Best of the Week
Most Popular
1. US Housing Market Real Estate Crash The Next Shoe To Drop – Part II - Chris_Vermeulen
2.The Coronavirus Greatest Economic Depression in History? - Nadeem_Walayat
3.US Real Estate Housing Market Crash Is The Next Shoe To Drop - Chris_Vermeulen
4.Coronavirus Stock Market Trend Implications and AI Mega-trend Stocks Buying Levels - Nadeem_Walayat
5. Are Coronavirus Death Statistics Exaggerated? Worse than Seasonal Flu or Not?- Nadeem_Walayat
6.Coronavirus Stock Market Trend Implications, Global Recession and AI Stocks Buying Levels - Nadeem_Walayat
7.US Fourth Turning Accelerating Towards Debt Climax - James_Quinn
8.Dow Stock Market Trend Analysis and Forecast - Nadeem_Walayat
9.Britain's FAKE Coronavirus Death Statistics Exposed - Nadeem_Walayat
10.Commodity Markets Crash Catastrophe Charts - Rambus_Chartology
Last 7 days
Will You Make Money in the New Silver Bull Market ? - 13th Aug 20
Hyper-Deflation Capital Destruction And Gold & Silver - 13th Aug 20
Stock Market Correction Approaching - 13th Aug 20
Silver Took the Stairs to $21 in 2008, Took Escalator to $29 2010. Is Silver on Elevator to 120th floor today? - 13th Aug 20
President Trump Signs Additional COVID Relief – What To Expect from the Markets - 13th Aug 20
Has Gold's Upward Drive Come to an End? - 13th Aug 20
YouTuber Ads Revenue & How to Start a Career on YouTube - 13th Aug 20
Silver Notches Best Month Since 1979 - 12th Aug 20
Silver Shorts Get Squeezed Hard… What’s Next? - 12th Aug 20
A Tale of Two Precious Metal Bulls - 12th Aug 20
Stock Market Melt-Up Continues While Precious Metals Warn of Risks - 12th Aug 20
How Does the Gold Fit the Corona World? - 12th Aug 20
3 (free) ways to ride next big wave in EURUSD, USDJPY, gold, silver and more - 12th Aug 20
A Simple Way to Preserve Your Wealth Amid Uncertainty - 11th Aug 20
Precious Metals Complex Impulse Move : Where Is next Resistance? - 11th Aug 20
Gold Miners Junior Stcks Buying Spree - 11th Aug 20
Has the Fed Let the Inflation Genie Out of the Bottle? - 10th Aug 20
The Strange Food Trend That’s Making Investors Rich - 10th Aug 20
Supply & Demand For Money – The End of Inflation? - 10th Aug 20
Revisiting Our Silver and Gold Predictions – Get Ready For Higher Prices - 10th Aug 20
Storm Clouds Are Gathering for a Major Stock and Commodity Markets Downturn - 10th Aug 20
A 90-Year-Old Stock Market Investment Insight That's Relevant in 2020 - 10th Aug 20
Debt and Dollar Collapse Leading to Potential Stock Market Melt-Up, - 10th Aug 20
Coronavirus: UK Parents Demand ALL Schools OPEN September, 7 Million Children Abandoned by Teachers - 9th Aug 20
Computer GPU Fans Not Spinning Quick FIX - Sticky Fans Solution - 9th Aug 20
Find the Best Speech Converter for You - 9th Aug 20
Silver Bull Market Update - 7th Aug 20
This Inflation-Adjusted Silver Chart Tells An Interesting Story - 7th Aug 20
The Great American Housing Boom Has Begun - 7th Aug 20
NATURAL GAS BEGINS UPSIDE BREAKOUT MOVE - 7th Aug 20
Know About Lotteries With The Best Odds Of Winning - 7th Aug 20
Could Gold Price Reach $7,000 by 2030? - 6th Aug 20
Bananas for All! Keep Dancing… FOMC - 6th Aug 20
How to Do Bets During This Time - 6th Aug 20
How to develop your stock trading strategy - 6th Aug 20
Stock Investors What to do if Trump Bans TikTok - 5th Aug 20
Gold Trifecta of Key Signals for Gold Mining Stocks - 5th Aug 20
ARE YOU LOVING YOUR SERVITUDE? - 5th Aug 20
Stock Market Uptrend Continues? - 4th Aug 20
The Dimensions of Covid-19: The Hong Kong Flu Redux - 4th Aug 20
High Yield Junk Bonds Are Hot Again -- Despite Warning Signs - 4th Aug 20
Gold Stocks Autumn Rally - 4th Aug 20
