political world.
The narrative is that bail-ins are good as they protect taxpayers. This forgets that small and medium enterprises employ millions of people who are taxpayers and contribute billions in tax revenues. Therefore, if you confiscate their deposits, their very working capital, they will not have the monies needed to pay wages and salaries of millions of employees.
Is it not before time that we have a real debate about the developing bail-in regimes and the deflationary risk they pose to western economies?
In Greece, small and medium size enterprises - the backbone of the Greek and indeed most economies - are already suffering the adverse effects of capital controls. The restrictions on transferring cash abroad has prevented them from importing the various products they use to run their businesses or sell to consumers.
The limits on cash withdrawals - now €420 per week which can be withdrawn all at once as opposed to the previous €60 daily limit - is greatly hampering their ability to do business. All business has to be done with cash and some with the return of barter.
The Economist suggests that a separate Emergency Liquidity Assistance (ELA) program be introduced to specifically to give banks greater flexibility in lending to businesses to keep them afloat.
Failure to provide emergency liquidity to businesses will lead to defaults by otherwise reasonably healthy businesses which will further undermine the balance sheets of banks, increase unemployment and further impact the already devastated Greek economy.
The Economist also makes a passing reference to the insane situation whereby businesses would have to beg their banks for credit while their own cash reserves are being withheld:“Any such improvements are likely to rely heavily on extra ELA rather than a return of deposits.”
The magazine argues that Greece now faces a solvency crisis. They almost ran out of cash during the bank runs of the past few weeks. The situation was only barely stabilised when the Greek central bank received the go ahead from the ECB to provide ELA.
The Economist also points out that, despite capital controls, ELA now provides more liquidity to the highly indebted Greek banks that customer deposits do. This underlines that the current model of treating debt crises with more debt and hoping the problem will go away is utterly stupid and futile.
It is storing up a world of financial pain in the coming months and years.
The erstwhile capitulation of Syriza likely opens the door to further ELA and a stabilisation of the Greece’s banking system but the true health of that system will only become clear when stress tests are performed in the Autumn according to the magazine.
The magazine suggests that - now that a “Grexit” is off the table - “bail-ins” are the biggest concern facing Greek savers and businesses.
They argue that bail-ins are unlikely because the program is not set to be fully ratified Europe-wide until next year and suggest that assurances from Europe to Greece that “bail-ins” are off the table would help stabilise the system.
We are unclear as to whether bail-ins will be applied to Greek deposits at this time. They may not be as they would send an extremely negative message to savers throughout Europe. However, the threat of bail-ins may be used to keep Tsipras and the Greek government in line and force them to implement the new austerity regime.
The treatment of Greece - who are one side of a two sided process and who have been forced to bear the brunt of the consequences of the foolishness of the Troika in recent months has alarmed many Europeans. They are beginning to sense that policy is being directed by financial and banking interests rather than by a democratic process.
Financial interests of banks are once again being placed over those of small and medium businesses and taxpayers in general.
In the event of a systemic European banking crisis, however, laws can be changed at the stroke of a pen and “bail-in” mechanisms could become fully operational. Also, the comforting guarantee of €100,000 will be erased in such a crisis.
Must-read bail-in guide: Protecting Your Deposits From Confiscation
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In a wind down without a bail out the big depositors would still be hosed.
The problem with wind downs is that it's hard to do with every bank in a country at the same time. The popular example of Iceland created a seperate bad bank for foreign liabilities to wind down ... Greece does not have that luxury (Cyprus maybe).
For one's viewing (dis)pleasure......
http://www.fatf-gafi.org/documents/documents/ml-tf-risks-and-vulnerabili...
http://www.fatf-gafi.org/media/fatf/documents/reports/ML-TF-risks-vulner...
Winding up failed banks? Does this incolve dragging bankers into the streets and shooting them or not?
They lent depositor money to Athens, who then used the money to effectively give tax exemptions to Greek oligarchs. When are we "bailing in" Yanis Varoufakis' rich father or confiscating that EUR5000 a week villa in Aegina?
If its counter productive they'll do it.
Greece is just one banana peal away from civil war,
but then, we all are.
