John Cochrane The Grumpy Economist: Greece Again

My main thought: what about the banks? The minute Greece reopens its banks, it’s a fair bet that every person in Greece will immediately head to the bank and get every cent out. The banks’ assets are largely Greek loans, which many aren’t paying — why pay a mortgage to a bank that’s already closed and will probably be out of business soon anyway — and Greek government debt; mostly Treasury bills that only roll over because banks hold them. They can’t sell either, so the banks will instantly be out of cash.

The deal reported in today’s papers really barely mentions that problem. But that is the problem of the hour.

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Posted in * International News & Commentary, Europe, Greece