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Monday, June 29, 2015

Coming to a nation near you

Greek shuts down its banks:
Banks in Greece and the country's stock exchange will be shut all week in a sign of the deepening financial crisis. The drastic move comes after people rushed to withdraw their cash amid panic ahead of the referendum on bailout terms. Under the controls, there will be a daily €60 limit on withdrawals from cash machines, which will reopen on Tuesday.
Any fractional-reserve system is doomed as soon as people realize that there are more claims on each piece of paper than can be exercised at any given time. As with everything they do, the banks took something that worked, more or less, and pushed it well beyond the breaking point.

It was eye-opening when I realized that the "ten-percent" reserve system about which we'd learned in college was actually a "less-than-one-percent" reserve system. That was the point when I realized that the global financial system was bound to fail eventually; it simply doesn't have a sufficient margin of error for predictable events, such as the Greek inability to continue servicing their external debt, much less genuinely unexpected and exogenous shocks.

As awful as bail-ins sound, they are actually much more fair than bail-outs. After all, whether you realize it or not, your "deposits" are actually unsecured loans you have made to the bank. Why you would want to make such a high-risk loan to such an irresponsible borrower without collateral or much in the way of interest is, of course, your business.

UPDATE: It's official. Greek default tomorrow:
Greece will not pay a 1.6 billon euro loan installment due to the International Monetary Fund on Tuesday, a Greek government official confirmed on Monday, highlighting the depth of the financial crisis facing the country.
This should help settle the debate. The answer is "deflation".

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55 Comments:

Blogger Sgt Polite June 29, 2015 4:38 AM  

As always, if you don't Hold it, you don't truly Own it.

Anonymous George of the Jungle June 29, 2015 4:50 AM  

As in many ancient Greek tragedies, there is only one way out of this....

Deus ex machina

Blogger JCclimber June 29, 2015 5:02 AM  

I don't believe people are really, really, ready to fully accept Jesus and His second coming until they come to the realization that they cannot depend on their talents, wealth, perseverance, luck, family or anything else.

The Bible speaks to us in several places about the deceitfulness of riches. Japan is less than 1% christian. Many western nations are a fraction of their former numbers, percentage-wise. And even within the Christian community, how many are really, really ready to trust God for their daily bread as Elijah had to do?

The coming financial storm is going to be truly awful. But God can also use it to finally break through our self-sufficiency.

Even holding physical won't be enough (unfortunately). We should all be preparing physically with food stocks, developing talents and useful skills. But more vital, preparing mentally. We are going to be squeezed, and the powers will not want to relinquish their hold on the financial and political structures.

Isn't it interesting that this is coming around the time of the Gay Marriage vomit?

I cannot seem to get anyone to realize the truth that their money in the bank is a loan to the bank. I'm not sure if it is because they cannot comprehend it, they refuse to comprehend it, or they do comprehend it but are naively hoping for the best or hoping they can get their money out quickly enough.

Blogger Mark Citadel June 29, 2015 5:31 AM  

Always remember, it is in economic and civil unrest that true overturn is possible. Liberalism is desperate to avoid this.

Blogger Shimshon June 29, 2015 5:34 AM  

"It was eye-opening when I realized that the "ten-percent" reserve system about which we'd learned in college was actually a "less-than-one-percent" reserve system."

It was even more eye opening to learn that checking accounts, once required to be fully backed (the definition of demand deposit), were subject to "sweeps" starting in the early 1990s.

Anonymous Difster VFM #109 June 29, 2015 5:36 AM  

Sadly, people will accept whatever comes next from their elites because they will be offered safety, security and financial stability. Really, they'll get it right this time. Everything will be fine. Here, have some bread and circuses.

Anonymous Fp June 29, 2015 5:50 AM  

"Always remember, it is in economic and civil unrest that true overturn is possible. Liberalism is desperate to avoid this."

Leftardism is always about maintaining the corrupt status quo just look at SFWA.

Blogger JDC June 29, 2015 6:06 AM  

Leftardism is always about maintaining the corrupt status quo just look at SFWA.

I agree, but also believe the status quo idol is prevalent amongst conservatives as well - politicians and their constituency (If I'm truly being honest I include myself in this admonition). As I look across the landscape of our political system, it's getting more and more difficult to discern teams. Right now everybody looks pink.

