Posted on 02/23/2010 12:42:02 PM PST by FromLori
We previously wrote about the possibility of a bank run in Greece following unsubstantiated reports that Greek citizens don't trust the Greek financial system all that much anymore, courtesy of the whole bailout and GDP reporting fraud thing. The rumor was not only just confirmed and also quantified: Dow Jones reports that in the past three months Greeks have moved about €8 billion out of local banks "fearing a possible new tax on bank accounts, increased government scrutiny on assets and a run on the banks if Athens is forced to turn to the International Monetary Fund." This represents over a quarter of the money held by private banks in the country. This also represents about €400 billion in total money leaving the system courtesy of fractional reserve banking and the money multiplier. Yet the worst news for Greeks: money controls are coming.
"There is a lot of uncertainty out there," said a senior private banker at a Greek bank. "We've had a number of customers asking to move funds out of Greece, mostly to Cyprus, Luxembourg and Switzerland."
Clients of private banks also fear that Greece may be unable able to raise the EUR54 billion it needs this year to pay back maturing bonds and will therefore have to turn to the IMF for help.
"Some of our clients are concerned about a run on the banks if the IMF gets involved," said another private banker, this one from a foreign bank. "They believe the situation in Greece will get worse before it gets better. There is also very little clarity from the government about its intentions on new tax measures."
"We estimate that €8 billion has moved out of Greece to accounts abroad since December. It's money from bank accounts, stock sales, property sales and other sources. This is pretty substantial considering that there is only €30 billion under management in private banks here," he added. All is fine and well if this was all: just your plain vanilla run on the bank. But it's not - the Greek response to this capital outflow: upcoming money controls.
Wealthy individuals may have good reasons to be concerned, however. Finance Minister George Papaconstantinou earlier this month urged Greeks with accounts abroad to repatriate their money and said the capital will be taxed at a 5% rate. He said those who choose to keep their money abroad should declare their deposits and pay a tax of 8% for the first six months.
Thereafter he threatened that Greece will use all laws at its disposal, such as double-taxation agreements, to ask foreign banks for information on Greek account holders.
"For us this is the first step towards taxing all accounts in Greece," said the chief financial officer of a major Greek shipping company. "The line is minimum deposits here and moving all assets abroad," And now back to your regularly scheduled program of curling and no mention of the imminent collapse of Greece in the mainstream media whatsoever.
Greeks Scramble To Pull Out 8 Billion From Local Banks As Greece Responds With Money Control Measures
I expect the average Greek is planning to withdraw any accounts they may have very soon too.
I wonder if the EU is beholden to prop up Greek Banks? Will it cause a domino effect?
I would if I were them. There is all kinds of corruption, etc. in Greece but there are also politicians no doubt paid off by people just like here who helped get them into problems.
Goldman Sachs for example.
They are not obligated but some of the banks in the EU have a lot to lose if they don’t. They have not yet said they would they just keep saying they are but no money.
I don’t know if it will cause a domino effect I suppose it depends on if they ever do bail them out but I sure believe it could.
Please do not give Zero, Pelosi and Reid anymore ideas. If I understand this right this 5% would be a tax on assets not income.
If they’re doing 10% fractional reserve banking, that’s $80bn pulled from the lending capacity of their banks.
This also represents about €400 billion in total money leaving the system courtesy of fractional reserve banking and the money multiplier.That WILL leave a mark.
Over a three month period, hardly a “run” on the banks as the title might lead one to believe.
Now that the FDIC has gone into the red, we’ll see if similar money movements start happing here in the US.
Good question but just so people understand about the FDIC guarantee....
http://www.chrismartenson.com/martensonreport/how-safe-my-fdic-insured-bank-account
I see you didn’t take public school math, where 8=400,
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