So you run to the bank to get all your cash out. You beat the crowds and you stuff your mattress with euros. What happens when your fiat currency that has no basis in real assets collapses? I mean, will the greeks even recognize it once there is no euro? Or will they create an exchange where you can turn them in for one drachma for thousands of euros(since it’s worthless once it collapses). I think the lucky ones who got their cash out might find themselves sitting on piles of the equivalent of our civil war confederate currency. Interesting to have, but worthless.
I’d wager they are buying food and other stuff with it.
Maybe you didn’t read the article. Some is cash withdrawl, maybe to stockpile food and goods for a temporary shortage.
The article said...
“This includes cash withdrawals, wire transfers and investments into money market funds, German Bunds, U.S. Treasuries and EIB bonds,” said one banker, who spoke on condition of anonymity.
So people going into Bunds, dollars, US treasuries, EIBs, that is safety from the Drachma or Euro.
Meanwhile, people who have some Euros on hand are going to be in better shape than people who have none on hand if Greece returns to the Drachma. The Euro isn’t going to collapse overnight just because Greece leaves. It will still have stability and solid value in the meantime. Even if it goes to par with the dollar, that is going to be a lot better than the Drachma once they start printing to pay off their debt.
For Greeks, what they fear is that the government will lock their Euros in their bank accounts, electronically switch them to Drachmas, and then devalue the Drachma, which will destroy the value of their savings.
If a Greek has a loan, it is almost certainly denominated in Euros. If they suddenly convert to Drachmas and devalue, the loan will still be denominated in Euros, and their salaries will now be paid in drachmas, so it will take far more drachmas to convert to Euros to pay the loan. Many loans will default when that happens, because their salaries will not go up by an equivalent amount.
So the best strategy right now for a Greek, or Spaniard, or Italian, is to keep withdrawing their cash from the banks in Euros, and keep them in paper cash at home. If they wake up one day with drachmas, they still have the Euros they physically have in their mattresses, and can still pay their loans, because their physical cash will not be converted by stealth into Drachmas.
That’s why you have to SPEND or CONVERT it once you get it out. Food, necessities, ammo, liquor, gas, etc...