Johan Van Overtveldt

Belgian website’s banker mole reveals stunning truth

Yesterday, the Belgian website Trends led with an investigative article using a mole inside the Bank of Greece. The allegation – put forward by prominent economics writer Johan Van Overtveldt – is that the Bank has run out of money from other sources, and is simply printing its own euros to keep the other Greek majors afloat.

Johan Van Overtveldt is a director of Belgium-based economics think-tank VKW Metena and a regular columnist for publications such as Knack, Trends, De Tijd and The Wall Street Journal Europe. His main areas of focus are history of economic thought, macroeconomics, industrial economics, international politics and terrorism.

Thanks to Slogger Gemz, there is a translation of the article below:

‘We will call him Dimitriou, from the name on the picture of the waiter who serves us in one of the hotel restaurants in Syntagma Square. After a brief introduction Dimitriou pressed me by the the hand and informs me of the success of the Greek edition of my book.

It is noteworthy that he immediately takes me to a table which has a clear view of the restaurant’s entrance. Dimitriou is not really nervous, but he knows that he is doing something that he ought not do. That is to say, speaking off the record with a journalist about the Bank of Greece. It is one of the central banks that form part of the system of the ECB.
Dimitiriou describes to me his job function at the Bank of Greece. It is just under the directorate of the Bank, a high position let us say. Central to his story, is the ELA program. This stands for Emergency Liquidity Assistance, a kind of emergency program where national banks that are part of the ECB system can fall back on in case of an unexpected emergency.
Ireland uses this mechanism a lot, and for the last few months, the Greek use of the ELA facility has grown substantially. By the end of November this amounted to some €43bn. On the 8th of March the Greek parlament voted that this utilization could go up to €90bn, and according to Dimitriou this will be used. Besides this, Greek banks have called on €73bn in liquidity from the ECB through normal channels* [*Klaus Kastner speaks of this at length].
Dimitriou tells his story of the ELA and of the Greek bankruptcy: “The normal way of things is that banks with liquidity problems offer assets to the ECB. In exchange euros are transferred to the bank in question. This so-called collateral could be anything: bonds from the bank’s portfolio, outstanding loan packages, and so on. The ECB investigates the value of this collateral and on the basis of this will take 70% to 90% of the value into account. The problem is that Greek banks have nothing more to offer the ECB. With the €73bn already taken up by the banks, these banks are at the end of the road. Given the continued flight of capital [out of Greece] the banks are having to cough up more of their remaining liquid funds. This is now happening through the ELA mechanism.”
Dimitriou knows that the capital flight from Greece is around €60bn, and this is the puzzling part, around a third of the Greek GDP. [!!] How does this square with the ELA mechanism? Dimitriou looks me straight in the eye and says in a soft voice “Greece is printing its own Euros. The bank of Greece credits the accounts of Greek banks that would have been shutting their doors but for the emergency funds. All Greek banks are effectively bankrupt, it is that simple. These zombie banks can only survive through these ELA injections. Within the ECB system the only collateral for the euros created within the ELA mechanism – is the guarantee of the Greek state. I do not know what you think of this, but my humble opinion is that this guarantee is as good as worthless. You can change all sorts of declarations about the whys and wherefores of these operations, but believe me, the basic fact is simple: only by allowing the Greek central bank to print euros [create euros] can you avoid the implosion of the entire Greek financial system, with all the consequences that this would have for the eurosystem as a whole”.
The second rescue package that was given to Greece with the debt allowance of €100bn is an eye-catcher is just another fix? Dimitriou says “Yes; first and foremost: how long will this take to become fully operational. Every day the Greek banks are continuing to bleed. Secondly: more than 60% of the aid to Greece does not even come into the country, most of it goes to [private] banks in other countries. Thirdly: how does this aid package help the Greek economy to grow? I simply cannot see this, you know. It wins a little time, in my estimation six months at most and that is being optimistic. In the meantime, the instructions of the government and from the top of the Bank of Greece are quite clear: keep pumping from the ELA well!’
This is the first evidence I have seen of straightforward money-printing going on. Other indirect methods are of course being used throughout the eurozone, but the imputation of this piece is that this action in Athens is either unauthorised – or Mario Draghi is turning a blind eye to it.
It once again raises the obvious issue: as the situation in Greece is so patently hopeless – and even what the Troika has offered is a complete sham – why is the EU persevering with
the pretence that Greece can any longer remain in the eurozone?
And the answer – as I posted a few days back – is that (as this article confirms) Greece is running up an ever-bigger debt at the ECB; if it leaves the ezone, that will become one whopping great bad debt.


  1. If you were lokking for a reason not to hand over €130bn to Greece and letting her sail off into the sunset, this sort of thing would be just what you’d be looking for.

    O am I being tooooo cynical?