“Government Sachs” Is Worried About the Federal Reserve Note - 4th Aug 20
Gold Miners Still Pushing That Cart of Rocks Up Hill - 4th Aug 20
UK Government to Cancel Christmas - Crazy Covid Eid 2020! - 4th Aug 20
Covid-19 Exposes NHS Institutional Racism Against Black and Asian Staff and Patients - 4th Aug 20
How Sony Is Fueling the Computer Vision Boom - 3rd Aug 20
Computer Gaming System Rig Top Tips For 6 Years Future Proofing Build Spec - 3rd Aug 20
Cornwwall Bude Caravan Park Holidays 2020 - Look Inside Holiday Resort Caravan - 3rd Aug 20
UK Caravan Park Holidays 2020 Review - Hoseasons Cayton Bay North East England - 3rd Aug 20
Best Travel Bags for 2020 Summer Holidays , Back Sling packs, water proof, money belt and tactical - 3rd Aug 20
Precious Metals Warn Of Increased Volatility Ahead - 2nd Aug 20
The Key USDX Sign for Gold and Silver - 2nd Aug 20
Corona Crisis Will Have Lasting Impact on Gold Market - 2nd Aug 20
Gold & Silver: Two Pictures - 1st Aug 20
The Bullish Case for Stocks Isn't Over Yet - 1st Aug 20
Is Gold Price Action Warning Of Imminent Monetary Collapse - Part 2? - 1st Aug 20
Will America Accept the World's Worst Pandemic Response Government - 1st Aug 20
Stock Market Technical Patterns, Future Expectations and More – Part II - 1st Aug 20
Trump White House Accelerating Toward a US Dollar Crisis - 31st Jul 20
Why US Commercial Real Estate is Set to Get Slammed - 31st Jul 20
Gold Price Blows Through Upside Resistance - The Chase Is On - 31st Jul 20
Is Crude Oil Price Setting Up for a Waterfall Decline? - 31st Jul 20
Stock Market Technical Patterns, Future Expectations and More - 30th Jul 20
Why Big Money Is Already Pouring Into Edge Computing Tech Stocks - 30th Jul 20
Economic and Geopolitical Worries Fuel Gold’s Rally - 30th Jul 20
How to Finance an Investment Property - 30th Jul 20
I Hate Banks - Including Goldman Sachs - 29th Jul 20
NASDAQ Stock Market Double Top & Price Channels Suggest Pending Price Correction - 29th Jul 20
Silver Price Surge Leaves Naysayers in the Dust - 29th Jul 20
UK Supermarket Covid-19 Shop - Few Masks, Lack of Social Distancing (Tesco) - 29th Jul 20
Budgie Clipped Wings, How Long Before it Can Fly Again? - 29th Jul 20
How To Take Advantage Of Tesla's 400% Stock Surge - 29th Jul 20
Gold Makes Record High and Targets $6,000 in New Bull Cycle - 28th Jul 20
Gold Strong Signal For A Secular Bull Market - 28th Jul 20
Anatomy of a Gold and Silver Precious Metals Bull Market - 28th Jul 20
Shopify Is Seizing an $80 Billion Pot of Gold - 28th Jul 20
Stock Market Minor Correction Underway - 28th Jul 20
Why College Is Never Coming Back - 27th Jul 20
Stocks Disconnect from Economy, Gold Responds - 27th Jul 20
Silver Begins Big Upside Rally Attempt - 27th Jul 20
The Gold and Silver Markets Have Changed… What About You? - 27th Jul 20
Google, Apple And Amazon Are Leading A $30 Trillion Assault On Wall Street - 27th Jul 20
This Stock Market Indicator Reaches "Lowest Level in Nearly 20 Years" - 26th Jul 20
New Wave of Economic Stimulus Lifts Gold Price - 26th Jul 20
Stock Market Slow Grind Higher Above the Early June Stock Highs - 26th Jul 20
How High Will Silver Go? - 25th Jul 20
If You Own Gold, Look Out Below - 25th Jul 20
Crude Oil and Energy Sets Up Near Major Resistance – Breakdown Pending - 25th Jul 20
FREE Access to Premium Market Forecasts by Elliott Wave International - 25th Jul 20
The Promise of Silver as August Approaches: Accumulation and Conversation - 25th Jul 20
The Silver Bull Gateway is at Hand - 24th Jul 20
The Prospects of S&P 500 Above the Early June Highs - 24th Jul 20
How Silver Could Surpass Its All-Time High - 24th Jul 20

