Hi 'Yall,

I've been thinking about the subject of a "cash shortage". I've read of late of penny shortages. I really am interested in your take on my "take" -- here goes:

I'm thinking yes, there is but a fraction of all money "on the books" in the form of hard cash. But what really matters is the "payment system"; i.e. the existance of a "system" of non barter exchange -- such as check, electronic transfers, ect. For instance, every month when I make my truck, rent and credit card payment, I pay by check. I've been thinking about the definition of "money". Basically, it's something that others will accept as payment for goods and/or services because THEY can trade it latter for what THEY want -- so they accept it from you today for what YOU want -- figuring it will still be worth what they gave up for it by the time they get ready to "trade it off" for some good or service.

If I'm hungry, I can't eat gold or silver. I'm not knowedgeable enough not to accept counterfiet or "watered down" precious metals. Plus, if I have ounce, or ever tenth ounce pieces, how much is that chicken worth? An ounce of gold; i.e. a $300 chicken?

Lets say lots of people make runs on banks. All the cash is in private hands. If there is no more cash to withdrawal, and cash is less than two percent of the "money on the books", does that mean the banking system will be OK because 98% of the "money on the books" will then just be subject to "bookkeeping transfers" via check, electronic transfers, ect? Think about this point. Please share your "take".

I'm thinking that IF cash is unavailable, and people start making withdrawals of bank drafts, certified checks, ect, they will eventially deposit them right back into the banking system so they can write checks on those funds/amounts inorder to buy or pay for things like we do now. I'm wondering if what we will witness is a great "non-cash withdrawl" followed by a "non-cash deposit" when the bill collectors start calling! All this assumes, of course, that it won't be TEOTWAWKI. Something less severe, does my analysis hold water?

Lots of the "hard cash" is out of the country. I don't know if these amounts are figured into the 1.7% or so numbers I see attributed to the percent of "money on the books" in the form of hard cash. In addition, lots of "money on the books" in held in corporate business accounts of one sort or another. With companies running a "tight ship", I figure most of 'em will need to leave their money in the bank so as to be able to write checks against it so as to stay in business!

My main thrust is this -- I'm thinking it's the PAYMENT SYSTEM that counts -- not the percentage of "money on the books" in the form of "hard cash" that counts. I'm thinking as long as there is a "non-barter medium of echange" accepted as payment for goods and services, then our financial/banking system will weather the storm.

I think about that movie "It's a wonderful life". How COULD we have a banking system where money just sat around, uninvested, just costing the owner a storage, guarding and insurance fee? For that matter, the same "bank run" phenomenon could happen anytime, anyday -- but as soon as people figure the payment system -- even if it's just another bank from the one they withdrew their money from -- is OK, the money goes back in, the depositer gets paid interest, and the banker loans out the money at a profit -- using "statistical thinking", much like an insurance company uses to figure out how much to "invest" (in 30 year home loans for the banker, 30 year bonds for the insurance company) and how much to keep on hand for "redemptions" (cash withdrawls for the banker, claim payments for the insurance company).

Think again about my point of "if the total amount of "bank runs" is limited to only 1.7% of the "money on the books", with any other "withdrawls" being in some form of "check/bank draft", does not his insure the survivability rather than guarantee the destruction of the financial and banking system?

Also, whenever I've heard about penny shortages, I've never heard about "breakdowns" because of it. I guess people either round to the nearest nickel, or use checks, credit cards, ect. if they can't stand to be "shorted" the "rounding amount". I'm thinking the "penny shortages" are in microcosm what a "paper cash shortage" would be like or how it would be "worked around/out". What do 'yall think?

