So that…escalated quickly.

Although given that the word “blackmail” was being thrown around on Friday, perhaps not that surprising? I guess?

Anyway. Where we now find ourselves:

  1. The Greek government has imposed capital controls, closed Greek banks until Monday next week (at least), halted trading on the Athens Stock Exchange, and generally taken the country into suspense until the results of this coming Sunday’s referendum are in.
  2. The rest of the Eurozone are either berating the Syriza government for declaring a referendum, or beginning to talk about “18” members. Or both.
  3. And the economic commentary has already moved on to discuss Spexit, Itexit, Pexit, and other fun cobbled-together derivations. Which allowed me to post this tweet (I’m very proud of it):

Screen Shot 2015-06-29 at 8.05.22 AM

Twitter, of course, has exploded with quasi-informed commentary. Mostly along the lines of “Bet the Greeks are wishing that they bought gold now, amirite?” and/or “Bank RUN!!!


Many of the ATMs still have cash in them. Or, at least, they had cash in them yesterday. And the BBC can phrase its headline as “Only 40% of Greek ATMs have cash” – but that’s still an infinity percent more than most people were expecting. And as for these ATM queues, here’s a picture from someone in Greece:

Screen Shot 2015-06-29 at 8.15.21 AM

*Laughs out loud*

That is not a queue. That is a Saturday morning!

No no. This*:
*(thank you, my Zimbabwean heritage)

This is what a bank run looks like.
This is what a bank run looks like.

So the bigger question is: why is there still cash in any atm? And where is this bank run?

This graph from Zerohedge:

Greek Bank Deposits

The truth is: the bank run has been happening since, oh, 2009. Because the Greek depositors are not blind.

I mean, would you leave your money in situ after:

  1. Six years of Grexit threats; and
  2. Syriza; and
  3. What happened to all the depositors in Cyprus?

The problem seems to be that many people feel that there should be no money at all left in deposits.

But if you stop to think about it, that wouldn’t be true, really.

The “Possibility Of Capital Controls” Thought Experiment

Let’s say that you were faced with the likelihood of capital controls in the near future, with the possibility of a sudden rapid re-denomination of your bank account into a much lower purchasing power balance (whether through the introduction of a new currency, or through a massive tax on deposits like what the eurocrats did to Cyprus).

What would you do?

At first, you might try and take all of your money out of the formal banking system. But then you’d realise that you probably shouldn’t take all of it out because you have debit orders that need to be paid – and it’s quite hard to pay debit orders when there is no money in your account.

Then you might recall that you have a credit card, and having credit cards requires minimum balances and minimum repayments.

Then you might start asking yourself what capital controls are, actually? They’re limits on transfers abroad, not transfers internally. So you’ll still be able to make local payments by card or by EFT.

And tbh, keeping all your money in a mattress can be cumbersome. And you never know what your unemployed 25 year old son might do while you’re out during the day…

So really, the rational reaction to the threat of capital controls is the following:

  1. Split your bank account in two:
    1. Savings; and
    2. Day-to-day living expenses.
  2. Keeping the savings in your Greek bank account? Not a great idea. Move it out: either into cash, or into assets, or into Germany (or any tax haven other than Cyprus – because that was all fun and games until the Eurozone burnt everyone something hardcore).
  3. Then take out a cash buffer. Because if capital controls involve limiting cash withdrawals, it’d be nice to have some cash on one. Also, that rather helpfully means you can evade VAT by paying for things without a receipt. And given that most Greek shops will only accept cash (other than the large chains), you’re doing that anyway.
  4. The money that you keep in your bank account can now be limited to the sum of:
    1. Your outstanding debts with the bank (because then you can offset your redenominated bank balance against your redenominated debt);
    2. Your outstanding debts to suppliers; and
    3. What you could reasonably spend in a large supermarket (using your debit/credit card) during a mass scramble for value.
  5. And ACTUALLY, if the debt is going to be re-denominated as well (it would have to be – that’s how a currency redenomination works), wouldn’t this be a good time to try and take out some loans?

Where I’m going with this: an orderly bank run doesn’t involve depleting your bank balance down to zero. It involves minimising your exposure to a potential devaluation.

When bank runs are disorderly, it’s because:

aint nobody got time for dat

You take out as much as you can, as soon as you can. Because that is “minimising your exposure” in a hurry.