As JCclimber so aptly wrote, we need to choose our own switch, and have our self-sufficiency taken behind the woodshed for a good whipping. I figure that's going to happen anyway, so we may as well prepare for it. Instead of wearing twelve pair of underpants I'll stick with the pure Word of God.

It will still hurt, but sometimes change comes with a bit of pain. Most people will avoid that pain at all costs.

For I consider that the sufferings of this present time are not worth comparing with the glory that is to be revealed to us. (Rom 8:8)

Anonymous Stilicho June 29, 2015 6:13 AM  

Yup. Bail-ins are just old fashioned bank failures where depositors lose their deposits with some minor variations.

Blogger YIH June 29, 2015 6:31 AM  

Seems the Japanese are going to be the canary in the coalmine...

Anonymous NorthernHamlet June 29, 2015 7:01 AM  

Bloomberg says, don't worry cause it's only one payment. Nothing bad yet, they won't even really be in default! And maybe they'll make their ECB payments later after all.

Zerohedge says... This is probably it. Get ready, baby. CHAOS!

Blogger Rek. June 29, 2015 7:07 AM  

Why you would want to make such a high-risk loan to such an irresponsible borrower without collateral or much in the way of interest is, of course, your business.

Without wanting to intrude in your personal finances. How do you go about handling this? 6 months overhead in the bank + Gold/silver (20%) + Real estate (50-70) + stocks (30-10)?

Anonymous grey enlightenment June 29, 2015 7:21 AM  

liberalism fails? who knew

Anonymous ticticboom June 29, 2015 7:24 AM  

In the Carboniferous Epoch we were promised abundance for all,
By robbing selected Peter to pay for collective Paul;
But, though we had plenty of money, there was nothing our money could buy,
And the Gods of the Copybook Headings said: "If you don't work you die."

Blogger Shimshon June 29, 2015 7:29 AM  

According to this the Greeks don't even have enough money to carry out the vote!

Anonymous Earl June 29, 2015 7:30 AM  

The problem with fractional reserve banking is that it is full of fractional withdrawals. Grant them prima noctes.

Longbanks, from Bankheart.

Anonymous Steve Brown VFM#0273 June 29, 2015 7:31 AM  

Americans wake up. Get out of all financial markets today!

Blogger ScuzzaMan June 29, 2015 7:37 AM  

Speaking of high ruck loans to impoverished and irresponsible borrowers, let's not forget that every large bank you can name has been found guilty of multiple criminal conspiracies since the beginning of the financial crisis.

Banks come last on every single metric of risk profiling for financial purposes, even using their own methods.

Blogger ScuzzaMan June 29, 2015 7:38 AM  

Meh. ruck=risk

Anonymous Jourdan June 29, 2015 7:44 AM  

My friend who is working on the margins of these negotiations game me an update in the middle of the night my time, and according to him this radical stiffening of the Troika's attitude is due to one man's late night imposition of a collective ass-kicking: Mr. Dijsselbloem.

Here is his report, in part:

Dijsselbloem is the man. Who defenestrated the Greeks this weekend.

Like a boss.

I really thought the Euro institutions would puss out and wait for the Greek referendum July 5.

But no. They're gearing up to cut off Greece this week, and the Greek referendum - Tsipras' "master stroke" - is moot, a dead letter. I'm amazed.

In a group of EZ cowards, who wanted Greece out but didn't want the blame, he stepped up and said give me the damn knife, I'll do it...

Dijsselbloem folded up the negotiating table and went home. So the "program" - the bailout - will end Tuesday without extension or further disbursement. €1.7B is due to the IMF - also on Tuesday. They don't have it, they can't get it. They will default. The Greek sovereign is de facto bankrupt.

Which, since its banking system is stuffed full of government debt, means its banking system is also insolvent.

The ECB just voted to freeze liquidity assistance, which means capital controls at least and possibly a "bank holiday" starting Monday.

Getting any money to Greece before the Tuesday deadline would require bills to pass parliaments - there's no negotiation, there's no bills, and there's no political capital to get anything through. No small group has the authority.

