Just finished reading two articles from the Zero Hedge. They are about a possible hyperinflation scenario in the US and an interesting event in Greek's banking industry.
The writer enumerated several concrete steps for Americans to protect themselves in case of hyperinflation. I could not relate with his other suggestions except those related to investment in natural resources, agriculture, and commodities; and to the purchase of tradable items such as jewelry, food, and foreign currency. It is also interesting that though he thinks it could be sooner depending on the turn of events, he gave "the mid-2020's to early 2030's" as a tentative period where this event could take place.
The other article is about what's going on right now in Greek's financial sector. The writer talks about those who are taking risky decisions in continually trusting the banking sector. They include big stockholders and bondholders, the ECB, blue-chip investors, the Greek government, speculators, retail investors, and Greek depositors. Among the blue-chip investors are Fairfax Financial Holdings, Capital Group, Wellington Management Group, Hedge Fund Paulson and Company, and Dimensional Fund Advisors. The first three actually increased their stakes, while the last two decided to stick it out. What follows are relevant statements that describe the situation:
". . . any new recapitalization of the banks is likely to hit shareholders and certain bondholders under a new set of European regulations—the Bank Recovery and Resolution Directive—enacted at the beginning of the year."
"This becomes all the more obvious when observing that the ECB itself is now the single biggest stakeholder in the Greek banking system, with some €130 billion in claims, well above the total amount of deposits, suggesting that any other Greek bank liabilities are now almost certainly null and void."
"The Greek state already owns sizable chunks of the major banks following a recapitalization in 2013. Existing shareholders were given warrants by the government to buy back their stakes; the share prices have, however, continued to collapse following the bailout."
". . . speculative investors, including a number of Greek retail investors and high net worth investors, picked up stocks in Greek banks."
". . . bank depositors are nothing more than unsecured creditors. If and when the reality of the Greek economic collapse is fully tabulated (as the IMF appears to have finally done) it won't be just the equity that is wiped out - depositors themselves face the risk of creeping haircuts to their 'liabilities.'"
Other institutional investors chose the other way; they sold their shares. They include "the Dutch national pension fund, Franklin Templeton, TIAA-CREFF, and emerging market hedge fund Charlemagne Capital, . . ."
After seeing the present scenario in Greek's banking industry, I am thinking about the source of its primary threat. Will the Greeks continue to trust the banking sector after experiencing first-hand the pain of a bank run? Or will they rush into the banks and withdraw all the deposits they have? If the latter be the case, we are about to see what would be the next move of the authorities to restrain such distrust.
After seeing the present scenario in Greek's banking industry, I am thinking about the source of its primary threat. Will the Greeks continue to trust the banking sector after experiencing first-hand the pain of a bank run? Or will they rush into the banks and withdraw all the deposits they have? If the latter be the case, we are about to see what would be the next move of the authorities to restrain such distrust.