Oh, I don't know. THe "Cucktards" seem willing to endure any all and all indignities inflicted upon them without repercussion.
http://www.amren.com/news/2015/07/what-is-a-cuckservative/
ELA to facilitate bank “lending to businesses to keep them afloat… [instead] of a return of [businesses’] deposits”.
Combine these problems and solutions with government attempts to “guarantee” bank deposits… and we have the making of an economic slaughter of historic proportions.
It is a slaughter that, probably, will devastate every country on the planet. Greece is only a trial run for what international banks plan to impose on the world’s population.
By these guarantees, when a bank failed, or was seized by the government, all deposits less than $250,000, for example, would be protected; all amounts over that limit would be lost.
This immediately created massive problems for depositors with accounts larger than the limit (wealthy individuals, companies and corporations).
It would, for example, be a disaster for a corporation with a “cash” position of $500,000,000 to be caught in such a bank failure. (By “cash”, a “bank account” is meant.)
This policy of guarantee set in motion mad scrambles by large depositors to protect their “cash”. It led to the creation of so-called zero-balance accounts (which go by many names). By these accounts, positive balances in large checking accounts were swept into US Treasuries at end of each day. Thus, if the bank failed/was-seized after closing that day, the account holder had nothing to lose.
But there was a limit to this remedy: very quickly, there were not enough Treasuries to satisfy demand, by US banks as well as foreign ones. This gave rise to the demand for Mortgage Backed Securities (MBS) as a substitute for Treasuries. This demand was world-wide. Now, there are probably $6 to $15 trillion MBS serving as so-called “cash equivalents” on corporate balance sheets world-wide. (Beginning about 15 years ago, corporations began replacing the term “cash” on their asset statements with “cash equivalents”.)
And now all these “cash equivalents” are collateralized by US Treasuries (directly or indirectly): that is, American taxpayers.
Other “cash equivalents” include all US Treasuries; dollar instruments owned by foreign private or central banks; all MBS owned by the Federal Reserve; all currency issued by the Federal Reserve (the scrip we carry in our pockets); and a whole plethora of fruit-cake debt (such as defaulted-SBA loans, defaulted-car-lot loans, defaulted-student loans, defaulted-credit-card debt et cetera).
Few people realize the enormity of collateralizing the world’s reserve currency with such financial trash as enumerated in the above paragraph.
When we trace all these “cash equivalents” to their collateral, we arrive at the gold that may or may not be at “Fort Knox.”
Our problem now is, ‘How do we make the price of that remaining gold equal to the $15 to $20 trillion in “cash equivalents” supposedly collateralized by that gold?’
And who would believe it… until it’s too late.
I guess we will have to count as collateral all of the donatable organs of every U.S.citizen.
Best easily accessed place IMO to park electronic USD is in the bowels of the beast, treasurydirect.gov. No banker including Yelen can grab it from there. Hillary might have a way to get at it though so keep an eye on that grifter at all times.
After 5 years of shit, there souldn't be any "big depositor" left.
Get all of your possessions and Fiat out of the banking system.
"safe" manufacturing companies might be a good investment.
Get all of your possessions and Fiat out of the banking system.
"safe" manufacturing companies might be a good investment.
"Get all of your possessions and Fiat out of the banking system."
As soon as around just 2% of depositors actually did that , that process in itself would cause the banking system to collapse.
Bail ins sounds so much nicer than theft by government decree. No kidding its simply theft by another name. Like calling fraud an inovation.
The sad truth is our current monetary system and governments are set up to run on theft. My guess is its the same way everywhere including Russia and China. The NWO is the old world order and has been running this shitshow for a very long time. All of it.
Bail ins are just in your face theft at gunpoint by government. The government is not yours it never was your government. In thier view you are the governments property and never had any say in any of this theft.
We need to stop using the words they choose for theft. Let us call it what it is so everyone can understand what is going on. Bail ins are theft. Period end of story.
These cap controls are also simply theft of operating cap. They are ment to allow the big boys a clear field to operate without having to compete with anyone. In a cashless system everything will operate on credit and debt only. That my honest friends is the end game / bankster utopia.
