Third times a charm?greenspun.com : LUSENET : TimeBomb 2000 (Y2000) : One Thread
I'll ask this question a third time.
I'll ask this again. Let's assume that every bank, Credit Union, S&L, various non-banks, etc. and every ATM on the face of the planet are all 100.0000% Y2K fully compliant. That's our "given" or our "constant" in this equation.
Pick a poll, any poll. This one http://www.gallup.com/poll/releases/pr990312.asp or maybe this one http://cnn.com/US/9901/10/y2k.poll/index.html or perhaps this one http://www.sciencedaily.com/releases/1999/01/990108080346.htm your choice.
They ALL say that (X%) people plan to pull out "a little extra" money or (Y%) all of it before 12/31/99. If only half of the people that say they are going to do that, do actually do that, the banks will all go insolvent and belly up due to the fact that they are running on the ragged edge of solvency and have been for years.
Now due to the fact that banks, etc. are under no legal obligation what so ever to give you cash, matter of fact if your account is an interest bearing Negotionable Order for Withdrawl, they aren't even obligated to give you a check without 90 days notice, there will not be any banks runs in the classic sense of the word. However, you currently are not under any obligation to deposit money in your bank, you can have a "nur knab", that is a bank run done backwards. A classic bank run is people pulling money out of a bank, a "nur knab" is people not depositing money in a bank (but still writing checks). Different mechanism, same results over time.
Another mechanism to accomplish the same results (again slowly) is defaulting on loan payments.
When people find out they can't get their money out, I sure as heck would not want to be a teller.
So, even if everything is 100.00% compliant, can anybody explain to me how the banking system is going to survive? If you want to make a more interesting answer you can factor in foreign deposits too.
-- Ken Seger (firstname.lastname@example.org), May 27, 1999
I am not smart enuff to give you an answer Ken, but I can tell you that the banks will survive or not survive without my help. We pulled everything out of banks, money markets and stocks, bonds last year. We have a checking account at the bank and I put in only what we need to pay the phone bill and electric bill. Next month I will receive (hopefully) my first Social Security check, via direct deposit. So that means I will be writing a check for cash each month. I don't know how long that will be allowed to go on. So if banks crash, there goes SS, and I am not convinced that SS will hold up under Y2K even if the banks don't crash. Fortuantely we are not dependent upon it. However, I earned it and its mine and I am going to be real ticked off if I don't get it. So.....what about those who are dependent upon SS or welfare?????? In the past few weeks I have gone from a 7 to 8 to a TEOWAKI, which seems to be agains the flow. Oh well, I have always listened to a different drummer.
-- Taz (Tassie @aol.com), May 27, 1999.
Ken, the banks will fail not for technological reasons but for psychological reasons. reserve banking relies on trust and confidence, both of which are running on fumes these days.
i realize i'm just re-stating your argument. the first bank that attempts to limit withdrawals will spark the countrywide panic. the news that people can't get their money out of even one branch of one bank will spread so fast it will make professional journalists green with envy.
-- Cowardly Lion (email@example.com), May 27, 1999.
Part of me agrees that bank runs, and therefore collapse of the banking system, are inevitable. (Part of my reasoning is the disappearing $5 bill.) OTOH, I expect bank holidays will be declared before bank runs allow the system to crash. (Not sure that resolves the issue of snur knab, though.)
I haven't been able to think of any aspect of my day-to-day routine that requires cash. I can schlep my lunch and sodas to work. I can use my ATM card or credit card at the supermarket, gas station and other stores. I can arrange for a public transportation pass to be automatically paid via payroll. Some of my bills are already automatic withdrawals or credit card charges, and I have my plastics and checks for anything else.
I can also arrange quite easily, say at the beginning of the year, not to need my ATM or credit cards for quite a while. So I'm not especially concerned whether ATM machines will work or whether cold hard cash will be unavailable for a period of a few days or a few weeks. My incentive to withdraw substantial amounts of cash has far more to do with whether the banks will survive, period.
So, I believe there is a workaround, and whether there is a bank run and any associated problems, may depend to the extent the masses realize they have other options. Withdrawing $ is probably the easiest of all contingency planning, and therefore may be irresistible even if there is little logical reasoning to do so. It's something to do, when options like stockpiling food or batteries or bottled water or ensuring an alternative heat source are no longer available, let alone time to think it out.
