Day: May 18, 2012

Friday, 18 May 2012

07:52 – Barbara slept at her parents’ house Wednesday night and then went into work yesterday after visiting her mom at the hospital. She left work early to go back over to the hospital to visit and then have dinner with her dad. Her mom is doing better. She may or may not be released today. Barbara slept over at her parents’ house again last night. She’ll take her dad over to the hospital this morning and then head in to work. Colin and I have been scrounging meals as best we can. In the evenings, we’ve been re-watching series one and two of Heartland.

Two weeks left until the final deadline for Illustrated Guide to Home Forensic Science Experiments, and it looks like we’ll make it with time to spare. That’s good, because we definitely need to spend some time this weekend rebuilding our stock of chemistry kits.

13:12 – It’s looking increasingly possible that the breakup of the eurozone won’t result from the Greek government (such as it isn’t…) defaulting, but instead from a run on Greek banks. Greeks are now lining up outside banks to withdraw the entire amounts in their accounts. Ordinary Greeks perceive, rightly, that their money is much safer under their mattresses than it is in a Greek bank. One day soon, Greece and the world will learn with no notice that Greece is no longer in the euro, but has converted back to the drachma or whatever they choose to call their new local currency. When that happens, Greece will institute capital controls even harsher than those now in effect, to prevent euros from fleeing Greece. (Smuggling literally suitcases full of euro notes is now common; a lot of that is stopped at the borders, but I suspect most of it gets through.)

When the banks open that Morning After, Greeks will find that all of their euro deposits are now are now drachma-denominated, no doubt at an exchange rate of 1:1. Of course, despite the fact that the euro will soon itself be in free-fall, one drachma won’t actually be worth anything near one euro. When Greece adopted the euro a decade ago, the drachma:euro exchange rate was, IIRC, something like 350:1. And Greece was at that time in a lot better financial shape than it is now. My guess is that the drachma:euro exchange rate will soon be at something like 1,000:1, if not 10,000:1. And then we’ll see the real inflation taking hold, just as it did in Weimar Germany. People will have to haul a wheelbarrow full of overstamped drachma-euros up to the counter to buy a cup of coffee.

But for now, Greek banks are paying off euro depositors in euros, of which they are embarrassingly short and getting shorter. At this point, there isn’t technically a run on the Greek banks, because they’ve been able, so far, to meet depositor demands. But with Greek depositors withdrawing euros at a net of something like 5 billion a week and increasing fast, that’s likely to change very soon. Remember, neither Greek banks nor the Greek government can issue euros. They print them, yes, but only as authorized by the ECB, which isn’t authorizing them to print any more. In the absence of authorization, any euros that Greece prints will legally be counterfeits. Not that I’d expect that to prevent them from printing those euros. Desperate people take desperate actions.

So ordinary Greeks now have two priorities. First, get their euros out of Greek banks. Second, get those euros out of Greece. And who can blame them?

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