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 During an appearance on Meet The Press on Sunday, Jim Cramer of CNBC boldly predicted that "financial anarchy" is coming to Europe and that there will be "bank runs" in Spain and Italy in the next few weeks. This is very strong language for the most famous personality on the most watched financial news channel in the United States to be using. In fact, if Cramer is not careful, people will start accusing him of sounding just like The Economic Collapse Blog. It may not happen in "the next few weeks", but the truth is that the European banking system is in a massive amount of trouble and if Greece does leave the euro it is going to cause a tremendous loss of confidence in banks in countries such as Spain, Italy and Portugal. There are already rumors that the "smart money" is pulling out of Spanish and Italian banks. So could we see some of these banks collapse? Would they get bailed out if they do collapse? It is so hard to predict exactly how "financial anarchy" will play out, but it is becoming increasingly clear that the European financial system is heading for a massive amount of pain. (Read More....)
 With each passing day, the banking crisis in Europe escalates. European banks are having their credit ratings downgraded in waves, bond yields are soaring and billions of euros are being pulled out of banks all across the eurozone. The situation in Europe is rapidly going from bad to worse. It is almost like watching air being let out of a balloon. The key to any financial system is confidence, and right now confidence in banks in Greece, Italy, Spain and Portugal is declining at an alarming rate. When things hit the fan in Europe, it is going to be much safer to have your money in Swiss banks or German banks than in Greek banks, Spanish banks or Italian banks. Millions of people in Europe are starting to realize that a "euro" is not necessarily always going to be a "euro" and they are starting to panic. The Greek banking system is already on the verge of total collapse, and at this rate it is only a matter of time before we see some major Spanish and Italian banks start to fail. In fact it has already been announced that the fourth largest bank in Spain, Bankia, will be getting bailed out by the Spanish government. It is only a matter of time before we hear more announcements like this. Right now, events are moving so quickly in Europe that it is hard to keep up with them all. But this is what usually happens in the financial world. When things go well, it tends to happen over an extended period of time. When things fall apart, it tends to happen very rapidly. (Read More....)
 Money is being pulled out of Greek banks at an alarming rate, and if something dramatic is not done quickly Greek banks are going to start dropping like flies. As I detailed yesterday, people do not want to be stuck with euros in Greek banks when Greece leaves the euro and converts back to the drachma. The fear is that all existing euros in Greek banks would be converted over to drachmas which would then rapidly lose value after the transition. So right now euros are being pulled out of Greek banks at a staggering pace. According to MSNBC, Greeks withdrew $894 million from Greek banks on Monday alone and a similar amount was withdrawn on Tuesday. But this is just an acceleration of a trend that has been going on for a couple of years. It has been reported that approximately a third of all Greek bank deposits were withdrawn between January 2010 and March 2012. So where has all of the cash for these withdrawals been coming from? Well, the European Central Bank has been providing liquidity for Greek banks, but now it has been reported that the ECB is going to stop providing liquidity to some Greek banks. It was not announced which Greek banks are being cut off. For now, the Greek Central Bank will continue to provide euros to those banks, but the Greek Central Bank will not be able to funnel euros into insolvent banks indefinitely. (Read More....)
 The bank runs that we are watching right now in Greece are shocking, but they are only just the beginning. Since May 6th, nearly one billion dollars has been withdrawn from Greek banks. For a small nation like Greece, that is an absolutely catastrophic number. At this point, the entire Greek banking system is in danger of collapsing. If you had money in a Greek bank, why wouldn't you pull it out? If Greece leaves the euro, all euros in Greek banks will likely be converted to drachmas, and the value of those drachmas will almost certainly decline dramatically. In fact, it has been estimated that Greek citizens could see the value of their bank accounts decline by up to 50 percent if Greece leaves the euro. So if you had money in a Greek bank, it would only make sense to withdraw it and move it to another country as quickly as possible. And as the eurozone begins to unravel, this is a scenario that we are going to see play out in country after country. As member nations leave the eurozone, you would be a fool to have your euros in Italian banks or Spanish banks when you could have them in German banks instead. So the bank runs that are happening in Greece right now are only a preview of things to come. Before this crisis is over we are going to see bank runs happening all over Europe. (Read More....)
 What was considered unthinkable a few months ago has now become probable. All over the globe there are headlines proclaiming that a Greek exit from the euro is now a real possibility. In fact, some of those headlines make it sound like it is practically inevitable. For example, Der Spiegel ran a front page story the other day with the following startling headline: "Acropolis, Adieu! Why Greece must leave the euro". Many are saying that the euro will be stronger without Greece. They are saying things such as "a chain is only as strong as its weakest link" and they are claiming that financial markets are now far more prepared for a "Grexit" than they would have been two years ago. But the truth is that it really is naive to think that a Greek exit from the euro can be "managed" and that business will go on as usual afterwards. If Greece leaves the euro it will set a very dangerous precedent. The moment Greece exits the euro, investors all over the globe will be asking the following question: "Who is next?" Portugal, Italy and Spain would all see bond yields soar and they would all likely experience runs on their banks. It would only be a matter of time before more eurozone members would leave. In the end, the whole monetary union experiment would crumble. (Read More....)
 The recent elections in France and in Greece have thrown the global financial system into an uproar. Fear and worry are everywhere and nobody is quite sure what is going to happen next. All of the financial deals that Greece has made over the past few years may be null and void. Nobody is going to know for sure until a new government is formed, and at this point it looks like that is not going to happen and that there will need to be new elections in June. All of the financial deals that France has made over the past few years may be null and void as well. New French President Francois Hollande seems determined to take France on a path away from austerity. But can France really afford to keep spending money that it does not have? France has already lost its AAA credit rating and French bond yields have started to move up toward dangerous territory. And Greek politicians are delusional if they think they have any other choice other than austerity. Without European bailout money (which they won't get if they don't honor their current agreements), nobody is going to want to lend Greece a dime. (Read More....)
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