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Anxious Greeks Emptying Their Bank Accounts

Tuesday, December 6th, 2011 at 11:09 am  
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By Ferry Batzoglou in Athens

Many Greeks are draining their savings accounts because they are out of work, face rising taxes or are afraid the country will be forced to leave the euro zone. By withdrawing money, they are forcing banks to scale back their lending – and are inadvertently making the recession even worse.

Georgios Provopoulos, the governor of the central bank of Greece, is a man of statistics, and they speak a clear language. “In September and October, savings and time deposits fell by a further 13 to 14 billion euros. In the first 10 days of November the decline continued on a large scale,” he recently told the economic affairs committee of the Greek parliament.

With disarming honesty, the central banker explained to the lawmakers why the Greek economy isn’t managing to recover from a recession that has gone on for three years now: “Our banking system lacks the scope to finance growth.”

He means that the outflow of funds from Greek bank accounts has been accelerating rapidly. At the start of 2010, savings and time deposits held by private households in Greece totalled €237.7 billion — by the end of 2011, they had fallen by €49 billion. Since then, the decline has been gaining momentum. Savings fell by a further €5.4 billion in September and by an estimated €8.5 billion in October — the biggest monthly outflow of funds since the start of the debt crisis in late 2009.

The raid on bank accounts stems from deep uncertainty in Greek households which culminated in early November during the political turmoil that followed the announcement by then-Prime Minister Georgios Papandreou of a referendum on the second Greek bailout package.

Papandreou withdrew the plan and stepped down following an outcry among other European leaders against the referendum, and a new government was formed on Nov. 11 under former central banker Loukas Papademos. That appears to have slowed the drop in bank savings, at least for the time being.

Bank Withdrawals Worsening Crisis

Nevertheless, the Greeks today only have €170 billion in savings — almost 30 percent less than at the start of 2010.

The hemorrhaging of bank savings has had a disastrous impact on the economy. Many companies have had to tap into their reserves during the recession because banks have become more reluctant to lend. More Greek families are now living off their savings because they have lost their jobs or have had their salaries or pensions cut.

In August, unemployment reached 18.4 percent. Many Greeks now hoard their savings in their homes because they are worried the banking system may collapse.

Those who can are trying to shift their funds abroad. The Greek central bank estimates that around a fifth of the deposits withdrawn have been moved out of the country. “There is a lot of uncertainty,” says Panagiotis Nikoloudis, president of the National Agency for Combating Money Laundering.

The banks are exploiting that insecurity. “They are asking their customers whether they wouldn’t rather invest their money in Liechtenstein, Switzerland or Germany.”

Nikoloudis has detected a further trend. At first, it was just a few people trying to withdraw large sums of money. Now it’s large numbers of people moving small sums. Ypatia K., a 55-year-old bank worker from Athens, can confirm that. “The customers, especially small savers, have recently been withdrawing sums of €3,000, €4,000 or €5,000. That was panic,” she said.

Marina S., a 74-year-old widow from Athens, said she has to be extra careful with money these days. “I have no choice but to withdraw money from my savings,” she said.

Bad Loans

The shrinking Greek bank deposits compare with bank loans totalling €253 million. Analysts say the share of bad loans could rise to 20 percent next year, or €50 billion, as a result of the recession. This in turn will worsen the already pressing liquidity problems faced by Greek banks.

Nikos B., a doctor in the Greek military, has had enough of the never-ending crisis his country is going through. While the 31-year-old has a secure job, repeated salary cuts have made it increasingly hard for him to make ends meet.

He needs most of his money to make loan repayments for a small car. “How can I clear my account? There’s hardly anything in it,” he says. He started learning German two months ago and wants to leave Greece. “As soon as possible!”

Nikos pauses and looks down. He quietly utters words that must be painful for a proud Greek. “It would be best to change nationality.”

The Revolution has begun…

Monday, June 13th, 2011 at 4:05 pm  
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You’re probably wondering why there has been so much buzz about bitcoin lately. In short, it puts you in control of your money and takes it away from the banks, politicians, central bankers and tyrants of the world.

The ramifications are revolutionary. The world will not be the same in a few years as a direct result of bitcoin.

There’s something magical about having your money sitting on your laptop or mobile phone which can then be transferred across the room or across the globe while completely bypassing the entire banking system at almost no cost.

Think about the last time you paid a credit card fee, ATM fee, checking account fee, bank wire fee, currency exchange fee, balance inquiry fee, cash deposit fee, credit card fee, PayPal fee, etc., etc. Imagine never having to pay those again.

Think about the last time you had to provide a Social Security Number, 3 forms of identification, and give a DNA sample just to open a bank account or cash a check.  Bitcoin bypasses all of these.

Yes, bitcoin is a little difficult to understand initially, and it is not the most user friendly at the moment but that is all changing at lightening speed.