P.S. Just to address all you "conspiricy theorist" out there, I'll state for the record that I am a Y2K programmer analyst in the financial services industry. However, I'm just a private citizen, not a "company man" or "disinformation agent". Also, I couldn't care less what the "widgets" are that I'm writing or modifying code for happens to be. With me, it's "how do you want your eggs today, boss....splat!!" Now how many days before my next payday? But, since I figure on sticking around thru the rollover, and will have to work on any "problems" that do come up, I have given the matter some thought over the last week or so. The above is my analysis. I welcome your thoughts -- especially any that expose errors in my logic or analysis -- I'm interested in what is correct -- don't care about the source, or "who is right". And I qualify my analysis by saying that this assumes it won't be TEOTWAWKI. Thanks for sharing, 'yall.

Cordially,

Sincerely,

-- Louis (StLouisLouis@Yahoo.com), August 02, 1999

Answers

My main thrust is this -- I'm thinking it's the PAYMENT SYSTEM that counts -- not the percentage of "money on the books" in the form of "hard cash" that counts. I'm thinking as long as there is a "non-barter medium of echange" accepted as payment for goods and services, then our financial/banking system will weather the storm.

It's deeper than that. How are PEOPLE going to react when they are told there is a limit to the amount of their own cash they can take out? To me, my checkbook doesn't represent my assets, it's the cash behind it. A check is an arbitrary form of payment; any business can decide to accept it or decline it at will. You can't do that with cash except under VERY special circumstances. That's what 'Legal Tender for All Debts Public and Private' means.

Tell me I can't take out every damn penny from my account and I will close the account on the spot. If enough people do this (and I believe a great many will) then the bank will HAVE to close it's doors. If they don't have enough 'assets' on the books, they are out of business. Who's gonna take a check from a bank that just closed? Or one that might close next week? Would you?

-TECH32-

-- TECH32 (TECH32@NOMAIL.COM), August 02, 1999.

Louis points the way to a discussion about the payments system if the banks (and Fed) are cleaned out of paper currency, but the electronic records and payments system holds up.

If 98% of bank account value remains on record but can't be accessed as paper currency, will the "e-money" trade on its own and how will it be valued?

Seeds for thought...

-- Mr Gresham (wh@t.century.is.this?), August 02, 1999.

Louis, nice to see you back with another excellent post.

Ray

-- Ray (ray@totacc.com), August 02, 1999.

TECH32 commented:

"It's deeper than that. How are PEOPLE going to react when they are told there is a limit to the amount of their own cash they can take out? To me, my checkbook doesn't represent my assets, it's the cash behind it."

Well TECH32, the American people are pretty easy going. You can mess with their Constitution and you can mess with their right to be armed but the ONE thing you don't mess with is their dough!!

The one and only computer system that MUST run on time and correctly is the PAYROLL system.

As I indicated in another thread, when folks are told that their hard earned money may not be readily available, banker beware!!

Ray

-- Ray (ray@totacc.com), August 02, 1999.

The problem is that your deposit was loaned out to joe six pack and joe just lost his job because of other y2k effects and can't pay his mortgage, his car loan or anything else. Because joe could not make his car payment, sam's used cars went belly up. Sam owed the bank big time. This feeds on itself.

-- rambo (rambo@thewoods.com), August 02, 1999.

The problem isn't the payment system, bank runs, or the cash on hand. The actual problem is the value of money. What happened during the great depression can be boiled down into 5 points.

1) Stock market bottomed out - this caused a small percent of people and businesses to lose money.

2) Banks were investing in the stock market - this is also going on today.

3) There was not enough available cash for withdrawals once consumer confidence in banks bottomed out.

4) The federal government decided that everyone could get 30 cents on the dollar back from their deposits - the ratio of available cash to total deposits was higher back then.

5) The value of the dollar was deflated to make the 30% thing acceptable.

Now apply this concept to today's economic situation. If the value of the dollar was deflated by the federal government and your bank account went from say $1000 to $100, how would you feel? Actually 10% is an optimistic amount. However, if you had $1000 in cash, the government can't touch it's value, it would still be $1000.

Think about it.

DJ

-- DJ (reality@check.com), August 02, 1999.

