The country's slow-motion bank run could end the euro -- if the ECB lets it.
Bank runs usually have one speed: all-out-sprinting. But today, the Greeks are jogging.
There's been a quiet bank run in Greece the past three years. Since 2009, Greek banks have lost somewhere between 25 and 30 percent of their deposits. That's actually surprisingly low considering that a euro in a Greek bank doesn't look like it's worth as much as a euro in a German bank. The calculus is simple. Greece might turn its euros into cheaper drachmas and Germany won't. Why wouldn't more Greek people move their money to be safe?
Increasingly, they are. On Monday and Tuesday alone, Greeks withdrew over €1.2 billion ($1.53 billion). That's roughly 0.75 percent of remaining Greek deposits. This still-gradual bank run -- what FT Alphaville's Joseph Cotterill calls a "bank jog" -- is accelerating because Greek politics is making a Greek exit look more imminent.
It is a classic case of self-fulfilling economic expectations. Greeks are nervous about leaving the euro. The nervousness leads to a bank run. A bank run increases the chance that Greece will have to leave the euro. Which makes people more nervous. And around we go.
GOOD NIGHT, EURO
As Greek banks lose deposits, they need new sources of funding. But they can't raise money from markets. That leaves the ECB. The ECB has so far been a reluctant lender-of-last-resort, but it has been a lender-of-last-resort -- for banks, if not countries. The Cliff Notes version is that the ECB has kept Greek banks afloat by giving them money in exchange for collateral.* Warning bells might be going off. If Greek banks have good collateral, why can't they use it to get private loans? The answer is that they don't have good collateral. In other words, if Greece defaults and exits, the ECB will be stuck holding a bag of mostly worthless pieces of paper.
How big is the problem? Let's take a look under the hood of the ECB. The below chart courtesy of Scotty Barber shows so-called TARGET2 balances. It's a bit technical, but TARGET2 shows how much countries owe or are owed by the ECB. That's more or less a decent proxy for where deposits are moving from and to within the euro zone.
A Greek default would effectively cost the ECB roughly €100 billion ($127 billion), to be split between the remaining euro zone members.
Here's how this could push Greek out of the euro zone. Greek banks are running out of collateral. Even bad collateral. All they have is really bad collateral. As the bank jog speeds up, they need to get more and more money from the ECB. But they might not have good enough collateral to get it. The ECB can change its rules and accept dodgier collateral -- but that would open the ECB up to even bigger losses down the line, assuming a Greek exit is inevitable.
If the ECB says no, then the jig would be up for Greece. Its banks would run out of money. That's when the bank jog would turn into a full-fledged run and then a sprint -- if it hadn't already. Of course, when banks don't have money, nobody has money. The Greek government wouldn't have a choice: It would have to start printing new drachmas. Good night, euro.
AFTER GREECE ...
The damage won't stop there. Take a look at the TARGET2 balances again. Italian and Spanish banks are even more dependent on ECB funding than Greece. Already, there are signs of a bank racewalk going on among them. If the ECB cut the cord on Greece, Italian and Spanish depositors would frantically move their euros to German banks to protect themselves against the same fate. This deposit drain would eventually push them into the same collateral bind. The ECB would have to dramatically reverse itself to save the common currency.
Let's take a step back for a minute. The world of TARGET2 balances can be something of a rabbit hole, but there are two big takeaways here. First, the Greek bank jog will put more pressure on the ECB to do more. It will have to decide again whether or not to boot Greece from the euro zone. And second, a Greek exit would be a mess for Italy and Spain regardless of whether Greek politicians or the ECB makes the move.
It's hard to imagine the ECB pulling the plug on Greece anytime soon. Europe doesn't have anywhere near the bailout fund it needs ready, nor a consensus on euro bonds, nor on more aggressive ECB action. But the longer the ECB keeps Greek, Italian, and Spanish banks on life support, the greater the final cost if one of them exits -- and the greater the panic will hit the other countries in that event. The danger is that the ECB will lose its nerve -- that it will worry about potential future losses. That's what Bundesbank chief Jens Weidmann fretted over a few months back. That could become a self-fulfilling prophesy.
The biggest thing Europe has to fear is ECB fear of a euro breakup.
* It's a bit more complicated than that. There are two ways banks effectively get money from the ECB. They can either pledge collateral to the ECB directly, or pledge collateral to their national central banks. The benefit of the latter option -- so-called Emergency Liquidity Assistance (ELA) -- is that banks can use worse collateral. Still, the ECB has to okay the collateral. ELA are technically liabilities of each individual country, but if a country defaulted and left the euro zone, the ECB would be on the hook. Joseph Cotterill has a good summary of ECB versus ELA liquidity in Greece.
