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Monday, May 18, 2015

The Greek canary

Default is coming. So is Grexit. Bloomberg's take:
How long can Greece carry on? With revenues just about covering the pay and pensions bill, there’s not much left over to make even the small(ish) payments due to the IMF in June. If Greece and its banking sector can limp a little further, the state should get a boost from income tax receipts that usually flow in July. Unfortunately, that might come too late to pay the ECB 3.5 billion euros due on July 20, and the repayment that follows in August looks like an impossible challenge without a disbursement of Eurogroup funds.

Should Greece’s citizens begin to lose faith in a positive outcome to negotiations, it’s quite possible that receipts could falter as more of the usual tax payments are held back and taxable activity is curtailed. Still, some boost to the Treasury’s bank balance is likely in July. General government revenues could be lifted by about 3.8 billion euros compared with the average for the other months of the year. That would get some way towards the figure needed to pay the ECB, though it might not come soon enough to avoid a missed payment.

Of course, making it as far as July depends on how long the Greek banking sector can survive. Absent a change to the haircut imposed by the ECB on Greek banks’ collateral, limitations on emergency liquidity assistance are unlikely to pose serious constraints before mid-July. Greek banks have enough collateral to access 93 billion euros in liquidity. That's 13 billion euros above the current cap. The four-week average of increases by the ECB stands at 1.5 billion. At the current pace of increase, Greek banks could keep borrowing more for about eight weeks to offset deposit flight.
The usual suspects will insist that this is irrelevant because the USA has the ability to "print" its own currency, but again, the limit has nothing to do with printing and everything to do with finding someone willing to either borrow or loan the credit money. Furthermore, the Greek public is obviously quite willing to borrow, whereas the American public is not.

But this superficial assessment omits the fact that all the "Greek bailout" money went to the Greek banks, and deposits are loans to the banks. The negative interest rates beginning to appear around the world mean that the various publics are increasingly unwilling to loan their money to the banks, which is why the various proposals for banning cash and other means of preventing individuals to keep stores of value money outside the ever-widening maw of the banking system are being floated.

It's a complicated subject and no one understands it completely, to the best of my knowledge. But rest assured that any solution that does not involve most of the banks writing off bad loans and then going out of business will be a failure.

Labels:

66 Comments:

Anonymous AlteredFate May 18, 2015 8:41 AM  

Zero Hedge had an excellent write up on this yesterday and gives a third option on how the EU can deal with the Greek problem. It makes the case that the EU has the ability to basically hold Greece hostage by preventing it from creating a new Drachma and not allowing an exit, which would cause the Greeks to throw out the current government and install one more willing to bow to EU orders.

Blogger Salt May 18, 2015 8:50 AM  

Henry Ford once remarked that if the American people understood what was done there'd be revolution by morning. Of course. Most people simply cannot grok what is even right in front of them, neon lights blazing.

Anonymous Geoff May 18, 2015 8:59 AM  

Why do negative rates suggest that the public is increasingly unwilling to loan their money to the banks? Wouldn't banks have to offer HIGHER rates to entice the public?

Anonymous p-dawg May 18, 2015 9:03 AM  

That's why I convert all of my money into things with inherent value, like beanie babies and pokemon cards. Even if they ban cash, they won't think to ban Charizard.

Blogger Nate May 18, 2015 9:06 AM  

"The usual suspects will insist that this is irrelevant because the USA has the ability to "print" its own currency, but again, the limit has nothing to do with printing and everything to do with finding someone willing to either borrow or loan the credit money."

It has nothing to do with printing your own money. It has everything to do with lending it to yourself.

The other thing you're mistaken about... is the notion that americans aren't willing to borrow more money. You couldn't be more wrong about this. Americans willingness to borrow is as high as ever. What has changed is banks are less likely to lend to them because they are less qualified than they were 7 years ago.

its not easy to lend to someone that has no job. And lots and lots and lots of Americans have no jobs.

So rather than lending money the banks are leveraging and instead of lending they are buying stock... or insanest of all... lending the money to companies that are using it to buy up their own stocks!

its a giant clusterfustastrophe.

We both said it would be worse in the future if it all wasn't allowed to wash out in 2008... but I had no idea what "worse" would look like. Well here it is.

Blogger Mr.MantraMan May 18, 2015 9:20 AM  

German bonds are about cash equivalents while Greek bonds are about the cash flow from the Greek "economic units", that is my take.

That being the bond continuum with Third World 'Murka being closer to Greece than what should be comfortable. "Our" ten year bill reflecting some unease as compared to Japanese yields as if TW'M lead by a President Camacho is a higher risk than the docile Japanese worker drone, who would have thunk it.

Anonymous Alexander May 18, 2015 9:25 AM  

That's why I convert all of my money into things with inherent value, like beanie babies and pokemon cards. Even if they ban cash, they won't think to ban Charizard.

Say what you will, but at least holographs aren't claiming to be anything more than an illusion. Charizard-backed currency is inherently more honest than the greenback.

Blogger Remo - Vile Faceless Minion #99 May 18, 2015 9:27 AM  

We both said it would be worse in the future if it all wasn't allowed to wash out in 2008... but I had no idea what "worse" would look like. Well here it is.

I remember you and our hosts famous inflation vs. deflation debate. I wonder in the end if either will matter - go take the mark if you want to buy food and by the way we're using "bank credits" now so all former cash is worthless and illegal so please turn it in. Is that deflation, inflation, or simply destruction?

About the only thing you both agreed on is it will be a hideous mess - how right you both were...

Anonymous Geoff May 18, 2015 9:39 AM  

Remo, you are the Wayne Gretzky of the Vile Faceless Minions.

Blogger Nate May 18, 2015 9:45 AM  

"About the only thing you both agreed on is it will be a hideous mess "

we agree on more than we disagree on. More than anything our disagreement is based on perception. What he sees from where he is... and what I see from where I am.

An example of this is how he thinks americans have lost their appetite for borrowing. I mean I understand how someone can look at the numbers and conclude that. But there is no way you could live in america around americans and conclude that.

Americans would borrow and borrow and borrow. Its not won't. its can't.

Blogger Josh May 18, 2015 9:49 AM  

An example of this is how he thinks americans have lost their appetite for borrowing. I mean I understand how someone can look at the numbers and conclude that. But there is no way you could live in america around americans and conclude that.

Americans would borrow and borrow and borrow. Its not won't. its can't.


And many Americans have already borrowed thousands in student loans before joining the work force. So the money that would go to monthly payments for new cars and a first house is already going to pay student loans.

Blogger Nate May 18, 2015 9:52 AM  

well..the banks ran out of working people to lend to... to they opened up the market of "People who aren't working yet but who soon will be" to keep the machine going.

I suppose the next step will be to lend money to high schoolers on the terms that they can start making payments when they are eligible for student loans for college.

Blogger Josh May 18, 2015 9:56 AM  

I suppose the next step will be to lend money to high schoolers on the terms that they can start making payments when they are eligible for student loans for college.

I'm sensing a new opportunity for student loans to cover tuition for private school.

Anonymous Dan May 18, 2015 10:00 AM  

Zero hedge has a smart take by a quest columnist.
http://www.zerohedge.com/news/2015-05-17/guest-post-why-syriza-will-blink

Gist is, Greece's ruling Syriza can't exit easily now that they have a primary account deficit. Instead, Europe withholds funds, and then the government misses salary and pension payments, getting crushed inside the Euro. At that point, Syriza's popularity crashes and it becomes unviable, ridding Europe of a pesky dissenter.

The USSR was happy to starve the dissenting Ukrainians into submission. Why should the E-USSR be any different?

Anonymous cheddarman May 18, 2015 10:12 AM  

I had the misfortune of hearing part of a conversation the other day between two female debt slaves, both who were working at Wallmart after taking on piles of debt to get worthless college degrees. They were both forced to admit they could not have children because of their debt loads. They were trapped in the cycle of barely getting by and not being able to get out of debt.

It was one of the best arguments for patriarchy i have heard in a long time. It also says a lot about the black hearted bastards that sold them the worthless degrees and loaned them the money.

Anonymous Mike M. May 18, 2015 10:25 AM  

Never underestimate the role of government pressure on the banks to make loans to marginal customers. A bank has no particular interest in making a bad loan, unless it's to get the government off their backs.

Unfortunately, the notion that lower-class people will develop middle-class habits if they are loaned the money for a middle-class education and middle-class goods is very, very alluring.

And completely false.

Anonymous Porky May 18, 2015 10:27 AM  

The negative interest rates beginning to appear around the world mean that the various publics are increasingly unwilling to loan their money to the banks

I think you got that backwards, imho.


any solution that does not involve most of the banks writing off bad loans and then going out of business will be a failure.

IMF bailout of central banks in 3....2.....1.....?

Blogger Josh May 18, 2015 10:28 AM  

A bank has no particular interest in making a bad loan, unless it's to get the government off their backs.

Or if they can bundle the loan into a security and sell it off...

Or if they have an implicit guarantee of a bailout from the Fed...

Or if they can sell the bank to another bank before the loans default...

Let's stop this nonsense of pretending that the poor innocent banks were forced to make bad loans by those evil democrats in government.

Blogger Nate May 18, 2015 10:36 AM  

"A bank has no particular interest in making a bad loan, unless it's to get the government off their backs."

Oh for fucks sake. In their blinded 2006 eyes there was practically no such thing as a bad loan.

Blogger VD May 18, 2015 10:36 AM  

Americans willingness to borrow is as high as ever. What has changed is banks are less likely to lend to them because they are less qualified than they were 7 years ago.

Most people are willing to be given free money they never have to pay back. But when you already struggle to make your debt payments, it doesn't really matter if you aren't applying for new loans or if the bank won't give you one.

And loan applications are down. Home loan applications are at their lowest level in 15 years.

Blogger bookstopper May 18, 2015 10:40 AM  

Why do negative rates suggest that the public is increasingly unwilling to loan their money to the banks?

No bank would accept money from a private lender at a higher interest rate than it can get from the government. If the government interest rate is less than 0, there is no incentive for individuals to lend to a bank.

Blogger Nate May 18, 2015 10:48 AM  

"But when you already struggle to make your debt payments, it doesn't really matter if you aren't applying for new loans or if the bank won't give you one. "

dude.

People who don't have jobs don't apply for loans.

What's the workforce participation again?

Blogger Tank May 18, 2015 11:00 AM  

When (not if) the default comes, what are the likely consequences?

Curious as to what VD and others think about how that would play out.

Anonymous Donn #0114 May 18, 2015 11:01 AM  

The rent-taking vampires will suck the system dry before they give up their lamprey death grip. That they will crash it means nothing to them.

Blogger dc.sunsets May 18, 2015 11:02 AM  

People account for wealth (in the USA) in dollars.
"I have $50,000 in IBM stock."
"I have a pension that will pay me $3,000/month for the rest of my life starting when I'm 65."
"I have $45,000 in a commercial bank savings account."

All of these are IOU-dollars. They are NOT dollars. Each and every one of them requires one or more market transactions and/or time to pass in order to convert them into actual dollars you can hold in your hand.

As such, each and every one of these exists only mentally, as a kind of short-hand. The transactions are assumed, but we all know that if "everyone" tried to sell their stocks, cash their bonds or withdraw their bank balance all at once, the system would yield an infinitesimal faction of that "mental short-hand" balance.

Banknote cash is like a chair, in a game of musical chairs. Those paying the band want to keep the music going FOREVER, but they know the band has to take a break sometime. They see the existence of chairs as bad on several levels; 1) if you can't "cash out," there's no such thing as a bank run. This is the same concept as trading curbs on stock markets, so-called circuit-breakers. Unfortunately, these don't work; crashes are a function of mass psychology, not mechanics. 2) people "sitting in chairs" robs the system of productive capital. 3) people sitting in chairs are not "visible" to the people controllers; they have too much volition, and are not to be trusted with it.

We have existed in a Credit-bubble driven Great Asset Mania for 20 years. People have been conditioned to NEVER sell (even if stocks fall 50%, as they roared back twice now from that kind of fall) and they have been conditioned by a lifetime of peace and predictability that mental money is the same (or better) than banknote cash.

It's time for a Great Paradox in finance to occur.

Blogger Nate May 18, 2015 11:04 AM  

dc.sunsets


you're obviously new here.

Anonymous dB May 18, 2015 11:04 AM  

If there ever was a skype interview to be done, it would have to be between nate and vox. Can this happen or what.

Anonymous tdm May 18, 2015 11:09 AM  

"borrow and borrow and borrow", so Bob was right.

I have a car salesman friend in Arlington Texas who tells me that right now they will sell a car to anybody who walls thru the door.

Blogger wrf3 May 18, 2015 11:14 AM  

dc.sunsets wrote: As such, each and every one of these exists only mentally, as a kind of short-hand.

Well, yes. That's what money is. Physical dollars, or gold, or grains of sand aren't needed. Those things are just easy ways of exchanging "mental short hand" between people who don't have computers.

Blogger dc.sunsets May 18, 2015 11:16 AM  

@Tank, it all depends on the timing IMO.

Best guess: Bonds accelerate their capital loss, stocks top sometime soon (weeks, months?) and it all heads south together. Measures of monetary inflation turn outright negative. GDP turns negative within a quarter or two. Happy talk says, stay invested, remember last time(s), only fools sell. Interest rates start hitting milestones to the upside and articles appear with mild hand-wringing about interest expense on the national debt. Japan's situation takes a visible lurch into "BOHICA." People visibly begin to see that Greece is a black hole, but Italy, France and a host of other EU members suddenly look a lot sicker than they did a few months ago.

A new wave of unemployment begins to rise. Auto loan default rates surge, and the hard-stop of securitizations causes the market prices for used cars to plunge when credit availability freezes solid. Inter-bank loans cease. The Fed lurches one way, then the other. Politicians see blood in the water and finger-pointing ensues as we are reminded there is no honor among thieves.

Prices for things begin to fall...and fall hard. Commodities resume their years'-long bear market. Stocks, bonds, land, gold, commodities and beanie babies all head south together.

Bank withdrawals become noticeable, and an executive order is issued limiting American Citizens to $500 cash withdrawals per month, and capital controls are issued preventing American Citizens from expatriating wealth to other countries (corporations continue to move billions around as their officers see fit, while the multinational elite continue moving their wealth around, although they are the ones losing the most, because they already have the most to lose.)

Proposals to ban cash accelerate, but politics takes time. By the time proposals are wheeled out in law, markets for virtually everything are down 95-98% in dollar terms. All holders of cash are ordered to turn it in to banks in return for a debt card. As soon as all that is done, all bank deposits are reduced by a factor of 10.

Life goes on. The social upheaval from all this is anyone's guess. Taxation of visible wealth will likely skyrocket, adding to the LOSS in value of it (for what is something worth if it's just a crime magnet, i.e., if the neighbors will simply tax it right out from under you?)

Blogger dc.sunsets May 18, 2015 11:18 AM  

@Nate, yeah long comments are naught but self-flagellation. Unless you meant something else.

Blogger dc.sunsets May 18, 2015 11:23 AM  

"But rest assured that any solution that does not involve most of the banks writing off bad loans and then going out of business will be a failure."

The banks loaned the wealth out, and took it back as deposits, but those deposits evaporate if the loans go bad, too. So the mental "bank vault" cash will disappear each night. The only "cash" that doesn't evaporate is the little stained pieces of paper, and there isn't anywhere near enough of that to "make good" on all those demand deposits...so people will be stiffed.

