- By Bill Bonner
This is an Amber Alert day in the markets.
Both stocks and gold were calm as we ended last week. Then, they got interesting over the weekend.
"Greeks Line Up at Banks; ATMs Run Dry" was the headline over at the Drudge Report. Versions of it ran throughout the financial media.
You'll recall our prediction. In a crisis banks will move fast to block your access to your own money. First, they will limit withdrawals. Then, they will close either close their doors or run out of cash. That's the story that was playing itself out in Greece over the weekend.
First, the showdown that has been going on there for months seems to be reaching a climax as Greece announced that it would put creditor demands to a popular vote.
'Hey, how do you feel about paying our national debt," they're going to ask the hoi polloi. And what do you think the hoi polloi are going to respond?
The best guess is that they're going to say: let's not.
Which will leave the banks cut off from new funds... and short of old ones.
Smart depositors figured this out long ago. They took their money out of Greek banks. But the rest of the people are now wising up. In effect, they're voting with their money - getting it out while they still can.
Naturally, the banks tried to protect the money that isn't theirs. Pireas Bank and Alpha Bank both limited the amount you could take out. All you could get from a Pireas ATM, for example, was 600 euros.
This, of course, made people more eager than ever to get their hands on their money. Lines formed at ATMs on Saturday. One banker estimated that 110 million euros left the banks by 11:30 in the morning.
Not all banks are open on Saturday. But even those that were normally open stayed shut.
And now the New York Times tells us that the government (always in cahoots with the banks) has moved to close down the whole banking system:
Mr. Tsipras's remarks did not include details of the bank closings and other controls on the movement of money, which the government was expected to explain later in the evening. Greece, though, appears to be taking steps similar to ones by Cyprus in 2013 to avoid a bank collapse.
When Greek officials huddled before Mr. Tsipras addressed the nation, it had not yet been decided how long the banks would remain closed or what cap would be placed on daily withdrawals from A.T.M.s, according to a person briefed on the discussion. But the person, who was not authorized to speak publicly, said that the daily limit could end up as low as 50 euros.
Meanwhile, the sense of panic and impending doom over the weekend was heightened as the Chinese government took action to halt a stock market plunge. In the last two weeks, the Shanghai Composite Index has lost 20% of its value. That's the equivalent of the Dow losing 3,600 points. It's the kind of thing that makes investors nervous. Or desperate.
If that happens in the US - which it surely will - you can bet your bippy that the feds will intervene. The Chinese are doing the same thing. They've just cut the central bank lending rate to the lowest level ever. Will that do the trick?
John Rubino at DollarCollapse opines:
Stay tuned for more exciting developments.
Bill Bonner is the President & Founder of Agora Inc, an international publisher of financial and special interest books and newsletters.