It’s a paradox: Shouldn’t the most accomplished be well equipped to make choices that maximize life satisfaction?
There are three things, once one’s basic needs are satisfied, that academic literature points to as the ingredients for happiness: having meaningful social relationships, being good at whatever it is one spends one’s days doing, and having the freedom to make life decisions independently.
But research into happiness has also yielded something a little less obvious: Being better educated, richer, or more accomplished doesn’t do much to predict whether someone will be happy. In fact, it might mean someone is less likely to be satisfied with life.
That second finding is the puzzle that Raj Raghunathan, a professor of marketing at The University of Texas at Austin’s McCombs School of Business, tries to make sense of in his recent book, If You’re So Smart, Why Aren’t You Happy?Raghunathan’s writing does fall under the category of self-help (with all of the pep talks and progress worksheets that that entails), but his commitment to scientific research serves as ballast for the genre’s more glib tendencies.
Nearly half of Americans would have trouble finding $400 to pay for an emergency. I’m one of them.
Since 2013,the Federal Reserve Board has conducted a survey to “monitor the financial and economic status of American consumers.” Most of the data in the latest survey, frankly, are less than earth-shattering: 49 percent of part-time workers would prefer to work more hours at their current wage; 29 percent of Americans expect to earn a higher income in the coming year; 43 percent of homeowners who have owned their home for at least a year believe its value has increased. But the answer to one question was astonishing. The Fed asked respondents how they would pay for a $400 emergency. The answer: 47 percent of respondents said that either they would cover the expense by borrowing or selling something, or they would not be able to come up with the $400 at all. Four hundred dollars! Who knew?
A professor of cognitive science argues that the world is nothing like the one we experience through our senses.
As we go about our daily lives, we tend to assume that our perceptions—sights, sounds, textures, tastes—are an accurate portrayal of the real world. Sure, when we stop and think about it—or when we find ourselves fooled by a perceptual illusion—we realize with a jolt that what we perceive is never the world directly, but rather our brain’s best guess at what that world is like, a kind of internal simulation of an external reality. Still, we bank on the fact that our simulation is a reasonably decent one. If it wasn’t, wouldn’t evolution have weeded us out by now? The true reality might be forever beyond our reach, but surely our senses give us at least an inkling of what it’s really like.
DATE: MAY 1, 1994
FROM: DR. HUNTER S. THOMPSON
SUBJECT: THE DEATH OF RICHARD NIXON: NOTES ON THE PASSING
OF AN AMERICAN MONSTER.... HE WAS A LIAR AND A QUITTER,
AND HE SHOULD HAVE BEEN BURIED AT SEA.... BUT HE WAS,
AFTER ALL, THE PRESIDENT.
"And he cried mightily with a strong voice, saying, Babylon the great is fallen, is fallen, and is become the habitation of devils, and the hold of every foul spirit and a cage of every unclean and hateful bird."
Richard Nixon is gone now, and I am poorer for it. He was the real thing -- a political monster straight out of Grendel and a very dangerous enemy. He could shake your hand and stab you in the back at the same time. He lied to his friends and betrayed the trust of his family. Not even Gerald Ford, the unhappy ex-president who pardoned Nixon and kept him out of prison, was immune to the evil fallout. Ford, who believes strongly in Heaven and Hell, has told more than one of his celebrity golf partners that "I know I will go to hell, because I pardoned Richard Nixon."
When schools ask applicants about their criminal histories, a veneer of campus safety may come at the expense of educational opportunity.
The long-running “Ban the Box” campaign is now gaining ground at colleges and universities. The movement aims to protect job, and now student, applicants from being asked about their criminal histories and was recently bolstered by President Obama, who is taking executive action to ban the practice at federal agencies. Campus officials say the background question helps them learn as much as possible about prospective students and allows them to take steps to keep everyone on campus safe. But opponents say the question—which requires prospective students to check a box if they have criminal histories—is an undue barrier that harms certain groups of students.
Some colleges routinely ask an optional criminal-background question; some schools are compelled to ask it by the state in which they’re located; and, whether intentional or not, more than 600 colleges and universities ask simply because they use Common App to streamline the admissions process. This year, 920,000 unique applicants used Common App to submit 4 million applications, or 4.4 applications per student, according to the organization. The criminal-background question that Common App asks is:
Garry Marshall's patronizing 'holiday anthology' film boasts a star-studded ensemble, but its characters seem barely human.
