Home > Uncategorized > The Greek payment system was not the problem, in the summer of 2015… Banks were.

The Greek payment system was not the problem, in the summer of 2015… Banks were.


Greek tax payers have to foot a 25 billion bill (excluding interest!) for another rescue of their banks. What happened? The ECB did not prevent – nay, even triggered! –  an bank run. A very limited bank run, in fact, as the amount of money on sight and overnight deposits (the accounts one uses to pay her or his bills) barely changed. The payment system was not in jeopardy. The banks were, of course. But let those banks go bust (and finance all deposit claims with money printing, cash, by the ECB, to prevent money destruction). The truth is however: trust your mattress – not the ECB. I mean – aren’t Eurozone citizens allowed to use the magic of the market and move their deposits to another bank, or another place once they do not trust a bank anymore? No, they aren’t. We are allowed to change to another supermarket. Not to change to another bank.

  1. October 18, 2015 at 2:44 pm

    Pretty soon, we’ll be stuck in the same supermarket too!
    Solution? Grow you own consumables, including money.

  2. October 18, 2015 at 3:42 pm

    The Euro is not in fact a currency, it’s an elaborate and sometimes fragile peg. Why? Because there are different risk premia. A Euro in a bank in Greece, Spain, and Germany are not worth the same. There are also barriers to convertibility. The citizens of Greece or Spain cannot en masse decide to convert their ES-Euro and EL-Euro to DE-Euro. When they do, as the Cypriots and the Greeks found out, the relatively fragile support of the peg breaks down and CY-Euro and EL-Euro emerge as different currencies with the same face value but convertibility limited by capital controls.

    As a minimum, the EU needs to face up to that reality and decide if it wants a real currency or a peg. I think Europe (Schaüble) wants a currency without the “difficult” members and at least that’s a valid think to want, even if it’s hard to say openly.

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