Louis: An excellent presentation regarding the *payment system* can be found at www.e-gold.com

-- DaveW (dwood@southwind.net), August 02, 1999.

"It's a matter of faith," they say. Would you accept a check during the first month of 00/2000, not knowing if things will get progressivly better or worse? Barter could be stronger. Even dollars could just be worth the paper they are printed on!

-- dw (y2k@outere.com), August 02, 1999.

You speak of essentially a cashless society. Today, most depositors feel THEIR money is safe in a bank and that thet can access THEIR money in cash at any time. If they go down and try to withdraw THEIR money and cannot get cash, they could demand all of their electronic deposits and move them to another bank that has cash. If banks act 100% together and refuse to issue cash, one or more of the cash based businesses like a McDonalds or your local tavern would cash checks for a small fee. Taverns do this today for their regulars.

One of the objections to a cashless society is a loss of freedom and invasion of privacy. Cash is like potential energy you can store it, transport it and are free to do with it most anything you wish. You can keep some handy just in case of a rainy day (or Y2K). In a cashless society, the banks computers (and any snoop) would track all transactions which would likely lead to a black market currency.

With cash you can buy things you want without concern that the computer is up, the power is working, the phones are functional, etc. Besides it is yours - you earned it.

Keep cash green!

-- Bill P (porterwn@one.net), August 02, 1999.

Ray,

The one and only computer system that MUST run on time and correctly is the PAYROLL system.

I disagree. Businesses will want stock up on cash to meet payroll 'just in case' the same way joe six-pack will want to. How much will they stock up on? This is just a WAG but I'd say two-three payroll cycles is a fair bet. In the end though the result will be the same, failed banks.

As I indicated in another thread, when folks are told that their hard earned money may not be readily available, banker beware!!

Agreed.

-TECH32-

-- TECH32 (TECH32@NOMAIL.COM), August 02, 1999.

You know payroll can be done by hand. Its a pain - but it can be done and often is by one person. Even for business of up to 75-100 people. If the tax structure was simpler it would be even easier.

-- R (riversoma@aol.com), August 02, 1999.

I expect to accept at least a couple of (payroll) checks in January 2000. Furthermore, these will be directly deposited. BUT, I don't necessarily expect all banks to be so fortunate... And my biggest worry isn't in the first couple of weeks, but slightly later, as the cumulative domino effect takes hold.

-- Mad Monk (madmonk@hawaiian.net), August 02, 1999.

One point for comments I forgot to mention is this:

IF there is a "hard cash" shortage, but the payment system remains OK, I figure "above ground", i.e. legal commerce will continue via check, bank cards, ect. -- but what about the "underground economy"? I'm thinking illegal drugs, ect. Now I don't participate in the underground economy, -- AND I DON'T WAN'T TO DIVERT ATTENTION FROM THE MAIN POINTS I ASKED 'YALL TO COMMENT ON IN MY ORIGINAL QUESTION -- but do you think there would be some positive effects from "hard cash shortages" on dope dealers not being able to "re-stock" from their suppliers without cash, ect. For instance, in my home town, lots of people used to sell their food stamps every month for fifty cents on the dollar. I know a couple of retired people who would buy them -- and use them. The people selling them would blow the money on dope, booze and cig's. After Illinois (I live accross the river from St. Louis) went to a "debit card" system, this activity is waaaaay down; too much trouble for people in a hurry to party!

I'm NOT saying I want this -- I'm wondering about the EFFECTS -- less illegal activity that's harmfull to our society, but "out of work criminals"...with lots of time on their hands. I remember a documentary on the effects of ending "probition". All the people in the booze business, being used to "big money fast", didn't like unemployment (and no spending money!). So they went into kidnapping. I wonder what anyone put out of an illegal business would likely do to regain some of their old lifestyle they now can't afford. Just make do? Adjust over time? I'm wondering about this from a long term prospective -- not just "why, they would loot and steal, of course" -- maybe so -- but not "forever" -- unless we have TEOTWAWKI. I'm wondering about this issue long term.

