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.
Gerard Baker thinks the president lies all the time, but insists that applying that appellation puts too high a burden on news organizations.
Last January, Gerard Baker, editor-in-chief of the Wall Street Journal, urged caution in using the word “lie” to label untruths spoken by Donald Trump. Last week, The New York Times published an opinion article titled “Trump’s Lies” that purported to be a definitive list of the president’s falsehoods, invoking the word “lie” repeatedly.
What did Gerard Baker think about that?
Katie Couric asked him at the Aspen Ideas Festival, co-hosted by The Aspen Institute and The Atlantic, eliciting an extended defense of his reticence in using the l-word that began with an admission that he personally thinks that Trump lies a lot.
“What I think is not really important,” he began. “I think the president probably lies a lot, right? I think the president makes things up at times. I think I've got a fair amount of reasons for believing that.”
The show, this season, with exploitative plotlines that treat racism as entertainment, is becoming harder and harder to defend.
This post reveals minor plot points for The Bachelorette Season 13 Episode 6.
A few years ago, in response to a combination of scientific studies, legal cases, and human tragedies, commentators began to question the morality of watching American football. We’d always known the sport was an especially dangerous one to play—that, indeed, is part of its brute appeal—but now there was undeniable evidence of that brutality, rendered in statistic and awful anecdote. To watch the violence play out, it became increasingly clear, was to be in some way complicit in it—to cast asilent vote, not with one’s pocketbook but with one’s attention, in favor of all that violence continuing.
The Bachelorette, of course, depicts a sport only in the loosest sense; the show is very rarely violent in the literal sense of the term. And yet it has recently adopted the same rough outlines that football acquired a few years before: The show, always questionable, has become in its latest season more troubling than it has even been before. Recent episodes of the long-running ABC show have laid bare just how craven and exploitative its producers have become. Problems that have long been simmering in its world have come to a boil. Watching it has become harder and harder to enjoy—and, like that other blood sport, harder and harder to defend.
A look at the varied and even contradictory changes that GOP senators are seeking in exchange for their votes
After abandoning a quick vote on his original proposal, Senate Majority Leader Mitch McConnell wants to come up with a revised health-care bill by Friday so it can be ready for debate and a vote when lawmakers return to Washington the week of July 10.
His challenge is stark: At least 10 Republican senators have declared their opposition to the plan McConnell originally unveiled, and he can afford only two defections and still get the 50 votes he needs to pass the bill. If he does, Vice President Pence would cast the tie-breaking vote.
McConnell’s central hurdle is that the 10 critics are split nearly down the middle between conservatives like Senators Rand Paul and Mike Lee who want the bill to spend less money and repeal more of the Affordable Care Act, and more moderate senators like Senators Susan Collins and Lisa Murkowski pushing to restore cuts to Medicaid and provide more funding to states. At the majority leader’s disposal is a pot of nearly $200 billion resulting from the fact that the original draft reduced the deficit by more than the Senate was required to do. Short of simple persuasion, McConnell’s narrow path to passage likely involves a combination of more money sought by moderates and a loosening of existing regulations that conservatives want—if the various factions will agree to a trade.
Early drafts of a canonical work show how Muslims' understanding of their faith has evolved.
“What does the Koran say about…?” is perhaps the most common question my students ask me in the Islamic history courses I teach. It’s an understandable question, but they will be disappointed with the answer if they hope it will explain how Islam has been interpreted and practiced for all of history.
In the post-enlightenment West, a society historically influenced by Protestantism’s “back-to-the-Bible” appeal, many of my students have grown up imbibing a public discourse obsessed with a religious or civil tradition’s origins and founding documents—the Hebrew Bible, the New Testament, the Constitution—and by extension often assume that the only book of consequence for Muslims is the Koran. After 9/11, sales of the Koran skyrocketed. More recently, in the wake of the Orlando nightclub shooting, news outlets from Haaretz to Newsweek ran pieces asking “What Does the Koran Say about Being Gay?” And over the past month, as ISIS called for increased attacksduring Ramadan, the Koran was again scrutinized as the source of the violence.
A California company makes weed vaporizers to suit every mood—here’s what happened when I tried them.
I’d been traveling for work—to Europe then to Asia then to Europe again while pinging back and forth from L.A. to New York. For months my carryon contained the sneakers that I didn’t use in the hotel gyms I never visited. I was exhausted to the brink of tears since previous to this spate of travel. I had a schedule so rote I could give myself jetlag by sliding lunch up half an hour.
