modern banking and plain ol rithmatickgreenspun.com : LUSENET : TimeBomb 2000 (Y2000) : One Thread
Well Mr. Edward Kelley of the Fed said today that the banks are doing well in getting up to speed on the Y2K deal, and that's the second batch of (ostensibly) good news in the past 24 hours. (NERC report also)
But one thing still gets me....according to the Business Today article, "The central bank plans to place $200 billion in bills in its inventory next year. The Fed usually holds $150 billion. The Fed is planning to hold the extra cash in case U.S. citizens seek extra currency because of fears that automated teller machines and other payment systems will crash heading into the new millennium." Yeah we already knew that.
Okay, that's an extra $50 billion. Extra funds, to take care of any extra withdrawal needs precipitated by a Y2K scare (real or imagined). The U.S. Census Bureau estimates that as of July 1, 1999 (about the time people in general might start thinking about taking money out of banks, I reckon...correct me if need be), the number of people in the U.S. population 18 years old or above will be 201,781,000. [From the U.S. Census Bureau web site.]
Okay. $50 billion ($50,000,000,000) divided by 201,781,000 people = $247.79 per person 18 or over. All right, all right, not everybody is going to take extra Y2K money out of the bank, yeah, I know. Let's say only 5% of those people 18 and over want to take extra Y2K money out of the bank. That's 10,089,050 people (201,781,000 x .05).
$50 billion divided by 10,089,050 people = $4955.87 per person 18 or older, if only 5% of them want to withdraw funds.
Tell ya what: I hope no more than 5% of people 18 years of age or older want extra money, and that they don't want any more than $4955.87 per person, on average. Any higher percentage, and/or any higher dollar amount, and guess what's a-gonna happen -- (simple rithmatick)
-- John Howard in Greenville, NC (firstname.lastname@example.org), September 18, 1998
Just went back reading that post, and saw how someone might say, "But 5% of the people (18 or over) at $5000 per person would only wipe out the EXTRA cash the Fed's planning on."
Okay, granted. What happens if 10%, or 15%, or 20% withdraw $5000 apiece? (Not beyond the realm of possibility, now is it)
-- John Howard (email@example.com), September 18, 1998.
It's ludicrous to think that half those people even have money to take out of the bank. The U.S. is not a nation of savers. They are a nation of credit and waste. The only thing they will be taking out is the charge card to try and get a cash advace.
-- Dave (firstname.lastname@example.org), September 18, 1998.
You are correct, sir! A one month scenario would bankrupt an amazing amount of people. So many people live week to week that they could not survive even a slight problem with the economy. This is the calm before the storm, because even if things only screwup for a short time, many are doomed.(Financially anyway)
To anyone out there who is 'depressed' about Y2K, you are ahead of your time.
-- Uncle Deedah (email@example.com), September 18, 1998.
Maybe I'm wrong but I thought everybody kept their money in the stock market these days, not the bank. The stock market has had better returns the last few years than anything you can make off of CDs or savings accounts. Yes, I know, that's all going to change. Of course, given that the banks don't hold much money these days, I wonder how they manage to make loans. You always hear them offering a home improvement loans. It's a mystery to me. Who has over 5000 in a bank? Anyone you know?
-- Amy Leone (firstname.lastname@example.org), September 18, 1998.
Not to mention the blow to the value of currency already IN circulation - what happens to it when $200 BILLION is poured out into the economy?
-- Melissa (email@example.com), September 18, 1998.
I see where you are all going with this. After working for a large bank for so many years, you realize how many people out there have lots of money and how many don't (live paycheck to paycheck) but keep in mind...all the people that will take their money out of the stock market, out of their IRA's, those that will sell their homes in large areas and move to small towns, turn in bonds, etc. Where do you think they will take those big checks to be cashed, not DEPOSITED, but to the bank of course. I know, I have seen it first hand, people panicking and withdrawing everything they have and hiding it or temporarily putting it into their safe deposit boxes for safe keeping. It would not even surprise me to see people running to the bank getting cash advances on their credit cards (if they are not already max'd-out) and taking the cash with them. Money can make people act very strange even when times seem normal. One time a customer had me cash a $10,000.00 check. I displayed the money on the counter as I counted it. When I was done, he looked at all the money, smiled and then said..."Okay, deposit it now. I just wanted to see what it would look like!" Many times I would cash large checks and off I would see them go to the safe deposit box where I knew they were putting it. And this was in normal times. So, I believe that no matter how much money is printed up, it will not be enough. There are plenty of rich people out there that $5,000.00 is not enough for them to get through perhaps even one day! I know this is only my thoughts on this, but I thought I would share them with you. Also, having been robbed twice while working at the bank, both in normal times, I am hoping that this will NOT soon be the scenario of the desperate and down & out who become aware of y2k and don't have a dime to prepare for their families that are already doing without. :( Blondie
-- Blondie Marie (Blondie@future.net), September 18, 1998.
