Most people still cannot wrap their head around what is going on in Greece and how it will affect their lives. Let me summarize that for you, but not before you get an intro on the banking system.
**Banking System Fact 1. **
(Physical) cash is the core of the banking system. The electronic money people see in their bank accounts is a derivative of that cash. It may or may not be converted into physical cash, when you ask for it.
Banking System Fact 2.
The total amount of physical cash in the banking system is limited. The situation is similar to gold in the 1930s. Yes, it is true that the governments can print banknotes, but they are restricted by the banks to not do so.
Banking System Fact 3.
The worldwide banking system is going to blow up due to lack of collateral and the world is going cash only. You can see that process by following the events in Greece over the last few years. In a cash-only regime, very little electronic cash will be accepted anywhere, because a person/business accepting electronic money will be taking the risk of being locked within a bank holiday somewhere.
Based on above the three facts, can you tell me the people of which country in Europe have the highest amount of cash right now? Then after the blow up, who will be the most ahead?
In 1930s analogy, Greeks ran away with Europe’s ‘gold’ and that was the main purpose of this drip-drip-drip bank run over the last six months funded by ECB. Do not underestimate Varoufakis.
[Photo via allaksogolies.gr (h/t@acting-man blog)]
In the meanwhile, enjoy a number of great cartoons on Greece here.