That's a "bail in."

Blogger Danby May 18, 2015 11:26 AM  

Shorter dc.sunsets

"Look at this horse. isn't it a great horse? I am flogging it. Flogging it repeatedly and with great vigor! Who would like to join me?"

Blogger Doom May 18, 2015 11:30 AM  

Yeah, mostly, good call and all. However, you only suggest two of the three, at least, choices. While the fed, and other central banks, are partially government operated, most are not fully state operated. That, I think, is where the next push will be directed. It would buy more time (kick that can, boys), and be another possible path to global governance (which would offer another can kick sometime in the future).

I am surprised you, of all people, didn't see this coming. Perhaps you discounted it, perhaps you were busy with the now, the minutia of what is happening. Don't know, but I've been seeing that as a possibility for a while.

Anonymous Geoff May 18, 2015 11:32 AM  

I bought long Treasuries last week at a yield north of 3 percent. A huge bargain, IMO, as the yield is likely heading south of 2 percent. Central banks around the world have tried every trick in the book to try to inflate but as, VD says, you can't print more borrowers.

Deflation is coming.

Anonymous cheddarman May 18, 2015 11:42 AM  

"When (not if) the default comes, what are the likely consequences?

Curious as to what VD and others think about how that would play out." - Tank

Tank, vox wrote a book "return of the great depression" he wrote out a couple of different overall scenarios. a link is in the upper right corner of this web page

in the book, he suggests deflation as the most likely scenario.

buy the book, it is a good read.

Blogger ScuzzaMan May 18, 2015 11:42 AM  

"Why do negative rates suggest that the public is increasingly unwilling to loan their money to the banks? Wouldn't banks have to offer HIGHER rates to entice the public?"

It doesn't. It illustrates that the banks have become less willing to lend money to the public. IOW, that the people who want and can afford loans already have them.

Since "stimulating the economy" necessarily requires getting newly minted credit into circulation, and lending is the only accepted mechanism for doing that, a dearth of borrowers threatens the appearance of the "recovery". So the governments are forcing interest rates negative as a means to incentivise banks to lend.

Given that it was a dearth of willing and qualified borrowers that led to the deadlock in the first place, the governments are trying to force the banks to lower their lending standards, enlarging their pool of potential borrowers thereby, even as their regulatory agencies are forcing the banks to raise their lending standards in tardy response to the financial crisis. If it weren't an enormous karmic burden coming home to roost, and we didn't know that bankers are some of the worst, most vicious criminals in this world, one could almost pity them.

(I, personally, do not pity them the feckless affections of their political allies. I pity them the judgements of the Almighty.)

However, to your final question: if the banks offer higher interest rates to depositors, they must perforce charge even higher rates to borrowers, which decreases their pool of potential borrowers - precisely the opposite effect to that desired.

This is so because the banks generate income on the difference between the money they borrow (latterly from central banks) and the money they lend (to the public (well, and to the Greek government, but that's another story!) ). They can borrow from the central bank at 0.25% and lend at 2.5% and make a profit, but they cannot pay depositors 5% and lend at 2.5% and make a profit. If they pay depositors 2.5% then (A) they have to deal with the government wanting the same rate of return*, and (B) they have to charge borrowers 5%.

*because the government/central bank loans at historically low rates are predicated on the banks inability to pay, such that it threatened the entire system with cascading cross-defaults. If they CAN pay then, (A) the government wants to be paid, and (B) stops the low rate emergency loans.

Plus, the public would become perturbed at such behaviour, since even voters are smart enough to figure that one out.

Blogger ScuzzaMan May 18, 2015 11:45 AM  

Oh, sorry for the postscript, but "where this goes" is war.

War, WAR, and MORE war.

War is the banker's tool of choice for distracting the voting populace from their crimes.

Remember, you read it here.

Anonymous Jack Amok May 18, 2015 11:49 AM  

I'm sensing a new opportunity for student loans to cover tuition for private school.

