What's Going on in Greece?
I predicted the end of the Euro back in November, a bit prematurely. However, as the worm continues to turn in Greece, it is becoming more and more obvious that (at least) Greece will leave the Euro. The messy details of what happens are rather terrifying, when you think about how Greece, tactically, is going to have to redenominate all of the Euros on deposit into Drachmas.
If I lived in Greece, I've thought for a while that I'd've taken my Euros out of the bank, completely, and tried to place them somewhere else. At least in a bank in another Eurozone country - but if you believe Greece is about to leave the Euro, you also believe the Euro is about to decline in value, so as long as you're moving it, why not to a US bank?
But, as much as there have been stories in the past week about a "Greek Bank Run" on the order of a million or so Euros a day, there have been absolutely no stories about panics - crowds standing outside banks demanding their money and not getting it.
This has puzzled me, but I think I have thought it out. The money leaving Greece right now are the people who are paying attention, and relatively savvy. They're just doing electronic transfers - ordering the banks to make changes to entries on a spreadsheet, in essence. The banks could conceivably do this until their assets are zero, and it would be relatively orderly.
The problem is that at some point the average citizen - Iōséph Retsina - is going to realize that, next week, his Euros are going to turn into Drachmas, probably. And, if that's going to happen, he needs to get to the bank with a sack, right now, and withdraw everything. When everyone has that same realization at the same time, then there will be a panic.
What happens then will be interesting. They may still not have a government to take care of this problem. What they'll need to do at that point is close the banks, freeze withdrawals and shift to the Drachma, immediately. Will the "technocratic" caretaker government be able to accomplish that?
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