Bank Run In Greece

[Guest spp]

I didn't say it was off topic.

It's just that, y'know, when the bugs come out, threads get relegated. That "gold, cure for cancer" thread was epic and everything but.....yeah.

Maybe you just start accepting Gold as a store of value.

You use the word 'bug' to turn it into some sort of conspiracy....WAKE UP!

Go find yourself a Gold/Euro chart since the birth of yet another flawed fiat currency.

[mfp123]

Yes, Euro denominated credit owned by Greeks in accounts outside Greece (in the scenario of Greece dropping out of the Euro) will stay as Euro denominated bank credit.

Those with their wealth in the form of Euro denominated credit with Greek banks are likely to see it frozen and converted to whatever new currency emerges. Almost certainly to their great disadvantage.

That's how fiat currency and the banking system works. The bank in Germany (for example) 'owes' the account holder whatever amount of Euros are credited in their Euro-denominated account.

Physical, paper Euros are credit notes 'owed' by the ECB - it doesn't matter where they were issued they are still credit notes for the ECB to honour.

Of course the danger is that a Greek default could in turn cause a run on the entire European banking system as people scramble to convert currency to assets, just as anyone in Greece's population with a whit of financial sense is currently trying to do.

what i wonder though is can greece force a british citizen to convert his euros into new drachmas in an account held in greece?

because if the bank you hold your money in is not nationalised (if it was a nationalised bank, they would be defaulting on you), technically a private bank owes you the money not the government.

now normally if greece was defaulting in drachmas, they would be able to seize their own currency from you, but they dont "own" your euros, so i wonder can they forcibly convert the currency of the ECB, if you are not a greek citizen (and the bank is not nationalised).

[Game_Over]

Thanks for the interesting replies.

Still not convinced though that Greek assets is European banks would not be frozen.

[MEtallic]

The discussion taking place on this thread demonstrates why the situation in Greece is as it is: simply, no one knows what will happen over the course of the next few weeks.

While we can theorise on the fate of 'Greek' Euros or money transfers to German banks, the average Greek is probably just thinking about saving their money, so taking money out of the bank is a very prudent option at this stage.

[Injin]

Maybe you just start accepting Gold as a store of value.

You use the word 'bug' to turn it into some sort of conspiracy....WAKE UP!

Go find yourself a Gold/Euro chart since the birth of yet another flawed fiat currency.

Again, I was not commenting on gold and it's likely value, but on the correlation between threads with goldbug rantings in them and topics said rantings occur in being moved to the off topic section of the forum.

[Traktion]

In this scenario, what's to stop Greeks all transferring their Euros to German banks?

Then when they default no Greeks will lose anything, apart from their debts of course.

Because the Greek banks don't have enough money to transfer - that's why there is a bank run going on, as the smart money is being moved to German banks.

People can only withdraw a fraction of total deposits from a FRBs, before it goes bust and is unable to meet its liabilities (to return said deposits).

[Injin]

what i wonder though is can greece force a british citizen to convert his euros into new drachmas in an account held in greece?

because if the bank you hold your money in is not nationalised (if it was a nationalised bank, they would be defaulting on you), technically a private bank owes you the money not the government.

now normally if greece was defaulting in drachmas, they would be able to seize their own currency from you, but they dont "own" your euros, so i wonder can they forcibly convert the currency of the ECB, if you are not a greek citizen (and the bank is not nationalised).

They'll just take the ones with greek serial numbers and pictures of zorba on them, no worries.

[MongerOfDoom]

In this scenario, what's to stop Greeks all transferring their Euros to German banks?

Then when they default no Greeks will lose anything, apart from their debts of course.

Nothing, which is presumably why there are rumours of them doing precisely that. If you meant the Greek state (and not the individual citizens), the main reasons are that i) they don't have any, and ii) they would gain nothing by not simply keeping any that they do. The observant reader might ask what it means to simply "keep" a Euro. One way is to obtain banknotes or coins, another to have a deposit at the ECB.

I am puzzled about just why anyone would worry about relatively minor details that will only affect the Greeks. The real question is whether Spain is next, what happens to the billions of Greek debt held by the ECB, just how much it will cost to bail out the Eurozone banks that also invested in Greek debt, and what effect it's going to have on the global economy given what the supposed consequences of Lehmans collapsing were. I am sure there are many other questions I am not quite smart enough to have thought of, but can we please not worry about serial numbers and other conspiracy rubbish.

[geezer466]

So if Mr Stropadopalous withdraws 50,000 euro's,sticks them in a box and buries them in a field what is to stop him digging them up a year after a Greek default trotting off the Germany and spending them?

