lotstodo
aka "The Jackal"
Even though they voted a far left socialist party into power, the Greek populace may be having secret buyer's remorse. That party was not able to form a coalition government, so there will be new elections (Greek "democracy" is a bit twisted). This has caused some consternation among the populace, who even before this news started a mini "run" on Greek banks. They are removing Euro's from these banks in anticipation that the EU may cut them off, forcing them to replace the Euro with some new highly devalued Drachma that will take the form of Monopoly Money.
According to EU rules, the European Central Bank can not deal DIRECTLY with an under-capitalized bank, and they moved today to cut four large Greek Banks off from the well, two of which are actually negatively capitalized. But, and this is a big but, these banks simply turned to the Greek Central Bank for cash flow. Guess who backs the Greek central bank. That's right, the European Central Bank. This has created a bank "jog" where the slow motion run on one bank has been transferred to the EU as a whole through the GCB and the ECB (we also back the ECB by providing them with as many printed US dollars as they request). Sweet for the Greeks as long as Germany lets it last. This will be a real test of just how far the EU is willing to go to keep their problem children in the fold. Is the ECB willing to capitalize the entire Greek monetary supply as socialists hedge their bets? Many suspect that this mattress stuffing will spread, and both Greece and Italy will soon be kicked out of the nest as a matter of EU survival. The really astonishing thing is that even bat blind Krugman actually recognizes this, although he believes that the World Bank should also step directly in to back the transfer of wealth and spread the misery.
According to EU rules, the European Central Bank can not deal DIRECTLY with an under-capitalized bank, and they moved today to cut four large Greek Banks off from the well, two of which are actually negatively capitalized. But, and this is a big but, these banks simply turned to the Greek Central Bank for cash flow. Guess who backs the Greek central bank. That's right, the European Central Bank. This has created a bank "jog" where the slow motion run on one bank has been transferred to the EU as a whole through the GCB and the ECB (we also back the ECB by providing them with as many printed US dollars as they request). Sweet for the Greeks as long as Germany lets it last. This will be a real test of just how far the EU is willing to go to keep their problem children in the fold. Is the ECB willing to capitalize the entire Greek monetary supply as socialists hedge their bets? Many suspect that this mattress stuffing will spread, and both Greece and Italy will soon be kicked out of the nest as a matter of EU survival. The really astonishing thing is that even bat blind Krugman actually recognizes this, although he believes that the World Bank should also step directly in to back the transfer of wealth and spread the misery.