Again, thank you for your "two cent's worth" -- and please don't forget about my original questions/ideas at the top of this thread. Thank 'yall!!

Cordially,

Sincerely,

-- Louis (StLouisLouis@Yahoo.com), August 02, 1999.

The entire banking system can be summed up as follows: A CONFIDENCE GAME. As long as people are CONFIDENT that their money is safe, and that they can get it when they want it -- IN CASH, IF DESIRED -- the game continues.

Bank runs = loss of confidence = game over

-- King of Spain (madrid@aol.com), August 02, 1999.

Dear TECH32,

I've thought about a couple of your comments. I would like to share my thoughts for your consideration and comment. Please understand that I'm seeking a discussion, not a debate. Thanks!

"How will PEOPLE react when they're told they can't have all their money in CASH right now"...I've thought about this. I'm thinking what are their choices? Like the penny shortages, if there are no pennies -- or paper notes to be handed out -- they are going to have to use checks, debit cards, ect. As long as businesses get credit for THEIR deposits, i.e. the payment system still functions, businesses will, I'm thinking, still accept checks like they do now. What's their choices, close down with unsold inventory? I'm also thinking people might rush to buy items they can barter. This might result in prices for barter items going up -- but prices in what currency? Would there be one "cash price" and another "check/debit price"?

Thinking about this last point, I'm thinking that at first, people might indeed panic/worry about wether their money was indeed "still there" and "safe". I'm also thinking that, again, as long as the payment system still functions, They will go along with using checks for at least two reasons. First, they will want to buy stuff instead of not using their account balances until more currency is printed up and distributed. Second, and this again assumes the payment system is still functioning, they will get tired real quick of paying a "premium" to get cash, only to buy what they could have bought with a check. I'm thinking that "market efficiency" would zero out the advantage of any lower "cash price vs. check price" with the increased "premium" paid to "buy cash at a premium" with "check/debit/e-money".

For instance, lets say I want CASH!! I barter a check -- or even food, ect. having a "non-cash price/value" of $150 for $100 in cash. I then take my $100 in cash and buy the same amount of some different item -- let's say gasoline or clothing -- at the $100 "cash price/value" -- that's really the same amount I could have bought it at the $150 "non-cash price/value". I've made two transactions to buy what I wanted. I still end up with $150 worth of "stuff" for my $150 of "money on the books". In this scenario, I think people would get tired of paying -- that means losing -- whatever transaction price they're paying to convert their "money on the books" into another currency before finally buying what they want. I'm thinking -- as long as the payment system works, they are going to get tired of converting into some other type of currency to get what they want.

Another thought I had as I'm writing this -- I'm thinking this logic would also apply to gold, silver, ect. as well as "hard cash". If people got tired of paying a "conversion premium", -- or if there is not enough cash, gold, or whatever to handle the sheer transaction volumes of daily commerce, people would again have no choice but to just do what they are doing now. I'm thinking, how else is some company going to pay for the cargo of an ocean going cargo vessel full of oil or whatever? And if the sheer transaction volume -- or the speed requirements of transacting business -- preclude the possibility of converting "money on the books" into a "hard asset" for barter-payment, I'm thinking the "opportunity cost" of forgoing the transaction while waiting for "hard currency" to become available would make people change their initial attitudes about discarding their "money on the books" for "hard assets". In short, once the "net result" of, say trading $150 worth of "money on the books" for $100 cash to buy $150 worth of goods and services sinks in and becomes transparent, the "premium value" of cash, gold, silver or whatever would dissapear.

At first, I was worried about cash shortages, bank runs, ect. Then it dawned on me -- what are people going to do -- what are their choices -- if there is no more cash to be had at the teller window?

