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Market Oracle FREE Newsletter

Urgent Stock Market Message

Big Fat Greek Bank Run - Greece Banking System Could Collapse Monday 22nd June

Interest-Rates / Eurozone Debt Crisis Jun 19, 2015 - 02:52 AM GMT

By: Nadeem_Walayat


It appears times up for the Greek Trojan Horse that has been parked outside of the European Central Bank for years, slowly but steadily bleeding the euro-zone dry of now in excess of Euro 360 billion (E240 billion bailout + E120 billion banking system support), as the euro-zone bureaucrats and politicians are finally starting to understand what many have understood for the past 5 years that Greece just cannot function within the Euro-zone, it should never have been allowed to join with bogus economic statistics and subsequently should not have been bailed out again and again and again.

BBC Newsnight briefly reports that at a meeting of european finance ministers on Thursday a senior official of the ECB was asked will the Greek banks be able to open tomorrow (Friday), he said yes, but I don't know about Monday.

Greece Bank Run Going Exponential

The Greek banking system has been bleeding deposits all year, having seen at least Euro 40 billion withdrawn this year, leaving behind approx Euro 120 billion. However, as the end game approaches (Varoufakis is apparently an expert on Game Theory) the rate of withdrawal has accelerated to over Euro 1 billion per day, up from approx Euro 200 million a day of a week ago, and could keep doubling every other day, which is despite ECB support on a DAILY basis without which Greece's banking system would have collapsed 5 years ago! Which means Greek banks are paying withdrawing depositors with funds from the ECB that to date totals approx Euro 120 billion because the Greek banks have been bankrupt for some time!

Even Greece's central bank panicked by opening warning the Syriza government that Greece was heading for a catastrophic crash out of the euro-zone.

So the worry for depositors is that one day, perhaps Monday, the ECB fails to provide enough liquidity to prevent a banking system collapse when the Greek banks make the call for more money and as Northern Rock illustrates, for already worried savers it only takes a media report of queues outside of banks to trigger an out of control panic reaction that no matter what the politicians state or promise has no effect on panicking savers, fearing that they will only get back a fraction of the value of their original euro deposits after Greece prints its own devalued currency.

My yesterdays article covered the dynamics of the Greek debt crisis that have their roots in the fact that Greece wants a permanent subsidy from other euro-zone member states to subsidise the Greek life style as illustrated by the fact that Greeks can retire as early as from age 26 with most retiring before age 55. Something that many other eurozone member states such as Germany cannot stomach, especially after having sunk Euro 360 billion already into the Greek black hole (read - GREXIT - Greece Wants to Become Scotland, Seeks Permanent Subsidy from Euro Tax Payers.)

It does look like that Greece is galloping towards a GREXIT, in which case that will put pressure onto the other PIIGS member states as the question will be asked who will be next, as I wrote yesterday :

The Big Problem is PorExit, SpaExit and ItaExit.

Greece in economic terms is a flea on the back of the Euro-zone elephant that could easily survive a GREXIT. But the real problem is who would be next, for soon the pressure would mount on the other PIIGS, with Portugal, Spain and Italy vying for who would be next to EXIT the euro-zone, something which the Euro-zone would not survive. Therefore that remains Greece's 'Ace in the hole', which is why they are still in the eurozone, so probably suggests that some sort of fudge will be arrived at that would only DELAY GREXIT for the fundamental reason Greece is BANKRUPT!

A GrExit would also make a BrExit more probable, whilst Putin would be dancing in the Kremlin.

Greece to Enter ECB Torture Chamber

So called game theory expert Varoufakis appears to be greatly miscalculating the unintended consequences of the belligerent path that Syriza has put Greece on as unfortunately a softly, softly, orderly, ECB supported exit out of the Eurozone will just not work for the fundamental fact that the only way that the euro-zone can prevent contagion from spreading to the other teetering on the edge of bankruptcy member states is to let Greece crash out hard of the euro-zone, its economy in a total state of collapse triggering much civil unrest so as to focus Spanish, Portuguese and even Italian minds on the consequences of following a similar path towards an EXIT.

So Greece really does appear to be on the brink of experiencing chaos that will make the depression of the past 5 years look like a picnic, which would be looked back on with much nostalgia as a golden era when the Euro-fools subsidised Greek life-styles.

Also I am sure that Tsipras realising that Greece is doomed will in the last few days before GrExit engineer events to their maximum advantage so as to lay as much of the blame as possible onto to the Troika.

Hyperinflation Beckons

Again for many of the consequences including hyperinflation see my earlier comprehensive article: 26 Jan 2015 - Greece Votes for Syriza Hyperinflation - Threatening Euro-zone Collapse or Perpetual Free Lunch

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Source and Comments:

By Nadeem Walayat

Copyright © 2005-2015 (Market Oracle Ltd). All rights reserved.

Nadeem Walayat has over 25 years experience of trading derivatives, portfolio management and analysing the financial markets, including one of few who both anticipated and Beat the 1987 Crash. Nadeem's forward looking analysis focuses on UK inflation, economy, interest rates and housing market. He is the author of five ebook's in the The Inflation Mega-Trend and Stocks Stealth Bull Market series that can be downloaded for Free.

Housing Markets Forecast 2014-2018The Stocks Stealth Bull Market 2013 and Beyond EbookThe Stocks Stealth Bull Market Update 2011 EbookThe Interest Rate Mega-Trend EbookThe Inflation Mega-trend Ebook

Nadeem is the Editor of The Market Oracle, a FREE Daily Financial Markets Analysis & Forecasting online publication that presents in-depth analysis from over 1000 experienced analysts on a range of views of the probable direction of the financial markets, thus enabling our readers to arrive at an informed opinion on future market direction.

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any trading losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors before engaging in any trading activities.

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19 Jun 15, 21:08
disagree GREXIT will not happen


I disagree here, I don't think ECB or other EURO political leaders will allow a GREXIT. They will keep Greece within EURO. once one country exits, then the whole EURO project fails, other peripheral countries will follow. The "Euro higher Powers" will not let this happen.

of course I am talking my book. I recently bought Eurobank EGFEY for $0.07/stock for a small gambling amount.

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