Counterparties: Meet the new European bank run
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If you’re a European politician, there is no bank run in the euro zone. It may be more accurate, as Mohamed El-Erian says, to call this a slower “jog” rather than a full-on run, but it’s getting increasingly hard to ignore charts like these which Felix found last week.
Gavyn Davies has an equally disturbing chart looking at cross-border flows in the euro zone. The trend is stark: The ECB’s interventions have not stopped depositors from moving their money to Germany en masse. This slow-motion bank run, Davies writes, is particularly tricky to stop because it isn’t just about worries of bank failures. It’s about fears that the euro will crumble altogether, leaving Europeans holding their own country’s devalued currency.
The euro zone crisis, Jeffrey Sachs writes, is now a very immediate banking crisis; Greece, like Spain, is mainly suffering from “chronic lack of working capital.” Adam Posen thinks Europe’s problem isn’t Greece, it’s undercapitalized banks.
All of this comes as we learn that Europe’s “growth agenda” isn’t set to arrive until June. And European officials have for the first time publicly confirmed that they’re making contingency plans for a Greek exit from the euro zone, which could include a debt time-out for Spain and Italy. Here’s the WSJ:
The euro zone’s financial “firewall” may need to be boosted to reassure markets that neither Spain nor Italy would be allowed to default on their debt during any market panic that might follow an eventual Greek exit, they said. The bloc’s bailout fund has unused lending capacity of €500 billion ($635 billion), only enough to finance Spain and Italy, widely seen as the next two dominoes that could fall in the euro-zone crisis, for a few months.
And on to today’s links:
“JPMorgan’s total loan base remains lower today than it was in 2008″ – Felix
Dimon forgot that a “CEO is only as successful as his lieutenants are powerful and independent” – Epicurean Dealmaker
Why the debate over JPMorgan’s “portfolio hedging” is a complete sideshow – Economics Of Contempt
JPMorgan’s ex-risk manager had a tiny problem with money-losing trades, with sanctions at previous job – Bloomberg
America has 5% of the world’s population and 25% of the world’s prison inmates – The Economist
The world’s most humane prison, where every cell has a flat screen and a private shower – The Guardian
15 charts that track Facebook’s first day of trading in incredible detail – Zero Hedge
“The World’s Simplest Stock Valuation Method” suggests Facebook is worth about $33 a share – Crossing Wall Street
Silicon Valley can do a lot better than Facebook – Tech Crunch