Yes it is indeed wonderful to get two such "good news" reports about our electric utilities and banking systems in as many days. But "read between the lines": It is this day September 18, 1998. There is not one, no not one, power plant that is Y2K-ready TODAY. There is not one, no not one, bank (well, maybe in Jamaica??) that is Y2K-ready TODAY. Yep, thats our world today: "Riding on a smile and a shoe shine".
-- Joe (firstname.lastname@example.org), September 18, 1998.
One of the things that is so irritating about the Y2k issue is the amount of conflicting evidence offerred by the 'experts'. I am having great difficulty 'following the money trail' to discern who is saying what and why.
As a small business person I know that just because I often have a conflict of interest doesn't mean that I am not telling the truth. (I want people to buy my programming services) I often know that I can do the best job and the best price and that the job will pay for itself in 'X' months. To new customers who don't know me yet and have no reason to trust me, this could easily be perceived as self serving grandstanding. To repeat customers who know me, - they just accept that I am telling the truth as I see it. It doesn't hurt my reputation that I often say, "I dunno", "nope, I can't", or "you need help from another source on this - I'm out of my league". Yet comments like these from 'informed sources' are often cited as grounds for everything from conspiracy to just plain incompetance.
So how do we judge this most recent report from a FED insider against the gartner groups testimony to congress a few months ago? What does the FED have to gain by saying all is well if its not? What does the Gartner Group gain by saying 'we're all behind' if we're not?
-- Carolyn Hoagland -Atlanta (email@example.com), September 18, 1998.
For those of you who think people don't have money in the banks in the U.S. these days, here are some figures:
As of March 31, 1998, FDIC-insured commercial banks in the U.S. had non-interest-bearing deposits of: $ 665,331,000,000 interest-bearing deposits of: 2,802,512,000,000 ---------------------- total deposits of: $ 3,467,843,000,000
(source: http://www2.fdic.gov/qbp/1998mar/cb1_2.pdf; preliminary figures)
That's $3.467843 Trillion. Lotta moolah in the banks.
The U.S. Census Bureau estimates that on July 1, 1998, there were 200,224,000 people in the U.S. age 18 and over (basically, those old enough to have a bank account). (Source: http://www.census.gov/population/estimates/nation/intfile2-1.txt)
$3,467,843,000,000 in bank deposits w 200,224,000 people age 18 and over = an average of $17,319.82 in bank deposits per person age 18 and over in the U.S.A. Those are the facts. Yes, people certainly have money in the stock market; but people have money in the banks too. (These figures only cover FDIC-insured commercial bank deposits; they don't include savings institutions. On March 31, 1998 there were 9024 FDIC-insured commercial banks, and 1755 FDIC-insured savings institutions. http://www.fdic.gov/databank/sob/9803/allstru.html )
So it is entirely possible for a large number of people (i.e. millions) to withdraw many thousands of dollars apiece from our nation's banks. The figures show this very clearly. Check it out, do the math.
What I'm trying to get across in this thread, is that the $50 billion in extra funds that the Fed plans to have on hand for Y2K needs is woefully inadequate -- that isn't but about 1.44% of present commercial bank deposits.
-- John Howard, Greenville, NC (firstname.lastname@example.org), September 18, 1998.
You said it right John! "That's $3.467843 Trillion. Lotta moolah in the banks". Now take the figure of 150 billion U.S. dollars in circulation here in the U.S. and discount a fair chunk that is already outside of banks and in the pockets of citizens and what do you have? A terrible shortage. Most of our banking is done digitally. People don't have that concept in mind when thinking about it.
You get your paycheck, you deposit your paycheck, you write checks for your mortgage, groceries, insurance, trips to Walmart, etc, etc. We are living in an "almost" cashless society.
It is not going to take more than a few percent of people to create a dollar shortage at the banks. Do you dig?
-- Goldi (email@example.com), September 18, 1998.
I dig, Goldie. That is why I have already dug! :)
-- Dave (firstname.lastname@example.org), September 18, 1998.
I dig too, you two. And another thing (which we all know) is that not but a splinter fraction of that money is actually available in cash at the banks. They've invested most of it somewhere else, to make their profits. That's what pays for all those nice skyscrapers in mid-town. But the dollar amounts are there, on the books, people have the legal right to demand withdrawal of those dollar amounts (they are termed "demand deposits" after all).
I hope to the good Lord not, but this has potential to make 1929 look like nursery school. (I was thinking along the lines of something like that being on the horizon two years ago, before even becoming aware of Y2K.)
What will happen with the banks, as has been said, hinges on public perception. We need to be wary of creating self-fulfilling prophecies...again, another high-wire act.
-- John Howard (email@example.com), September 18, 1998.
Dadburn it, how stupid of me.
Assumptions mean everything in this finance game. The deposit figures in the earlier post are accurate. But they aren't all deposits belonging to individuals (DUH - smacking forehead). A LOT of them are corporations; some are foreign corporations, for that matter (thought $17,000 per individual person sounded high, sheesh)
Back to the drawing board...but I still think the public could cause a run on the banks, and the Fed's $50 billyun isn't enough....will be back with more figures as I find them!
-- John Howard (firstname.lastname@example.org), September 19, 1998.