Money Supply : LUSENET : TimeBomb 2000 (Y2000) : One Thread

I posted this as a reply on another thread, but I wanted to re-post it because I'd like to get some input on whether you all think my assumptions are reasonable or not.

Some people have a little extra cash, especially those with retirement accounts. Sure, you gotta eat, but let's say someone has a couple of hundred grand in a retirement account, or even "just 30K" in their "401K", for the sake of argument. They're a real doomer and spend 15K on food and other supplies. That leaves them with 15K in the bank, and if they're serious enough to spend half their money on food for the end of the world, they might be concerned about keeping the other half in cash or precious metals to function in a post Y2K society, or maybe "just to be safe".

Based on Yardeni's poll ( , and assuming 4.33 weeks per month (52/12), if you do a weighted average of the results, this is what you'll come up with for what the "average" person will withdraw:

zero x 13% = 0.00

2.5 weeks x 33% = .83 weeks salary (one to four weeks more than usual: avg. = 2.5 weeks)

8.66 weeks x 29% = 2.57 weeks salary (one to three months: avg. two months x 4.33 = 8.66 weeks)

12.99 weeks x 24% = 3.12 weeks salary (more than three months, but I used three months to be conservative: three months x 4.33 weeks = 12.99 weeks)

Now, add up the weighted results to arrive at the average number of weeks salary that the average person will withdraw:

0 + .83 + 2.51 + 3.12 = 6.46 weeks. According to the poll, the average person will withdraw the equivalent of 6.46 weeks salary.

According to the Bureau of Labor Statistics, the average worker works 34.5 hrs per week at an average wage of $13.04 per hour. The average weekly salary is 34.5 x $13.04 = $444.35

$444.35 x 6.46 (weeks) = $2,870.50 (average withdrawal per person).

Now, plug this in to the top line of the cash computer ( as "Cash on Hand for Day to Day Needs"

Leave all other withdrawal amounts as zero (including business withdrawals), and assume that the Fed will make all of the cash that they promised available.

-- Clyde (, May 21, 1999.

-- Clyde (, May 22, 1999



I think you're missing one basic point: the average American family doesn't have 6 weeks of salary in the bank. I read somewhere (though I can't find the URL at the moment) that some banker reported at a recent conference that the average bank balance (combined checking and savings) is $300.

In any case, if a family DID have $2,807 in spare assets lying around, it's more likely that they would have it invested in a high-tech mutual fund (where they believe they have the absolute certainty of doubling their money) than in a savings account generating 2% interest.

My guess is that the average family will take out about $500 (approx equal to one week's salary, according to your calculations) "just in case". But if they begin to be more worried in the fall, they're going to have to liquidate their stock-market portfolio in order to generate whatever additional cash they need.

Thus, it seems to me that a Wall Street crash would be the first indicator of a serious desire on the part of the public to hoard cash.


-- Ed Yourdon (, May 22, 1999.

Good analysis, though I might dispute your poll numbers, the weighted average is a little more credible that just picking a number somewhere .

I'm curious if the BLS figure for a weekly salary is justified in this case. Isn't it likely that really rich people with n-times more income WONT take out n-times more cash, while poorer people might take out more? (and the really poor take out nothing?

-- Larry (, May 22, 1999.

When hubby bought that 40kw generator, we went well over the $15k for y2k. We are probably at about $25k. And if others have spent $10k on preparations, I would say these same people already have their money out of the banks and stocks. We do. I put just enuff in a checking acc't to pay our electric and phone bill. When big bills like insurance and property tax come in then I put that amount into bank and write a check. My whole attitude has gotten to be one of hunkering down and watching. I remind myself of a ferret peeking out of its hole. I am of the opinion that there is lots and lots of stuff going on behind the scenes that we don't know about and its going to come to a head soon as things start to collapse. Everyone is having insurance problems, telephone and credit card problems. My neighbor paid her mortgage off last December and still hasn't been able to get her deed. The mortgage company tells her its "in the mail". When the Atty General finally got involved, they found out that the mortgage company lost all their records off the computer and are having to put everything together by hand. Now say it will be 6 months before she will get the papers. That takes her past y2k. You think she isn't upset? All she has is her cancelled check. You MUST simplify your lives as part of your preparations. Don't have any bills if possible. Try and pay off and get rid of credit cards before the end of the year. I pay my one card off every month, but I plan on turning it in and getting a statement from them that I no longer have a card and owe them no money. I can handle the no power, telephone etc. I can't handle the frustration of screwed up billings, etc. Preparation gives you a feeling of having some control over your life. Standing in line for water and food is going to be extremely frustrating mentally. We are not used to "Waiting" on anything.

Back to my ferret hole Taz

-- Taz (Tassie, May 22, 1999.

