Guest Post by Karl Denninger
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.
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