Greeks Scramble To Pull Out €8 Billion From Local BanksZeroHedge ^ 2/21/10 Tyler Durdin

Posted on Tuesday, February 23, 2010 12:42:02 PM by FromLori
We previously wrote about the possibility of a bank run in Greece following unsubstantiated reports that Greek citizens don't trust the Greek financial system all that much anymore, courtesy of the whole bailout and GDP reporting fraud thing. The rumor was not only just confirmed and also quantified: Dow Jones reports that in the past three months Greeks have moved about €8 billion out of local banks "fearing a possible new tax on bank accounts, increased government scrutiny on assets and a run on the banks if Athens is forced to turn to the International Monetary Fund." This represents over a quarter of the money held by private banks in the country. This also represents about €400 billion in total money leaving the system courtesy of fractional reserve banking and the money multiplier. Yet the worst news for Greeks: money controls are coming.
"There is a lot of uncertainty out there," said a senior private banker at a Greek bank. "We've had a number of customers asking to move funds out of Greece, mostly to Cyprus, Luxembourg and Switzerland."
Clients of private banks also fear that Greece may be unable able to raise the EUR54 billion it needs this year to pay back maturing bonds and will therefore have to turn to the IMF for help.
"Some of our clients are concerned about a run on the banks if the IMF gets involved," said another private banker, this one from a foreign bank. "They believe the situation in Greece will get worse before it gets better. There is also very little clarity from the government about its intentions on new tax measures."
"We estimate that €8 billion has moved out of Greece to accounts abroad since December. It's money from bank accounts, stock sales, property sales and other sources. This is pretty substantial considering that there is only €30 billion under management in private banks here," he added. All is fine and well if this was all: just your plain vanilla run on the bank. But it's not - the Greek response to this capital outflow: upcoming money controls.
Wealthy individuals may have good reasons to be concerned, however. Finance Minister George Papaconstantinou earlier this month urged Greeks with accounts abroad to repatriate their money and said the capital will be taxed at a 5% rate. He said those who choose to keep their money abroad should declare their deposits and pay a tax of 8% for the first six months.
Thereafter he threatened that Greece will use all laws at its disposal, such as double-taxation agreements, to ask foreign banks for information on Greek account holders.
"For us this is the first step towards taxing all accounts in Greece," said the chief financial officer of a major Greek shipping company. "The line is minimum deposits here and moving all assets abroad," And now back to your regularly scheduled program of curling and no mention of the imminent collapse of Greece in the mainstream media whatsoever.

Trader Dan’s Commentary
The financial health of any state is directly related to the financial health of its various cities and towns. Here is further evidence of the mounting crisis that is yet to erupt and make itself felt in the larger scheme of things.


The rating of a city’s or state’s bonds is related to its fiscal condition. As their debt gets downgraded by the various rating agencies, the cost of borrowing increases, further compounding the already tenuous condition of these cities and states.
Remember those scenes of social unrest from Greece that we saw earlier this week? Wait until these deep cuts in services begin to take effect.