  2. As soon as the first trimmed installment of the new package is released and only a few weeks after the elections, the plg will be pulled. (I expect that to happen between mid May to mid June)

    They need to have made even a tiny downpayment in order to activate all the contract clauses that in fact allow the virtual confiscation of the whole country.


  3. It will be interesting to see how the german press pick this story up. There was not much fuss made when Ireland printed.

    Until price inflation starts getting scary, it suits the ruling class to see no evil. But then it’s too late to stop it. Of course the elites will have accumulated all the tangible assets by then, so what do they care? Same old cyclical enslavement repeated.

    PS John, followed your posts when as I was India. Brilliant reporting on Greece.


  4. Could this euro-printing escapade be the opportunity for Germany (and perhaps others) to finally say “Scroo Yoo!”?

    Not only, but also – just to keep the pot boiling, this on DMN this morning;

    “Venizelos is the new PASOK leader

    In the middle of the crisis: Greece needs new finance minister

    Evangelos Venizelos has announced his resignation. He wants to concentrate fully on his new job as head of the PASOK party. Thereby, Papademos loses the man who, in the coming months, would actually have had to implement the EU savings requirements. Thus, the reforms are likely to be further delayed.”
    The job is a Herculean task for any new finance minister: Forced into an extremely tight schedule, the finance minister has to implement the requirements of the EU for further belt-tightening. The familiarisation period alone is likely to take several weeks.

    It can therefore be assumed that further reforms in Greece will be delayed. This could very soon affect the figures and throw most of the already existing over-optimistic forecasts of the EU prognoses onto the rubbish heap.”

    And a little bit further away –

    “Chinese Premier Jiabao fears a new cultural revolution

    The Chinese Premier Wen Jiabao has called for more democracy and radical reforms. But his motives are not only about concern for the welfare of the people. In the party a dispute is raging over the correct orientation for China.
    Since the initial signs of a crash in China (more here) the first Chinese have already started to leave the country (more here).

    Unusually, Wen openly criticised the conditions in China and declared himself very much in favour of more democracy in the country. In the future elections should be conducted not only in villages but also in cities (in which more people live here – more here) and at the regional level, Wen has demanded. “I believe the trend towards more democracy cannot be stopped by any power”, he said.”

    Marvellous innit – the boss of the Commies wants to introduce more democracy while the Hirnrissigen* in Brussels want to eliminate it to the greatest degree. Truly interesting times.

    *Hirnrissigen = crazies, crack-brains, lunatics etc. etc.


  5. If I have learnt one thing over the years it is this: if someone I do not know very well tells me something, the first thing I ask myself is, “Why am I being given this information?”.

    Now I may be a trusting old soul by and large … but even to me this is a bit whiffy. I’m not saying that it’s not true (how could I know?) but I wonder in whose interest this works. It’s all very well saying, ‘Follow the money’, but when the stuff is sloshing about like a leaking South West Water main, it is difficult to see the point of origin.


  6. Pingback: John Ward – Bank Of Greece “Printing Its Own EURO’s” Says Belgian Economist – 15 March 2012 | Lucas 2012 Infos

  7. I cannot believe that the ECB is not aware of the Greek creation of Euros if it is going on. I also cannot believe that the Bundesbank, Schauble and Merkel are not aware of this if it is going on.
    I lean to accept that somekind of Euro creation is going on because as the informant says, the only way the effect of capital flight from the Greek banks can be countered is for them to get the Euros from somebody like the Greek Central bank or the ECB.
    As for the legality or transparency issues…puhlease spare me, this is the EC in action after all.


  8. Thanks to John and Gemz.

    If true, and it becomes publically accepted to be true, then Greece’s EZ exit looks certain. What is more it undermines the Eurozone as a whole.

    It would be interesting to know if the EZ have any restrictions on Greek Euro circulation outside of Greece because the obvious thing to do with those freshly printed Greek Euros is to launder them so that in the increasingly likely event of a Greek EZ exit the banks hold currency which will still have some value.


  9. So by now we´ve moved from cooking the books to ripping of private investors to outright counterfeiting currency?
    Because that is what it sounds like, EUR printed and guaranteed by Greece hold about as much value as EUR printed and guaranteed by me.


  10. “Foreign credit given by the Bundesbank within the eurosystem”
    aka TARGET2
    aka moniez that go poof if the eurosystem crashes
    aka moniez that kept southern economies afloat to buy our crap and fund our export surplus

    You´re welcome.


  11. Terp, if you own a house you’re a better bet. At least you have an asset.

    It’s a shame the Greeks aren’t printing Drachmas instead. Unless of course, they already are…


  12. OTOH if you knew that sort of thing was going on, you’d prefer that your own 130bn of fiat money was not going to be debauched by 90bn of fiat fiat money. But to answer JW’s question, it’s to avoid the EU being seen as having been pwned to bits by the crooks on Wall St. For the EU mafia, it is like having to pay for the privilege of donating a kidney.


