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.
Paul faced danger, Ani and Ray faced each other, and Frank faced some career decisions.
This is what happens when you devote two-thirds of a season to scene after scene after scene of Frank and Jordan’s Baby Problems, and Frank Shaking Guys Down, and Look How Fucked Up Ray and Ani Are, and Melancholy Singer in the Dive Bar Yet Again—and then you suddenly realize that with only a couple episodes left you haven’t offered even a rudimentary outline of the central plot.
The winners of the 27th annual National Geographic Traveler Photo Contest have just been announced.
The winners of the 27th annual National Geographic Traveler Photo Contest have just been announced. Winning first prize, Anuar Patjane Floriuk of Tehuacán, Mexico, will receive an eight-day photo expedition for two to Costa Rica and the Panama Canal for a photograph of divers swimming near a humpback whale off the western coast of Mexico. Here, National Geographic has shared all of this year’s winners, gathered from four categories: Travel Portraits, Outdoor Scenes, Sense of Place, and Spontaneous Moments. Captions by the photographers.
What if Joe Biden is going to run for the Democratic nomination after all?
Most Democrats seem ready for Hillary Clinton—or at least appear content with her candidacy. But what about the ones who who were bidin’ for Biden? There are new signs the vice president might consider running for president after all.
Biden has given little indication he was exploring a run: There’s no super PAC, no cultivation of a network of fundraisers or grassroots organizers, few visits to early-primary states. While his boss hasn’t endorsed Clinton—and says he won’t endorse in the primary—many members of the Obama administration have gone to work for Clinton, including some close to Biden.
But Biden also hasn’t given any clear indication that he isn’t running, and a column by Maureen Dowd in Saturday’s New York Times has set off new speculation. One reason Biden didn’t get into the race was that his son Beau was dying of cancer, and the vice president was focused on being with his son. But before he died in May, Dowd reported, Beau Biden tried to get his father to promise to run. Now Joe Biden is considering the idea.
Put simply: Climate change poses the threat of global catastrophe. The planet isn’t just getting hotter, it’s destabilizing. Entire ecosystems are at risk. The future of humanity is at stake.
Scientists warn that extreme weather will get worse and huge swaths of coastal cities will be submerged by ever-more-acidic oceans. All of which raises a question: If climate change continues at this pace, is anywhere going to be safe?
“Switzerland would be a good guess,” said James Hansen, the director of climate science at Columbia University’s Earth Institute. Hansen’s latest climate study warns that climate change is actually happening faster than computer models previously predicted. He and more than a dozen co-authors found that sea levels could rise at least 10 feet in the next 50 years. Slatepoints out that although the study isn’t yet peer-reviewed, Hansen is “known for being alarmist and also right.”
Even when they’re adopted, the children of the wealthy grow up to be just as well-off as their parents.
Lately, it seems that every new study about social mobility further corrodes the story Americans tell themselves about meritocracy; each one provides more evidence that comfortable lives are reserved for the winners of what sociologists call the birth lottery. But, recently, there have been suggestions that the birth lottery’s outcomes can be manipulated even after the fluttering ping-pong balls of inequality have been drawn.
What appears to matter—a lot—is environment, and that’s something that can be controlled. For example, one study out of Harvard found that moving poor families into better neighborhoods greatly increased the chances that children would escape poverty when they grew up.
While it’s well documentedthat the children of the wealthy tend to grow up to be wealthy, researchers are still at work on how and why that happens. Perhaps they grow up to be rich because they genetically inherit certain skills and preferences, such as a tendency to tuck away money into savings. Or perhaps it’s mostly because wealthier parents invest more in their children’s education and help them get well-paid jobs. Is it more nature, or more nurture?
Writing used to be a solitary profession. How did it become so interminably social?
Whether we’re behind the podium or awaiting our turn, numbing our bottoms on the chill of metal foldout chairs or trying to work some life into our terror-stricken tongues, we introverts feel the pain of the public performance. This is because there are requirements to being a writer. Other than being a writer, I mean. Firstly, there’s the need to become part of the writing “community”, which compels every writer who craves self respect and success to attend community events, help to organize them, buzz over them, and—despite blitzed nerves and staggering bowels—present and perform at them. We get through it. We bully ourselves into it. We dose ourselves with beta blockers. We drink. We become our own worst enemies for a night of validation and participation.
A new EPA rule is designed to withstand legal challenges from Republicans while convincing world leaders to follow suit.
President Obama’s plan to reduce greenhouse-gas emissions is aimed at three major constituencies. First, there’s the plan’s immediate goal: significant decreases in the emissions in the U.S. between now and 2030. Second, the rule arrives as the world gears up for global emissions talks in Paris in December, and American action is seen as necessary to convince other countries to act. And third, Obama views the fight against climate change as an essential part of his legacy, alongside the Affordable Care Act.
“We’re the first generation to feel the impact of climate change, and the last generation that can do something about it,” Obama said at a press conference at the White House on Monday, repeating a line he’s used before. The president emphasized the moral case for reducing emissions throughout the speech, invoking Pope Francis’s call for action, and scolding “cynical” critics who charged his plan would hurt minorities and the poor. “If you care about low-income minority communities, start protecting the air they breathe and stop trying to rob them of their health care.”
Two hundred fifty years of slavery. Ninety years of Jim Crow. Sixty years of separate but equal. Thirty-five years of racist housing policy. Until we reckon with our compounding moral debts, America will never be whole.
And if thy brother, a Hebrew man, or a Hebrew woman, be sold unto thee, and serve thee six years; then in the seventh year thou shalt let him go free from thee. And when thou sendest him out free from thee, thou shalt not let him go away empty: thou shalt furnish him liberally out of thy flock, and out of thy floor, and out of thy winepress: of that wherewith the LORD thy God hath blessed thee thou shalt give unto him. And thou shalt remember that thou wast a bondman in the land of Egypt, and the LORD thy God redeemed thee: therefore I command thee this thing today.
— Deuteronomy 15: 12–15
Besides the crime which consists in violating the law, and varying from the right rule of reason, whereby a man so far becomes degenerate, and declares himself to quit the principles of human nature, and to be a noxious creature, there is commonly injury done to some person or other, and some other man receives damage by his transgression: in which case he who hath received any damage, has, besides the right of punishment common to him with other men, a particular right to seek reparation.
Every time you shrug, you don’t need to Google, then copy, then paste.
Updated, 2:20 p.m.
All hail ¯\_(ツ)_/¯.
In its 11 strokes, the symbol encapsulates what it’s like to be an individual on the Internet. With raised arms and a half-turned smile, it exudes the melancholia, the malaise, the acceptance, and (finally) the embrace of knowing that something’s wrong on the Internet and you can’t do anything about it.
As Kyle Chayka writes in a new history of the symbol at The Awl, the meaning of the “the shruggie” is always two, if not three- or four-, fold. ¯\_(ツ)_/¯ represents nihilism, “bemused resignation,” and “a Zen-like tool to accept the chaos of universe.” It is Sisyphus in unicode. I use it at least 10 times a day.
For a long time, however, I used it with some difficulty. Unlike better-known emoticons like :) or ;), ¯\_(ツ)_/¯ borrows characters from the Japanese syllabary called katakana. That makes it a kaomoji, a Japanese emoticon; it also makes it, on Western alphabetical keyboards at least, very hard to type. But then I found a solution, and it saves me having to google “smiley sideways shrug” every time I want to quickly rail at the world’s inherent lack of meaning.