In case you haven’t yet heard, the Greeks are quietly continuing with a run on their banking system, a situation we’ve reported on previously, and one that British EU minister Nigel Farage warned of just a few short months ago. Savings and time deposits have dropped 30% since the start of the year and almost 10% was withdrawn in just September and October. It’s not panic in the streets – not yet, at least – but it’s getting close.
Der Spiegel reports:
Many Greeks are draining their savings accounts because they are out of work, face rising taxes or are afraid the country will be forced to leave the euro zone. By withdrawing money, they are forcing banks to scale back their lending — and are inadvertently making the recession even worse.
This headline description for the Der Spiegel article suggests that it is the fault of the Greek people that the country’s recession – more appropriately, depression – continues to worsen.
Is Der Spiegel, essentially the German versions of the New York Times, suggesting that amid all of the chaos with Greek government bonds which are without a doubt in free fall, and the threat of a destabilizing (and potentially destroyed) Euro, account holders should put their trust in the very system that brought about this crisis?
While some may argue that the behavior of Greek account holders is irrational and contributes to the problem, we’d suggest it is the most rational move a person can make, especially if you recently heard Federal Reserve Chairman Ben Bernanke’s testimony before Congress in which he specifically noted the substantial risk to our economic and financial systems stemming from, among other things, a run on the banks in Europe.
Depression style bank runs are not just some outlier that exist only as theoretical, low probability events. In fact, it is becoming apparent to many that this is exactly what is playing out now in Europe, as governments are reportedly requesting Contingency Planning for Extreme Scenarios Including Rioting and Social Unrest.
The very problems coming to a head in Europe in recent weeks and months are also embedded within our own financial system. After the crisis goes full-panic in Europe, we won’t be far behind. And you can be assured that our media, like Der Spiegel in Europe, will be touting the many benefits of keeping your money in your bank account – and using guilt-based motivation purporting that those who withdraw funds are hurting the economy. All the while there will be scheming behind closed doors to restrict capital flows and likely bank holidays during which we may very well see devaluations of the US dollar. One day you may wake up and learn that the $1,000 you had in the bank is now only worth $100 in purchasing power.
Hard to believe that it can happen in America? Yes. Impossible? Elliot Wave Theorist weighs in:
The problem was serious in 2002 and enormous in 2006. Now it has become acute, because many loans are becoming fossilized, as the market for mortgage investing has dried up while foreclosures on the ‘collateral’ have been slowed by court actions and politics.
The specter of a banking panic has become far darker since the collateral for bank deposits — land and buildings — has fallen globally in value at the steepest rate since the Great Depression. One day this shortfall in collateral value will impress itself on people’s minds, and there will be an unprecedented run on banks around the globe…. Yes, I know about the FDIC, but I don’t believe it will be able to fulfill its promises when most banks go bust.
If you want to leave all of your money entrusted with the very same people who have stolen billions in tax payers’ dollars to pay off their fraudulent too-big-to-prosecute schemes, be our guest. If you believe that the FDIC will have enough funds to bail out individual Americans, then we suggest you go ahead and have another glass of Kool Aid.
But, be aware that unless you act before the rest of the crowd, you may very well end up at your bank one morning to a sight similar to the following.
Anxious customers wait to get their funds all over IndyMac banks in California after regulators took control in July of 2008:
Thousands all over the UK headed straight for Northern Rock Bank once they learned it was no longer solvent in 2007:
Crowd at New York’s American Union Bank during a bank run early in the Great Depression (June 1931)