  13. The head of the Mitsubishi UFJ Financial Group global banking operations, told the Financial Times that they had received approaches to buy more than $119.6 bn of mostly eurozone assets, as banks in France, Germany, Spain, Italy and the UK have sought buyers for unwanted assets.
    “We have the risk appetite for deals in Germany and northern Europe but not in southern Europe,” he said. “But that means only a small percentage of what we have been offered is appealing”


  14. depends what you mean by ‘democracy’. If iit’s what we call democracy here in the west then you can forget that. Remeber, originally ‘democracy’ was a system of governance in ancient Greece in which only men registered for military service had a say.

    In all probability the Chinese mean giving more say to party members as to how the party is run.


  15. The current economic paradigm is falling to pieces but MSM’s focus solely on the numbers means they are not looking at the bigger picture.
    When the Greek economy implodes, civil unrest could easily degenerate into anarchy. (We are told it’s easy to buy a rifle on the black market there.) Two possible outcomes; the Greek military take over, and/or Turkey seizes the opportunity of the chaos and takes over the disputed borders and possibly the other half of Cyprus. Dangerous times, and all due to the Euro. Those printing presses should have been churning out drachmas.


  16. @Confused,

    If you were lokking for a reason not to hand over €130bn to Greece and letting her sail off into the sunset, this sort of thing would be just what you’d be looking for.

    Surely if Greece is printing its own, you are assured of getting your money back? I don’t see the problem ;-)


  17. FWIW euros are printed in several places and contain the originating bank coded in the serial number. But this piece was not about paper, but electronic ledger entries.


  18. So the Greeks are printing money are they? But is this not what every London Hedge-fund does each morning before breakfast (okay, after breakfast). Okay, this money stays in the notional realm of the derivative, but the profits do not.

    Someone somewhere is being careless.

    Greece is running up an ever-bigger debt at the ECB; if it leaves the ezone, that will become one whopping great bad debt.

    Which is why Greece will stay in the eurozone. The likes of Draghi are now terrified of the consequences of losing that money and will do anything to avoid having to deal with such a terrible outcome. All sense and proportion went out of the window a long time ago if this article is to be believed.


  19. BTW can anyone tell me why I cannot post with my other email? WordPress tells me that “I need to be logged in with that email address to post comments” – is this WordPress or have you clicked a button in Admin? I will add that there are a lot of queries on this topic at the helpdesk – none of which can be seen as they have not yet been moderated.


  20. The Troika appear not to have scrutinised and validated the results of the debt swap, and now this possibly illegal issue of money seems to have slipped under their radar too. They are turning a blind eye to a lot of things. Slog readers may have their suspicions.


  21. Was not Greece supposed to sell 50 Billion’s worth of state owned assets?

    Or are these assets now supporting the ECB preferential creditor position?

    It will be interesting to see what is left of Greece after the inevitable reality check takes place and they call a halt to this game of ‘creative accounting/money creation’ and just default.

    Greece is likely to be the first of many and the probability of ‘unknown unknown’ events being triggered by counterparty risks are very high.

    Interesting times it remains to be seen what changes in the rules of the game can those supposedly in charge make because as sure as eggs are eggs they will continue to change the rules (or re-interprete them)


  22. Actually, it’s not money-printing on the part of the Bank of Greece. It’s money-printing on the part of the ECB which gives the printed money to the BoG which gives it to Greek banks.

    Greece is by far not alone. In fact, Draghi acknowledged at the outset that one of the most serious issues was the availability of “eligible collateral”. One way to resolve that was to scratch the word “eligible” because, for some months now, everything is eligible which the National Central Banks deem so. Some banks have allegedly signed over part of their loan portfolio as collateral (remember: “eligible collateral” used to be government securities with investment grade rating…). And I believe it was Italy which came up with the simplest idea so far:

    Document the debt owed to the ECB with a promissory note and have that note guaranteed by the state. Just like dodgy sub-prime loans became AAA-rated once they were put into a SIV, that guarantee makes the note a security and the Bank of Italy can deem it “eligible collateral”.

    But there is, indeed, another way how Greeks have learned to print their own money over the last years (since long before the crisis). In fact, they created a new Euro-currency and that is post-dated checks. A pays B by issuing him a check dated, say, 6 months later. B endorses the check and uses it to pay his bills with C. And so on… No problem at all if the check eventually gets paid. But the check could get paid by paying for it with someone else’s post-dated check…

    Actually, there is nothing wrong with this kind of system per se. In German and Austrian banking it’s called bill discounting with a rediscount facility at the Central bank. What makes the Greek system so unique is that it is totally unregulated and no one has the slightest idea how much “created money” is in circulation that way.