Say, that's a pretty good idea you've got there.... partner. What should we name our program? PrepStart? Of course the debts can't be discharged through bankruptcy, but I suggest we offer our clients the option to discharge their debts through service in our private army (Nate hereby appointed Armorer-General).

Blogger Tank May 18, 2015 11:51 AM  

@cheddarman

LOL at me. I bought and read his book when it came out, but forgot he made predictions. Seems like a LONG time ago (ah, five or six years). Of course, there's been a lot of factual developments since then, although I don't know if they make any difference to his predictions.

Anonymous AlteredFate May 18, 2015 11:54 AM  

@Jack Amok

I know there is an awesome joke somewhere in there involving comfort women with degrees.

Anonymous p-dawg May 18, 2015 12:02 PM  

@Alexander: Well, I admit to being a bit facetious as to the actual vehicles. But I wasn't joking about the underlying principle. It's just that mentioning beanie babies and pokemon cards doesn't get you put on government watchlists....yet.

Anonymous Jourdan, #200 May 18, 2015 12:03 PM  

It is a serious error to analyze this as an economic issue. It is a political issue. The ruling elite in the EU cannot allow the Euro to fail nor Greece to leave and they are willing to sacrifice their national interest in favor of their class interest. This is why sites like Zero Hedge are so wrong on predictions so often: they have made a category error.

There will be no grexit.

Anonymous Jack Amok May 18, 2015 12:05 PM  

Nate and Vox, seems to me the two of you are mostly just using different definitions for "willingness", with Vox's definition being more "willing and able." But it doesn't seem like the difference actually matters so long as the workforce participation numbers and overall economy stay on their current path. And I don't see much hope they won't. I don't see consumer debt being a viable place to dump inflate-o-bucks.

The difference I wonder about is this one:

It has nothing to do with printing your own money. It has everything to do with lending it to yourself.

Since the banks are an unacknowledged branch of the US government (or is it the other way around?) what's the impact of loaning each other money going to be?

Anonymous Jack Amok May 18, 2015 12:18 PM  

Or if they can bundle the loan into a security and sell it off...

Or if they can sell the bank to another bank before the loans default...


Yep. Sometime back, banks decided it wasn't profitable enough making a few percent interest on 30 year loans. Their "inventory turnover" was too long. So they started packaging up their loans and selling them for cash so they could turn around and loan the cash out again right away. Origination Fees, and a host of other signing fees became their revenue stream, while they dumped the liability for the questionable loans onto someone else (generally investment funds hungry for ever bigger returns).

One of the hilarious things from the 2008 mess was a guy who pointed out that when banks and brokerages merged, the bank side of the house was shoveling bad debt out the back door and the brokerage side was shoveling it back in the front, both as fast as they could.

Ponzi schemers who got so caught up in excitement they started buying into their own scheme!

Blogger ScuzzaMan May 18, 2015 12:20 PM  

@Jack:

Look at the distribution of wealth. It has been on an upward trend since 1973. Since the abandonment of hard money. The fiat money system is a system designed, deliberately and with malice aforethought, to transfer value (i.e. wealth) upwards. This is what it measurably and demonstrably and inevitably does.

THAT is the implication of the governments and their phony "independent" central banks lending money to each other. ALL of their ability to do so rests on the government's ability to tax you. Once you can no longer afford their taxes, there's only two possibilities:

A) the entire system resets, somehow, probably with a lot of blood, suffering, and chaos

or

B) we all officially go back to feudalism, with a lot of blood, suffering, and chaos

The future's so bright ...

Anonymous Geoff May 18, 2015 12:41 PM  

Scuzzaman, thanks. Banks are indeed in the spread business. If their lending rates are driven down, it makes perfect cents that their deposit rates would also have to decline.

So next question is how dependent are the banks on retail deposits? Could they increasingly turn to alternative sources of funding like wholesale or, as you said, the Fed.

Blogger CarpeOro May 18, 2015 12:53 PM  

"Unfortunately, the notion that lower-class people will develop middle-class habits if they are loaned the money for a middle-class education and middle-class goods is very, very alluring.