To get a quick feel for it you can easily open an account at  www.mybitcoin.com while you study and learn more. From there you can move on to downloading the software so that you can actually store your money on your computer. Then you can continue to increase your knowledge on the finer points. New tools and resources are coming on daily that will help make this transition easier.

Actual bitcoin money is a little difficult to acquire right now but there are several sources at http://www.bitcoin.org or you can contact us for a recommendation.

The opportunity is before you to, not only gain more freedom, but to profit by figuring out what products and services you can begin offering to the growing bitcoin community. It reminds me of The Great Oklahoma Land Rush. A whole new economy has opened up and there are numerous opportunities to be the “first to market” with your product or service.

Here are a couple of news links about bitcoin and a link to some great economic analysis as well:

Bitcoin is Economic Singularity
http://tinyurl.com/44zoplu

New Decentralized Currency Stimulating Underground Barter Economy
http://tinyurl.com/3fektol

Several Articles on the Economics of Bitcoin:
http:///www.economicsandliberty.com

The revolution as begun. Are you going to be a part of it?

Bitcoin is Economic Singularity

Monday, June 13th, 2011 at 3:22 pm  
Comments (2)

By Astrohacker
Saturday, June 4, 2011

http://astrohacker.com/ahc/bitcoin-is-the-economic-singularity

Three weeks ago I discovered bitcoin. It sounded interesting enough that I decided to devote an entire Saturday to it—that was my “day of bitcoin.” My day of bitcoin evolved into my three weeks of bitcoin. In that time, I have been obsessively reading about it, writing about it, buying it, and creating businesses for it. As far as I can recall, I have never been so obsessed about anything. But the reason I am obsessed with bitcoin is simple: it is the most incredible thing to ever happen in the world. I am not exaggerating. We are presently witnessing the most disruptive change to ever happen to collective human behavior. Although there have been other disruptive changes to human behavior in the past, bitcoin is happening much faster than those. Consider, for instance, computing. Charles Babbage invented the mechanical Analytical Engine in the 1830s. It took on the order of a century or more before those seeds of an idea blossomed into something that actually started being used on a large scale. Or consider, say, the internet, which was invented in the 1960s, but took on the order of decades before it saturated the world. That was faster than computing, but still long compared to bitcoin. Bitcoin was only invented about 2.5 years ago. And already, I have been able to ask random people about it, and they know what I’m talking about. If the growth of bitcoin continues exponentially like most widely useful technologies, it will only be on the order of years—not centuries, not even decades, but individual years—before virtually everyone is using it.

The standard term for such a rapid change is a “singularity.” Robin Hanson predicted an economic singularity. Bitcoin, as I will argue, is that singularity. (Hat tip to noagendamarket on the bitcoin forum for reminding me of Robin Hanson’s article.)

What is bitcoin?

Bitcoin is the decentralized digital currency. I say “the,” rather than “a,” because there can only be one. Since decentralized digital currencies rely on computational power to ensure security, the currency with the most computational power is the most secure. If we ever found ourselves with more than one decentralized digital currency, which ever one had more computational resources devoted to it would be the most secure, and thus more people would trust it, and thus more people would use it, and thus it would come to dominate and be the only one. Bitcoin is that currency. (Previously, I argued that there could be a market of currencies. However, I now realize that, while there can be a market of currencies, there can’t be more than one decentralized digital currency.)

Why is it gaining traction?

Bitcoin is useful for all the same reasons that any currency is useful: it is a medium of exchange. The advantage of being decentralized is that you do not have to rely on a third party for security. Thus, bitcoin is more useful than digital dollars for the same reason that digital dollars are more useful than paper dollars, or paper dollars are more useful than gold: it is just easier to pay people with them. No banks means less headaches, in the same way that no gold means there is a lot less weight you have to lug around. Bitcoin is thus a better answer to a problem humanity has been slowly solving for millenia: how do we remove barriers to payment?

There are other advantages to bitcoin too, besides being more convenient. The fact that no central party party controls the supply means no central party can inflate it to redistribute wealth in their favor. No one can debase bitcoin to pay for a war. Also, since it is deflationary (in the sense that prices reliably go down), it encourages savings, because everyone gets richer that way.

Exponential growth

Certainly, then, bitcoin is a candidate for an economic singularity, because everyone has incentives to use it, and it makes the world a better place. That’s great in theory, but the reason why it cleary actually is a singularity is because its adoption is, in fact, growing exponentially. There are at least two exponential curves we can see. One is Google Trends, where bitcoin has crystal clear exponential growth. And another is its value in USD, where again the growth is clearly exponential. Although these quantities are not the same thing as adoption, they are probably proportional to adoption. 2.5 years ago, there was one user of bitcoin. We may estimate that there are somewhere between 104 and 105 users of bitcoin at present. Thus, in another 2.5 years, there will be somewhere between 108 and 1010 users. Since there aren’t even 1010 people on the planet, we may estimate that adoption will be ubiquitous in approximately three years.