    A Greek familiar with the scene once told me that up to one-third of business transactions outside the major cities are being settled that way.


  23. I’m sitting here in the UK thinking that, if the UK had adopted the Euro, my paltry savings in my bank would be in Euros. And I’d be a very worried man right now. A Euro collpase would mean converting my hard-earned back into pounds sterling. The bank would no doubt charge me a big fee for doing the conversion. The price of everything would skyrocket (remember decimalisation folks?).
    When I put myself in their shoes, it’s no wonder that the people in Euroland are desperate to hold on to that currency. It would take a brave politican to call it a day.
    p.s. I am anti-EU by the way; please don’t shoot me down in flames ;-)


  24. @VJ: On democracy. It may not be as bizarre as it sounds. Sure, in the West generally, and the EU in particular, the political elites are stripping away what we call ‘democracy’. We are becoming a 21c corporate/political fascism. And in China, the bossman wants to introduce more of what THEY will call ‘democracy’, which will also be a 21c corporate/political fascism.

    None of it will be accountable democracy. That is history, sooo 20th century.

    By the time this transformation process is complete, we will ALL end up with a similar system of what THEY call ‘democracy’ but in truth won’t be worth the paper it’s printed on. A bit like the EU Constitution.


  25. @gojam: Yeahbut … even if Greece is ejected from the EZ, it might continue printing Euro notes. Why not? I mean it’s been known for years that Iran prints dollar bills!


  26. @Max

    whilst the ECB has printed around €1trillion, this is for a GDP of €15t.

    Britain has printed almost as much – for an economy far smaller. The problem is that the Eurozone is in the cross-hairs of the markets right now, and nobody seems to have noticed what is going on in the UK. Add to this London’s unregulated derivatives bubble – all off-balancesheet and not traded openly – means that nobody knows how much there might be. The sums will be beyond the fantastic.


  27. If the money owed to the ECB referred to is Target2, I do not think it’s as simple as that. Target2 is the system used as a conduit. The debtor remains as Greece.


  28. All this talk of printing their own euros conjures up visions of suitcases stuffed with unauthorised euro denominated banknotes bearing German serial numbers, fed into an unsuspecting euro economy with the intention of wreaking hyperinflationary havoc. This may be appealing but a bit hard to swallow.

    Exactly what form of new money is being created? Entries in the accounts of Greek banks or newly printed euro denominated banknotes? If it is only the former then the ECB is unlikely to worry unless then amounts are large enough to create systemic risk to the EU. The ECB may be in on this anyway. After all it was only just over a year ago that headlines were screaming: Accelerating Deposit Flight In Ireland Forces Irish Central Bank To Print Money Independent Of ECB. The ECB was aware in that instance.


  29. There is an old MI6 joke that there are two countries that could not opperate properly : Japan , because no one talks and Greece because everybody talks ( and everybody lies , i add myself ) hard to believe anything the greeks say ,officialy or unofficialy .


  30. @Klaus

    thankyou for the clarification. We need a few bankers around here with a moral core and a large spot of integrity.

    I had thought to share it with you, but seeing that you have commented already.

    The notes you describe in Greece are the same sort of thing that any hedge fund can do (so long as they can pay the interest on the base rate – not hard at 0,5% in London!). The wholly unregulated derivatives sector in London is a real time bomb, as much as any ship in the Thames estuary.


  31. @BT

    this has nothing to do with Target 2 – which siphons off central bank money and puts it where it is needed. It has just gotten a little out of control with the Club Med central banks being in such poor shape.


  32. Good point – I think we in the UK would rather forget this. Add to that our blessed Chancellor is proposing to offer 100-year bonds. We really are in never-never land, aren’t we?


  33. Strangely for a few weeks now, I have not seen a single “Greek” (Y series) banknote in 50, 100 & 200 euro notes, here in Athens.

    Vast majority is German (X series) & Italian (S series).

    There are plenty Greek notes in 5 & 10 Euro notes & fewer 20 Euro notes.

    Anyone knows or cares to explain why?


  34. I think the ECB has printed (via LTRO) a far higher proportion to Eurozone GDP than either the Fed or the BoE.

    As to derivatives, yes these are a major ‘global’ problem alothough much is written in London the players are JPM, BoA, Citi, Deutsche Bank, etc and when these explode they will land right back on their respective Governments (as AIG did although the London office wrote the business the US taxpayer picked up the tab).

    One thing I have always found funny is the Euro politicos view that all of the problems are due to nasty ‘anglo-saxon’ bankers while their banks were whiter than white, this could not be further from the truth, German and especially French (and don’t forget Dutch, the ABN purchase by RBS was tantamount to fraud the state of the loan book they had) are if anything more venal and corrupt than any US/UK bank, and i know I’ve worked for several of them over the years.