Now for the good news. It wont work because it cant. This is going to blow up in thier faces bigtime. I just hope I live long enough to see it.
Spot on - "Bail-ins" = "Theft". There is no way around it, bail-ins are theft. Twice.
eg. Imagine you have $20k that you are saving so you can buy a car. You put in the labour, in return you get $20k. Now the money gets "bailed in". You have now been paid zero dollars for $20k of production. But also, the car dealer doesn't make the sale. The car dealer has lost $20k of revenue. Hence the reason for my first rant above: "Yeah, we can fix an economy by stealing your money and lending it back to you". Fix it all right. Fix it up real good.
While we're at it, take a good look at the price of real estate:
It's not so much that Real Estate is expensive: YOUR LAND IS BEING STOLEN FROM YOU.
"No, no, no PT. You don't understand. Supply and demand, you have to work hard and smart and innovate..."
No. The price is being bid unsustainably high by idiots who themselves can very easily lose that land because they can't afford the repayments. When all that is happening in the real world is netted out, the land is simply being stolen.
BAIL-INS = THEFT
YOUR LAND IS BEING STOLEN FROM YOU
"DEBT" IS NOT "AFFORDABLE"
Really really we need to stop using thier weasel wording. Its no wonder most people dont understand wtf is going on.
"Dry Ass Fucking" just doesn't sound as good as "Extraordinarily Counter-Productive."
Especially when 55-gallon drums of lube are available at such low prices.
+ 1000
Only once concept ... if a debt is no longer serviceable it needs to be removed no matter what.
Bad debt left in the system keeps growing as more and more (the bailin) is thrown at it to ptetend it is all fine (AKA Greece) - That's the current central banker policy too afraid of the bust.
Then you got the good debt "it really is worth it" but the bailin just removed the sustainability of good debt because bad debt snaffled all the funds gto keep it going a little bit longer.
True growth comes from good debt whereas bad debt just inflates values higher to deflate away the sovereign debt and in this process on behalf of elites the poorest are wiped out.
Inflation actually would be a good idea for eliminating debt or making it serviceable, except of course that it punishes savers and responsible people who work to a realistic budget. We actually could get mileage out of something dumb like raising minimum wage to $1000 per hour* or giving everyone a million* bucks IF:
1. Yeah, I'll get this one out of the way first: Not gonna happen. No way would The-Powers-That-Be would ever let such an initiative work. The idea is doomed before you even burst a brain-cell thinking how dumb the idea is.
2. The banksters would suddenly have to start lending responsibly. Give everyone a billion bucks, force them to pay off debt before they can use it for anything else. Even if everyone kept going to work (not gonna happen), as long as the banksters can lend uncontrollably, they will. Unsustainable debt will reappear before the end of the week. At the current trajectory, every single workable idea available will NEVER work because the banks will continue to lend money to idiots and the idiots will bid prices beyond a sustainable level.
In fact this is what uncontrolled lending is all about. It is the equivalent of simply giving money to idiots. The idiots don't work too hard, less stuff gets produced, prices get bid too high, sensible people either pay prices that are too high or they do without. The difference between (giving everyone a pay rise or free money) vs lending to idiots is simply the interest rate. Oh, that and only idiots "benefit" from borrowing money. At least with the "Print and give money away" idea, sensible people won't lose "market share". In fact sensible people would benefit if everyone got an equivalent amount of free money and idiots were forced to pay down debt. The sensible people would end up in front again. But again, not gonna happen. We're just gonna bumble our way through this shit the way we normally do. The hyper-inflation may come, but it will just fuck everyone up the way it always does.
Hell, I probably shouldn't have even bothered arguing with you. May as well have written a comment on how to toss a coin so it lands on its edge. Must be past my bed time.
*Note: There would be an optimum figure that would have to be calculated but again - that simply ain't gonna happen.
Problem with that is all money is loaned into existance. Thus all you are doing is increasing the debt burden even more. To bring money into existance that is not debt would still be mathematically impossible to pay the debt off without debt deflation (ie mass bunkruptcy of the banking system) or hyperinflation. But there is one very elegant solution to this problem: Digital currencies ie bitcoin are not loaned into existance , they do not exist as debt and exist opposite as a genuine credit , therefore , like gold , they have the very rare ability to actually EXTINGUISH debt.