Gravity is doing the work now; metal on metal... the discussions now are around cleaning up the mess - and "humanitarian aid"...

Anonymous p-dawg June 29, 2015 7:55 AM  

Why would I want to? I don't. But my employer requires direct deposit, so I deal with the bastards. I just keep as little as possible in the bank, so when they eventually decide to take my account, I won't lose more than a paycheck at most.

Blogger HickoryHammer #0211 June 29, 2015 7:57 AM  

Whoops Vox, I hear some Italian banks shut down too. Hope you've got your fiatscoes in a safe place!

Blogger HickoryHammer #0211 June 29, 2015 8:00 AM  

Nevermind, it's just their stocks that aren't trading, for now. Man what a mess, for something that was pretty predictable. I guess everyone thought Greece would get some can kicking love for a few more years at least.

Anonymous rienzi June 29, 2015 8:10 AM  

Vox:" Why you would want to make such a high-risk loan to such an irresponsible borrower without collateral or much in the way of interest is, of course, your business."

Of course, the bankster's wet dream is to get another barbarous relic,"cash", eliminated, so you'll have no choice but to make that dangerous, unsecured loan.

While you can barter around for lot of things, its going to be hard to exchange a chicken for a gallon of gas down at the quikee mart. Even the Amish have to use money for things like hand tools and nails.

Interesting times coming.

Anonymous p-dawg June 29, 2015 8:25 AM  

@rienzi: Always remember, you can buy approved things with credit money and then trade those things for what you really want, probably at a loss, to others. They can try to eliminate cash and barter, but they are not smarter than the market. Even when rationing was in effect, people who wanted extra gasoline and butter and such could get it. It's just going to make everyday transactions harder and more frustrating, but not impossible.

Blogger Ben Cohen June 29, 2015 8:57 AM  

What do you think of the Harry Browne portfolio which is 25% in stocks, bonds, cash, and gold?

Blogger Mr.MantraMan June 29, 2015 9:01 AM  

WAG time, US markets show green today, flight to quality and more importantly the Obama cult is still in fashion, I'm not even sure the banksters would oppose Reverend Barak Hussein Obama at this point.

Fusing gay hysteria and finance CNBC your trusted source of "news" had the usual 10 best, 10 worst states to live in article, basically our Big Gay ass Steve could have written it, the best were all white states with gay wedding cakes, the 10 worst were in large portion black with no wedding cakes for gays (yet).

Anonymous MrGreenMan June 29, 2015 9:19 AM  

I had a conversation once with a true believer in fractional reserve, who has also told me that he's sure it's really just 10%, and also numerous times responded: "I don't know how things are, I'm just discussing the ideal case." - usually while rejecting a specific fact as false. It must be nice to live in such a world where you may simply choose facts don't exist.

Anyway, he said fractional reserve banking could exist with a hard currency. It took 30 minutes for him to accept that he'd converted from clams to "IOU one clam" without skipping a beat.

Blogger Joshua Sinistar June 29, 2015 9:35 AM  

I don't think these bankers really understand the concept of money. With a worthless fiat currency like the US Dollar or the Euro, if the people choose to no longer accept it then the bankers have little or no options. They could try to force compliance by having businesses clamp down on credit and demand people use their worthless scrip, but that requires that there is no small business sector outside their financial control.
I urge all White Americans to go off the grid. Do not accept US Dollars any longer. Work through a system of barter and local trade only with other Whites and starve the Government and bankers out of America. They want you dead. Let them starve..

Blogger dc.sunsets June 29, 2015 9:42 AM  

Banks become criminal extensions of the state when they enter into fractional reserve lending.

Especially in today's world where those with excess money (savings) can elect to loan it to borrowers in an explicit arrangement like "lending club" or its clones, there is simply no excuse for having a banking system that creates monetary demand out of thin air, lends it and then accepts the deposits back as capital.

It should be impossible to lend without having first produced, and not just "produced" credit.

Blogger JartStar June 29, 2015 10:18 AM  

It will be interesting to see if the Greek people can withstand the capital controls, lack of money, and most importantly the coming lack of imports from the rest of the EU. The Greek government currently runs a deficit so just leaving the Euro doesn't solve that, or make the other EU countries which ship food and other necessities continue to ship them. Can the Greeks withstand no pension payments, no food on the shelves, no medicine from the EU as they are strangled economically in effort to bring them back into compliance?