  35. This looks slightly more complicated than it seems.
    Are Greece printing their own currency notes?
    Are they creating the new money electronically?
    If the latter, it seems they’re allowed to under the ECB/ELA programme.
    Does the ECB know how much electronic money they’re creating?
    Does the ECB care?
    Are other EZ countries doing it too?
    Is the Euro becoming a banana republic currency?…………………..


  36. I´m sorry but this is NOT how I read the article.
    The supposed greek informant explicitly states that the BOG is printing EUR notes themselves (under ELA) because the 73 billion they got from the ECB are gone and they do not have any more collateral to pledge.
    The article says the BOG is printing physical notes to keep their banks from running out of cash to hand out to folks who pull their deposits (aka bank run).
    Am I missing something here?


  37. If what the article states is true I would guess Y series (greek) Euro notes are being discarded for other series (laundered) because of fears the greek notes will be deemed counterfeit in the near future.

    Just a crazy thought, of course…


  38. @Jason

    you bring up an important problem: bank regulation. They are tightly regulated in places like Germany and Sweden – and loosely regulated in places like Britain and Portugal. It is this imbalance that is causing a lot of problems. It is something that should have been enforced at the beginning of the Euro (the Germans wanted it, the French/US did not). In short, otherwise tame banks go feral in London where the cages are all open.

    It is a dangerous situation for sensible investors and business people.

    I would like to see your evidence for “a far higher proportion to Eurozone GDP than either the Fed or the BoE” LTRO or otherwise. Do you have any links? After all, if the Fed/BoE has published data, would it not be possible to do it at the ECB too?

    @Carys – – – as to confidence tricks, we all need money to buy things. That is confidence. I note that Sterling is down this morning after the warning of a downgrade. Perhaps the inflation is now starting? Even Mr Dopey Warner at the DT has seen the potential to erase the debt using Mugabenomics. Perhaps he has been on a trip not to Davos but Harare?

    @Max – – – what is the British electorate/citizenry doing about all this? Osborne is an elected MP. He should be listening to you, or is it that he cannot hear you? I think the British electorate need to raise their voices above a whisper. Remember the anti-internet regulation rallies? Eight in Britain and seventy in Germany. Germany’s Bundestag had already backed down on that issue as well. Where does Britain stand on this? That it is off-topic only shows that there is no effective voice in Britain against what is happening.


  39. @ Bankrupt. The confusion may be in the “mole” using a figure of speech …“Greece is printing its own Euros. The bank of Greece credits the accounts of Greek banks …. ” [presumabaly electronically rather than via bits of paper]
    The consequences of creating both paper and electronic money have been discussed already but at this point I’m throwing in the towel. It’s the most spectacular economic mash up ever.


  40. Inflation is like a pear. By the time you see a black spot on the skin it’s too late.

    (the original quote cites a banana. But IMO bananas are fine with a few black spots).


  41. @Terp
    whether it is the BOG or the ECB printing – they are still printing.

    What I do not see is that the Eurocrats still have confidence in Greece when the Greeks themselves have lost it. Klaus Kastner has dealt with this in some detail on his blog, and it is a situation since 2010.

    Tell me: what is the difference between printing money and creating money using a credit-debt contract for a mortgage or credit-card?


  42. But he also said the banks need the funds to meet the deposits that are pulled on a daily basis. That would mean in cash, no?


  43. @BT
    any person or organization that has a banking licence can create electronic money – for credit cards, mortgages and derivatives.

    BMW has a banking licence for example. So do Sainsbury’s and Tesco.

    Does the ECB care? – – – does the ECB know? Or are they too terrified to look? Modern post-classical economics can run rings around those trained clasically.


  44. When I met several Germans recently with euros in their pockets I had fun asking them, are they German or Greek euros. They look bemused. They haven’t got a clue.Seems to take an anti EU Brit to tell them to look at the serial number.


  45. @Gemz. The very few Brits taking any interest in the situation are looking towards UKIP. Cameron’s manifesto included cast-iron guarantees to hold a referendum, but he has reneged on that. Osborne is preceived to be a joke.
    Otherwise TV soaps, celebrities’ lives and reality shows seem to be the main topics of conversation (the same everywhere isn’t it?).
    In fact there have been two defections to UKIP by twoTory politicans (Swan and Helmer) over the last few weeks. The remainder have been threatened to be cast into outer darkness by the Conservative hierarchy if they step out of the pro-EU line.


  46. @Jason
    a very interesting read – if only skimmed. However, it only goes as far as 2009. We are well into 2012 and things have changed dramatically. My other thought is that there is no dissection within the ECB – which after all does not represent the goings on in (say) the Bundesbank or the BoG.

    I will see if the writers have updated their ideas. The CEPR itself does not have anything more up to date (on a very quick search of their published papers). Perhaps you can find one?


