Gyroscopic Investing

The Greek government is only allowing people to withdraw about $70 from ATMs, and now it is going even further by banning citizens' access to their safe deposit boxes in banks.

This is being done as a form of capital control measure to prevent Greek citizens (and non-citizens too?) from withdrawing any cash stashed in SBDs. Presumably, access to gold in SBDs is also being blocked. Will the government (which has just appointed its second Marxist finance minister) seize the gold and sell it to scrape up more cash?

The rumor is that the cash confiscated from SDBs will be used to re-stock Greek ATMs.

So it goes. As Margaret Thatcher noted, the problem with socialism is that you eventually run out of other people's money, usually sooner rather than later.

For details on the Greek SBD freeze, see:


https://mises.org/blog/lesson-greek-cri ... e-not-safe

Gosh, that's awful. SDBs have always rubbed me wrong for just this reason.

goodasgold wrote: So it goes. As Margaret Thatcher noted, the problem with socialism is that you eventually run out of other people's money, usually sooner rather than later.

That quote may have been valid under a fixed exchange rate system (the bogus "gold standard"), but not a floating exchange rate system.  Greece has no monetary policy so they are dependent on the ECB to be a lender of last resort to its banks which completely politicalized the referendum situation last week by violating its contractual obligations by not providing it!  That's intentional war by any other name.  Is it any surprise Greece flipped the Troika the bird?

Once Greece exits the stupid EMU, it will be able to run its own monetary policy and central bank again and the economy will spring forward like a chicken.  Problem solved.  It's getting to that point that seems to be completely lost on the economically illiterate politicians over there.  A true Marxist wouldn't even put up with the Troika, nevermind negotiate with them.  So slinging that outdated label around is pretty hollow.  Actions speak louder than words and Greece has been acting as a Fascist.

TennPaGa wrote: In this age of electronic money, how important is the ability to withdraw cash from a bank?

The fact that banks in Greece have been closed for over a week now and there is not rioting tells me that people are scraping along OK.  But I recognize that I could be missing something.

Greece is a very cash heavy economy because of tax evasion, avoidance, what have you.

And the limits withdrawing inside the bank as opposed to the ATM machines is 120 Euros.

TennPaGa wrote: Another related question... Are people in Greece now using gold to pay for goods and services?  If not, why not?

No, besides Euros, they're using their own form of community scrip money they created out of thin air.  Gold isn't money anymore.  Seems to be really hard for people to understand that concept around here.

There is just nothing magical about gold other than the long-lived physical properties that keep it from debasing/degrading.  But those properties really don't matter in the short-term for transferring value among humans.  Any real asset goes up in nominal value when paper money is being debased higher than the return you get on it, not just gold.  Greece has been facing deflation not inflation.

Remember, back in the "gold standard" days, most gold was just bank reserves that sat in the vaults or was shifted from one vault to another for accounting records purposes.  Less valuable silver was used as the common everyday currency.  That's why there's so many pre-1933 gold coins available in Brilliant Uncirculated condition.  They just sat in the vaults.  A shiny useless lump of metal, indeed!

SDBs are generally fine, if you are living in a first world country that is not bankrupt. Greece does not meet that criteria and has not for quite a while. Anyone with more than 2 functional brain cells will have known for years that Greece was broke and that any solution was going to involve some degree of financial repression.

Why anyone living in Greece would have kept ANY money beyond the minimal amount needed to pay bills for the next month, in a bank is beyond my ability to fathom. I would have gone 100% cash and stash probably 3-4 years ago.

The lesson here is not that SDBs are unsafe. there is no completely safe storage for gold or cash. The lesson is to be aware of what's going on and tailor your storage according to the threat level. These things do happen now and then. But they almost never happen without a good deal of warning.  (Hint: When politicians start making statements reassuring people that they will not touch their bank accounts or retirement money, that's a huge warning sign that such an eventuality is a real possibility.)

Why can't Apple just buy them from their petty cash and save the world a lot of headaches?

The new best store of value seems to be Louis Vuitton and Chanel handbags. It seems that they are being gobbled up over there.

Reub wrote: The new best store of value seems to be Louis Vuitton and Chanel handbags. It seems that they are being gobbled up over there.

What, no gold?!!  I'm shocked.  Shocked!

I know this is blasphemy, but Gold may be decoupling from being an inflation hedge as well as SHTF insurance.  It's acted fairly weird lately in times of crisis. 

You mean like it's still overvalued and wants to drop some more?

it never really was a good inflation hedge.

Gold isn't an inflation hedge, really, IMO.  It's mainly hedge against negative real interest rates, of which inflation is only half of the equation.  Further, it works far better in correlation to the world's reserve currency than any others.  And since for most of us the PP is carries 50% U.S. dollar denominated interest-bearing securities, gold still fits, IMO. 

MachineGhost wrote: No, besides Euros, they're using their own form of community scrip money they created out of thin air.  Gold isn't money anymore.  Seems to be really hard for people to understand that concept around here.

I haven't heard of USD being used for trade in Greece right now either.  It must not be money anymore.

MachineGhost wrote:There is just nothing magical about gold other than the long-lived physical properties that keep it from debasing/degrading.  But those properties really don't matter in the short-term for transferring value among humans.  Any real asset goes up in nominal value when paper money is being debased higher than the return you get on it, not just gold.  Greece has been facing deflation not inflation.

Remember, back in the "gold standard" days, most gold was just bank reserves that sat in the vaults or was shifted from one vault to another for accounting records purposes.  Less valuable silver was used as the common everyday currency.  That's why there's so many pre-1933 gold coins available in Brilliant Uncirculated condition.  They just sat in the vaults.  A shiny useless lump of metal, indeed!

Yeah who in their right mind would want to have this shiny useless lump of metal instead of Euros held in government-insured bank accounts in Greece!

/sarcasm

Stewardship wrote: Yeah who in their right mind would want to have this shiny useless lump of metal instead of Euros held in government-insured bank accounts in Greece!

Now I have to clean the coffee off my keyboard. 

Let me see if I understand this.

Greece is considering legal action against Goldman Sachs for executing a currency swap that hid a large amount of Greek debt, allowing them to get into the Eurozone in the first place. 

Two of the men in charge of the debt management agency of Greece at the time have argued the department did not understand what it was buying and lacked the expertise to judge the risks or costs.

The poor government officials were simply the victims of evil predatory lenders.

Also:

Based on publicly available information, he believes the size of the profit Goldman made on the transactions was unreasonable. Scrutiny and analysis of the documents and email exchanges could give Greece grounds to seek compensation and assess if the deals were executed for the sole purpose of concealing the country’s debts.

Of course, concealing debts was entirely the purpose to begin with.

http://tinyurl.com/oxueskd

Socialists will be socialists.

Tyler wrote: The poor government officials were simply the victims of evil predatory lenders.

Doesn't government exist to protect us from this sort of thing? Yet it can't even protect itself

Can't we just blame the neocons for all of this?

Reub wrote: Can't we just blame the neocons for all of this?

Regardless, I'm sure the solution involves drone strikes.

An on-the-ground observation:

With Greek banks still shuttered, unsold eggs point to deeper woes

http://wapo.st/1M4OEEB  (Washington Post)

Just as problematic is a crisis in payments. With tight controls on financial transactions, Kalyvas has to cover his daily costs in hard-to-find cash, leading him to demand payments in cash, too. It’s money that many of his clients simply don’t have.

looks like gold is down again  overseas with bonds to follow now that a tentative deal has been reached.

futures were up around 100 points for markets this morning.

i hope the trading day will be good.

i can be back to zero losses today with  a favorable move by the market gods .

Pointedstick wrote:

Reub wrote: Can't we just blame the neocons for all of this?

Regardless, I'm sure the solution involves drone strikes.

hey , lets not forget we are  a country with missiles and bombs as part of its national anthem ,  why would you expect other wise ?  ha ha ha 

So if the the 90 billion Euro bailout really comes to pass, how much time does it buy the Greeks? Does Europe get another year before it has the same situation again with the Greeks in even worse shape?

Hmmm Who would have thought it? Germany conquers Greece twice in less than a hundred years.