Courtesy of Mish.
The first rule of panic is simple: “Panic before everyone else does.” With that rule in mind, the pertinent question at hand is also simple: “Should I panic now?”
For those in Europe, I offer an emphatic “Yes!” One is foolish at best to keep more than 100,000 euros in any European bank, especially any Southern European banks.
There is a clear and obvious “Rational Reason to Panic“.
By “panic” I mean get your money out now, while you can, before everyone else does. I am not the only one who thinks that way. Wolfgang Münchau makes a well-stated case in his Der Spiegel column Euro rescue plan: Thank Dijsselbloem!
Dutch Finance Minister and Euro Group Chief, Jeroen Dijsselbloem earned much criticism because he deviated from the official line that Cyprus was an “isolated incident”.
I welcome this unusual burst of openness. Dijsselbloem expressed the brutal truth. I’m not criticizing that he states the policy. Rather, I criticize the policy itself.
This policy will destroy the euro, with the two now foreseeable interlocking mechanisms.
The first way is capital flight from the euro crisis countries. Expect permanent restrictions on the free movement of capital.
The second way is a never ending recession in the eurozone.
The first of these mechanisms is the logical consequence of Dijsselbloem’s settlement blueprint. Spanish or Portuguese citizens would be pretty stupid to keep over 100,000 euros in a savings account.
Rational savers will distribute their assets to different banks, each with a limit of €100,000. German savers will do so as well.
Germany rejects a European deposit guarantee, so no credible reinsurance exists across southern Europe. Most of the Southern states are insolvent. A Cyprus-like rescue works only in context of a union of banks, and Germany emphatically rejects that mechanism. …
