Greece Bank Deposits Flight

Greek bank deposit flights are continuing and we can see that here in the column of “other euro area residents”. It’s a very easy way to check if there is a deposit flight going on in your European country. (I checked Belgium and we are pretty stable)

http://sdw.ecb.europa.eu/reports.do?node=1000003177

Greek deposits went from 155 billion euro to 147 billion euro month over month. They probably all went to Germany.

But overall there is an increase in total deposits when MFIs are counted in. The Bank of Greece probably started confiscating deposits. So basically, people are running away with their money (drop in other euro area resident deposits), but the central bank is preventing that by confiscating it (rise in MFI deposits).

The total amount of deposits look like this, red chart is Greece: The chart rises due to an increase in central bank deposits.

 

So how to use this? I would just keep in mind how to check on the deposit flight via the tables and at some point, when interest rates get too low, people will automatically flee from their banks. Who wants to have money in a bank with negative interest rates? Don’t be the last to wake up…

Bank Deposits Update and ECB QE

Ok, so when the ECB prints money, we will see bond yields rise in the eurozone and we will see deposit rates go back up, when banks get more liquidity.

This chart below will reverse itself and we see it already for Portugal and Spain.

European Bank Deposits Update: Greece sees outflows

This week we had an update of the deposits at the European banks. Deposit outflows continue. What strikes me most is that we see inflows to safer countries (Netherlands, Germany, France) and outflows of the periphery (Italy, Greece, Ireland).

Most curiously, the largest deposit outflow can be seen in Greece (red chart). We peaked out in Greece deposits after a series of bailouts starting in 2010. Ever since the debt restructuring in 2012, the deposits kept going down, which collapsed the trade credit.

Bank Deposits Eurozone Periphery

As a result, (especially) imports and even exports are collapsing. This is the way of restructuring. Bailouts in 2010 strengthened exports. Restructuring of debt starts in 2012, bailouts are gone, exports collapse.

And the best thing is, the debt hasn’t gone away, it’s all there.

Bank Deposit Vs. Interest Rate

There is a very interesting correlation between bank deposits and the deposit interest rates that I haven’t noticed yet.

Whenever yields are low, be it that the government lowers interest rates or imposes taxes on deposits. The result is that people will flee out of bank deposits and move their money either into equities or gold. Or anything else for that matter. This is because investors are searching for yield on investment. If interest rates are low, they will find a better use for their money than putting it in a bank.

Take Spain for example. Ever since the treasury yields peaked out in 2012, the same happened in the bank deposits in Spain.

Spain 10 Year Yield

As you can see here, the peak in Spain deposits (green chart) can also be found in 2012.

Eurozone deposits

Gold Price Disconnected from Central Bank Balance Sheets

With this correlation between central bank balance sheets Vs. gold in our minds, we can confidently say that gold will have to move to $2000/ounce in a hurry to balance out all the money printing in this world.

Central Banks Vs. Gold Price

To help you monitor the balance sheet expansion, you can check this chart daily. Look how Japan is almost winning the race from Europe.

Another Banker Drama: ABN AMRO

You can’t count them on your fingers anymore. Jan Peter Schmittmann (former CEO of ABN AMRO) has been found dead in his house along with his wife and daughter. The cause of death is suicide.

I think we need to chart the amount of dead bankers on a timeline, could be a correlation there. Apparently it started to get serious around February 2014, which was also the month where the stock market was the lowest in 2014.

• CEO Daniel Eicher, 53 — suicide, left two notes — week of 6/10/2013
• CEO Carsten Schloter, 49 — suicide, found hanging — 7/23/13
• Intern Moritz Erhardt, 21 — seizure due to exhaustion — week of 8/12/2013
• CFO Pierre Wauthier, 53 — suicide, found hanging, left two notes — 8/26/2013
• Hedge fund exec Robert Wilson, 87 — suicide, jumped from 16th floor — 12/23/2013
• Wallstreet Reporter David Bird, 55 – missing/disappeared – 1/11/2014
• Swiss Re AG director Tim Dickenson, 39 — cause not released — week of 1/19/2014
• Executive William Broeksmit, 58 — apparent suicide, found hanging— 1/26/14
• Banker Gabriel Magee, 39 — jumped or fell from building — 1/28/14
• Chief economist Mike Dueker, 50 — found dead next to Bridge — week of 1/26/2014
• Executive Ryan Crane, 37 — no cause given — 2/3/14
• CEO Richard Talley, 57 — suicide by nail gun,7 or 8 self-inflicted wounds — 2/7/14
• Banker Dennis Li Junjie 33 — jumped from from a buidling— 2/18/14
• CEO Autumn Radtke, 28, — was found dead in her Singapore apartment— 2/28/2014
• Banker Kenneth Bellando, 28 — found dead outside his apartment . — 3/12/2014
• CEO Jan Peter Schmittmann, one of the 3 dead found in a home — 4/5/2014

