However the problem has spread as Spain has seen its bank deposits fall from 979.5 billion Euros last summer to 942.3 billion at the end of December (and this probably flatters the situation as deposits tend to rise in December). Also Italy had shown some signs of this before the year end effect wiped it out.

So where has the money gone? Some will have gone into the German banking system for a higher level of perceived security but take a look at the exchange rates for a clue too.

The Euro has been strong recently

Unfortunately the mainstream media only really cover falls in the Euro but since the middle of January when it dropped to 1.26 versus the US dollar it has been strong and is now over 1.34 as I type this. If we look at it versus the Japanese yen we see that it has put in a strongman type performance. On the 16th of January one Euro purchased only 97.25 Yen whereas as I type this it will purchase some 108.3 having nearly touched 110 this morning. Just as an aside if we were discussing most other currencies we would have been talking about a Yen rout and it is important to recall that this is reversing a period of considerable strength, but for the first time in many moons we can wonder if we are seeing a reversal of a trend. If you wish to consider this by time then the Yen has gone back to where it was in late October 2011.

The Swiss Franc

Here we see quite a different performance and for a musical accompaniment we can play this by Ashford and Simpson.

Solid (Oh)
Solid as a rock
And nothing's changed it

Actually that understates the performance of the Swissy as if we look back to mid-January when the Euro began to strengthen it was at 1.21 and it is at 1.2048 now. Indeed after the Swiss National Bank established a cap at 1.20 late last summer it had been pushed down to 1.24 but since early December it has kept edging forwards. If it keeps this up it may not be too long before we find out what the Swiss National Bank meant by "unlimited intervention" and the SNB may well end up ruing its hyperbole and bombast.

If we look at the exchange rate pattern it is hard to avoid the conclusion that money has been leaving the Euro for the perceived refuge of the Swiss Franc. Also it may be on a larger scale than we might think as currency traders are likely to sell the Swissy ahead of the 1.20 cap thinking that if it goes wrong the SNB will provide a relatively cheap stop loss. Yet again central bank action makes perception and reality diverge, no wonder people get confused!

We find ourselves looking at another unstable situation which could move very fast. It has quite a few implications.