“Bank Holiday” and Capital Controls in Greece Extended. Banks to Remain Closed.

via twitter user @kencampbell66

Imagine going to the bank for some cash and seeing it surrounded by riot police. You try the ATM but it is “out of service”. You’re hungry and low on food so you take what little cash you have left in your wallet to the grocery store for some eggs, bread, and milk. But the grocery store is empty.
If all of this sounds like some post-apocalyptic nightmare, it isn’t. It’s what is actually happening in Greece right now.
A week and a half ago, most people believed that the IMF and the Syriza party would come to a last-minute agreement and either extend the deadline for debt repayment or impose a haircut to make the debt more manageable. They didn’t. The deadline passed, Greece defaulted on a 1.6 billion euro payment and the country held a referendum to put it up to the people– stay in the eurozone and undergo further austerity measures or get out.
The Greek people voted “No” by an overwhelming majority, leading many to now believe that a “Grexit” from the euro is imminent. Markets in Europe crashed. The DAX fell by more than 230 points and the MDAX dropped by more than 300. In the U.S., the response is still muted with the DOW dropping only 50 points as investors wait for further evidence of a possible contagion. Many analysts believe that Spain and Italy could be the next dominoes in line.
As part of an effort to stem the bank run, officials in Greece decided to extend the current “Bank Holiday” by at least two days. It will likely be extended even further. The daily withdrawal limit of 60 euros is also to remain in place for the time being. ATMs throughout the country are rapidly running out of cash and grocery stores and gas stations are running out of products while citizens scramble to snatch up whatever essentials they can get their hands on before the country formally exits the euro and the new drachma currency is issued.
Analysts expect the drachma to immediately lose as much as 40% of its value as soon as it is released. For pension holders and people with large amounts of money still in the bank, this is a nightmare scenario. Imagine 40% of your life savings vanishing overnight. It is coming. And people can’t get their money out of the bank fast enough.
Prime Minister Alexis Tsipras is expected to have a phone call with Russian President Vladimir Putin today to discuss the referendum results as well as the outcome of the latest meeting with the Eurogroup’s finance ministers. Russia has already pledged their support for Greece and opened the door for possible assistance. Such a deal with Greece would likely also include some provisions to allow Gazprom to use Greece as a corridor to supply Europe with gas.
With the BRICS New Development Bank holding its first meeting tomorrow, Greece is expected to be a hot topic of discussion. The New Development Bank was established to rival the IMF and assisting Greece could be the perfect opportunity to establish the NDB as a viable, favorable alternative.
Most people have no idea that the situation in Greece could spark a domino effect across the European continent, with the entire eurozone falling like a house of cards. While the U.S. has only a small amount of exposure to Greek companies, a wider euro crisis would cut the legs off of U.S. markets and send stocks tumbling.
But an even more frightening notion for the U.S. isn’t the collateral damage from the current situation in Greece or even the Euro collapsing– it’s that the same exact thing could also happen here. This crisis is a result of an impossible level of debt for Greece that it will never be able to repay. The U.S. currently has more than 18 TRILLION dollars in debt that most economists agree will also be impossible to ever pay back. When those payments finally come due, what will happen to the dollar? What will happen if China (who holds more than 1/3 of our foreign held debt) says that they won’t accept dollars as repayment?

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