Bank Runs In Greece Will Soon Be Followed By More Bank Runs In Europe

Depression: "Runs on Banks": people milling about outside of bank. Photograph of Anxious Depositors, 02/28/1933 (Photo credit: Wikipedia)

The bank runs that we are watching right now in Greece are shocking, but they are only just the beginning.  Since May 6th, nearly one billion dollars has been withdrawn from Greek banks.  For a small nation like Greece, that is an absolutely catastrophic number.  At this point, the entire Greek banking system is in danger of collapsing.  If you had money in a Greek bank, why wouldn't you pull it out? 

If Greece leaves the euro, all euros in Greek banks will likely be converted to drachmas, and the value of those drachmas will almost certainly decline dramatically.  In fact, it has been estimated that Greek citizens could see the value of their bank accounts decline by up to 50 percent if Greece leaves the euro.  So if you had money in a Greek bank, it would only make sense to withdraw it and move it to another country as quickly as possible. 

And as the eurozone begins to unravel, this is a scenario that we are going to see play out in country after country.  As member nations leave the eurozone, you would be a fool to have your euros in Italian banks or Spanish banks when you could have them in German banks instead.  So the bank runs that are happening in Greece right now are only a preview of things to come.  Before this crisis is over we are going to see bank runs happening all over Europe. More...