Submitted by Charles Hugh-Smith of OfTwoMinds blog,
If things fail from the periphery to the core, perhaps dominoes fall that way, too.
So what is that group is doing in other eurozone nations? We are not going to monitor every nation, rather, only the ones where Smart Money could conceivably make a decent profit by being there. This is quantified by the interest rate differential.
In the charts below, the black line represents the percentage of total deposits in that country that come from Smart Money. The lower the percentage, the lower the damage to Smart Money from any default. And one thing we've learned since 2008 is, core nation politicians will not hesitate to throw any peripheral nation under the bus in order to avoid any losses to Smart Money. The red line is the interest rate spread - the higher the number is above 0, the more profitable it is for Smart Money to remain. So if its profitable, and Smart Money is for some reason fleeing, you might want to pay attention! Regardless, if Smart Money is mostly gone, that means the people in charge of the Eurosystem can pull the plug on the country's banking system at any time without fear of loss to their own banking system.
First is Cyprus, to provide an example of what a deposit situation looks like when the core system political class feels comfortable torpedoing a periphery banking system.
Thank you, David, for the commentary and charts. As David observed in our email exchange, "Things fail from the periphery to the core." With this in mind, we might arrange the dominoes in this order: Slovenia, Portugal, Malta, and then Spain.