Where'd the Greek Money Go?

By: Adrian Ash | Fri, Apr 30, 2010
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How to flee the worst currency crisis in three decades...

THERE IS NO last mover advantage in fleeing a debt default. Not least when it's so clearly flagged in advance.

So whether or not the Greek government has to restructure its finances - screwing one set of creditors or another - you can't blame Greek savers for moving a chunk of their money out of the country since New Year.

Holders of Eurozone bonds fearing a little inflationary "solution" might like to take note. But where to go instead? Let's see where Greek savers have gone.

Did the €10.6 billion in cash pulled from Greek bank accounts by private individuals and private businesses during the first quarter simply vanish into wallets and purses? Perhaps, but non-Greek branches of Greek banks is a better guess. Because, all told, Greek-bank liabilities as reported by the European Central Bank rose to a new record in March.

Non-Greek banks altogether were a likely choice too, as were non-Euro currencies. Overall, total Eurozone banking deposits crept 0.02% lower during the first quarter, as the ECB's chart of M3 year-on-year money supply growth shows below.

ECB Chart of M-3

And certainly, a little of the money leaving Greece came here to BullionVault, where it was swapped for physical gold.

Euro transfers from Greek bank accounts more than doubled at BullionVault in Jan-Mar., reaching their best quarterly level since the global flight into gold at the end of 2008. Daily traffic from Greek I.P. addresses has also doubled from the start of this year, hitting over 300 visits per day.

Note, we are talking about very small sums here, especially as part of that €10.6bn exit. But it's a straw in the wind, perhaps. And seeing how - on 2009's full-year data from the World Gold Council - European gold demand overtook total demand from both US and Middle Eastern households, jumping by 21% in tonnage terms to stand in third place only to India and China, it might not be the last either.

Currency crises typically prove good for gold prices, if only because it rises in terms of the sunken money. And the world hasn't seen a reserve currency hit quite this much trouble since US Treasuries became "certificates of confiscation" in the late '70s.

 


 

Adrian Ash

Author: Adrian Ash

Adrian Ash
BullionVault.com

Formerly City correspondent for The Daily Reckoning in London and head of editorial at the UK's leading financial advisory for private investors, Adrian Ash is the head of research at BullionVault, where you can buy gold today vaulted in Zurich on $3 spreads and 0.8% dealing fees.

About BullionVault

BullionVault is the secure, low-cost gold and silver exchange for private investors. It enables you to buy and sell professional-grade bullion at live prices online, storing your physical property in market-accredited, non-bank vaults in London, New York and Zurich.

By February 2011, less than six years after launch, more than 21,000 people from 97 countries used BullionVault, owning well over 21 tonnes of physical gold (US$940m) and 140 tonnes of physical silver (US$129m) as their outright property. There is no minimum investment and users can deal as little as one gram at a time. Each user's unique holding is proven, each day, by the public reconciliation of client property with formal bullion-market bar lists.

BullionVault is a full member of professional trade body the London Bullion Market Association (LBMA). Its innovative online platform was recognized in 2009 by the UK's prestigious Queen's Awards for Enterprise. In June 2010, the gold industry's key market-development body the World Gold Council (www.gold.org) joined with the internet and technology fund Augmentum Capital, which is backed by the London listed Rothschild Investment Trust (RIT Capital Partners), in making an $18.8 million (£12.5m) investment in the business.

For more information, visit http://www.bullionvault.com

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Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events - and must be verified elsewhere - should you choose to act on it.

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Source: The Contrarian Take http://blogs.forbes.com/michaelpollaro/
austrian-money-supply/