"You're in a laundry room.
You're in a laundry room.
The clue that came to you, oh."
All depositors are pretty much bailed in through capital controls and daily withdrawal limits.
Now that the German bankers are in charge without being physically present in Greece to face the wrath of the great unwashed, they can confiscated deposits (and cash flow) at their pleasure.
How are you protected from bail ins and the war on cash?
While the german government can continue to raise taxes on us to cover any bad investments made by the bankers.
I don't hate the so-called "shiftless" Greeks at all. They had their system, they were fine with it, the banks (goaded by Brussels) stupidly offered low interest loans to get them to surrender their national sovereignty and join the Euro Zone.
The name calling on both sides is the standard way to divide the Greeks and Germans and misdirect our attention from those who really caused this mess.
Becoz everyone knows that if someone is up to their eyeballs in debt then the solution is to steal half of their money and then lend them some more money to make up for their shortfall.
Becoz everywun noes that the way to make an economy successful is to steal half of the working capital from businesses and then lend them more money.
And the way to build a book shelf is to borrow money.
And you can make your car go faster by borrowing money.
And you can fuck anyone you want any way you want and not get AIDS if first you borrow money.
And you can lose weight faster if you borrow more money.
And you can turn shit into gold by borrowing money.
And you can bring your grandma back to life by borrowing money.
And you can tame wild animals by borrowing money.
And all your problems magically disappear if you borrow money.
And you can pay off all your debts if you borrow more money.
And you can drive a nail into a piece of wood if you borrow money.
Hugs
Luv from a wunch of bankers.
P.S. We luv you moar when you borrow moar munny.
I have vague recollections from two or three decades ago: Small businessmen laughing at my naivete because I hated debt. "Debt doesn't matter", they said, "Servicing that debt is all that matters."
Back then I had no idea of the difference between good debt and bad debt. I had no idea of the advantage of buying time through leverage. Given that I still hate debt, you could say I haven't learnt much.
I remember the nineties where the word of the day was you must "take on more risk". That was quickly modified to "you must learn how to manage risk". In other words (that were never spoken at the time), borrow a shitload of money that you have no idea how to repay and then, if necessary, find some poor schmuck(s) onto which you can offload all your losses. If you don't do it then someone else will do it and you'll never be able to keep up with them. The job goes to the lowest bidder. Sensible planning takes time and money and thus is too expensive. Sure, 80% of the people who try this will go bankrupt in the first year but the other 20% will look like geniuses.
Man, THESE GRAPES TASTE REALLY, REALLY SOUR TODAY!!! Well, of course I haven't tried them. But I'm quite sure they're very, very sour...
... should I ask for sweet instead of dry?
Your bank balance is nothing more than an unsecured loan from you to your bank.
Bitcoin user NOT affected.
Here's a guy from Venezuela on Reddit who claims that most of his family has bought Bitcoins to protect their money:
https://www.reddit.com/r/Bitcoin/comments/3en66h/venezuelas_bolivar_is_w...
99% of the population can not avoid direct-deposit for their wages. Maybe you can. But for every one of you, 99 can't. Asking more than 1% to follow your advice is asking for a pyramid. What you say may be legally correct, but it is morally THEFT. The herd must choose where to stampede: Trample their foes or stampede over the cliff.
Unfortunately, I have little faith that the herd will be smart enough to trample their foes.
Yes and no.
While it is true that crypto-currencies might, at least initially, be safer than bank deposits, there is a very real possibility that the impending collapse could be so jarring that most will lose faith entirely in both paper and electronic promises, and demand something tangible for trade. In that case, Bitcoin (as opposed to PMs, for example), certainly would be affected, and in a negative way.
Well, yes, but until they are unable to manipulate PM I surely feel like somebody is screwing me (without lube).
I console myself because I can continue to stack at low prices, (which may be headed even lower for awhile) but cognizant dissonance is pushing me towards an anti-depressant (like some huge percentage of the American population).