Answer -- use the 98.3% of "money on the books" not in the form of cash to do what they do now -- by paying with checks, bank/debit cards, ect. In short, if that 98.3 % can't "dissapear from the system", or be buried, is there still a risk that the banking/financial system would collapse? I'm thinking not more and more -- but want 'yall's input in case I missed something in my analysis.

Can it really be that NOT having all the "money on the books" in the form of "hard cash" would be what PREVENTS a collapse of the banking/financial sytem due to "cash runs"? If so, why did I and so many others overlook this "answer" for so long?

On to your second point of unemployed people not making their home, car or whatever payments: I'm thinking yes, this would indeed be a problem. These payments are for things pledged as collateral for the initial loans. IF there is not some type of "national, temporary moratorium", people delinquent on their payments would get their collateral -- houses and cars, ect -- repossesed. If the market value for such things went down, I can see how banks and financial companies could get hurt real bad -- but what percentage would the market value of repossesed items have to go down -- and what percentage would have to get repossesed before the bank/finance companies net worth got wiped out and they went under? I'm thinking of the nation as a whole here. Also, I'm thinking there might be lots of rich people seeing this turmoil as a great "buying/investment opportunity". But I pity the poor family who figured their $1000+ a month house payment would NEVER be a problem. There would definitely be a big "ouch" in adjusting to living within whatever their new means were. Thinking about it, I guess they would still be living "paycheck to paycheck" -- just without a bunch of debt to finance a nicer lifestyle in the present. Instead they would life "paycheck to paycheck" on a "cash basis" (renting, owning a car a few years older, ect.). Please don't think I'm saying any of this would be nice/good/desirous -- I'm not. I'm just trying to think "downstream effects", "probabilistic scenarios", ect. I know this is a lot...but with me, one thought just leads to another...thanks again for sharing your thoughts and comments -- 'cause I've been around here long enough to value your opinions!

Cordially,

Sincerely,

-- Louis (StLouisLouis@Yahoo.com), August 02, 1999.

Still hot on the trail, Louis!

You wrote: "For instance, lets say I want CASH!! I barter a check -- or even food, ect. having a "non-cash price/value" of $150 for $100 in cash. I then take my $100 in cash and buy the same amount of some different item -- let's say gasoline or clothing -- at the $100 "cash price/value" -- that's really the same amount I could have bought it at the $150 "non-cash price/value". I've made two transactions to buy what I wanted. I still end up with $150 worth of "stuff" for my $150 of "money on the books".

You probably would not need to do such a conversion, if merchants were indeed taking "e-money" checks that they could take to their banks. What they would be asking themselves is what THEY could buy with those deposits. If there was general uncertainty as to the long- term usefulness of those deposits, then they would trade at a discount to paper currency. The phrase "not worth a Continental" comes to mind, even though those early American paper notes came to be used at great markdowns.

The 150 to 100 differential in value would be built into the selling prices of goods; perhaps posted as the "E-price", with a one-third discount in price for payment with paper currency. Though there would probably be moneychangers who would do this for you, it would likely be similar to the interchange of U.S. and Canadian currency that commonly happens at border towns.

You wrote: "In short, if that 98.3 % can't "dissapear from the system", or be buried, is there still a risk that the banking/financial system would collapse? I'm thinking not more and more -- but want 'yall's input in case I missed something in my analysis.

And: "Can it really be that NOT having all the "money on the books" in the form of "hard cash" would be what PREVENTS a collapse of the banking/financial sytem due to "cash runs"? If so, why did I and so many others overlook this "answer" for so long? "

The money would indeed remain on the books if confidence in recovery remained high, or until it was spent on tangible goods at soaring prices if confidence waned. In the realest sense, it isn't "money" any longer if you can't spend it on other things of your own choosing.