European Bank Deposit Outflows: The Case of Italy

European bank deposits have seen outflows since the start of 2012, right when the ECB started tightening its balance sheet. Two of the countries most affected were Spain and Greece where the outflows are steepening. Italy has been holding pretty steady.

But more recently, we see that Italy is topping out, right on the breaking news that inbound money transfers to Italy will have a 20% tax imposed on them. I wonder what this will do to the Italian economy as nobody will buy stuff from Italy anymore because the merchants won’t be able to make a profit. Everyone will also transfer their money out of Italian bank accounts to foreign bank accounts.

Let’s see how fast the deposits will flow out of Italy going forward.

China Central Bank Gold Holdings Don’t Match

Today China came out with their Central Bank Gold Holdings.

They reported 1054 tonnes as always since 2008. But this is impossible. Here is why.

China imports gold and also produces gold. This total addition in gold has surged since 2008 (white bars), due to the imports through Hong Kong. China consumes 60% of its gold in jewelry, the other 40% is added to the central bank gold reserves. This implies that we have 2710 tonnes instead of 1054 tonnes. That’s almost 3 times the reported number from the Chinese government. 

China Gold Reserves

Additionally, the total assets of the Chinese central bank has gone up from 3 trillion to 6 trillion from 2008 till now, which is a doubling of the balance sheet.  And you tell me that they didn’t buy any gold since 2008?

I believe they want to quietly buy more gold…

China doesn’t want the Bitcoin

Today, China announced a war on Bitcoin.

Chinese bank deposits shouldn’t be allowed to be transferred to Bitcoin as Bitcoin isn’t a real currency. I shouldn’t tell you how important this is. This means China is viewing Bitcoin as its enemy and encouraging its citizens not to believe in it. Instead they probably want every Chinese to have gold in its possession.

We saw a 20% drop instantly when the news came out and rightly so.

Because, when China does this, America and the whole world will follow in its footsteps. They basically made Bitcoin illegal. The normal people like me, who don’t want to do all this downloading of programs and all, want “comfort”. Which means, I want to just transfer my money from the bank to a provider like Mt. Gox. But if this is not possible anymore, I lose this “comfort” in trading. Do you really think that people will still want Bitcoins if the government and their banks turn against you? And we’re not even talking about my aunts, who only think about one thing: “What can I do with this Bitcoin, can I buy vegetables with it?”. The answer is “no”. They don’t have interest in transactions in Bitcoin, they want to have cash in their wallet.

Unless you want to trade Bitcoins on the black market by going to Bitcoin trading spots, I would be very wary about Bitcoins after this important event.

IMF has plans to impose 10% tax on deposits

What happened to Cyprus, doesn’t stay in Cyprus. We already warned everyone about this in this article. What they do to Cyprus, they will do to every European country. That was my statement.

And here we finally have it. The IMF is setting up plans to impose a 10% tax on the savings of citizens of European countries.

After citing their colleagues, IMF economists are throwing themselves into the water. “The tax rate needed to bring debt ratios (relative to GDP) to the level of the end of 2007 would require a tax of about 10% of all households with positive net savings.” These calculations, we specify the IMF has been made to 15 countries in the euro zone. Let us recall that such arguments are intended merely suggestions to “theoretical” character. They are no less iconoclastic. But is it soft solutions leveraging outside of inflation, the most hypocritical of all?

 I wonder what will happen to the deposits of the European banks. If I had savings in the bank, I would take them out of the bank and store them at home or buy gold.

=> And yes, the bank deposits are falling.