  47. @Green Gecko

    It would not surprise me to know that – but I doubt if the Bundesbank is going to discriminate on the basis of the provenance of a note.

    Just think of the trouble and expense of checking if a note has a Y or a Z or a P on it … it would make no sense. The Bundesbank will either change them all at face value, or none. That in itself would be expensive enough.

    Speaking of what you do shows that the average Brit lives with a level of fear that most Germans do not.


  48. @Max

    and the UKIP is of course the poblem. They have no experience in government, and Whitehall would have a ball. The PVV has 20%+ of the seats here in NL which means that all can see that they are a fringe party with no sensible claim to leading a national government. They are, let us say, a safety valve for views that are extremist.

    It is a great shame that Britain has such an unwieldy and unuseful system of voting that leaves UKIP in the shadows where its influence is greater through people imagining what it could do rather than what it really is capable of.


  49. @MaxC:/@Terp: Exactly.
    It may be a figure of speech by the mole. But Greek banks are suffering heavy capital out-flows which suggests currency notes are being printed.
    The very existence of the ECB ELA system is fundamentally wrong.

    And at this moment I don’t know for sure if it’s currency notes being printed or electronic money being created. If either is going on secretly by the BoG without ECB authorisation and control, the Euro is destined to become a banana republic currency. Wait till Italy powers up its printing machines!!! They have form.

    The more I learn about the control and management systems governing the Euro currency, the more I’m convinced it was dreamed up by a bunch of innumerate, incompetent buffoons who simply do not understand what they’re doing. Welcome to the EU.


  50. In the UK, anyone granted a banking licence comes under the strict control of the BoE. None of them would get away with printing money in the sense we are talking about here tha appears to be going on in Greece. Only the BoE is allowed to produce worthless currency notes and it does a very good job of it, I might add! ;-)


  51. @BT

    “anyone granted a banking licence comes under the strict control of the BoE” – – – yet you have no faith in politicians. As to the strictness of the BoE, they have reduced the cost of borrowing that means that creating money from contracts is now cheaper than it ever was. Is that “strict control”? It doesn’t look like it from here. What is more, how do the BoE hope to control this if most of it is off-balance sheet and not traded openly? It is impossible. In short, the BoE whilst strict has no way to implement that strictness, and your strict politicians don’t know about the problem yet.

    I do understand the difference between creation and printing; it is an important difference too. It is also the hope of the BoE governors that much of that created money never reaches the real world.


  52. @Mike

    as Klaus Kastner says, are they printing their own, or getting them through the ECB? It is a technicality that has important consequences. The Bank of Ireland (or whatever it is called) is allowed to print Euros – but only in certain measure.

    Printing euros without the ECB knowing about it would be a very serious situation indeed. Which is why the Greeks are under such scrutiny. Thankfully Greece is only 2% of the Eurozone GDP.


  53. Hi Gemz

    Yes things are a lot different now than in 2009 (a lot worse tbh) I will do some hunting and see if I can get an up to date position. My view is that Sterling, Euro and USD are the ‘three ugly sisters’ who are in a dance of death together


  54. @Gemz:
    Nothing I wrote was intended to give the impression that I have any faith in either politicians or the BoE. Far from it. I was simply pointing out that printing currency notes is a strict preserve of the BoE, not of any old bank with a licence. The issues you raise are of course valid and highlight what an appalling job government (the last Labour Govt), BoE and that other useless organisation: FSA, did in managing our economy.
    Between them, they took us up the creek and we’re now grounded!


  55. @Terp: You’re probably right. My idea that it might be hoarding doesn’t fit too well given that @Mike says there are plenty supplies of other national €50 / €100 / €200 Euro notes in circulation, especially German.


  56. The problem in the UK (and this can be laid at Gordon’s feet though how much was pressure from the EU I don’t know) was the removal of this function form the BoE in 2000 with the creation of the FSA. Had the BoE been in charge of banking supervision from 2000 then I think we might have had a different approahc to reigning in banl lending, the FSA just didn’t know what i was doing and the banks ran rings around them


  57. I’ve been waiting for something like this to emerge. My understand of ELA is that a fixed number of EU nations have to determine there is an emergency (although this seemed to be intended for non-European nations as recipients).

    This is first smart thing that the Greeks/Eurocrats have done since this crisis emerged. There is nothing sacred about money, it is a tool to be used (as a shovel is used to dig a grave, right?).

    Right now, the Greeks must borrow euros that nobody outside of Greece will lend. What is Greece to do? Starve? Have another bloody civil war/revolution? If Greece prints she meets redemptions — capital flight out of Greece. This problem exists b/c the ECB is run by fools. The ECB should have been recycling flight capital back into Greece at near-zero rates. The central bank is not a safe haven for flight capital or a wealth-management firm for millionaires. Both ECB and Target 2 system are disfunctional b/c their managers do not address the matter of intra-EU capital flows directly. As a consequence, flight capital flows increase, including flight out of the euro itself.