Market Oracle FREE Newsletter

How to Get Rich Investing in Stocks by Riding the Electron Wave

Greece Enters Its Crack-Up Boom - The War on Cash

Economics / Eurozone Debt Crisis Jul 09, 2015 - 01:00 PM GMT

By: John_Rubino

Economics

The Austrian School of economics has a concept called a “crack-up boom” in which a critical mass of people conclude that their government is actively trying to devalue its currency.

Consumers respond by front-running the government, spending their paychecks immediately in order to convert their soon-to-be-less-valuable money into real things. Merchants, not happy about the sudden influx of suspect currency (and sensing the panic of their customers) hold out for ever-higher prices, causing inflation to spike. But it’s a special kind of inflation, driven not by a sudden increase in the money supply but by collapsing confidence among holders of the currency.


In a very short time, so goes the theory, the supply of stuff available for purchase dries up, prices hyperinflate, and the economy collapses.

Welcome, in other words, to Greece:

Greeks spend in droves, afraid of losing savings to a bailout

(CNBC) – Business has been so brisk in the giant Kotsovolos appliance and electronics store in this upper-middle-class suburb of Athens that you might think a sale was on.

But, no. It is panic buying, those who work here say. Increasingly concerned that greater economic trouble lies ahead of them, and limited in how much cash they can take out of banks, Greeks have been using their debit cards to buy ovens, refrigerators, dishwashers — anything tangible that can hold its value in troubled times.

“We have sold so much,” said Despina Drisi, who has worked in the store for 12 years. “We even sold display models. People have been pulling at my sleeves. We’re spacing things out now to cover the holes on the shelves.

To the casual observer, the bustle of everyday life looks unchanged here. Greeks, many of whom long ago traded in their cars for cheaper motor scooters, clog the streets at rush hour on their way to and from work. Tourists pack the Acropolis. Friends meet, greet and sit in cafes, looking for shady spots against the heat.

But beneath the surface, Greeks are struggling with growing fear, the strange ramifications of closed banks and the mounting potential for much worse. They could face the unknown consequences of being pushed out of the eurozone within the next week if Greece and its creditors cannot come to an agreement.

Some are watching television and checking their smartphones constantly. Others refuse to follow what is going on in Brussels at all. But either way, many are doing what they can to protect themselves financially, buying appliances and jewelry or even prepaying their taxes so they will have taken care of one financial obligation if they end up losing some of their savings to a bank failure, as happened to depositors in Cyprusunder a bank rescue plan there in 2013.

“Panicked doesn’t begin to describe how people feel,” said Antonis Mouzakis, an Athens accountant. “I have a huge number of customers wanting to file their taxes right here, right now, to have the tax calculated and paid instantly before a possible haircut. Even if the tax is 40 to 50 thousand euros, they pay it off in one go.”

A Greek jeweler, George Papalexis, said a customer had approached him on Wednesday wanting to buy a million euros — about $1.1 million — worth of merchandise. But Mr. Papalexis, the chief operating officer of Zolotas, said he had refused because he was more comfortable holding on to the jewels than having money in Greek banks.

“I can’t believe that there I was, turning away a million-dollar offer,” he said. “But I had to turn down the deal. It’s a measure of the risk we face.”

Mr. Mouzakis said that many companies were also trying to settle their debts quickly, not wanting to owe money if their deposits are hit in a deal to rescue Greek banks. Others do not want to accept payments for the same reason. When banks in Cyprus had to be bailed out in 2013, depositors with more than €100,000 lost about 40 percent of their money.

A contractor at a Greek energy company, who spoke on the condition of anonymity, said his firm had paid all its taxes for the year last week to whittle down the funds that could be subject to a deposit tax.

“I’m even thinking about buying a car, although I don’t need one, to get my cash balance lower,” he said. “People want their money in physical assets, not in the bank.”

But some who are unlikely to be troubled by losing a percentage of their bank deposits are spending, too. Vassilis Bekiaris, 29, said he knew two brothers who had gone on what was probably an ill-advised spending spree, fearing a cut to their savings. One who had just €1,000 in his account bought an iPhone. The other had €10,000 euros but, thinking he could lose 20 percent, bought €2,000 worth of clothes. “All they managed to do was prop up the economy a bit,” Mr. Bekiaris said.

While pensioners and others in need of cash struggled, some employers who were behind in paying their employees surprised them by digging into their safes and producing cash rather than risk losing money to the terms of a bank bailout.

A few companies, prepared for the bank closings, were ready to pay cash to their grateful employees. The family-owned Petsas group, which manufactures a range of products from biodiesel to cotton clothing, paid all of its workers, about 130 people, in cash.

When Greeks start clamoring to pre-pay their taxes, you know the end is near.

But viewed through a Keynesian rather than Austrian lens, this process actually looks kind of positive, like really effective stimulus. The Greeks appear to have discovered the secret to convincing an over-indebted people to keep borrowing and spending: Just telegraph the destruction of their savings and watch the little folks consume.

In an era when new and wild economic theories are being tested on a weekly basis, Greece is perhaps the most interesting laboratory of all. If this sudden burst of consumption and tax compliance results in “growth” and “a balanced budget” then don’t be surprised if the people running the eurozone, Japan and maybe the US come to the comical but from their point of view logical conclusion that far from screwing up, Germany actually did something right in Greece. And that maybe the rest of the world should pre-announce capital controls and bank bail-ins to get their citizens off their butts and into the mall.

Which, when you think about it, might be exactly what the war on cash is setting up.

By John Rubino

dollarcollapse.com

Copyright 2015 © John Rubino - All Rights Reserved

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 losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules