Eurozone Bank Deposits and “Black Mail” Point to More Crisis!

• All the indicators of an imminent banking/financial system meltdown are there. There are silent bank runs in the PIIGS, where money is flowing out of them into safe haven countries like Switzerland. Don’t be taken for a ride. Things are not improving but are getting worse at an accelerating pace. The Euro is about to collapse. The Eurozone experiment about to end! (emphasis mine)
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  Bank Deposits and “Black Mail” Point to More Crisis
  by Justice Litle, Editor, Taipan Publishing Group
  As bank deposits flow from Greece to Switzerland, the odds of another crisis flare-up in Europe look assured. “Follow the money” is an old and wise adage. To understand what’s happening in Europe — and why there is more trouble ahead — we can follow the money literally. I’m talking specifically about depositor money in banks. As the WSJ reported last week:
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  Greece’s worsening slump is threatening to compound another risk for the country: the steady withdrawal of money from Greek banks.
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  In the last 20 months, the country’s banks have suffered an unprecedented withdrawal of customer deposits. Tens of thousands of Greeks — from the well-heeled to the less well-off — have moved their savings out of the country or stashed the cash in safe-deposit boxes or under a mattress, bankers say…
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  As the Greek banks lose deposits, they also lose liquidity. This makes it even harder to lend, in an economy gripped by deep recession. According to the Greek central bank, a third of the funds withdrawn have gone abroad. One could safely consider that a low-end estimate, as the central bank has reason to be conservative. The higher the percentage of funds flowing across borders, the worse things look.
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  Why are Greeks pulling cash from the banks? Because they don’t know what will happen to the banks… or to the country in general. Greece has lost control of its fiscal fate. The terms of a Greek bailout, previously thought settled, have been upended again by demands for collateral. Following the money further: While Greek banks can’t hold on to cash, Swiss banks are seeing too much cash. Via Marketwatch:
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  [Swiss bank UBS] said it may shortly begin to levy a temporary charge on Swiss franc deposits as a way of encouraging its bank customers to keep their cash in the surging Swiss currency as low as possible.
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  The bank said in a statement distributed by Swift earlier Friday that “in view of the prevailing market conditions which in particular affect the Swiss franc, we are closely monitoring the development of the CHF cash balances maintained in current accounts of our CHF cash clearing customers.”
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  The Swiss have been here before. In the 1970s the Swiss National Bank (SNB) imposed “negative” interest rates, meaning holders of Swiss francs had to pay a charge to stay in the currency.
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  Now the futures markets — where currency contracts trade on forward months — are predicting “negative” rate conditions until 2013! It is “Alice in Wonderland economics,” writes Gillian Tett of the Financial Times.
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  The strength of the franc is a major burden for Switzerland as a country. When a currency shoots up in value for artificial reasons — because of buying pressure not related to exports — the export sector of the country suffers. Swiss goods and services become less competitive on the world market. Traveling to Switzerland becomes cartoonishly expensive (due to out-of-whack exchange rates). Over time, the result can be recession and deflation.
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  Money keeps flowing out of places like Greece, and into places like Switzerland, because of uncertainty and ongoing crisis. European banks are dancing on the edge of a precipice. The eurozone experiment is headed for crack-up. And Europe’s leaders show no sign of averting disaster.
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  Take German Chancellor Angela Merkel for example. In a political speech on Friday, Merkel accused the financial markets of “trying to blackmail states,” encouraging “countries that are highly indebted to really do their homework and get their debt down.” And as for euro bonds, Merkel adds: “That’s where we have to put up a clear stop sign and say we won’t do that.”
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  In Germany’s terrible choice, we wrote of how Germany had to embrace a wide-scale solution like euro bonds, or risk letting the whole euro currency project break apart. With euro bonds so firmly off the table, the internal health of European banks unknown, and bailout agreements coming under new pressure, it is only a matter of time before a new crisis wave comes barreling out of Europe. Stay prepared.

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