-- Brooks (firstname.lastname@example.org), May 27, 1999.
Brooks said, "Withdrawing $ is probably the easiest of all contingency planning, and therefore may be irresistible even if there is little logical reasoning to do so."
Hadn't thought of that. Very true, I suspect, based on stray comments from DGIs over the past year. Say, November (they'll all think they are beating the rush .... at the same time).
-- BigDog (BigDog@duffer.com), May 27, 1999.
Anybody ever heard the word "Barter?" Well, that may be one answer to immediate day-to-day needs. A few cans of baked beans traded for...? Yes, my plans call for a large withdrawl in November. But, what about the mail? Who will be taking my mortgage payment to the lender? Yes, it is possible that life as we know it today will not be what it can become. We're all going to find out that what is of great importance to us now may not amount to much in eight or nine months from now. A total shift.
-- Richard Westerlind (Astral-Acres@webtv.net), May 27, 1999.
"Yes, my plans call for a large withdrawl in November." Richard, the question is -- will you be ABLE to do it then? It does seem that everyone has the same idea, & that 270 million people will be trying to make a large withdrawal at the same time. Maybe you need to give that a little more thought.
-- act now (email@example.com), May 27, 1999.
Self fulfilling prophecy
-- newlurker (firstname.lastname@example.org), May 27, 1999.
newlurker -- you may be right. But it won't be because of the 500 people or so in the United States who read this forum, but the 50 million whose idea of preparation, thanks in no small measure to the powers that be, is to wait until the last minute, imagining they are "beating everyone else" to what is needed.
-- BigDog (BigDog@duffer.com), May 27, 1999.
Newlurker - Self fulfilling prophecy of what? Can't be bank runs now can it? With the 90 day rule on NOWs that won't happen. You want all your money sir, happy to oblige, yes sir, you want that in a cashiers check, money orders, or wire transfer?, cash?, please read your deposit agreement sir, article 7 I believe. [insert sacharin smile here]
Richard - Do re-check your plans and reread your deposit agreement really closely. If you plan on doing an end run around those via cross writing of checks between two banks and doing cash withdrawls at the time of a deposit, please note that the maximum amount of cash the bank has an obligation to give you at the time of deposit is $100 with an additional $400 on the day that the check clears. Note: nothing before and nothing after that check clearing date. The fact that it takes a different number of days for checks from various location makes everything just that much more fun.
-- Ken Seger (email@example.com), May 27, 1999.
I do not yet understand why 'the polls' say very few are preparing but many are taking their cash out. I dunno, but I think less may actually do so than we, with our particular bias, think. If the few who are preparing have not already made a significant dent in the banking system (I would imagine that most who are taking money out have already done so), then why would the remaining few do so?
Just questioning the suppositions upon which the senario rests.
-- Shelia (Shelia@active-stream.com), May 27, 1999.
Richard, You need to rethink the barter thing. Once you get out all your nice things to barter with, someone may try to take your nice things by force, vice bartering. Think about a gun in your face, or your wife's. Starting up a bartering thing when everyone else has virtually nothing is a great way to look very conspicuous.
-- Apple (firstname.lastname@example.org), May 27, 1999.
Sung that old Peter, Paul, and Mary tune.
Where have all the pollys gone? Long time passing Where have all the pollys gone? Long time ago Where have all the pollys gone? Hard questions have mifted them, everyone. When will they Get It? When will they Get it?
-- Ken Seger (email@example.com), May 27, 1999.
I agree that many bank runs are probably likely.
However, I believe the big (really big as in too big to fail banks) have a strategy and that is to put the entire economy on a cashless basis. By this time next year I expect to hear something like this from key bankers: "Because of the Y2K panic of 1999 and the ensuing bank failures caused by those irrational depositors that brought on the shole 2000 banking problem, we (the banking establishment) have moved up our plans to put smart debit cards with a microchip in the hands of every depositor. The smart cards will keep track of all purchases and update creditworthiness of everyone so that no one will ever have to experience the pain of a depositor caused failure again."
Buy gold and silver and learn bartering.
-- Bill P (firstname.lastname@example.org), May 27, 1999.