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.
Five days after Hurricane Maria made landfall in Puerto Rico, its devastating impact is becoming clearer.
Five days after Hurricane Maria made landfall in Puerto Rico, its devastating impact is becoming clearer. Most of the U.S. territory currently has no electricity or running water, fewer than 250 of the island’s 1,600 cellphone towers are operational, and damaged ports, roads, and airports are slowing the arrival and transport of aid. Communication has been severely limited and some remote towns are only now being contacted. Jenniffer Gonzalez, the Resident Commissioner of Puerto Rico, told the Associated Press that Hurricane Maria has set the island back decades.
How could six senior presidential aides mimic the strategy for which Trump lacerated Hillary Clinton? Only if they believe they are as immune to the usual rules as he is.
Updated on September 25 at 8:20 p.m.
Late Sunday night, Josh Dawsey of Politico dropped a story that, in any other administration, would have been cause for concern but hardly surprise.
“Presidential son-in-law and senior adviser Jared Kushner has corresponded with other administration officials about White House matters through a private email account set up during the transition last December,” Dawsey wrote. “Kushner and his wife, Ivanka Trump, set up their private family domain late last year before moving to Washington from New York, according to people with knowledge of events as well as publicly available internet registration records.”
One hundred years ago, a retail giant that shipped millions of products by mail moved swiftly into the brick-and-mortar business, changing it forever. Is that happening again?
Amazon comes to conquer brick-and-mortar retail, not to bury it. In the last two years, the company has opened 11 physical bookstores. This summer, it bought Whole Foods and its 400 grocery locations. And last week, the company announced a partnership with Kohl’s to allow returns at the physical retailer’s stores.
Why is Amazon looking more and more like an old-fashioned retailer? The company’s do-it-all corporate strategy adheres to a familiar playbook—that of Sears, Roebuck & Company. Sears might seem like a zombie today, but it’s easy to forget how transformative the company was exactly 100 years ago, when it, too, was capitalizing on a mail-to-consumer business to establish a physical retail presence.
E!’s 10-year-anniversary special celebrating its flagship family was surprisingly honest and strangely tragic.
On Friday, as Puerto Rico contended with the aftermath of a hurricane that had left much of the island without power, and North Korea threatened to detonate a hydrogen bomb in the Pacific Ocean, the internet-gossip complex grappled instead with the momentous news that an unmarried 20-year-old reality star was pregnant. Kylie Jenner, TMZ reported, the youngest scion of the Kardashian family, had been telling friends that she and her boyfriend, the rapper Travis Scott, were going to have a baby. Unidentified family friends promptly confirmed the news to People. And some fans began to wonder—had Kylie’s mother, Kris Jenner, leaked the news herself to boost the ratings for E!’s Sunday night 10-year-anniversary special of Keeping Up With the Kardashians?
A new film details the reason the star postponed her recent tour—and will test cultural attitudes about gender, pain, and pop.
“Pain without a cause is pain we can’t trust,” the author Leslie Jamison wrote in 2014. “We assume it’s been chosen or fabricated.”
Jamison’s essay “Grand Unified Theory of Female Pain” unpacked the suffering-woman archetype, which encompasses literature’s broken hearts (Anna Karenina, Miss Havisham) and society’s sad girls—the depressed, the anorexic, and in the 19th century, the tubercular. Wariness about being defined by suffering, she argued, had led many modern women to adopt a new pose. She wrote, “The post-wounded woman conducts herself as if preempting certain accusations: Don’t cry too loud; don’t play victim.” Jamison questioned whether this was an overcorrection. “The possibility of fetishizing pain is no reason to stop representing it,” she wrote. “Pain that gets performed is still pain.”
The foundation of Donald Trump’s presidency is the negation of Barack Obama’s legacy.
It is insufficient to statethe obvious of Donald Trump: that he is a white man who would not be president were it not for this fact. With one immediate exception, Trump’s predecessors made their way to high office through the passive power of whiteness—that bloody heirloom which cannot ensure mastery of all events but can conjure a tailwind for most of them. Land theft and human plunder cleared the grounds for Trump’s forefathers and barred others from it. Once upon the field, these men became soldiers, statesmen, and scholars; held court in Paris; presided at Princeton; advanced into the Wilderness and then into the White House. Their individual triumphs made this exclusive party seem above America’s founding sins, and it was forgotten that the former was in fact bound to the latter, that all their victories had transpired on cleared grounds. No such elegant detachment can be attributed to Donald Trump—a president who, more than any other, has made the awful inheritance explicit.