Attack vectors

This incredibly rapid exponential growth is being powered by the fact that people around the world are quickly learning about it. Thus, the exponential growth can only last until it saturates the world, at which point it will continue growing only at the rate that humanity grows (which is also exponential, but much slower). At present, there is no reason to think the growth will stop before that. There are no credible attack vectors at all; not even government (the US government or any other) can stop it, because the economic incentives are too large. A War on Bitcoin would have exactly as much efficacy as the War on Drugs: none. Bitcoin is susceptible to DOS attacks, but that would only slow its growth, not stop it. The only credible threat to bitcoin is quantum computers, because bitcoin relies on classical, rather than quantum, cryptography. But that threat is many years away. Bitcoin will be ubiquitous by then.

What will happen?

Bitcoin will take over as the currency of the internet. It will also take over as a store of value; why earn a measly, less-than-inflation interest rate in a savings account when you can have steady appreciation of value if you just keep your money in bitcoin? People will spend less and save more because they know if only they do that, they will be richer in the future. Companies will no longer produce things of no value, because no one will buy them. The world will become more efficient, because there will be less waste. Everyone will realize how much they lose by spending money on valueless things. There will be a more equitable distribution of wealth, because no one can inflate (or, to use a less charitable term, counterfeit) bitcoin at their whim.

Bitcoin will also take over any fiat currencies that inflate too rapidly (think Zimbabwe, Argentina, or any other country that presently has or will have a rapidly inflating currency). Central banks will be under enormous pressure to stabalize their currencies or become obsolete. Many banks will collapse. Many fiat currencies will become worthless. Probably, all fiat currencies will become worthless eventually, because it is only a matter of time before the central banks fall into the temptation of inflating their currencies just a bit too fast.

How to proceed

Since bitcoin appreciates in value very rapidly during the singularity phase, you should convert all of your liquid assets to bitcoin as quickly as possible. Do not keep any cash, savings, or checking beyond what you need to pay for goods and services that cannot yet be paid for with bitcoin. The more things you can buy with bitcoin, the more bitcoin you should keep.

Stop wasting money on excessively expensive meals, televisions, cars, and anything else that loses value quickly or instantly. Instead, put your money into bitcoin. You will be much richer that way. You may think having less stuff is less fun, but actually the pleasure of financial freedom far, far outweighs any losses.

During the singularity phase, you should also take out loans to buy bitcoin, since bitcoin appreciates far more rapidly than interest on any fiat currency loan. When bitcoin gets near saturation, which is the end of the singularity, you should pay off the loans, because at that point the rate of appreciation will probably be a lot closer to the interest on the loans, and you may not be able to reliably earn money that way anymore.

You may also be tempted to convert other assets to bitcoin. If you are invested in anything that is likely to be bitcoin-unfriendly, like a bank, it would be wise to convert those assets into bitcoin. However, if you are invested in companies that actually produce value, those companies will thrive after the singularity, so it is not necessarily a good idea to convert those assets to bitcoin.

If you own assets where the ownership of those assets is certified by a country that is likely to collapse after the singularity, such as if you owned land in a country where the currency is rapidly inflating, you should consider converting those assets to bitcoin, or risk losing it when your country’s government collapses.

If you own a business, you should start accepting bitcoin as quickly as possible to maximize your ownership of the bitcoin economy. If you don’t own a business, consider starting a bitcoin business. See my previous post to learn more about bitcoin startups.

Conclusion

The economy is going to change very dramatically in a matter of three or so years. You are likely to be doing a significant amount, if not all, of your economic activity in bitcoin very soon. The change will be as dramatic as, say, computing or the internet, except that it will happen much faster. The change will be for the better, since it is more convenient to use bitcoin than fiat currencies for digital payments. Fiat currencies may stick around if they do not hyperinflate; they will probably still be useful for buying coffee. The most interesting change is that we will all become more motivated and productive, since we will see very clearly how our work ethic affects how rich we are. And the world as a whole will be significantly more efficient, since it will be extremely difficult to finance huge wastes of money, like wars.

Personally, I have invested most of my savings into bitcoin, and am in the process of figuring out precisely how much more it is wise to invest. I have not yet taken out any loans to buy bitcoin, because that decision is too hard to swallow (I may yet do it if I can stomach it—Falkvinge did.) I have also begun producing bitcoin businesses which I am hoping will support me after I graduate. (My bitcoin savings alone will actually probably be enough to support me, but I will be richer if I work too.) Most of the other ideas I had about what to do with my life after graduation have gone into the toilet—I will probably do something with bitcoin.

In the future, books that summarize the history of money will have a line that says, “and then came bitcoin.” It is the economic singularity. And we are living in it now.

Reprinted with permission. Donations to Astrohacker appreciated: 1CU8KRSTcrYKyjfeGRTjpJ1S57jViwqrnh

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Friday, May 27th, 2011 at 5:22 pm  
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