Re: Re: Destinations for Eurozone Capital Flight!

#89751

Chopera
Participant

@angie wrote:

Don’t quite understand your post Chopera, but sad Ubeda never answers direct questions even polite ones, lives and works in Spain but doesn’t like living near Spaniards, weird or what? 😆

Ubeda, I doubt Germany would need your expertise 😆 😆

I don’t quite understand Target2 either, but I think it goes something like this: euros leave a Spanish bank for example and are deposited with a German bank, the German bank is then obliged to deposit them with the German central bank, which in turn is obliged to deposit them with the Spanish central bank. It’s a mechanism for preventing all the euros ending up in one country.

And indeed what has been happening is euros have been leaving bank accounts in Spain and other eurozone countries and ending up in German bank accounts (either through trade imbalances or people moving money around privately, it comes to the same thing). And the result is the German central bank has extremely large deposits in other eurozone central banks, which is what the graph above shows.

Some comentators are saying this makes it harder for Germany to leave the eurozone because it would effectively devalue the Bundesbank’s deposits with other central banks.

Well that’s my interpretation (which could be completely wrong)

You can read about it here:

http://en.wikipedia.org/wiki/TARGET2

(good for insomnia)