Yes there may be Euro's in the system with Greek identifiers on them but how can they withdraw them from circulation over a short period? If they devalued Greek euro units carte blanch then this would impact other Europeans holding the notes.

[Sour Mash]

what i wonder though is can greece force a british citizen to convert his euros into new drachmas in an account held in greece?

because if the bank you hold your money in is not nationalised (if it was a nationalised bank, they would be defaulting on you), technically a private bank owes you the money not the government.

now normally if greece was defaulting in drachmas, they would be able to seize their own currency from you, but they dont "own" your euros, so i wonder can they forcibly convert the currency of the ECB, if you are not a greek citizen (and the bank is not nationalised).

Any Greek banks not nationalised are likely to go bust very quickly after a Greek Euro drop-out as they are all heavily leveraged against their assets, as is the nature of banking.

In any case, it's extremely unlikely that the bank will get a choice. One of the main reasons for dropping the Euro will be so that the govt can seize wealth from bank creditors. Hence all the Greek banks will be nationalised, bank creditors screwed over. If your money was in a Greek bank, tough.

[Traktion]

what i wonder though is can greece force a british citizen to convert his euros into new drachmas in an account held in greece?

because if the bank you hold your money in is not nationalised (if it was a nationalised bank, they would be defaulting on you), technically a private bank owes you the money not the government.

now normally if greece was defaulting in drachmas, they would be able to seize their own currency from you, but they dont "own" your euros, so i wonder can they forcibly convert the currency of the ECB, if you are not a greek citizen (and the bank is not nationalised).

Why wouldn't they? They aren't going to give special treatment to foreigners over their own, unless there is a damn good reason.

The banks will just have their liabilities changed to Drachmas by fiat - the banks will wash their hands of depositors in the same way as they would if they were dissolved. If anyone has an argument with this, they will have to talk to the Greek government and their military.

EDIT: To add, if they aren't state owned, they will soon be insolvent anyway if it is a country wide bank run. You either lose all your money or have them switched to Drachmas then. Hell, they may only give out Drachmas to nationals in give the foreigners the middle finger.

[Sour Mash]

So if Mr Stropadopalous withdraws 50,000 euro's,sticks them in a box and buries them in a field what is to stop him digging them up a year after a Greek default trotting off the Germany and spending them?

Absolutely nothing - other than the fact that the Greek government will likely try to confiscate them if they can find out you are holding them. Expect a return of strong currency controls in the event of Greece dropping out.

By the same token, there's little to prevent one taking on loads of debt with no intention of ever paying it back and converting it to physical notes/ PMs/ liquid assets and hiding them away before your bankruptcy as long as you are clever/discreet about it (and the banks are stupid enough to extend loads of credit to you of course).

[mfp123]

Any Greek banks not nationalised are likely to go bust very quickly after a Greek Euro drop-out as they are all heavily leveraged against their assets, as is the nature of banking.

In any case, it's extremely unlikely that the bank will get a choice. One of the main reasons for dropping the Euro will be so that the govt can seize wealth from bank creditors. Hence all the Greek banks will be nationalised, bank creditors screwed over. If your money was in a Greek bank, tough.

yep, thinking about it, they would have to nationalise every bank, because taking "euros" which does not belong to them, would the the same as taking gold, or dollars, or any asset from you.

but if the bank is nationalised, they can default on you, so they must nationalise everything, before they can default on you, or indeed its own citizens.

[MongerOfDoom]

So if Mr Stropadopalous withdraws 50,000 euro's,sticks them in a box and buries them in a field what is to stop him digging them up a year after a Greek default trotting off the Germany and spending them?

Absolutely nothing, and it would have worked in Argentina too. In fact, he may not even need to bury the money in a field. It would be surprising if Greece outlawed the ownership of foreign currency, and would cause no end of hilarity when the tourists arrive in the summer. You simply cannot have a combination of that sort of law and a population that can move anywhere else in the EU on a whim.

[Traktion]

So if Mr Stropadopalous withdraws 50,000 euro's,sticks them in a box and buries them in a field what is to stop him digging them up a year after a Greek default trotting off the Germany and spending them?

Yes there may be Euro's in the system with Greek identifiers on them but how can they withdraw them from circulation over a short period? If they devalued Greek euro units carte blanch then this would impact other Europeans holding the notes.

Nothing, but if everyone tried to withdraw all of their money in preparation to bury them, the banks would run out after about 5-10% of the money had been removed. The (FRB) banks only have a fraction of their total liabilities (ie. promises to pay depositors) available at any time for withdrawal.

