As Via Meadia has reported in the past, the smart money has been quietly edging out of Greek banks for a long time. As concern spread, the bank walk turned into a bank jog. This weeks, there are signs the jog is breaking into a bank run:
Greek depositors withdrew €700 million ($898 million) from local banks Monday, the country’s president said, as he warned that the situation facing Greece’s lenders was very difficult.
The amazing thing is that there are any deposits left in Greek banks; rather than waiting for your money to be converted into soon-to-be worthless drachmas by some midnight decree from a desperate government, put your money in some nice safe German or Dutch bank and wait out the storm.Of course a bank run will hasten the insolvency of the banks and force an earlier Greek exit from the euro: that is all the more reason to panic fast. When there’s a fire in a crowded theater, you want to be among the first at the door.The question now is whether the bank virus spreads to other European countries that are potentially at risk of leaving the euro. Moving money around from one country’s banks to another in Europe is not that hard; considering that you could lose a significant percentage of your life savings by failing to move your assets out of Spanish, Portuguese or even Italian banks into a German (or, perhaps better, Swiss or even British) bank in time, more and more European depositors will make the obvious safety play.Bank panics are slow to start but they can build with unbelievable speed if the panic goes viral.Add the unsettling danger of a viral bank panic to the dangers and uncertainties that European policy makers — and the rest of us — face in these uncertain times.