German Banks Told To Start Hoarding Cash

Tyler Durden's picture

Submitted by Simon Black via SovereignMan.com,

Just stunning.

German newspaper Der Spiegel reported yesterday that the Bavarian Banking Association has recommended that its member banks start stockpiling PHYSICAL CASH.

Europe, of course, has been battling with negative interest rates for quite some time.

What this means is that commercial banks are being charged interest for holding wholesale deposits at the European Central Bank.

In order to generate artificial economic growth, the ECB wants banks to make as many loans as possible, no matter how stupid or idiotic.

They believe that economic growth is simply a function of loans. The more money that’s loaned out, the more the economy will grow.

This is the sort of theory that works really well in an economic textbook. But it doesn’t work so well in a history textbook.

Cheap money encourages risky behavior. It gives banks an incentive to give ‘no money down’ loans to homeless people with no employment history.

It creates bubbles (like the housing bubble from 10 years ago), and ultimately, financial panics (like the banking crisis from 8 years ago).

Banks are supposed to be conservative, responsible managers of other people’s money.

When central bank policies penalize that practice, bad things tend to happen.

Traditionally when a commercial bank in Europe wants to play it safe with its customers’ funds, they would hold excess reserves on deposit with the European Central Bank.

In the past, they might even have been paid interest on those excess reserves as an extra incentive to be conservative.

Now it’s the exact opposite. If a bank holds excess reserves on deposit at the ECB to ensure that they have a greater margin of safety, they must now pay 0.3% to the ECB.

That’s what it means to have negative interest rates. And for the bank, this eats into their profits, especially when they have tens of billions in excess reserves.

Talk about being between a rock and a hard place.

On one hand, banks stand to lose a ton of money in negative interest. On the other hand, they put their customers’ deposits at risk if they don’t hold extra reserves.

Well, the Bavarian Banking Association has had enough of this financial dictatorship.

Their new recommendation is for all member banks to ditch the ECB and instead start keeping their excess reserves in physical cash, stored in their own bank vaults.

This is officially an all-out revolution of the financial system where banks are now actively rebelling against the central bank.

(What’s even more amazing is that this concept of traditional banking– holding physical cash in a bank vault– is now considered revolutionary and radical.)

There’s just one teensy tiny problem: there simply is not enough physical cash in the entire financial system to support even a tiny fraction of the demand.

Total bank deposits exceed trillions of euros. Physical cash constitutes just a small percentage of that sum.

So if German banks do start hoarding physical currency, there won’t be any left in the financial system.

This will force the ECB to choose between two options:

1) Support this rebellion and authorize the issuance of more physical cash; or

 

2) Impose capital controls.

Given that just two weeks ago the President of the ECB spoke about the possibility of banning some higher denomination cash notes, it’s not hard to figure out what’s going to happen next.

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freewolf7's picture

So it must be a war on our cash.

cro_maat's picture

So banks are now playing Rock Paper Digits. Paper beats Digits and Rock (Gold) beats Paper. Methinks the banks are hoarding the wrong one.

MillionDollarBonus_'s picture

When the global economy faces the very real risk of deflation, hoarding cash is a threat to economic stability and is therefore a global security issue. We live in a globalized world now, and an economic catastrophe in one country can quickly spill over into other countries and precipitate a global economic crisis. Therefore I think it is wholly appropriate for us to issue a stark warning to countries who choose this path, that such actions are not only a threat to US national security, but to global peace and economic prosperity, and that we may resort to military action should this continue.

stant's picture

Globalization is failing and with it the collapse in socialism . It's just time

Killdo's picture

Which socialism? For the rich?

Father Thyme's picture

Oh say can you hoard,
     Cash under the floor board!
                               *tsh!*

Four chan's picture

im hoarding copy machines, makes about as much sense.

Arnold's picture

It appears some one remembers what 'Due Diligence'  used to mean.

Manthong's picture

“one teensy tiny problem”

… somebody is going to need a bigger vault and doors soon

Nutsack's picture

Hoarding cash and PMs???????

