I posted earlier to the Thread "what % will take their money out of the bank?" That thread was getting pretty long and I would still like to hear more opinions about it.

First off, let me say I did not take my money out because of fear of the banks or to hide it under the mattress. Except for mortgage payments for the first quarter of 2000 it will all be recycled into the economy probably within the next 90 days.

And this money will be spent on nonperishable food stuffs and other household items for 6 - 20 persons, so as to the $500 per person figure given in the former thread it may stretch out to about that.

So I guess what I am asking is how will this impact the banks and the economy in general if we are purchasing this year for use next year and thereby not spending money next year (maybe not even having any money next year)? Also if the banks keep printing up money won't that eventually devalue the dollar? Or aren't enough people preparing to make any impact? Inflation or deflation or what?

Sorry,if this thread is rambling and inconcise, think I got up too early!

-- sue (deco100@aol.com), April 15, 1999

Answers

sue: Nothing will happen to the economy this way because it would take a large percentage of the population to be GIs to spend mucho bucks at the markets, taking money out etc... Most of us have to remember that most of the fools out there are spending scads of bucks already on important stuff like those high price jeans, CDs and video games, not to mention those two hundred dollar a week food carts of cheese doodles and beer. We GIs wont devalue the dollar- the late Nov. or Dec. panic probably won't either...the year 2000 will take care of a devaluation (or implosion) itself. got monopoly money?

-- churchorganist (musicswede@webtv.net), April 15, 1999.

There may be a few niche sectors affected, but on the whole, not enough people are doing anything at the moment to affect the big picture. When they all do, they won't be able to.

-- SCOTTY (BLehman202@aol.com), April 15, 1999.

In addition to the above answers, there are quite a few of us who have already removed a large amount of cash from banks. And it has NOT gone back into circulation. Its just "sitting" in a safe place. Also, I happen to know that an awful lot of cash is going off shore. There are lots of Americans that live abroad that have or will with draw their US$ and take off shore with them. The US$ is recognized and prized all over. The poorer the country the more the US$ is prized. However, if the supply line goes tits up, then we could have too many dollars chasing too few goods. But that is a slim chance. A better chance is deflation/depression due to so many people out of work/business, suspended welfare and pension checks.

Gotta lump in your mattress???

-- Taz (Tassie@aol.com), April 15, 1999.

Sue - I have prepared in a way that I do not expect to need any cash (or other forms of money) for quite a while into 2000. (I'm immortal, so of course no emergencies will come up.) Therefore, the MAIN reason for me to have more than a few bucks on hand would be lack of confidence in the banking system as a whole. (I recall seeing on one of the threads a couple weeks ago that even though accounts may be FDIC-insured up to $100,000, the FDIC could take an excruciatingly long time to make good on its coverage. I have no idea if this is how it works, but if a number of large banks went down, it seems like a possibility.) I believe "money" is expanded and contracted based on loan activity; printing more currency for a one-to-one exchange with what you have in your accounts and could otherwise access by check or ATM card, will not cause inflation. I don't see that the banks will care when we spend the money, but clearly our JIT economy will squawk (the pharmaceuticals have been doing that for some time).

-- Brooks (brooksbie@hotmail.com), April 15, 1999.

I just cashed out my employee stock options and have a very lumpy mattress right now. Most of the money will be spent finishing the lower level of our home to provide a safer and more comfortable living area in case TSHTF, in addition to fencing around the rear of the property (was going to do both of these things anyway, but the time line has been moved up). The remainder of the cash will be stashed away until I see what early 2000 looks like. Like killing three birds with one stone.

-- Lurker (eye@spy.net), April 15, 1999.

If the amout being spent on Y2K prep and remediation is significant compared to GDP, the effect of a sudden switch from overspending to underspending will be deflationary. If the central bankers don't realise that this has happened in time, a recession will result. Given the (overheated!) state of the stockmarket right now, I expect that recession to be severe (the D-word).

Of course, this assumes Y2K itself turns out as a small bump in the road. If it's a large bump, things will get much more chaotic before they settle down, but down is likely to be the operative word in any case. (You might want to pray that "settle" is also operative!)

-- Nigel Arnot (nra@maxwell.ph.kcl.ac.uk), April 15, 1999.

I think we are missing one important (2 ?) point(s); it's that final ,last two weeks of withdrawals of everything by the paniced, where it's TOO LATE to buy the goods they want, which WILL keep the money out of circulation. If I remember my 1951 Economics course correctly, for every dollar spent by a person, it is handled (respent) about 10 times in that one day. NOW, work that BACKWARDS and you will see what it means to business failures AND THEREFORE JOB LOSSES !!! Also, as things worsen in February/March, prices will fall, meaning a larger percentage of the withdrawn money will NOT have to be returned to the economy. AND, what of the TRILLIONS in LOST "paper" money from the stock/bond market collapse ( in a rush to be liquid/i.e. "get out of paper") just before this ? If foreign bank runs (i.e. Japan) start on the US Treasury Bonds, and blossom around the world, you could wake up at 7AM eastern time and be TOO LATE to get any money from the government of the largest debtor nation in the WORLD !!! Eagle PS THE PARTY IS OVER !!!

-- Hal Walker (e999eagle@freewwweb.com), April 15, 1999.