I don't know beans about investment, as I don't have the money to do so, but I will have to second the first half of Ed's post. I and my fiancee' are preparing to get married, and to move. We live from paycheck to paycheck, as do most of the folks we know who are preparing for y2k. We don't *have* any money to take out of savings (other than maybe about 30 bucks each)...


-- Arlin H. Adams (, May 22, 1999.

Dear and respected Ed Yourdon:

I agree 101% in everything you say above in response to Clyde's calculations in cash hoarding possibilities.

But as much as I respect your opinions, I honestly believe that now it's YOU Ed that's "missing one basic point". I am referring to the rest of the world. Guys, don't forget, the rest of the world also exists. People everywhere in the world outside America, ALSO play the money game, and ALSO are performing stakeholders, and also affect Wall Street far beyond what you apparently believe.

So, yes Ed, you are right. A stock market and/or bond dip or outright crash will be the real first indicator of money hoarding trends. BUT do not forget that behind that bond/stock market trend are forces managed and directed by investors throughout the WHOLE WIDE WORLD. and its THEIR reactions that also need to be assessed. Example: Do you know that 85% of liquid assetts in Latin America and Asia, excluding Japan, are already held cash?

Regards George

-- George (, May 22, 1999.


The point I was trying to make with my analysis was to point out how much cash **people actually said** they will want to pull out of the banks, and compare that number to what is available. I believe that the poll data is an indication of a serious desire on the part of the public to hoard cash. They are TELLING US!! (In all fairness though, I think it would be wise to look at some other polls before jumping to any conclusions one way or the other). I agree with everything else you said regarding a stock market sell- off to raise additional cash (despite some of the outdated figures on liquid assets provided at the Y2K Newswire cash computer). Where the money will come from is secondary, although that makes the outlook even scarier in my opinion. If you look at it that way, not only might there be bank runs, but there will be a stock market crash first. (Actually, I think it will be a MELTDOWN!)

If one waits for a sell-off to make their decision, it may be too late. It's possible that a severe market crash could prevent many people from liquidating their holdings at all prior to Dec. 31 (although this doesn't mean they won't be standing in lines next year). If there is a rush for the exits this fall as you suggested, many people will not get out. Because of like-kind clauses in some mutual fund contracts, many will be paid in "like-kind", meaning that they will receive their distributions in shares of stock rather than cash. The remainder of mutual fund prospectuses have a clause stating that they have the right to withhold cash distributions to customers for periods of up to 60 or 90 days. In either case, the process of converting will take weeks or months. By then, their shares may be worthless.

I honestly hope none of this comes to pass, but I'm not very optimistic. Ironically, it seems like the only thing that can save us is the stunning ignorance and apathy that the public has had, and continues to have vis a vis the Y2K issue and the unravelling of the global economy.

Maybe the masses will remain asleep through the Y2K rollover and things won't be so bad, but I wouldn't bet on it.

-- Clyde (, May 22, 1999.


In response to your comment:

"I'm curious if the BLS figure for a weekly salary is justified in this case. Isn't it likely that really rich people with n-times more income WONT take out n-times more cash, while poorer people might take out more? (and the really poor take out nothing?"

I'm sure there are many variables such as those you mentioned that could skew the results of the analysis. It's a very rough illustration, to say the least, and there is a lot of room for error. As I mentioned in my reply above to Ed, it would be interesting to see other, more scientific polls along with data regarding how it was conducted, who was polled, etc.

But I think that point you made about the lack of correlation between the ratio of cash that people might withdraw and their level of income should already be reflected in the polling data. For example, in Yardeni's poll - assuming the respondents reflect a good cross- section of income levels, it is possible that a person in a higher income bracket could say that they would only take out the equivalent of 2 weeks worth of their salary, a very poor person would take out zero, etc.

Unfortunately, having to use the average weekly salary figure is where I think most of the error would be (so I guess what you said may still be true). I think it would be much more accurate if the poll used the actual dollar amounts that people intended to put aside instead of expressing the amounts in terms of weeks, don't you? (You would eliminate the step of having to calculate the average weekly income).

There is one other assumption that I made in my (admittedly crude) "analysis" that could lead to a much worse outcome than the one that was arrived at. For the respondents that said they would withdraw "more than three months", I used three months - which works out to $5,772 - to be conservative. It is conceivable that some very wealthy people may intend to withdraw much more than that, "just to be safe".

-- Clyde (, May 22, 1999.

Ed - I think the first indication of cash hoarding will be the realization that there ain't no mo' small bills around. (Maybe like the recently discussed penny shortage in Wisconsin.) GN has said that $1 and $5 are normally in short supply. I have not seen any new $5 bills for the several months that I have been paying attention, and generally they have been seriously moth-eaten. On the other hand, it is the $20 bill I would expect people would be stockpiling, fresh out of the ATM, so maybe $5 won't be the indication afterall.

-- Brooks (, May 22, 1999.

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