 

 

Now who the fuck would have thought of that?

PTR's picture

Holding cash?  Or "removing cash from the system under pretenses of 'hoarding'?"  We are talking about the member institutions of a manipulative monetary system, remember.

localsavage's picture

Unlike American banks, German banks (at least the smaller rural ones) are held account by their depositors.  My small bank even has an annual dinner for all of its depositors where they explain how they are investing your money.  If that money just vanished, it would be long pitchforks....literally.

Kirk2NCC1701's picture

Long hoarding Printing Plates, Currency Cloth, Currency Ink and Holographic skills and gear.

Kirk is specializing in Holo-tech and 3D printing. Aside from making Prosciutto and Brandy (value-added commodities), which are worth more in a Barter economy than beans or corn (basic commodities).

 

 

RichardParker's picture

Kirk:

Maybe consider adding olive oil soap (not all that hard to make) to the Prosciutto and Brandy offerings?

FoundInTranslation's picture

For all the unproductive, rich and poor. They are going to finally be forced to create something of value or face the consequences.

Spigot's picture

"There’s just one teensy tiny problem: there simply is not enough physical cash in the entire financial system to support even a tiny fraction of the demand."

I'm impressed with the management of the Bavarian banks. Best to be first in line. Yep. Those mountain people are independent types.

August's picture

A very large number of people can only create "show up in the morning and do what I'm told".

So it's their supervisors who are going to have to get creative.

All fall down.

Hans-Zandvliet's picture

Do you feel a bit confused?

Read the Bible!

(or the Koran, or the Torah, for that matter)

Kirk2NCC1701's picture

Hans, if we're not going to believe Modern Myths & Lore, then why would we believe in Ancient ones, that cannot be proven and were written by semi-literate men with bad teeth and bad hygiene? 'Chew' on that for a while.  -Franz

new game's picture

religion creates hatred and death, because a few take it to the limits of mind control, that only pschotic types can, and for that reason i'm out.

defined:

a person suffering from chronic mental disorder with abnormal or violent social behavior. also;  abnormal and obsessive; manic.
    Mr. Universe's picture

    Each man who searches openly and honestly will find God. You need no books, or religion or other men to tell you. You have to decide what that is for yourself, the rest is just human nature, laziness.

    new game's picture

    have you ever considered that your god may not exist? it is what an intellectualy honest man or woman should do imo. come up with concrete evidence that this figure exists first. or is a construct you have been programed with. cog dis on trial.

    techpriest's picture

    http://www.reasonablefaith.org/

    This has been thoroughly and exhaustively proven. But when it comes right down to it most don't want to believe. Or, invent a god that is always on their side and would never questions them.

    Mr. Universe's picture

    have you ever considered that your god may not exist? 

    Yes.

    it is what an intellectualy honest man or woman should do imo. come up with concrete evidence that this figure exists first. or is a construct you have been programed with. cog dis on trial.

     I spent quite of time searching for God and who he was. I made my decision and have Faith in it. If I'm wrong, I will have still lived a life in which I can say I tried to do unto others as I would have them do unto me, with respect and love.

     

    adanata's picture

     

     

    Hey kids, please stop fighting. No one knows whether there is a Creator or not; thinking, believing or hoping is not the same as knowing. It is as irrational to state 'there is no God' as it is to state there is one. There are three options; you believe in a creative hand or you believe in chaos theory or you may simply say you don't know, because you don't. A scientist once asked, "Why does everyone assume scientists are godless people? The more I study and learn the more I believe there is a hand behind all of this." It's like the joke about the two snowmen. One says to the other, "No one made me; the snow flakes just fell this way." Ironically perhaps, there are more rational reasons to believe than not to. Of course that might be wrong. However, no one knows.

    While it is true many are indoctrinated as children to ancient beliefs, it is both possible and reasonable those beliefs may be based upon accurate perceptions of life itself and not simply awe and fear of the unknown. If there is a creative hand and you wish to understand it you might study what was created in great depth.

