Banks Runs: Worse than we think? : LUSENET : TimeBomb 2000 (Y2000) : One Thread

Just a thought on bank runs. Most people have two or three credit cards that allow a cash advance from any ATM. If bank runs occur would people panic enough to withdraw not only their savings, but whatever cash they could get on credit as well? They might think 'well, if there is no problem, then I'll just pay it back next month; but if the credit card bank fails, then I've just gotten a free $200' (or whatever their cash withdrawal limit is) If this occurs, then the fractional reserve will be liquidated even more quickly.

-- John Ainsworth (, June 29, 1999


John --

Good observation. To take it one step further, you can bet there will be people that will do exactly that, but will take the cash and buy gold or precious metals etc. If you truly believe that the system is going to tank, this would be the perfect route to take. However, if the system stays intact and the price of gold plummets, you stand to lose quite a bit. If things go "10", what good would the cash do?

Personally, I'm stocking up on booze and cigarettes, and I don't even smoke or drink! :)

-- ariZONEa (, June 29, 1999.

If that thought just now occurred to you... the banks must have thought of it 18-24 months ago. I "got it" in April of 1998 & folks on these boards were already discussing bank runs, martial law, "spikey-haired cannibal mutants," & so on. Just a thought.

-- get your (, June 29, 1999.

Booze and cigarettes??? What are you bartering these for? Food is the only worthwhile commodity (and water)--maybe toothpaste (smile). I don't want any drunk neighbors at a time of crisis. If these are the people you are trading with--what do they have that you could possibly want?

-- Mara Wayne (, June 29, 1999.

The response from "get your" is correct. Bank directors have thought of this and other "unfunded committments" as they are called. Others are personal and commercial lines of credit and letters of credit. All these can and may be drawn on. Of course, in the normal course of business no bank expects to have ALL these committments drawn on at the same time. We are aware and taking action to be as liquid (cash) as possible at year end. In a panic, will it be enough? No.

-- A GI (, June 29, 1999.

Many months ago, I started a thread on the sequence that different forms of payment would not be viable. This is quite important.

There is a chance that credit cards will have severe limitations in 1999 Q4. Either Wall Street will stop buying short term credit instruments (3 month paper) during Q4 and Q1 2000 to wait Y2K out, or VISA/Master Card will halt the practice of certifying the credit of individual banks. Either event would crimp/eliminate bank credit cards.

In that environment, I do not picture merchants accepting checks. This leaves us with cash.

We know that the FED/banks can limit cash withdrawls.

Most families will not be able to put their hands on enough cash to deal with the wild end of 1999.

I invite others to address this issue of their best guess as to the sequence of elimination of the various means of payment

-- David Holladay (, June 29, 1999.

We have gotten to the point where no one does legal business without an electronic bank account filled with money that doesn't really exist in physical form. When the bank panic hits things will get confusing very quickly.

At that point I don't know if people will go into a sort of mass shock for a week or two or if rioting and looting will break out. I suppose it all depends on how it is handled by the media. The banks right now are saying that nothing could possibly happen to our money. In a sense that is true since "our money" doesn't really exist. Not only is it not backed by a gold standard but there is less than 25% of hard currency for every cyber dollar.

Then you have to consider that a sizeable portion of hard cash is tied up in illegle goods and services. I would love to know what percentage of our economy is black-market cash-only and compare that to the percentage of total currency required to support that. There is also the fact that the bulk of printed dollars are overseas.

We have this incredible economy because using cyber money has allowed us to place whatever value we want to on the dollar. However, out in the real world - without telecommunications and computers - we can't do the same smoke and mirrors. Nor can we play with e-stocks and drive the dow up over 10,000. People get very up tight about their money. I just have no idea how they will react to the collapse of the dollar when it is finally at its real value.

I have noticed in the last year a remarkable swelling in my mailbox of credit card offers. The interest rate was at 24% and they wanted an $89.00 application fee. I also got an interesting offer for a credit card that would allow me to buy only specific electronics. Things like VCRs, clock radios, faxes - all definitely date-conscious items. Because the credit card companies can list their customers debts as assets it can only be a good thing for them when the debt load goes higher. That way they can manipulate those "assets" into stock value.

Smoke and mirrors and slight of hand. Hocus pocus with our money. Its the biggest damn shell game the world has ever seen. The months ahead will be interesting times.

-- R (, June 29, 1999.

ariZONEa: BY God, I'd give a couple dozen eggs for one evening of 'feeling little pain'. I'll pass on the would only make me want more! I intend to bury a couple of buckets of happy juice! Just because some of us enjoy an occasional nip, doesn't make us drooling, slobbering, stumbling idiot! I guarantee ya sister.....I've got plenty that others will need! What planet do you live on anyway? Ever have the pleasure of meeting any of our armed forces? Sheeeeese. I'll pass on stocking cosmetics, however....tends to leave prints on the butt of a rifle.

