Bank Holiday and Bank Run Triggers

5 posts / 0 new
Last post
okubow's picture
okubow
Status: Bronze Member (Offline)
Joined: Aug 16 2009
Posts: 67
Bank Holiday and Bank Run Triggers

Just joined the site, and I'm glad to be here!

I've spent a lot of time doing research and learning more about the world monetary system and US monetary policies. Two things that I don't know much about are bank holidays and runs on the banks.

I'm wondering what could trigger either of these events in the US?

I know that the FDIC will release a quarterly banking profile on 25 August 2009. Could this be a possible trigger for a run on the banks or a bank holiday?

mpelchat's picture
mpelchat
Status: Silver Member (Offline)
Joined: Sep 10 2008
Posts: 214
Re: Bank Holiday and Bank Run Triggers

I do not beleive so.

A bank run due to the FDIC running out of current funds would not happen unless the government clearly states that they will not print more money to fill the FDIC up again which will mostlikely happen.  This and the fact that most banks have a maximum withdrawal per day will stop bank runs.  Do not forget a bank run will only happen if we get off our dead butts and do something ((granted this is a bit cinical)).

A bank holiday due to the FDIC running out of current funds is very unlikely.  The banks just need to lie on mark-to-estimate (or fantasy) for all loans they have as well as not help homeowners underwater renegotiate loans to a reasonable level you will not see bank holidays.

 

okubow's picture
okubow
Status: Bronze Member (Offline)
Joined: Aug 16 2009
Posts: 67
Re: Bank Holiday and Bank Run Triggers

Okay.

I guess I'm just wondering what set of circumstances could possibly trigger the theoritical systemic banking failure that Chris talks about in the videos.

keelba's picture
keelba
Status: Bronze Member (Offline)
Joined: Dec 17 2008
Posts: 55
Re: Bank Holiday and Bank Run Triggers

A run on the bank is a psychological or emotional event, not an economic one. By default there is already less money on the banks' books than is required to pay out all of its deposits and yet this does not trigger a bank run. A bank run will happen only when it's depositors panic. But as long as the people are willing to accept that their money is safe, the bank will remain open and there will always be more money from the Fed to back what they've got on their books.

A bank holiday is a catastrophic event and would only be used to halt an already occuring catastrophy. Imagine cutting off someone's legs at the first sign of a toenail infection. It wouldn't happen. Normally you would wait until gangrene has set in before you would consider something so drastic. I believe the country's economy would already have to be showing that it has gone off the deep end before the powers that be would implement something like that. You'll see it coming but that doesn't mean you shouldn't start preparing for it now. If you wait until you can see the signs it may be too late.

 

--Kevin

ckessel's picture
ckessel
Status: Martenson Brigade Member (Offline)
Joined: Nov 12 2008
Posts: 479
Re: Bank Holiday and Bank Run Triggers
keelba wrote:

A run on the bank is a psychological or emotional event, not an economic one. By default there is already less money on the banks' books than is required to pay out all of its deposits and yet this does not trigger a bank run. A bank run will happen only when it's depositors panic. But as long as the people are willing to accept that their money is safe, the bank will remain open and there will always be more money from the Fed to back what they've got on their books.

A bank holiday is a catastrophic event and would only be used to halt an already occuring catastrophy. Imagine cutting off someone's legs at the first sign of a toenail infection. It wouldn't happen. Normally you would wait until gangrene has set in before you would consider something so drastic. I believe the country's economy would already have to be showing that it has gone off the deep end before the powers that be would implement something like that. You'll see it coming but that doesn't mean you shouldn't start preparing for it now. If you wait until you can see the signs it may be too late.

--Kevin

Very well said Kevin.

Okubow,

I have bolded the portion of Kevins comment I emphatically agree with. Preparation is everything. 

And IMHO this statement :

"I believe the country's economy would already have to be showing that it has gone off the deep end" ......  which after review of the CC data and casual observation I could make the claim that it already has but it  perhaps deserves yet another "Titanic" analogy.  We have hit the berg, we're taking on water ........ but this ship is unsinkable!     isn't it?      Prepare to board the lifeboats because the water is definately rising.

Coop

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Login or Register to post comments