At such a point, banks would experience a liquidity crisis: unable to meet payments to other banks to clear these checks drawn on their accounts. However, they might still be technically solvent, with a positive balance sheet and a capital surplus. They have uncallable loans out long-term, while short-term deposits are fleeing their hands. But, once the loans start to go bad because of the general lack of cash flow to make current payments, we become like the nations under IMF tutelage who receive new loans to keep interest payments current, and it becomes only a matter of time when the lenders must finally acknowledge the loss of their capital.

In order to avert the most extreme collapse scenarios, something will have to force or make people (and businesses) want to leave their bank balances largely intact and not clean off every store's shelves, and also make it possible for them to continue making loan payments.

Now what, or who, might that be?

-- Mr Gresham (wh@t.century.is.this?), August 02, 1999.

King of Spain scored a concise bullseye. The only thing bankers fear, is fear itself. And for good reason. The system is dependent on the absence of wide-scale fear.

If the anecdotal stories I have read here about cash withdrawl limits are true, Americans may lead the way to a liquidity crisis and subsequent market crash. A y2k macro-economic event.

Imagine you walked into your bank and asked for $10,000 of your money - in cash. The teller smiled and said, "Certainly. What denominations would you like?" Any fear you had would dissipate quickly.

In my opinion, any regulatory attempts to limit cash availablity to Americans are a recipe for disaster - it plays into the hand of fear. A bank run in Venezuela, or Egypt, or Indonesia, or even all three combined won't have the global impact that bank runs in America could have.

I don't think the world currency system will change in the next few months, so the only option to maintain the integrity (used loosely) of the system is to try to contain fear and increase available currency. What other options are there?

We may come to find that the banking networks, enough individual banking systems and recovery plans work well enough after the rollover that we can muddle through. But it won't matter, will it? It would be too late.

And who's fault would it be? I suggest that the pin-headed bureaucrats that tried to 'control' Americans' access to their money would be a good place to start looking.

-- PNG (Peter Gauthier) (png@gol.com), August 02, 1999.

...I'm thinking what are their choices? Like the penny shortages, if there are no pennies -- or paper notes to be handed out -- they are going to have to use checks, debit cards, ect.

LOL. They aren't going to HAVE to do anything. You don't give them their cash and they will riot. To believe otherwise is 'travelling in a fantasy land'. People NEED cash to operate in todays world. Am I supposed to write a check or use my charge card for the $2.75 worth of newspapers I bought today? Or how about the $4.85 I spent on Dunkin Donuts muffins? What about the $8.50 I spent to rent some movies? You think any of those stores wants a check from me? Hell no. Am I supposed to start writing thousands of checks for my day-to-day living expenses? (especially when most banks have a per-check charge!)

If businesses start taking checks they're going to realize that MANY people (especially in hard-times when people are unemployed) will be writing bad checks. That's money out the door and it can't go on for long.

As long as businesses get credit for THEIR deposits, i.e. the payment system still functions, businesses will, I'm thinking, still accept checks like they do now. What's their choices, close down with unsold inventory?

Ummm, yes actually. Some might just shut their doors and wait until things get back to normal, others might try to operate on a cash only basis and others will liquidate for whatever they can get.

...They will go along with using checks for at least two reasons. First, they will want to buy stuff instead of not using their account balances until more currency is printed up and distributed.

Huh? Buy stuff and you are STILL using your balances. Only with cash you don't have to worry if the store will take it and you don't have to worry about your bank going under. What happens when you pull into a gas station after they have stopped taking checks because they were losing too much money on fraud? Unless you have cash, you don't get gas. And don't say 'credit-cards' because most people are close to the max now. I can assure you if there is any type of instability in the financial markets, or if lots of people are unemployed, the credit card companies will NOT be inclined to raise limitd just 'cause you ask nicely.

Second, and this again assumes the payment system is still functioning, they will get tired real quick of paying a "premium" to get cash, only to buy what they could have bought with a check.

You sure you don't work in the PR department? People won't be paying a premium for cash, businesses will.

