KeNo's Housing and Economic Portal: Thursday May 7 Housing and Economic stories

The "War On Cash" Migrates To Switzerland - (www.zerohedge.com) Banks Increasingly Refuse Cash Withdrawals – Switzerland Joins the Fun, The war on cash is proliferating globally. It appears that the private members of the world’s banking cartels are increasingly joining the fun, even if it means trampling on the rights of their customers. Yesterday we came across an article at Zerohedge, in which Dr. Salerno of the Mises Institute notes that JP Morgan Chase has apparently joined the “war on cash”, by “restricting the use of cash in selected markets, restricting borrowers from making cash payments on credit cards, mortgages, equity lines and auto loans, as well as prohibiting storage of cash in safe deposit boxes”.

This reminded us immediately that we have just come across another small article in the local European press (courtesy of Dan Popescu), in which a Swiss pension fund manager discusses his plight with the SNB’s bizarre negative interest rate policy. In Switzerland this policy has long ago led to negative deposit rates at the commercial banks as well. The difference to other jurisdictions is however that negative interest rates have become so pronounced, that it is by now worth it to simply withdraw one’s cash and put it into an insured vault.

Having realized this, said pension fund manager, after calculating that he would save at least 25,000 CHF per year on every CHF 10 m. deposit by putting the cash into a vault, told his bank that he was about to make a rather big withdrawal very soon. After all, as a pension fund manager he has a fiduciary duty to his clients, and if he can save money based on a technicality, he has to do it.

What happens if Greece can’t pay its debts? - (www.theguardian.com) This time it’s real: Greece has wriggled out of looming national bankruptcy on numerous occasions over the past five years, but now it has just a few weeks left before it must sign a new debt deal with its eurozone partners and the IMF – or find itself heading for an exit door that leads back to the drachma. On Friday, after a meeting of eurozone finance ministers in the Latvian capital Riga, the signs were ominous. Malta’s finance minister Edward Scicluna, said: “I would describe today’s meeting as a complete breakdown in communication with Greece.” The Dutch finance minister and chair of the 19-member eurogroup, Jeroen Dijsselbloem, warned that it was very hard to consider a new programme for Greece to cover its funding needs beyond June, given the lack of recent progress. Time was running out, he said, again ruling out giving Greece a slice of the €7.2bn (£5.1bn) of previously agreed bailout cash being held back until a series of self-help economic reforms, ranging from a privatisation programme to pension changes, were agreed.

Greece's grand plan: default and stay in the euro - (www.telegraph.co.uk) With the country coming ever closer to defaulting to its creditors, here's how Athens could stiff its lenders but still remain in the euro. There's a new theory doing the rounds in the "Grexit or no Grexit" debate. Unlike the widely-held conjecture that a default would lead inexorably to Greece's ejection from the eurozone, analysts and economists now think there are a number of ways the debt-addled country can retain its membership of the euro while stiffing its international lenders. With the country's bail-out drama continuing into another month, even Berlin has reportedly begun drafting plans to deal with Athens failing to make its obligations without a "Grexit". A default within the euro is not as unprecedented as it sounds. Greece effectively defaulted on lenders when it underwent the largest private sector bond restructuring in history in 2012. In his former life as an academic economist, the country's outspoken finance minister also advocated Greece defaulting on its obligations while remaining in the currency union.

Boston Fed Admits There Is No Exit, Suggests QE Become "Normal Monetary Policy" - (www.zerohedge.com) Given all of this, we’re not surprised to learn that in a new paper entitled “Let’s Talk About It: What Policy Tools Should The Fed ‘Normally’ Use?”, the Boston Fed is now suggesting that QE become a permanent tool at the disposal of the Fed. After all, “financial stability” depends on it… During the onset of a very severe financial and economic crisis in 2008, the federal funds rate reached the zero lower bound (ZLB). With this primary monetary policy tool therefore rendered ineffective, in November 2008 the Federal Reserve started to use its balance sheet as an alternative policy tool when it began the large-scale asset purchases. Now attention is turning to how the Fed should transition back to a more conventional monetary policy stance. Largely missing from these discussions about the Fed's "exit strategy" is a consideration that perhaps it should retain, not discard, the balance sheet tools.

Euro Ministers Alarmed as Bloc Shuts Down Greece Plan B - (www.bloomberg.com) Europe’s refusal to draw up contingency plans to prepare for the failure of negotiations with Greece is alarming some euro-area finance ministers. Slovenian finance chief Dusan Mramor led the calls at a meeting of the bloc’s 19 finance chiefs on Friday to consider a “plan B” to mitigate the fallout if negotiations with Greece fail. Several others raised similar concerns during official talks and in private conversations at a meeting in Riga, Latvia, on Friday, two people with knowledge of the discussions said. “What my discussion was about was what we will do if no new program will be achieved in time for Greece to be able to refinance itself or improve liquidity,” Mramor told reporters on Saturday. “A plan B can be anything.” As Greece struggles to pay pensions and salaries, its government has failed to present a plan to revamp its economy that passes muster with euro-area officials who are withholding further aid.

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