In Greece, there was no hurry. If anything, there was time to possibly get yourself exposed to some upside, through a little borrowing action. At least, that would have been my plan.

Some Statistics

So I did a bit of rummaging around in the Bank of Greece statistics earlier this morning. As one does.

And I made some graphs.

I want to start with this one:

Greek Savings in Money Market Funds
Greek Savings in Money Market Funds

Now I don’t know what happened in 2004/2005 to spark off the mass decline in Money Market investments by Greek residents (although that might have been around the time that people first started murmuring about the Greek government playing with the statistics for their entry in the Eurozone). But certainly, since 2008, there has not been very much money left in money market funds.

Meaning that: longer term Greek savings have long since fled the Greek banking system. I mean, it’s almost embarrassing just how small that savings balance is. From the heady days of €16 billion balances, down to €0.5 billion at the end of last month. A miniscule 3% of what it once was.

To put that number into perspective:

  • The labour force is about 4.7 million Greeks (as of end March 2015).
  • Money market balances are €550 million.
  • So about €117 per working Greek in a money market account. Or two days of ATM withdrawals under capital controls.

But that’s not really the interesting part.

I also redid that graph from Zerohedge:

Deposits from Individuals and Corporates
Deposits from Individuals and Corporates

And happily, the Bank Of Greece statistics let us break that down a little more:

Screen Shot 2015-06-29 at 11.24.05 AM

So most of the deposits are household deposits. And looking just at the households (who would be leading the bank run charge):

  • In 2013, there were estimated to be around 3.8 million households in Greece.
  • So given that the total household deposits were about €110 billion at the end of May, we’re talking about average household account balances of €29,000.

Seems a bit high, right? Almost as though the Greeks ought to be out there, fleecing those ATMs with cash left in them?

Except for the debt levels of Greek households:

Household Debt
Greek Household Debt

If anything, it looks like your average Greek household is trying to maintain their debt level as high as possible, while taking their deposits out of the system.

So let’s do this:

  • Take the deposits of €110 billion at the end of May, and subtract the €96 billion of outstanding household loans.
  • Why? Because that’s really the “unexposed” portion of the deposits – at least, it won’t be exposed to a new currency (because you’d use the new nominal deposit to offset the new nominal debt).
  • Meaning that the net exposure for households is about €14 billion.
  • Or €3,800 per household.

But let’s be clear, that was at the end of May.

€14 billion is not a completely unfeasible withdrawal in a month. Back in January, when Syriza first came to power, €9 billion of household deposits disappeared.

And based on this Reuters article from June 18:

  • Until June 15, between €200 and €300 million euros a day were being withdrawn.
  • On the three days between June 15 and June 18, €2 billion had been withdrawn (so about €650 million per day).
  • Assuming that rate of withdrawal stayed constant until capital controls were imposed last night, we’re talking about €11 billion in withdrawals in June.
  • Leaving ±€3 billion in household accounts, or about €800 per household.
  • Although, admittedly, that does imply that no money was received into the accounts during June.
  • But I’m assuming that there was partial offset in both accelerated withdrawals in the last week, as well as slightly higher general spending (wouldn’t you go and do a big grocery shop if you’re worried about not being able to draw cash?).
  • In any case, a household can spend €800, €1,000 or even €3,000 in a hurry. They might struggle a bit if everyone is doing it. But they’d get most of their money’s worth.
  • Also, if you wanted, you could shuffle the money between the household accounts and to your grandparents’ and start hauling out €60 per person per day. If there are 5 of you, including the grandparents, you’re doing €300 per day. I mean – you could find a way to get the cash if the bank balances are minimal.

My main observation is this: there’s still cash in the ATMs because there’s not really a need to draw any. That die was cast months ago. The only time you need to keep drawing money is when you receive more into your account (like the pensioners receiving their pensions this morning).

More concerningly, you might find that there’s a vested interest for some in a default and Grexit.

Consider: if you’re in a net debt position, a Grexit could mean that your domestic debt burden gets chopped down in swathes by a devaluating drachma…

I’m just saying that this would not be the first Greek flirtation with currency chaos. And the mentality for dealing with that chaos, and the distrust that came with it, are almost certainly still there. Paying attention and planning.

PS: if you want to read something that should concern the rest of Europe, check out this article. Worth your time.

Rolling Alpha posts opinions on finance, economics, and the corporate life in general. Follow me on Twitter @RollingAlpha, and on Facebook at