Greece turns to Gold

Dear Reader,

You will have all seen recent rises in the Gold price, in fact this is the third week running we have hit new all time record highs in Gold measured in GBP (Great British Pounds). The demand for a safe haven for peoples money is steadily growing and the price suppression by the manipulation of the market is steadily breaking under the weight of the demand.

Obviously one of the worst hit areas is Greece, with bailout number one having failed to stabilise the economy and bailout number two imminent. In fact I write this in late June 2011 and I think you’ll see this plan swing into action within the month. Largely because we know that Greece doesn’t have enough money to last another month, so its bail or collapse!

In response to this Greeks are doing the only sensible option left open to them and jumping from the sinking ship. (In financial terms anyway). Moving their money to safe havens and assets like Gold. See the excerpt below taken from the financial times……

“Greek citizens are emptying savings accounts and buying gold as they brace themselves for the possibility of a sovereign default and a run on the banks.

Pledges by socialist prime minister George Papandreou that his government would “save the country” have been widely discounted by the public. However, parliament gave him a vote of confidence late on Tuesday night. The socialists have a six-seat majority in the 300-member house.

Sales of gold coins have soared as savers seek a safer and fungible source of value.

“When the global financial crisis started, our sales of coins to investors overtook bullion for the first time,” said Harry Krinakis, at Sepheriades, a Greek precious metals trader. “Now the sales ratio has reached five to one.”

Tomas, a computer technician, has exchanged his euro savings for gold coins: “I keep them at home just like my grandmother did in the Second World War.”

Gold coin sales increasing over 500% is a sure sign that people have lost faith in the governments ability to manage their debt problems. Safe havens outside of their control is the only sensible option.

Whilst 500% is quite a staggering number it doesn’t really show the scale of the problem as 500% of 1 is only 5 and I’m not a man to give figures for shock value, information is king! (I wanted to say ‘Information is Gold’ but it seemed a little over the top in this article)

Lets measure this crisis in something we can all relate to ….MONEY!

In the first quarter of this year between 1.5 billion and 2 billion euros were being withdrawn from Greek banks EVERY MONTH. So with an 8 hour working day that’s just under 12 million euros an hour, every hour of every working day!

Now that IS a quantifiable figure showing the condition of the banking system. Worse still is the fact that last year 30 billion euros were withdrawn which is 2.5 billion every month, even more again!

30 billion euros last year represents 12.3% of total savings in Greece, with the crisis worsening and expectations of a second bailout increasing the pressure, how long do you think it will be before the banks decide to close their doors to stop the deluge of withdrawals?

Some of this money was transferred offshore to economies that were perceived to be more stable, such as Cyprus or Switzerland. As this global economy worsens even the offshore transfers are decreasing as their stability is not so ensured.

“We can’t trust the politicians to get us out of this mess and have to protect our families,” said Sakis, a garage owner, at an anti-austerity protest in Athens’ Syntagma Square. “A bank collapse has got to be in the cards.” He added he had withdrawn his savings and placed them in a bank safe deposit box for security. “Who cares about interest right now?”

Those of you with even the slightest knowledge of the financial system will appreciate how closely related all our economies are these days, even the banks are all tied to each other in innumerable and inseparable ways. What affects one of them, WILL have a knock on effect for the rest.

The US are still in denial about the next phase of quantitative easing but I would place good odds on seeing a new bailout package by the Federal Reserve in about 6 weeks time. Greece’s figures may be closer to home but make no mistake that a mass devaluation of the dollar will be catastrophic across the board.

The Greeks are taking action to secure their future, I hope you have had the sense to do so too.