Above is a YouTube video of one of the most frightening creations of man, an atomic burst. A cynic once remarked that mankind was the only creature on the planet with the intelligence to construct an atomic bomb. And the only creature on the planet stupid enough to set one off!
British Gazette readers will know that the atomic explosion above was the catastrophic outcome of what is called the “nuclear chain reaction.” Well, it appears that the financial equivalent of the nuclear chain reaction has started in Greece. It has been reported that Greeks withdrew 700m Euros ($894m; £560m) from the country’s banks in the seven days from the 7th to the 14th of this month. The source, the Greek president. Back in February, former finance minister Evangelos Venizelos said Greeks had deposited 16bn Euros overseas, including “32% in British banks and 10% in Swiss banks”.
The reason Greeks are doing this is obvious. As Greece heads towards either of the only remaining outcomes – its exit from the Euro or the Euro’s collapse – Greeks are beginning to realise the consequences for them of these outcomes: At some point the Greek government will freeze all accounts of all banks in Greece. Following this the accounts will be redenominated into a new currency – either the Drachma or another. The value of this currency will reflect the state of the Greek economy at the time. This inevitably will mean that the currency will be of little value. Of course, this would mean that those formerly Euro denominated accounts will have many Drachmas. Let us suppose the initial valuation, set by the Greek government is 10 Drachma to 1 Euro. It is virtually certain that this initial rate of exchange will sink like the proverbial stone on the international currency markets. Greeks naturally fear this and want to avoid this. This is of course PRECISELY why the majority of Greeks wish to remain in the Eurozone. Because they know the alternative is a weak and unstable currency.
Of course, in withdrawing their money from Greek banks they are hastening the time of their collapse. This contagion will of course spread. To Spain, Portugal, Ireland and Italy. What we are witnessing is one of the most catastrophic banking collapses in world history. This is going to make the bursting of the South Sea Company bubble in 1721 look like a damp squib in comparison.
Of course, the Europhile political establishment in this formerly sovereign country are reacting as terrified rabbits transfixed by their fear as the stoat advances towards them. Political commentators have already noted that Cameron’s grandstanding at the dispatch box in the Commons yesterday was for domestic consumption. Cameron, Clegg and Miliband all know that a financial hurricane is heading towards the London financial markets and its effect on the British economy is going to be devastating. That the consequences for ALL the Eurozone economies will be much more devastating will be of little comfort.
What you may ask are British politicians doing about this? The answer is of course nothing at all! Except of course make imbecilic statements about their wish that the banks would lend more. These statements of course are utterly fatuous.
British Gazette readers will of course have laughed derisively at those hopelessly naive politicians and commentators who have in the past asked the question: “Since the government owns a controlling interest in the Royal Bank of Scotland why doesn’t the government instruct its Chief Executive Stephen Hester to lend more money to its customers?”
The British Gazette would like at this point to apologise profusely to its readers for taking up web-space to answer this question that all but imbeciles will know the answer to! We answer this question for the benefit of those unfortunate souls such as Mr Ed Balls.
The answer Ed is this: Mr Hester and his fellow chief executives in the other banks are taking the action to strengthen the balance sheets of their banks to minimise the damage which is going to occur. Our choice of the word, “hurricane” is quiet deliberate. You see Ed, if you happened to live in Pensacola (which is in the sate of Florida in the USA) on the coast of the Gulf of Mexico you would from time to time have to face the prospect of a hurricane damaging your property. What the good people of Pensacola do in these circumstances is to make their homes as secure as they can before the hurricane strikes. Depending on the strength of the hurricane they will either stay in their homes or evacuate. What Mr Hester and his colleagues are doing is the banking equivalent of putting up the storm shutters. They are battening down the hatches. They know full well that the financial hurricane that will result from the collapse of the Eurozone will strike and they are doing all they can to make sure that there is something left of the bank afterwards. This Ed, is why the banks are not lending very much. Once the Eurozone has collapsed and the wreckage will be there to be cleared away, recovery can start. It will be a slow start and take a long time. A decade at least.