It’s hard to know where to begin with Mother’s Day, a misshapen Frankenstein of a movie that feels like it escaped the Hallmark headquarters halfway through its creation and rampaged into theaters, trying to teach audiences how to love. The third in Garry Marshall’s increasingly strange “holiday anthology” series, Mother’s Day isn’t the rom-com hodge-podge that Valentine’s Day was, or the bizarre morass of his follow-up New Year’s Eve. But it does inspire the kind of holy terror that you feel all the way down to your bones, or the revolted tingling that strikes one at a karaoke performance gone tragically wrong.
While it’s aiming for frothiness and fun, Mother’s Day is a patronizing and sickly sweet endeavor that widely misses the mark for its entire 118-minute running time (it feels much longer). The audience gets the sense that there are many Big Truths to be learned: that family harmony is important, that it’s good to accept different lifestyles without judgment, that loss is a natural part of the circle of life. But its overall construction—as a work of cinema—always feels a little off. One character gets a life lesson from a clown at a children’s party, and departs with a hearty “Thanks, clown!” Extras wander in the background and deliver halting bits of expositional dialogue like malfunctioning robots. Half of the lines seem to have been recorded post-production and are practically shouted from off-screen to patch over a narrative that makes little sense. Mother’s Day is bad in the regular ways (e.g. the acting and writing), but also in that peculiar way, where it feels as though the film’s creator has never met actual humans before.
In Trump’s aftermath, his enemies on the right will have to take stock and propose a meaningful alternative vision for the GOP’s future.
Donald Trump’s big victories in the Mid-Atlantic primaries don’t represent quite the end of the ballgame—but they come damn close.
And now Donald Trump’s many and fierce opponents in the Republican Party and the conservative movement face the hour of decision. Trump looks ever more certain to be the party nominee. Yet not perhaps since George McGovern in 1972 has a presumptive nominee so signally failed to carry the most committed members of his party with him.
So what happens now to those who regard themselves as party thought-leaders? Do they submit? Or do they continue to resist?
Resistance now means something more—and more dangerous—than tapping out #NeverTrump on Twitter. It means working to defeat Trump even knowing that the almost certain beneficiary will be Hillary Clinton.
To find out, scientists collected poop from thousands of people—but they ended up with more questions than answers.
There are tens of trillions of bacteria in my gut and they are different from those in yours. Why?
This is a really basic question about the human microbiome and, rather vexingly, we still don’t have a good answer. Sure, we know some of the things that influence the roll call of species—diet and antibiotics, to name a few—but their relative importance is unclear and the list is far from complete. That bodes poorly for any attempt to work out whether these microbes are involved in diseases, and whether they can be tweaked to improve our health.
Two new studies have tried to address the problem. They’re the largest microbiome studies thus far published, looking at 1,135 Dutch adults and 1,106 Belgians respectively. Both looked at how hundreds of factors affect the microbiome, including age, height, weight, sleep, medical history, smoking, allergies, blood levels of various molecules, and a long list of foods. Both found dozens of factors that affect either the overall diversity of microbial species, or the abundance of particular ones. And encouragingly, their respective lists overlap considerably.
There’s a common perception that women siphon off the wealth of their exes and go on to live in comfort. It’s wrong.
A 38-year-old woman living in Everett, Washington recently told me that nine years ago, she had a well-paying job, immaculate credit, substantial savings, and a happy marriage. When her first daughter was born, she and her husband decided that she would quit her job in publishing to stay home with the baby. She loved being a mother and homemaker, and when another daughter came, she gave up the idea of going back to work.
Seven years later, her husband told her to leave their house, and filed for a divorce she couldn’t afford. “He said he was tired of my medical issues, and unwilling to work on things,” she said, citing her severe rheumatoid arthritis and OCD, both of which she manages with medication. “He kicked me out of my own house, with no job and no home, and then my only recourse was to lawyer up. I’m paying them on credit.” (Some of the men and women quoted in this article have been kept anonymous because they were discussing sensitive financial matters, some of them involving ongoing legal disputes.)
The justices signed off Thursday on a new procedural rule for warrants targeting computers.
The U.S. Supreme Court approved a new rule Thursday allowing federal judges to issue warrants that target computers outside their jurisdiction, setting the stage for a major expansion of surveillance and hacking powers by federal law-enforcement agencies.
Chief Justice John Roberts submitted the rule to Congress on behalf of the Court as part of the justices’ annual package of changes to the Federal Rules of Criminal Procedure. The rules form the basis of every federal prosecution in the United States.
Under Rule 41’s current incarnation, federal magistrate judges can typically only authorize searches and seizures within their own jurisdiction. Only in a handful of circumstances can judges approve a warrant that reaches beyond their territory—if, for example, they allow federal agents to use a tracking device that could move through multiple judicial districts.