-- Will continue (, June 29, 1999.

You might want to check out this article on Gary North's site, yes, it was an anonymous source, but read what he says: He says that about half of the credit card acceptance machines (POS machines) will NOT work as of jan 1. The demand for cash to purchase items normally paid for with credit cards will put additional pressure on the banks for cash. Very interesting.

Also, I have a case of vodka set aside for a)pain relief b)making vanilla and other herbal extracts and c)trade/barter. If you ask anyone who lived through the depression, they will tell you that drinking establishments did just fine. I personally think that spices to make all that boring food storage will be hot, so I am really stocking those.

Got Cinnamon and bay leaves?

-- (, June 29, 1999.

Here's the link. Sorry about that.

-- (, June 29, 1999.

Mara --

I would rather have drunk neighbors that can't shoot straight and are pacified than neighbors that are pissed, sober and going through the DT's (or nic fits, for that matter). I also don't wish to divulge the location or even existence of my food supply,

Other items I have considered for bartering include toilet paper, camping fuel, bleach, gardening tools and fertilizer. Things most people would tend to overlook. Yes, food is the only thing of importance, which is what I will trade these things for, most likely. I may even start a stockpile of pot seeds. That will REALLY pacify the neighborhood!

-- ariZONEa (, June 29, 1999.

Some credit cards have a much lower "cash withdrawal at ATM" limit than just charges. But even that lower cash limit would be "too high" in case (likely) of panic.

-- A (, June 29, 1999.

Got Cinnamon and bay leaves?

-- (, June 29, 1999.

I have my very own bay tree! It's just a two foot baby as yet...but it was a present from my son-in-law who is an organic gardener and was happy to see me start growing my own herbs and veggies.

I've stocked up on those medicinal herbs that I use and know how to use effectively (learning from my herbalist/accupunturist brother), plus many of the cooking herbs. You're right -- a leaf of bay, a pinch of pepper/salt and thyme will turn the most bland soup into a delight.

-- Shelia (, June 29, 1999.


I feel compeled to say I think you are wrong on the "get the cash by maxing out the card in case you don't have to pay it back next year".

I fully recognize how anachronistic and stoggy my attitude is, however, I do believe this is tatamount to stealing.

Let's say my neighbor is going to go on a very dangerous trip and after he leaves I go over and borrow some tools (I know he won't mind, I've borrowed them before) on the chance that he may get killed and then I can keep the tools.

No, I have not exactly stolen the tools at the time I took them. But the intent is just the same.

-Greybear, color me old fasioned

-- Greybear (, June 29, 1999.

And of course, if we experience deflation and you *do* have to pay it back, you probably haven't improved your situation.

-- Flint (, June 29, 1999.


I remember your post regarding the issue of short term debt becoming a problem later in the year. If these credit card companies cannot float their debt then they will indeed be forced to limit the amount of available credit on the cards. They could also freeze it.

As you said, that would leave cash and the problem is there would not be enough of that so it, too, would be rationed. I have been thinking about this scenario and it does fit.

People are using credit cards now to advance money to invest in the market. I believe that at some point those who carry the debt are going to call a halt for a while and I do not believe that the system would survive such a halt without severe and domino-like repercussions.

The closer we come to y2k, the more risk will be attatched to debt. The driving force of greed will not be able to overcome the fear of loss. Soon we will have the driving force of fear. I do not intend to stand in the way.

-- Mike Lang (, June 29, 1999.


I wasn't advocating doing it, rather pointing out the possibilities. My question would be: What difference does it make what form the debt comes in? I mean what's the difference between running up the cards to buy gold as opposed to investing funds from a home equity loan, an unsecured line of credit or other source? The typical household "pool" of money now includes an unprecedented amount of debt. Would it be different if I used my credit card to purchase my food and pay my mortgage, and then used those funds to buy the gold?

I agree it would be unethical, and could be dishonest. But, to me, it's nothing different than the government does. It would almost be like "beating them at their own game."

I agree with Flint (shudder) that the risk is there and could be substantial, which is why I'm not personally employing the tactic. But, rest assured, you will see such things occurring, and even more things which I don't have a devious enough mind to think of.

-- ariZONEa (, June 30, 1999.

people will always pay for booze,cigs,and sex.barter away

-- zoobie (, June 30, 1999.

"If bank runs occur would people panic enough to withdraw not only their savings, but whatever cash they could get on credit as well?"

Let's think this through. If there are bank runs, do you think anyone is going to put cash in an ATM? If cash withdrawls are limited, then they sure aren't going to give you cash on credit.

-- just trying ( through), June 30, 1999.

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