When he began taking a knee during the National Anthem, earning the attention of the president and the entire press was the best outcome he could possibly have desired.
Friday morning, things didn’t look great for Colin Kaepernick.
The former San Francisco 49er had made headlines around the world last season for kneeling during the National Anthem. The offseason had seen a raging debate about the fact that he hadn’t been signed from free agency, which boiled down to whether teams were justified in deciding that his controversial protest outweighed his talent. Despite some comically atrocious performances by quarterbacks on NFL rosters in the first two weeks of the season, Kaepernick remained unsigned. A few fellow players said publicly that he deserved a roster spot somewhere, and some had taken up his protest, but it remained a niche question, and the cause to which Kaepernick wished to draw attention—police brutality against people of color—had faded a bit from the headlines, overwhelmed by the onslaught of Trump-related news.
More comfortable online than out partying, post-Millennials are safer, physically, than adolescents have ever been. But they’re on the brink of a mental-health crisis.
One day last summer, around noon, I called Athena, a 13-year-old who lives in Houston, Texas. She answered her phone—she’s had an iPhone since she was 11—sounding as if she’d just woken up. We chatted about her favorite songs and TV shows, and I asked her what she likes to do with her friends. “We go to the mall,” she said. “Do your parents drop you off?,” I asked, recalling my own middle-school days, in the 1980s, when I’d enjoy a few parent-free hours shopping with my friends. “No—I go with my family,” she replied. “We’ll go with my mom and brothers and walk a little behind them. I just have to tell my mom where we’re going. I have to check in every hour or every 30 minutes.”
Those mall trips are infrequent—about once a month. More often, Athena and her friends spend time together on their phones, unchaperoned. Unlike the teens of my generation, who might have spent an evening tying up the family landline with gossip, they talk on Snapchat, the smartphone app that allows users to send pictures and videos that quickly disappear. They make sure to keep up their Snapstreaks, which show how many days in a row they have Snapchatted with each other. Sometimes they save screenshots of particularly ridiculous pictures of friends. “It’s good blackmail,” Athena said. (Because she’s a minor, I’m not using her real name.) She told me she’d spent most of the summer hanging out alone in her room with her phone. That’s just the way her generation is, she said. “We didn’t have a choice to know any life without iPads or iPhones. I think we like our phones more than we like actual people.”
Guillaume Dumas attended classes, made friends, and networked on some of America's most prestigious campuses—for free. What does this say about the value of a diploma?
If you want to start taking classes at an Ivy League university unenrolled and undetected, says Guillaume Dumas, a 28-year-old Canadian, start with big lecture courses. If you must sit in on a smaller seminar class, it’s important to show up consistently starting with the first session, instead of halfway through the semester. Also, one of the best alibis is that you’re enrolled as a liberal-arts student. “That's the kind of program that's filled with everything and that you expect people to be a bit weird, a bit confused about what they do,” he says.
From 2008 to 2012, Dumas claims he did stints on a number of elite North American universities—Yale, Brown, UC Berkeley, Stanford, and McGill, to name a few—sitting in on classes, attending parties, and living near campus as if he were an enrolled student. This deception may sound like a lead-up to a true-crime story, but Dumas’s exploits appear to be harmless, done in a spirit of curiosity. "A lot of students are bored in class," he observes, "so if you participate, if you ask questions, if you are genuinely interested in the class, I think the teacher will like you."
“This fear is very deeply felt and not understood in the West—and it comes from a real place rooted in history.”
Over the past month, a crackdown by Burma’s military has forced more than 400,000 Rohingya Muslims from Rakhine state to flee to neighboring Bangladesh in what the UN human-rights chief has called a “textbook example of ethnic cleansing.” The military crackdown was prompted by an attack August 25th by the Arakan Rohingya Salvation Army (ARSA), a Muslim militant group with reported links to Pakistan and Saudi Arabia, on security outposts.
The international community has condemned the violence unleashed by the Burmese military on Rohingya civilians. It has also voiced sharp criticism of Aung San Suu Kyi, the Nobel laureate and de-facto Burmese leader, for, in the view of her critics, not doing enough to protect the Rohingya, who have been stateless for more than three decades. But where humanitarian groups and Western nations see the world’s most persecuted minority, the government of Burma (also known as Myanmar) and an overwhelming majority of its people see a foreign group with a separatist agenda, fueled by Islam, and funded from overseas. It’s this difference in perception that will make any resolution of the Rohingya issue extremely difficult.