City of Angels on brink of abyss Los Angeles, the second-largest US city, is facing a crisis of funding not seen since the darkest days of the Great Depression Friday 26 February 2010 15.00 GMT Sasha Abramsky
Two and a half years after the official start of the worst economic downturn and fiscal crisis in nearly 80 years, America’s economy is supposedly growing again, the stock market is halfway recovered from the lows of 2008 and early 2009, and the unemployment plunge seems to have been halted.
Yet, built-in time lags in how revenues are raised and budgets calculated mean that many states and cities around the country are only now starting to feel the worst of the pain. This year has been, quite simply, abysmal for local and state governments, and next year promises to be even worse. With easy cuts long-ago made, these days basic services are increasingly seen as luxuries, and public sector employees are increasingly vulnerable to wage cuts, benefits rollbacks, and unemployment.
While the federal government has considerable wiggle room to borrow or simply increase the supply of money to help fight its way out of financial collapse, smaller government units in America don’t have those options; increasingly cities, counties and states are facing the sorts of austerity measures we’ve come to associate with third world countries in crisis, or, in recent years, with vulnerable European nations such as Greece or Latvia.
In Arizona, a cash-pinched legislature put the Capitol building up for sale, proposing to lease it back for state use. In the small Colorado town of Colorado Springs, officials shut off half the street lamps and one-third of the traffic lights, told residents who wanted short grass in public parks to bring their own lawnmowers, and auctioned off a police helicopter on eBay. Around the country, libraries have been shuttered, after-school programmes have been curtailed, mental health services have been decimated.
In Los Angeles, the nation’s second largest metropolis, the Democratic mayor, Antonio Villaraigosa, addressed a full session of the city council on 9 February to detail just how grim the city’s finances had become. Miguel Santana, the city administrative officer (the CAO is the mayor and council’s chief financial adviser) had recently informed the mayor’s office that LA was facing a $200m shortfall through the end of this financial year and another half billion dollar-plus shortfall in the years to come if it didn’t radically, and rapidly, restructure its budget. Santana didn’t mince words. His nearly 300-page report (pdf) opened with this stark warning:
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Trader Dan’s Commentary
The Fed chairman’s concerns are well founded. Please especially note the paragraph I highlighted in blue. That is translated as monetizing debt which will bear directly on the well being of the Dollar….
Bernanke delivers blunt warning on U.S. debt Stage is set in U.S. for a Greek tragedy By Patrice Hill
With uncharacteristic bluntness, Federal Reserve Chairman Ben S. Bernanke warned Congress on Wednesday that the United States could soon face a debt crisis like the one in Greece, and declared that the central bank will not help legislators by printing money to pay for the ballooning federal debt.
Recent events in Europe, where Greece and other nations with large, unsustainable deficits like the United States are having increasing trouble selling their debt to investors, show that the U.S. is vulnerable to a sudden reversal of fortunes that would force taxpayers to pay higher interest rates on the debt, Mr. Bernanke said.
"It’s not something that is 10 years away. It affects the markets currently," he told the House Financial Services Committee. "It is possible that bond markets will become worried about the sustainability [of yearly deficits over $1 trillion], and we may find ourselves facing higher interest rates even today."
It was some of the toughest rhetoric to date about the nation’s fiscal and budgetary woes from the Fed chief, who faces a second round of questioning Thursday before a Senate panel.
Mr. Bernanke for the first time addressed concerns that the impasse in Congress over tough spending cuts and tax increases needed to bring down deficits will eventually force the Fed to accommodate deficits by printing money and buying Treasury bonds — effectively financing the deficit on behalf of Congress and spurring inflation in the process.
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Trader Dan’s Commentary
With the exception of some within the gold community, how many would have imagined this 5 years ago?


Head of IMF proposes new reserve currency IMF’s Strauss-Kahn suggests IMF may one day provide global reserve asset By HARRY DUNPHY Associated Press Writer WASHINGTON February 26, 2010 (AP)
Dominique Strauss-Kahn, the head of the International Monetary Fund, suggested Friday the organization might one day be called on to provide countries with a global reserve currency that would serve as an alternative to the U.S. dollar.
"That day has not yet come, but I think it is intellectually healthy to explore these kinds of ideas now," he said in a speech on the future mandate of the 186-nation Washington-based lending organization.
Strauss-Kahn said such an asset could be similar to but distinctly different from the IMF’s special drawing rights, or SDRs, the accounting unit that countries use to hold funds within the IMF. It is based on a basket of major currencies.
He said having other alternatives to the dollar "would limit the extent to which the international monetary system as a whole depends on the policies and conditions of a single, albeit dominant, country."
Strauss-Kahn, a former finance minister of France, said that during the recent global financial crisis, the dollar "played its role as a safe haven" asset, and the current international monetary system demonstrated resilience.
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