Anonymous Difranco June 29, 2015 10:44 AM  

The reason you would is because asset forfeiture laws. Carrying or Possessing large sums of money/cash is recipe for seizure along side the road.

Blogger Quizzer W June 29, 2015 10:45 AM  

28. Joshua Sinistar

So long as government accepts whatever currency it issues as payment for taxes, that currency will have a value. You'd be hard-pressed to replace that currency. Bitcoin and other crypto-currencies are a good example of the difficulties of doing so. A few years ago when California was issuing IOUs they were also accepting those IOUs in payment for taxes. In effect, California issued its own currency. Naturally, nobody in government actually cared that this is completely illegal.

I'm pretty sure bankers understand money far better than government, and they both understand it far, far better than the citizens they shaft with it.

Blogger Aquila Aquilonis Fulminata June 29, 2015 11:00 AM  

Vox - If you still lived in the US, how would you deal with your annual property tax payment? Would you still keep that in a bank?

Blogger James Dixon June 29, 2015 11:06 AM  

> What do you think of the Harry Browne portfolio which is 25% in stocks, bonds, cash, and gold?

I've recommended his book several times in the past. But note that there's more to it than that. Diversification of your investments is only the first step, albeit the most important one.

Blogger VD June 29, 2015 11:22 AM  

Vox - If you still lived in the US, how would you deal with your annual property tax payment? Would you still keep that in a bank?

Probably, yeah.

Anonymous Jourdan June 29, 2015 11:36 AM  

Negotiations of this magnitude are bare knuckle affairs. There is some reason to think the balance of favor has tilted towards the Troika, but the game is not over yet.

The Greeks have not even begun to take preliminary steps to allowing North Africans access and transit through their country. That's a pretty big weapon on their side yet to be deployed.

This thing isn't over yet.

Anonymous Jack Amok June 29, 2015 11:59 AM  

Man what a mess, for something that was pretty predictable. I guess everyone thought Greece would get some can kicking love for a few more years at least.

That's the trouble with predictable events like this. You know they're going to happen, but saying exactly when is really difficult. And for the same reason linear budget assumptions don't work - people respond to changes. And it's not just the timing you can't predict - the severity is unknown too. There are all sorts of possible scenarios from bad to worse to Fallout Four.

25% in stocks, bonds, cash, and gold?

I have a hard time seeing the value of holding stocks or bonds. Holding some cash (ideally outside of the banking system) in case the deflationary case is true, and some gold (in your own possession) in case the hyperinflation scenario is true, both make sense. But stocks and bonds seem... all risk and little reward.

Bondholders are sure to be screwed, especially the little guys who will find themselves pushed to the back of the line by government and banking entities when defaults occur (e.g. the small bond holders will be required to "bail-in" the big fish). And defaults are inevitable. And any profits from stocks and bonds are awfully easy to tax.

Blogger CarpeOro June 29, 2015 12:17 PM  

I've had my money in a Credit Union for years, and even there it is mainly a pass through. Wish I had the free capital to buy some silver.

OpenID mickoneverything June 29, 2015 12:17 PM  

Not directly related, but more appropriate here than today's other threads, and I think the ilk will like this.

Serbia erects a monument to Gavrilo Princip, calling him a freedom fighter and a hero.

http://www.startribune.com/serbia-unveils-monument-to-gavrilo-princip/310510241/

Blogger YIH June 29, 2015 12:22 PM  

It seems the American Empire has a 'Greece' of it's own to deal with:
Puerto Rico's governor recently confirmed that he had considered having his government seek permission from the US Congress to declare bankruptcy amid a nearly decade-long economic slump. His administration is pushing for the right for Puerto Rico's public agencies to file for bankruptcy under Chapter 9. Neither the agencies nor the island's government can file for bankruptcy under current US rules.
''May you live in interesting times'' indeed...

Blogger James Dixon June 29, 2015 3:08 PM  

> But stocks and bonds seem... all risk and little reward.