And completely false."

YMMV. My wife's family I'd classfiy as lower middle class (father was a GM worker/union man). My father's family was roughly the same (grandfather was a master machinist for GM). I am still working on getting my wife in the mindset of save now and then buy versus spend what you have and complain you can't afford more. My father (and I take after him) was very frugal and had my mom on a tight budget. He was able to afford a nice house in the suburbs working as a teacher in Detroit (also teaching night school). My mom was stay at home until my sister was in school, then went back to work part time as a nurse.
As it stands today, I couldn't afford a comparable house unless I liquidated my precious metal holdings. I don't see it as a lower class/middle class divide regarding money management, I see it more as generational. The Boomers of all classes were less likely to develop the saving mentality because not only was there a baby boom, there was also an economic boom when they were young. Members of the quiet generation, born in the inter-war years, experienced the depression. A large portion of them were frugal as a result, as are some of their children. #105


Anonymous Orville May 18, 2015 1:20 PM  

This banning of cash or cash transactions over a certain dollar amount is the the twitching leg on the nearly dead canary. That to me signals that debt destruction has reached a critical phase.

Anonymous patrick kelly May 18, 2015 2:23 PM  

"It's just that mentioning beanie babies and pokemon cards doesn't get you put on government watchlists..."

What about whiskey, porn and ibuprofen?

Anonymous Eric the Red May 18, 2015 2:33 PM  

"It has nothing to do with printing your own money. It has everything to do with lending it to yourself."

No qualitative distinctions there, only crass undifferentiated quantity, and therefore highly suspect.

....and round and round we go....

Blogger James Dixon May 18, 2015 2:48 PM  

> @Nate, yeah long comments are naught but self-flagellation. Unless you meant something else.

He means you're preaching to the choir. :)

> ibuprofen?

Aspirin is better for that purpose.

Anonymous p-dawg May 18, 2015 3:22 PM  

@patrick kelly: Those are probably safe. Beans, corn, rice, sewing supplies, sterno, water purification tablets, those are probably safe too.

Blogger praetorian May 18, 2015 4:04 PM  

Vox, can you explain how negative interest rates indicate a lack of willingness on the part of consumers to lend to banks? Perhaps naively, the this indicates the opposite to me: (some) people are willing to pay (some) banks to take loans from them. (Of course, without looking at the flows, it's hard to know just how many people are taking the banks up on this amazing opportunity.)

Thank you for your patience.

Anonymous BigGaySteve May 18, 2015 7:23 PM  

"Greece's ruling Syriza can't exit easily now that they have a primary account deficit."

Whatever happened to Greece threatening the EU with a Nigapocalypse of giving illegal aliens papers so they could go to other EU nations instead of leeching off the Greeks? The Greeks need to follow Iceland's lead


I have a car salesman friend in Arlington Texas who tells me that right now they will sell a car to anybody who walls thru the door

I had a neighbor who had bad finances that I had to explain to her she owed more than her car was worth. Oddly enough she managed to trade it in and get a newer car with even worse terms.

Blogger dc.sunsets May 18, 2015 7:32 PM  

Preaching to the choir.

Oh. Well, paraphrasing the Greater Marx, "I'm not sure I should join a congregation that would allow me as a member."

Anonymous BigGaySteve May 18, 2015 7:38 PM  

I have not heard anything about the possibility of dropping zeros on currency in a while any thoughts on the likelihood of this?

"When inflation goes on long enough, the number of digits required to express a price grows too large. (As has been seen with the Italian lira, the Zimbabwean dollar, and countless other currencies. One whitewash solution to chronic inflation that several other nations have chosen is dropping one, two, or even three zeros from their currency, in an overnight revaluation, with a mandatory paper currency exchange. " http://survivalblog.com/nickels/

Blogger HickoryHammer #0211 May 18, 2015 7:53 PM  

The numbers have been against Greece for the better part of a decade now. I'm surprised they were able to stagger forward for so long in the first place. I presume that most of their bonds must be sufficiently written down at this point that the powers that be feel safe cutting the cord.