    It is the capital flight/slow motion bank runs that is destroying the European economies, that and the waste-based economy that cannot pay its own way, but that is something else.

    Greece should guarantee all deposits remaining in Greek banks and be done with it. Not the bondholders or other liabilities, but deposits only. That would be a shot across the bow of Rehn, Schauble and Draghi as the guarantee would be in euros and Greeks would be clear that there are some Greek interests (in euros) that the Greeks will defend.

    By doing so the Greeks would defend the euro! Sacray Blew!

    The Greeks also should (if they had a government they could) re-constitute enough banking in the country to manage capital @ €500 billion. (they would need € 25 billion to capitalize a couple of ‘New Banks’) That would be the second shot. At a trillion euros the Greeks could shoulder the ECB aside and liquify the entire EU because the EU refuses to do so! This is because Greece has a treasury and the ECB does not. The alternative to Greece accepting liabilities (at this point who cares?) is Germany accepting them de-facto which will be annihilation of Germany by way of these EU liabilities.

    Germany could do the same thing, print euros and end the immediate crisis, but they are cowards, caught up in the idea of the sanctity of holy money which must be preserved at all costs.

    Up until this point everyone in Europe has been playing defense, being pushed to the end of the gangplank. Maybe the financiers will now wake up and ditch the sanctity of money shibboleth once and for all.


  58. @Jason:
    I believe the FSA creation to replace BoE supervision was Brown’s personal decision, as was making the BoE independent. He stuffed the FSA with old cronies and told them to run ‘light touch’ supervision. And the BoE was never really made independent (even less so now); if it had been it would have created its own inflation measurement and set interest rates accordingly (they would have been higher), not the Brown imposition of CPI which fails to capture much price inflation and which paved the way for very low interest rates and the huge credit bubble.


  59. Pingback: Bank of Greece 'Printing It's Own Euros' Says Belgian Economist

  60. About 6 months ago the only way the EZ was going to survive was if the ECB printed – to bail out a bust banking system and the sovereigns and to cover debt maturing for both – and new debt caused by government deficit spending. The view was that the Germans would never let it happen. Well they have. The german voters and Buba never got a chance to object because it was all done very quickly and with much smoke and mirrors.

    There is in fact nothing much wrong in printing money and injecting lquidity at times of great stress – but like certain medicines – you should not overdose.

    The Ez will survive another day. However it does not fix the structural competitiveness problem – but the can has been kicked – maybe past Sarkozy’s election “Greece is saved”) and possibly past Merkel’s. I have no idea where all this is going to lead but my guess is that club-med will not be able to borrow from the (real) market for a generation and something like 1T euros needs to be created each year to keep them solvent.


  61. I agree that the article seems to suggest that the BoG is printing Euros but that is legally not possible. Only the ECB can create new Euros (be they Greek Euros or German Euros, for that matter…).

    I suppose the Greek informant meant to say that by the state guaranteeing a promissory notes of a bank is creating a security which security gives access to new Euros. Ok, indirectly they would be printing money.

    The 73 BEUR ECB funding is out of the blue. It was 92 BEUR just before Christmas (when I asked the BoG). Given the fact that the entire Greek banking system never had more than about 45 BEUR in Greek bonds, they must already then have used quite a bit of “other paper” to secure the ECB funding.


  62. In the end there is no difference between creation and printing.
    The supposed ‘closed loop” has become impossible for the Fed in the
    US to maintain.It took 3.5 years but its leaking out now.
    Real inflation is now running at 10% and starting an exponential
    terminal upward gradient..
    The loss of confidence is very close.
    The music is about to stop.Grab a chair now.


  63. Wall Street crooks have done many things, but they haven’t wrecked the EU. Generations of European politicians have done that, and European voters have let them. Without taking responsibility for one’s own problems, solutions will never be found.


  64. Why would Greeks, fearing Greece’s exit from the Euro, hoard bank notes? Wouldn’t most just open a Euro account at a foreign bank?

    Isn’t this what everyone in Greece is doing, including businesses and banks? If so, the Greek banks must inevitably be broke.

    So if Greece is keeping the banks open by printing Euros, it must be to facilitate the exit of money from the country prior to the country’s exit from the Euro. This will prevent a collapse in the value of the soon to be restored Drachma, as money will flow back after the transition.


  65. The latter would happen. No military nor any other state structure would be functioning when the engine stalls. The engine would stall because the problem is not just administrative, it is structural. For Greece, there is only plan A, buying time to fix this structure. No drachma printing will do any good, when there is almost total dependency on imports, not only for petrol but even for food. Because of this, a sudden forced zeroing of the deficit doesn’t imply just a smaller pie to divide. Basic goods would become scarce, a quick chain reaction between private and public sector would wipe out any money circulation, all incomes would be pactically zero, the state services would stop, looting would follow, then lots of blood when gangs raid houses. Take into account millions of illegal immigrants, which Turkey has been sending for years, observe their role in past clashes. Yes, when there is no bailout money as an international guarantee for Greece, Turkey is not going to stand still.