Read the book. Yeah, it somewhat dated now, and with the collapse of the rule of law in the US bond risk is higher than it used to be, but it's still useful. http://www.amazon.com/Fail-Safe-Investing-Lifelong-Financial-Security/dp/031226321X

Anonymous bolo-toto June 29, 2015 6:09 PM  

Several things ..

It is much more than just about Greece..

Contagion (I comment here as fooser77)

George of the Jungle June 29, 2015 4:50 AM

As in many ancient Greek tragedies, there is only one way out of this....

Deus ex machina


See my comments in the YT discussion. Understand that this man is a most pious and very well connected Roman Catholic. They ultimately control both sides of the equation. So far as timing? That is a mystery left for Paradise to answer ..

JDC, grad of Fort Wayne, or St. Louis? Are you familiar with Joel Biermann and his course -- Civic Affairs ? Also on itunes as a seminar "From Sea to Shining Sea." Luther had a lot to say about civics (civil religion and politics) Also about banking and "buying income." In his treatise on usury (1524), he predicted what have now, because we ignored ancient wisdom .. (among other things)

Anonymous bolo-toto June 29, 2015 6:14 PM  

There are all sorts of possible scenarios from bad to worse to Fallout Four.

And what is coming out in Nov.?

Anonymous bolo-toto June 29, 2015 6:48 PM  

Jourdan June 29, 2015 11:36 AM

Negotiations of this magnitude are bare knuckle affairs. There is some reason to think the balance of favor has tilted towards the Troika, but the game is not over yet.

The Greeks have not even begun to take preliminary steps to allowing North Africans access and transit through their country. That's a pretty big weapon on their side yet to be deployed.

This thing isn't over yet.


Far from it ..

Greece is turning to the BRICS. And Russia will soon have a shiny new naval base ..

The other thing is, Amb. Wanta has $30 billion (USD) for Putin and the RF. One can do a lot of damage in naval hardware with 1,673,683,500,000.00 RUB ..

Blogger James Dixon June 29, 2015 8:05 PM  

US broader markets down over 2% today. Expect a pretty much equivalent performance tomorrow when the actual default hits. We may get some moderate recovery on Wed. and Thurs. before they break for the 4th. Then all hell breaks loose if the Greeks vote to not accept the deal,

Blogger Bard June 29, 2015 8:23 PM  

"25% in stocks, bonds, cash, and gold?"

Absolute minimum in bank to fund monthly bills. Don't give the thieves your $ as they sure as hell are not paying you for it. Run your personal life with cash from ATM, keep 10-20K cash in $20s in fireproof box at house, I keep a little more than 30% net worth in physical metals stacking more each month as savings vs investing in non tangible items like stocks and bonds. I use rental property income to buy one more house each year. 1 year real food stored in basement, 1000 rnds per weapon, multiple weapons. I do not invest in one single non physical item. I don't care that I may miss out on "the gains", I am not supporting their gay or criminal agendas.

Blogger Bard June 29, 2015 8:25 PM  

Also, OWN land with water. Some chickens, few cows, garden and fruit/nut trees

Blogger Bard June 29, 2015 8:26 PM  

Now get going, I need you to have what I have so we can rebuild together.

Blogger Bard June 29, 2015 8:28 PM  

Here is a final thought, the last thing the Egyptians sold to Joseph was themselves. What is the endgame when the banks own the GDP of the world several times over? You of course. And you will be happy to do it just to survive.

Anonymous bolo-toto June 29, 2015 9:10 PM  

I cannot reveal the source here, although clues are embedded for the astute to figure out. Let's just say this guy has a Ph.D in statistics and is very well connected, an ex-pat living south of the border ..

If a nation like Greece is actually allowed to default after such great lengths to prop them up, the entire sovereign bond market will enter panic. The panic would surely extend to London and New York banks, then to the USTreasury Bond market. The Greek Govt is flat broke, and can only pay its debt service with money handed to it by the EU and IMF, which means German Banks and EuroCB gifts. The prized Greek assets are either sold or ready for sale with carpetbaggers. The public is treated to a never ending series of deadlines for payments and red lines for sacred untouchable items. Meanwhile, the gutting of Greek assets continues apace. The bigger story is the consequence for the rest of Europe. A Greek failure would alert all bond investors that their money is not truly safe anywhere in Europe. The bond yields would start spiking for all Southern European debt (Spain, Italy, Portugal, even France) in a manner much worse than in 2010 or later. Minor bond moves would lead to bigger bond moves, causing gigantic problems in the financial world. Such a scenario might still come to pass if controls are lost, and they are being lost.