I’d gone straight to the weed store from LAX—ragged—trundling my suitcase past the spangly Turkish restaurant with the outline of a hookah on the sign, ducking into the alleyway with the Thai massage parlor on one end and my dispensary on the other. On the inside the shop looks like a cross between an Apple flagship and a Danish lighting boutique except there’s a security guard with a gun and a brown-haired girl who checks your ID and card and buzzes you through.
The House and Senate proposals benefit those at the top explicitly at the expense of the lower middle class—and voters are beginning to notice.
One key reason Senate Republicans have been forced to retract and retool their plan to repeal the Affordable Care Act is that the legislation favors one pole of the party’s modern coalition so emphatically over the other.
The teetering Senate repeal bill, like its predecessor the House passed in May, would shower a large tax cut almost exclusively on the very high earners who compose the party’s fundraising base. Simultaneously, the bill would impose deep benefit cuts—both in the private insurance market and Medicaid—on the older and blue-collar whites who now provide the largest share of the party’s votes.
To the frustration of liberal operatives and analysts (see: the best-seller What’s the Matter with Kansas?), Republicans have been able to surmount similar tensions for decades—in large part by appealing to blue-collar and older whites on cultural and racial grounds. With his brusque agenda of racially tinged nationalism, President Trump last November pushed that support to new heights.
The ways some “healthy voice hearers” cope might be able to help people with psychotic disorders.
Jessica Dorner was lying in bed at her cousin’s house when her grandmother, a “pushy lady” in an apron who had been dead for several years, appeared in front of her. “I know you can see me,” Jessica heard her say, “and you need to do something about it.”
It was a lonely time in Jessica’s life. She was living away from home for the first time, and she thinks her grandmother was drawn by some sense of that. She eventually told her parents what happened, and according to her they were concerned, but not overly panicked. “My parents are probably the least judgmental people I know,” she said.
As Jessica tells it, over the next two years, spirits visited her every now and again. Her brother-in-law’s deceased father began forming before her, ghostlike, just as her grandmother did. And while the experiences were intense and at times made her feel “crazy,” she said, they were infrequent, and insists that they were never a real source of suffering.
Adam Hamilton takes on controversial social issues from the pulpit, challenging his politically divided congregation to find common ground.
A recent study found that Methodism is one of America’s most politically divided denominations, with both congregants and their pastors roughly split between the Democratic and Republican Parties. That makes rising partisanship a particular challenge for pastors like Adam Hamilton, of the Church of the Resurrection in Kansas City. He estimates his congregants are perhaps 60 percent Republicans, and 40 percent Democrats—slightly more liberal than the communities from which they’re drawn, but still a decidedly red-state congregation. And, he argues, it gives the ways in which he navigates those tensions broader import.
Hamilton wanted to challenge his congregants to address pressing social challenges, despite their partisan divisions. “I’d like for them to look at the news every day, and think: ‘I wonder how the Gospel calls me to respond to this,’” he said.
And other tales from the intersection of science and airport security
When Martin Cohn passed through airport security at Ronald Reagan Airport, he figured that he’d probably get some questions about the 3-D-printed model of a mouse penis in his bag.
The model is 15 centimeters long, made of clear translucent plastic, and indisputably phallic— like the dismembered member of some monstrous, transparent, 11-foot rodent. One of Cohn’s colleagues had already been questioned about it when she carried it on an outward flight from Gainesville to Washington D.C. She put it through the security scanner, and the bag got pulled. A TSA official looked inside, winked at her, and let her go. She was amused but embarrassed, so Cohn offered to take the model home on the return flight.
Democrats for Life of America is asking the Democratic National Committee to alter its pro-choice party platform and make clear it supports candidates who oppose abortion.
A group of pro-life Democrats met with Democratic National Committee Chair Tom Perez at DNC headquarters in Washington, DC on Tuesday, according to Kristen Day, the executive director of pro-life group Democrats for Life of America. Day said that members of her organization as well as other Democrats who identify as pro-life, including Democratic congressman Daniel Lipinski of Illinois and other current and former elected officials, attended the meeting, which takes place as the party is struggling to win back power in Washington.
Democrats for Life of America delivered a list of requests to Perez that the group wants the DNC to fulfill in order to reach out to, and welcome, more pro-life Democrats into the party, according to Day.