The bottom line is this, when people want cash, cash is king. Period. If you're the third person in line at the bank when everyone else starts cashing out, you won't get any.

-TECH32-

-- TECH32 (TECH32@NOMAIL.COM), August 02, 1999.

Dear Mr. Gresham,

Thank you very much for your reply. Basically, my analysis depends on the continued existence of the "payment system". If banks, financial institutions, businesses, ect lose the ability to engage in commerce with whatever passes for "money" -- be it cash, check or whatever, then indeed we have at least a "transition" -- to what I don't know -- or even a "collapse" -- but I'm thinking people are still going to have needs and wants they are going to want to "trade for" in whatever passes for "money", since barter won't satisfy all needs and wants (i.e. I want what you have, but you're stocked up on what I have to barter, ect.).

I'm thinking that the reason why the payment system will continue to exist is because financial institutions will contine to honor checks, ect. from other financial institutions because there is some institution acting as the "guarantor of last resort" -- such as a country's central bank.

I'm a computer programmer/analyst, not a banker or economist; I may not understand these issues well enough. But I suspect that while the concerns are indeed real, that the reason things will be OK is because considering the sheer unimaginable transaction volume of commerce, I think when people are faced with deciding between "having confidence" in the present system verses abandoning it for a cash, gold or barter system with a "unit of exchange" that presents problems of unavalibility, indivisibility of a "unit" (ounce gold coin, ect), opportunity cost of waiting to complete the transaction on securing enough cash, gold or whatever -- I'm thinking people will just say, collectively, oh, what the heck, what other choice do we have...might as well just go back to what we've always been doing/using, ect.

I'm thinking this because people are not going to want to suffer the inability of conducting commerce/trading that a loss of the payment system would involve. I'm thinking that people as a whole will not be able to "throw away the present system" for a new one -- or would want to trade in their current "money on the books" for some new currency at "pennies on the dollar" if they can help it. I think the worries will be real for awhile. But once a check is accepted, clears the bank, and they then want to write a check on those "cleared/avalable" funds, do write a check, have it accepted, and the cycle thus continues like it does now, that the worries will subside, and the payment system will continue to hold, and the cash shortages will subside and the "calamity" will turn from a percieved crisis of a "cash shortage" into just "business as usual" because that is what is in people's best interest to happen. For those who have the "hard cash", what will they do with it? I'm thinking they will buy something with it. The cash then finds it's way back into the system. As those who have their "money in hand" instead of "on the books" satisfy their needs and wants as time passes, all those "dollars in hand" will simply go from being in "short supply" to "normal supply".

I guess my analysis rest in part upon a premise that our national/global financial system is like a big ship that one is not going to find "turning on a dime" or being "tossed out" for some physical bartering unit simply because I think the economies of the world are too big and fast moving to be hamstrung by the need to convert everything into some "physical unit" that everybody values equally. What would that physical unit be? I'm thinking it would BOTH have to be scarce enough to have adequate value for a given physical unit AND plentifull enough to be readily avalible to facilitate rapid, fluid commerce on a global scale. These two -- a physical "unit" of something that is both scare enough and plentifull enough at the same time seems like a contradiction in terms (to me at least). And if there were such a "physical thing, I'm thinking it would probably have to have "utility value", like being edible or usefull in some basic manufacturing process or it would lose it's "value" appeal -- but then it would be "consumed" and most likely cease to be available in sufficient quantities to be usefull as a "universal unit of exchange/money". Just my "off the top of my head thoughts" as I ponder your comments.

Again, thanks to one and all for sharing. I find, as with this thread, that I often don't know what I think until I hear what I've had to say (or read what I've written)!!

Thanks again,

-- Louis (StLouisLouis@Yahoo.com), August 02, 1999.