In a powerful breakdown, the $50 trillion interest rate derivatives scam would be revealed, would give off toxic gas, resulting in massive bank failures and widespread account vanishes following the broad sovereign bond rout. The officials would justify the losses in some mealy mouthed way, citing force majeure, but the losses would be catastrophic. Never before in modern history has the Western world been this close to the actual derivative bust and nuclear event, until now. The entire system of banks, bonds, and currencies are lashed together firmly, ever since Lehman fell (was killed). Let it be known that the contagion would reach the entire FOREX currency market also. Since there are 75 trillion dollars of derivatives directly tied to the value of the USDollar, the Euro, and other major global currencies, the FOREX fallout could also create a crisis of unprecedented proportions in a second wave. Conclude quickly that enormous efforts will be made, Herculean efforts indeed, to prevent even tiny Greece from defaulting.


So, I guess those much touted Herculean efforts have failed. Next the $50 T derivative interest rate scam comes tumbling down. Then ......................................... Fallout 4? Interesting he uses that same word -- contagion ..

Blogger Thucydides June 29, 2015 9:45 PM  

We always knew the answer was Deflation, and so did "they". The reason everyone fought so hard to keep the system inflated with weasel tricks like QE and the endless extensions of Greek debt is Deflation attacks the debtors far more than the savers, but the "elites" have set up a system where the wealth of the savers is being transferred to the debtors. A monster wave of Deflation will undo all of that, and potentially bankrupt all the debtors (including government) who were desperately trying to "inflate away" their debt obligations.

Reality really hurts when it hits you in the face.

As for the rest of us, the short and medium term solutions would be to invest in "victory gardens" and rain water barrels (that book on composting looks like it will be very handy; I'm starting it now and suggest the rest of you go buy it ASAP), and brush up on your marketable skills (real skills like carpentry, welding or car repair).

While it makes for great novels to imagine hordes of zombie like looters overrunning the Earth, the reality is about 98% of the people are "productive sheep" in Col Grossman's lexicon; all we really need to do is be aware and watch out for the 1% "wolves" who prey on the unarmed and defenceless. I'm afraid the other 1% of the "Sheepdog" class will be extremely busy dealing with current events and day to day problems of living, and while we may love our flocks, we won't have the resources or ability to protect all of them. The Great Depression shows what the world will be like after the crash; sluggish lines of beaten people waiting for their rations at the soup lines and the occasional migrations of Okies looking for work, while the more energetic manage to keep above water and even pull ahead under the new conditions.

As for groups like ISIS or even Putin and the Chinese; they are local problems for those in the immediate neighbourhoods; sucks to be living there, but even then these groups are limited by their own resources, demographics and the inability to project forces (only a few Western nations can project forces on a global basis; they just won't be doing so in the immediate future).

Sad times ahead, but so long as there is a strong core (and I am thinking of the strangely named American "Red" States), there is a place to rebuild from.

Anonymous A Reader June 29, 2015 9:46 PM  

This is an inflection point in world politics. It will get ugly in the short term, but the way this plays out in the end might be good. Short term: Economies and financial markets go down. Dis-satisfaction against the EU grows.

Then we move to rising nationalist sentiment. Countries ranging from France to the UK leave the European Union. The European Union collapses.

The European economic downturn affects the US. The US goes into recession come election time.

In the 1930, people incorrectly blamed the free market for the world wide depression. In the economic downturn coming soon, however, people will right blame the statists.

Blogger Nate June 29, 2015 10:42 PM  

"This should help settle the debate. The answer is "deflation"."

***chuckle***

yeah that... or you know... world war.

Anonymous Jack Amok June 30, 2015 3:00 AM  

yeah that... or you know... world war.

If there's no such thing as a US Dollar afterwards, it will be rather difficult to say whether there was inflation or deflation.

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