  66. just another dutch fairy tale to accuse Greece as the cause of a necessary euro inflation.
    Central europe loves to imagine and create bad woolfs who wants to eat the north pure red riding hood.
    First were the the bad lazy corrupted greeks, then portugueses, irishes, spaniers, italians, belgians etc but not the euro structure.
    But how all the bad south woolfs lost their wealth and the innocent north fairies increase their wealth is a big mystery.
    In economy I think is called “money transfer” ?


  67. @iraklis

    Perceptive and restrained; “money transfer” in your context has to be an all time understatement! Indeed, a euphemism that illustrates gallows humour at its best.


  68. @Klaus Kastner

    I know you are strong on the legal side of things, and all for doing the correct thing.

    However, as TERP says, the problem seems to be that the Bank of Greece is breaking the law and printing paper Euros.

    This is a very serious issue. If you do have inside info. on this, do contact JW at his email (above). I hope that this will spark enough indignation in your good soul that you will make representations where you can that might help to stop the silliness that is currently engulfing the Eurozone.



  70. Pingback: John Ward – Italian Crisis : Monti Moves Swiftly To Put Digit In Derivatives Dyke… – 16 March 2012 | Lucas 2012 Infos


  72. Pingback: John Ward – Revealed : How Berlin Has Been Planning A Euro-Exit Since 2009 – 21 March 2012 | Lucas 2012 Infos

  73. Pingback: HOW BERLIN HAS BEEN PLANNING A EURO-EXIT SINCE 2009 | Machholz's Blog

  74. Pingback: Germany Planning Euro Exit Since 2009 « alternative economics

  75. “It wins a little time, in my estimation six months at most and that is being optimistic.”

    That is six more months to get ready for the way the world is gonna change! Nothing wrong with ‘optimistic’! Unless of course you are all talking about this but doing nothing to be ready for it.


  76. Pingback: REVEALED: How the Troika bailout is ACCELERATING Greek insolvency. | The Slog

  77. Pingback: John Ward – REVEALED : How The Troika Bailout Is Accelerating Greek Insolvency – 5 April 2012 | Lucas 2012 Infos

  78. Pingback: EUROBLOWN: A small clue as to why the main Greek Parties are struggling for support…and why Brussels has a BIG problem | The Slog

  79. Pingback: John Ward – Euroblown : A Small Clue As To Why The Main Greek Parties Are Struggling For Support…And Why Brussels Has A BIG Problem – 12 April 2012 | Lucas 2012 Infos

  80. Pingback: EUROPEAN BANKNOTES: The suddenly missing Y chromosome in Greece | A diary of deception and distortion

  81. Pingback: John Ward – European Banknotes : The Suddenly Missing Y Chromosome In Greece – 18 May 2012 | Lucas 2012 Infos

  82. Pingback: Τράπεζα της Ελλάδος

  83. Pingback: Τράπεζα της Ελλάδος. | Στείρι Βοιωτίας

  84. Pingback: Τράπεζα της Ελλάδος

  85. Pingback: TheNewsgr » Το σκοτεινό ELA και η έκδοση χρήματος από την Τράπεζα της Ελλάδος

  86. Pingback: Το σκοτεινό ELA και η έκδοση χρήματος από την Τράπεζα της Ελλάδος

  87. Pingback: ΑΠΟΚΑΛΥΨΗ!!!!!Το σκοτεινό ELA και η έκδοση χρήματος από την Τράπεζα της Ελλάδος !! | Σύνδεσμος Αποφοίτων Στρατιωτικής Σχολής Ευελπίδων, Τάξεως 1

  88. Pingback: Το σκοτεινό ELA και η έκδοση χρήματος από την Τράπεζα της Ελλάδος

  89. Pingback: Effects on Belgium: bank of greece printing its own euros says belgian – The Slog | Euro Economy

  90. Pingback: Το σκοτεινό ELA και η έκδοση χρήματος από την Τράπεζα της Ελλάδος | Κ.Α.Π.Α.

  91. Money printing by digital, adding to the bank balance. Being done everywhere now, no choice, banks insolvent. There is no mention in the story regarding “euro notes”. Yet there have been a few stories regarding a Greek company printing Euro notes for the ECB. If; they are printing actual banknotes and ECB doesn’t know, things may be worse than the banks just being broke and printing fake numbers to enhance the balance sheets. It would make sense. Nothing like not being able to get banknotes in a bank run climate. One of the stories I recall regarded 10 Euro notes printed by Greece. Anything to is?


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