EU Desperation....Rip Off Greek Depositor's!

Greek banks preparing possible "bail-in" of depositors

But citing bankers and businesspeople with knowledge of the measures, the Financial Times reported: "The plans, which call for a 'haircut' of at least 30 percent on deposits above 8,000 euros, sketch out an increasingly likely scenario for at least one bank". 

The report quoted a source as saying: "It (the haircut) would take place in the context of an overall restructuring of the bank sector once Greece is back in a bailout programme."

Whether Greece votes yes or no, the euro cannot survive in its current form

Best case scenario? The EU will undergo years of painful convulsions, precipitating a new treaty that imposes greater centralisation and restrictions on the fiscal independence of nation states

Whether Greece votes to back or reject austerity on Sunday, the euro in its current form is dead, and rightly so. The defective structures that underpin it have been shattered by the Greek nightmare, and trust within Europe is at a low ebb. Even a yes vote would not undo the damage, and a no vote would lead to an almost immediate Greek departure from the euro. 

Meanwhile, in Athens, the levels of hatred towards the Euro-establishment from supporters of the “No” side are remarkable; it is hard to see how any meaningful negotiations will ever be possible if Syriza remains in power. For all of those deluded Europhiles who believed that enforcing an artificial, imperfect currency on 19 different, divergent nations was a good idea that would help bring about peace, friendship and prosperity, the events of the past few weeks have surely been devastating.

DYI Comments:  This is reminiscent of all of the problems with our Articles of Confederation and the need to move to a more centralized federal system.  Just as back then it was unworkable today it is a disaster for the EU.  In their desperation they will likely resort to ripping off Greek depositor's. Taking a 30% haircut or just outright abscond with all the money Greece is simply broke and will never be able to pay these huge debts.

Greece will eventually and much sooner than later leave the European Union unless Germany and more importantly German banks are willing to take a massive haircut on Greek debt an unlikely event.  Federalization of the EU will take too long(if ever) the only possibility is a "wild card" with Russia or China offering very low interest loans for military naval bases in Greece.  If that was to occur then the U.S. would be very involved keeping this soap opera alive. Once the Greek issue is behind them by then Spain and Portugal will be in default and it all begins again.

Without federalization the Euro currency and the European Union is doomed.  I wish them the best of luck they are going to need it.

DYI

Generational Dynamics

The Shanghai stock exchange index fell 6% on Friday, 10% for the week, and nearly 30% since June 12. The China Securities Regulatory Commission (CSRC) has been desperately trying different measures, such as cutting interest rates and allowing more stocks to be purchased on credit (margin), but the measures have been ineffective. 

According to one Chinese analyst, "The government must rescue the market, not with empty words, but with real silver and gold. It's a disaster. If it's not, what is it?" What it is -- is a huge stock market bubble bursting. 

Over 100 million Chinese investors, including many older people who have invested their life savings, have been spending 6 hours a day staring glumly at their mobile phones, watching the stock market index fall, and watching their own savings be destroyed. This feeds into the Chinese Communist Party's greatest paranoia - a people's rebellion. 

Now the CSRC has set up a team to look at "clues of illegal manipulation across markets." This should be a laugh. Some poor slob who sold some stocks last week is going to be blamed and sent to jail. 

When I wrote last week that, "It's well to remember that we don't know to this day what triggered the 1929 panic and crash," a web site reader wrote to say that Milton Friedman had written extensively about it. Actually, Milton Friedman has written extensively about the 1930s Great Depression, but nobody knows why the stock market panic occurred on the particular day, October 28, 1929, rather than a few months earlier or later. 

Wall Street stocks are also in a large bubble, as I've described many times, with the S&P 500 Price/Earnings ratio at a historically high 21.3. What can happen in Shanghai can happen on Wall Street. If you have your life savings in stocks, it's not impossible that you too could lose 30% of your savings in three weeks.

DYI