Blogger James Dixon May 18, 2015 8:17 PM  

> Vox, can you explain how negative interest rates indicate a lack of willingness on the part of consumers to lend to banks?

They're a casual factor, not an indicator. They don't indicate people don't want to lend to banks, they cause people not to want to lend to banks. For example, when our CD's came due a few years ago and the renewal rates were less than 1% we moved about half the money to our brokerage account instead of renewing it.

Anonymous Different T May 18, 2015 10:11 PM  

Vox, can you explain how negative interest rates indicate a lack of willingness on the part of consumers to lend to banks?

"They're a casual factor, not an indicator. They don't indicate people don't want to lend to banks, they cause people not to want to lend to banks."

"No bank would accept money from a private lender at a higher interest rate than it can get from the government. If the government interest rate is less than 0, there is no incentive for individuals to lend to a bank."

Don't say you're not a leader, Vox. LOL

Anonymous zen0 May 18, 2015 10:29 PM  

Jourdan, #200 May 18, 2015 12:03 PM

It is a serious error to analyze this as an economic issue. It is a political issue. The ruling elite in the EU cannot allow the Euro to fail nor Greece to leave and they are willing to sacrifice their national interest in favor of their class interest. This is why sites like Zero Hedge are so wrong on predictions so often: they have made a category error.

There will be no grexit.


Archived for future reference, Minion.

Anonymous zen0 May 18, 2015 10:42 PM  

> The ruling elite in the EU cannot allow the Euro to fail nor Greece to leave and they are willing to sacrifice their national interest in favor of their class interest.

They are not unsophisticated. They manage situations. Greece may well be considered an opportunity to war game an undesirable situation. Losing Greece is not that big a deal .

Using Greece as an example to other larger entities of what can happen when you try to $*%* the Oligarchs in the ass.......

Priceless.

Anonymous George of the Jungle May 18, 2015 11:44 PM  

The EU oligarchs are arrogant tyrants, but ultimately a tiresome bunch of arrogant tyrants. We can expect to see what we always see, specifically, that they will pull any sleight-of-hand trick to keep Greece in the EU. Expect to see endless variations on Ponzi and three-card-monte, as two months from now this all dies down to some confusing but calm situation.

Damn these people all to hell... the only thing that will bring them down is a revolution with every citizen in the country out on the streets shouting for their heads on a pike.

Blogger Floyd Looney May 19, 2015 12:13 AM  

It is common sense that you cannot continue to spend what you do not have indefinitely, except in Washington DC

Anonymous p-dawg May 19, 2015 7:49 AM  

@Floyd: Common people do not have the powers to 1. print their own currency or 2. default on their debts without penalty to themselves. The oafs in DC know they can do both, either, or neither as they wish. They aren't on the hook. The commoners are.

Anonymous Goshawk May 19, 2015 4:47 PM  

So then...if the banks get rid of cash I wonder what they'll decide to use for daily commerce. Hummm...oh, wait...I think I know...

Revelation 13:16-17
16 It [the second beast] also forced all people, great and small, rich and poor, free and slave, to receive a mark on their right hands or on their foreheads, 17 so that they could not buy or sell unless they had the mark, which is the name of the beast or the number of its name.

You know as a Christian, it's such a privilege to witness the fulfilling of the prophecies found in God's Holy Scriptures. It's so ironic because these antichrist don't even believe in the prophecies that they are currently working so hard to fulfill.

By the way, here is Jesus' recommended financial plan...

19 "Do not store up for yourselves treasures on earth, where moths and vermin destroy, and where thieves break in and steal. 20 But store up for yourselves treasures in heaven, where moths and vermin do not destroy, and where thieves do not break in and steal. 21 For where your treasure is, there your heart will be also.

24"No one can serve two masters. Either you will hate the one and love the other, or you will be devoted to the one and despise the other. You cannot serve both God and money.

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