[Guest sillybear2]

Hrm, these banks are going to end up nothing but agents for the ECB, someone is going to have to swallow the losses, does this game of pass the parcel end with the ECB having to take massive haircuts on their collateral? The French banks already offloaded a load of Greek government debt on to them last year.

It's inflate or default, they're simply doing extend and pretend until they can decide which is worse.

[Game_Over]

The discussion taking place on this thread demonstrates why the situation in Greece is as it is: simply, no one knows what will happen over the course of the next few weeks.

While we can theorise on the fate of 'Greek' Euros or money transfers to German banks, the average Greek is probably just thinking about saving their money, so taking money out of the bank is a very prudent option at this stage.

So if someone has a huge stack of Euros with Greek serial numbers on them and Greece returns to the Drachma

Does anyone really think that the Greek person holding this stack of Greek Euros will be able to travel to Germany and deposit them in a German bank

I don't think so - do you?

[Sour Mash]

Hrm, these banks are going to end up nothing but agents for the ECB, someone is going to have to swallow the losses, does this game of pass the parcel end with the ECB having to take massive haircuts on their collateral? The French banks already offloaded a load of Greek government debt on to them last year.

It's inflate or default, they're simply doing extend and pretend until they can decide which is worse.

Inflation through money printing is default - just with a PR makeover.

The banks lost hundreds of billions, probably trillions. Rather than letting them go bust with the knock on effect to their creditors our governments in the West have chosen to bail them out by printing money and taking on more government debt (which will ultimately be covered by printing money anyway).

Anyone who thinks that we will see deflation where little bits of intangible fiat currency that can be printed/created at a whim somehow become more valuable whilst the financial system comes tumbling down for a lack of said currency is deluding themselves.

[Traktion]

So if someone has a huge stack of Euros with Greek serial numbers on them and Greece returns to the Drachma

Does anyone really think that the Greek person holding this stack of Greek Euros will be able to travel to Germany and deposit them in a German bank

I don't think so - do you?

In theory, a Euro note is a Euro note, no matter who printed it. It is a liability to the ECB, not the Greek government or central bank. Therefore, the ECB and the Euro would lose a lot of credibility in being a currency zone, if they didn't honour this; that may be even more harmful to the Euro than just honouring the notes.

That said, I'd want to hold something else, just in case. What is the point in risking it?

[Sour Mash]

So if someone has a huge stack of Euros with Greek serial numbers on them and Greece returns to the Drachma

Does anyone really think that the Greek person holding this stack of Greek Euros will be able to travel to Germany and deposit them in a German bank

I don't think so - do you?

How long have you been reading HPC and not managed to get a clue about how banking works?

Euro notes are ECB credit notes, not the debt of an individual state.

[mfp123]

So if someone has a huge stack of Euros with Greek serial numbers on them and Greece returns to the Drachma

Does anyone really think that the Greek person holding this stack of Greek Euros will be able to travel to Germany and deposit them in a German bank

I don't think so - do you?

the serial number are irrelevant. all the notes belong to the ECB. the issue is who owns the notes, not where the note was printed.

greece doesnt create euros, it can only turn e-money into paper money.

that money, as far as greece is concerned, doesnt belong to greece.

[Traktion]

Inflation through money printing is default - just with a PR makeover.

The banks lost hundreds of billions, probably trillions. Rather than letting them go bust with the knock on effect to their creditors our governments in the West have chosen to bail them out by printing money and taking on more government debt (which will ultimately be covered by printing money anyway).

Anyone who thinks that we will see deflation where little bits of intangible fiat currency that can be printed/created at a whim somehow become more valuable whilst the financial system comes tumbling down for a lack of said currency is deluding themselves.

I dunno if the Germans will want to print though, given their history. As creditors, they will lose out either way though; they're both defaults, as you say.

[Rare Bear]

Well, it seems a return to the Drachma is now being openly discussed unless this just the Greeks playing hardball with the EU...

I should also add that allegations of corruption in FIFA are making front page news...you'd think a bank run in Greece would be more important than football??

I'm waiting for serious corruption allegations about the Olympics, should be mor fun

[urban_hymn]

So if someone has a huge stack of Euros with Greek serial numbers on them and Greece returns to the Drachma

Just remember to spend the ones which have a serial number starting with a 'Y' (Greece) first this summer on your hols. You might want to get rid of the 'V's and 'M's rather sharpish as well

[Injin]

the serial number are irrelevant. all the notes belong to the ECB. the issue is who owns the notes, not where the note was printed.

greece doesnt create euros, it can only turn e-money into paper money.

that money, as far as greece is concerned, doesnt belong to greece.

They can refute it within their borders as currency, however.