The first great bank run : LUSENET : TimeBomb 2000 (Y2000) : One Thread

The Federal Reserve Board of Governors estimates $426 billion worth of hard currency was in circulation at the end of 1997, compared to $6.6 trillion worth of savings and checking accounts, certificates of deposits and a host of similar liquid assets.

In addition, Americans could start cashing out the more than $13 trillion worth of stocks and $3.3 trillion worth of corporate bonds they held as of 1997. They could even try to convert non-liquid assets such as real estate, all putting tremendous and incalculable burdens upon a limited cash supply.

Even worse, if people started lining up to cash out their accounts, banks would face a "run" on their available hard currency funds. Such panics have destroyed thousands of financial institutions.

The first great bank run in the United States occurred in 1837, when a major economic depression resulting from speculation in inflated land values caused more than 800 banks to suspend "specie payment" to customers with accounts. Federal records show that 618 financial institutions failed that year. But there have been many other runs on financial institutions, including the failure of the Savings and Loan industry in the 1980s.


-- Sysman (, March 19, 1999



Good reminder. Delicate system. We are very, very vulnerable to the fractional reserve banking and settlement system upon which most transactions rely. We all need more confidence that systems are being responsibly remediated and that reports thereon are truly reliable and trustworthy.Herein lies the potential for a terrible crises. It's called: fix or implode!


-- Watchful (, March 19, 1999.

Here's another little problem that will probably contribute to bank runs. Money laundering is sometimes decribed as the biggest industry in the world, although how they mark it off as a discrete industry from the no.2, the illegal drugs industry, I don't know. Anyhow, I sometimes get a laugh thinking of these godfathers sending their daily 747's full of cash to be laundered into stocks and bonds, while us wiser squirrels are busy flying to cash, hopefully without getting done for structuring.

If it were to come to pass that the people involved in big-time money laundering were to sniff the air and realise that something wicked this way comes, then they would make an abrupt about-face and stop funnelling their daily billions of cash through the system. They'd hang on to it, or maybe convert it to metals. Because of the scale of their operations, if they were to change their behaviour to any large degree, then cash liquidity would seize up. Game over. Now these guys didn't get to be no-tax multi-billionaires by being stoopid, but here's hoping that they remain relatively ignorant about y2k.

-- humptydumpty (, March 19, 1999.

Sysman, that's an interesting slant. I hadn't really thought about that. It would be quite interesting to see the goverment printing $100,000 bills to facilitate a crash of the world economy in the ultimate flight to quality. It would only be fitting to have Clinton's picture on the front as a memorial to the quality of vision and leadership he has provided to the free world and the world's oldest republic.

I'd point out one feature that I believe will temper your figures somewhat. In a stock market crash, assets "disappear." To exaggerate for sake of discussion, if you own a share of Berkshire Hathaway at $30,000 per share or whatever, and the market completely collapses tomorrow and the highest bid on your Berkshire share is $1.00, then you will not be threatening much of a drain on the currency reserves. Which would be interesting, because I believe that, at least on the NY Exchange until an exchange trade goes through at $1.00, your asset would still be (theoretically)listed at $30,000 in the Wall St. Journal. Your $30,000 share would be worthless for any use of course, that is UNLESS you were a Japanese bank, in which you could probably borrow $30,000 worth of yen from the Central Bank, but I'm getting far afield here.

-- Puddintame (, March 19, 1999.

Sysman, your post just verifies my thoughts re a y2k induced banking collapse. It might/can/will happen sometime between now and next year. The event will be covered by the media and there will be a lot of hand wringing. Life will go on.

Our personal and national concern needs to focus upon Energy Sources and Transportation as they impact Agriculture and Food Distribution as a means to deal with the high probability of Famine and famine's handmaiden, Plague.

-- Mitchell Barnes (, March 19, 1999.


You blinked. BRK/A closed at $77,800 today, down $1,300 for the day. :-)

But if nobody wanted to pay a big price for it, the last could remain high, but the bid could drop and that could be reflected in the WSJ et al.


-- Jerry B (, March 19, 1999.


I predict that the last great bank run will occur before Y2K. After TSHTF, a new global monetary standard will arise. So will the new world leader.

-- dinosaur (, March 20, 1999.

humptydumpty -- Actually, the largest industries in the world are: 1.) sex 2.) drugs [legal & illegal] 3.) religion 4.) armaments/ defense 5.) finance

-- iknow (arne@?.com), March 20, 1999.

iknow, are you counting marriage in your sex industry figures? $Laundering is a kind of a combination of the drugs industry and the finance industry,..but I am talking off the top of my head about it, I'll go try find some links. Pretty sure sex and religion aren't up there with the other three, and it's also tradition to view legal/illegal drugs as seperate industries. Anyhow, drug$ barons hold more cash than governments do, they may be a major factor in any bankrun scenario.

-- humptydumpty (, March 21, 1999.

Moderation questions? read the FAQ