    Have you ever had a premonition? How about a telepathic experience? There is an African tribe whose members communicate telepathically. The CIA and Russian Secret Service spent millions trying to understand how they accomplished this. Can you imagine spies being able to communicate telepathically? Well, they couldn't figure it out and abandoned the investigation. In other words, arrogance and ignorance go hand in hand. I think there is clearly much more going on around us and within us than we understand or know.

    Now get those red arrows lined up....

     

    new game's picture

    popularity, ha, no matter, the truth is very observable. although the majority followers are peace loving and kind peoples, a few taint the whole concept of this supreme being religion thingy. so therefore i'm out...

    August's picture

    >>>a few taint the whole... so therefore i'm out...

    Understandable sentiment, but

    KnuckleDragger-X's picture

    Socialism isn't collapsing, its imploding, just like a star in the initial stage of a supernova. The next stage will be awesome in the same kind of way.......

    new game's picture

    you mean to say the foster gov.org ran out of other peoples labor, i mean money, opps, taxes, opps again, stolen labor. well, well, oh well oh well, maybe it is tyme to just take the money cyprus style. ha banks can hoard all the cash they want, just insures our taking position all the moar, because we can and will...

    two hoots's picture
    1. Hoard cash and die? But hoarding 0/1$ is perfectly okay?
    N2OJoe's picture

    Well the NIRP is to discourage people from hoarding digits.

    MANvsMACHINE's picture

    Military action? Even you've gone off the rails.

    Okienomics's picture

    Witness the fate of nations who have dared to issue a gold-backed currency.  Gold Dinar = War.  MDB is once again spot on.

    LawsofPhysics's picture

    LOL!  So you do believe that "might makes right after all"!!!!

     

    Not your best work MDB!

    DownWithYogaPants's picture

    Million Dollhair Boner might be joking.  It's just he's not funny enough for us to tell.

    Shad_ow's picture

    Yes. The repeated "sarcasm or is it" leaves us with knowing neither.

    Miles Ahead's picture

    @Yoga and @Shadow (especially you)... speak for yourselves, unless "us" is you and Yoga.

    MDB is classic.  Only the clueless know not.

    Kirk2NCC1701's picture

    Peak MDB wit, in an increasingly tougher crowd. What's an Entertainer to do?  ;-)

    Miles Ahead's picture

    I agree. Peak.  The "national interests" and military threat was an appropriate climax.

    Hitlery_4_Dictator's picture

    MillionDollarBonus_ But everything was fixed because the establishment did EVERYTHING you suggested they do. You are faggot and a horrible satirist. Someone had to say it. 

    Byte Me's picture

    Nah...

    You are faggot and a horrible satirist. Someone had to say it. 

    We know what MDB is. Only a twit would need to post: "Someone had to say it. "

    ( ..thinks.. Am I really defending a major douche-bag?? Holy frack..)

    Miles Ahead's picture

    Hey Hitlery For Dictator, are you serious with the Hillary thing or is that horrible satire?

    Man, get a clue.  If satire is horrible, you wouldn't react the way you do... hello???  And faggot?  Really... whew, dial it down big guy.

    Hitlery_4_Dictator's picture

    We are ready for Hitlery. MBD's satire is played out and predictable, it's getting old and passe. That's all I'm saying. It's not interesting or funny. 

    Miles Ahead's picture

    Fuck off.  That's not all you're saying - OBVIOUSLY.  You called him a faggot... what, for not being funny?  I for one, am ROTF.

    You got issues kid.  And the point was not Hitlery.  It was your attempt at satire whist you berate someone more worthy than you. 

    If it's old and passe, then don't fucking read it.

    spellbound's picture

    @MDB...you forgot that it also threatens grandma, grandpa, apple pie, baseball. football, Clark Kent and the American way. ....What a bullshit peddler you are!!! Next time you see yourself in the mirror, please slap yourself repeatedly for me.