The Market Ticker
Commentary on The Capital Markets- Category [Bank Reform]

Tsipras tweeted shortly before the markets opened that Greeks should be calm and that their deposits were completely safe.

The Greek people appear not to believe him, crowding gas stations, grocery stores and (working) ATMs to grab whatever they can.  They have good reason not to believe him -- or anyone else for that matter.

Several years ago, if you remember, I put forward a One Dollar of Capital standard for banks.  The premise is simple, just as a bank is in fact quite simple: Since liabilities (deposits) are always known to the penny, and assets must be greater than liabilities or you are bankrupt, a bank run cannot harm you provided that you never lie about asset values.

It can shrink the bank to the point of extinction, but no depositor can lose money.

All bank runs that threaten to, or do, cause depositor loss occur only because the bank is fraudulently claiming asset values that are not, in the present tense, true.

The truth of an asset is that it's value is only what someone will pay you for it at any given point in time.  This is always true, whether the asset is a house, car, rock of some composition (e.g. gold, silver, diamond, etc.), piece of machinery, bushel of corn or whatever.  There is no intrinsic value in any asset beyond its ability to be converted into useful work, and even that is subject to debate as to what it may be exchanged for.

Banking does not have to be performed in a fraudulent manner but it nearly always is, because the banksters always demand the ability to associate a value with their assets that they cannot receive at this given moment in time whenever it suits them.  Demanding to value something on tomorrow's price is inherently a fraud because nobody can predict tomorrow with accuracy.

Greece has declared a "bank holiday" because both its previous and present governments, yes, that includes you Tsipras, permitted its banks to claim asset values they could not receive in the present day should they sell those assets.  This is known to be fact because said banks "had" to pledge those assets to the ECB through the Emergency Liquidity Apparatus (ELA) in order to be able to meet depositor demands.

If they were not falsely valuing those assets (bonds) at above their market price they could have simply sold them to meet the withdrawal demand of their customers.  The reason they didn't do this is because the price at which they held them on their books is far higher than the price they could receive.

In other words they were lying.

If they were to sell those assets the loss would be crystallized; they would have to recognize that the value of the asset is not what they claimed, and having done that they would be exposed as bankrupt.

The problem is that they are factually bankrupt here and now while falsely claiming not to be predicated on a belief that in some tomorrow those assets will have the value they are carrying them at.

This is a purely speculative claim; it has no foundation in fact.

We will never get away from financial meltdowns -- nor the theft of your purchasing power -- until we put a stop to this.  In order to make money one must take risk.  When you enable a bank to falsely claim values that do not exist you must inherently steal value from everyone in the economy because there is no such thing as a free lunch.  If you make a "return" without taking actual risk then someone else takes risk and loses more than they should, loses where they should gain, or takes no risk and loses anyway.  It cannot be otherwise.

The people of Greece are discovering that this outrageous behavior not only went on since before their entry into the EU the present government did not put a stop to it.  Unfortunately the ability to continuing to conceal it was becoming more and more expensive and only remained possible with the consent of the Troika -- and they were demanding an ever-higher price for their continued consent.

Now all of that hidden loss is out in the open and it hurts -- a lot.

The question now becomes this -- do we wish to learn from these events here in America or are we going to repeat them?

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