Dear TECH32,

Thanks for your thoughts. Some "grist for the conversation":

No, I don't work for the PR department. My post are just responding (not debating) to alternative points of view regarding my analysis. I guess I am being an advocate of my analysis, but I am ready to throw it out in a heartbeat if I think it's invalid. I love the truth and hate a lie. As a programmer, I'm used to dealing with "fine little slices of logic", I guess :) Hey, it pays the rent. And I get to work in air conditioning when it's hot or cold outside :))

With the above said on conversation versus debating, here goes:

As to rioting if people can't get their money in cash, I'm thinking three things. First, I remember reading about the Russian situation last summer. People did want their money in cash. But all they could have was what was available. I'm not saying this is Ok -- I'm just making an observation. Second, would rioting "get" them their "cash"? I'm thinking not, because thirdly, rioting would simply not magically change their "money on the books" into "cash in hand". I'm thinking they would most likely just use checks or debit cards while waiting for more paper currency to be printed up and distributed -- and would probabley get tired of waiting and standing in line for "cash" when they could go get what they want and be benefiting from whatever they buy by using a check or debit card.

Your points on several industries that now are mainly or totally "cash only" are well taken. I posted above about "what would happen to such businesses such as the underground economy, ect." if cash came into short supply. I'm wondering about these effects. I'm not sure I would want to trade my "direct deposit" paycheck for a business that MUST have CASH ONLY right now! Might be some "bumps in the road" if people "hold tight" their cash and coin for a while after the new year -- or just cut back on "non essential" purchases out of fear or lack of income, ect. Haven't "fleshed this aspect out" yet.

As to fraud, I'm thinking that, again, assuming that it's not TEOTWAWKI -- or at least the phone lines still work -- that businesses might either use some kind of "check verification" type service or rapidly insist people get some kind of "debit card". For instance, I personally have one checking account. My paycheck gets direct deposited into it twice a month. My ATM card is also a VISA and a debit card. When I go to Schnucks (a local grocery store chain), I can specify debit or VISA. Either way (or at a store or via mail order where only VISA is acepted), my account balance is instantly reduced by the amount of the transaction. It's kind of like an "instant check" that clears at the time it's accepted. I'm sure you're aware of this. I'm thinking that as long as the phone lines are up, merchants might very well insist on cash or some type of VISA/debit card like I use to avoid the type of fraud you're talking about. If that is indeed the case, then I'm thinking that gas station you mentioned would continue to accept my "VISA" card as they do now. If my bank WERE to become "temporarily out of order", but the payment system still operated, I would have to open an account right away with a "good bank", or imagine the powers that be would "merge" or "assign" my account to a healthy bank, with the "temporarily closed" bank having a bunch of "permanantly unhappy" share holders!

Keep in mind my card is not a credit card at all. The amount I'm "charging" is really just an instant reduction in my account balance at the time I "charge" something on it. Again, my analysis does depend on the continued existance of the payment system, no TEOTWAWKI, ect. But if it IS TEOTWAWKI, I really don't know what "commerce" would be like -- a demolition derby in Mad Max's Thunderdome for that last can of beets...I mean peaches? :) I don't know. If it's TEOTWAWKI, my best guess is "the law of the jungle" with "let the breather...er buyer...beware"!.

Take care, and thanks a lot for sharing.

Cordially,

Sincerely,

-- Louis (StLouisLouis@Yahoo.com), August 02, 1999.

Louis, I guess what you are saying in essence is that John Q. Public would simply accept the "solution" of simply using checks, credit cards, etc., and simply not worry about not being able to have currency per se. I doubt that, and I doubt that quite strongly. For two big reasons:

1) Y2K. I mean, lets remember what is motivating the cash withdrawals in the first place -- the belief that electronic promises to pay will be no longer safe, thus the need to flee to cash. Upon being told that there is no more cash to be had, I doubt if John Q. is going to say, "Well, OK, I guess we didn't need it anyway."

2) The definition of "money". You may be very comfortable of thinking of your money as electronic digits. Like a lot of people these days, you may do 99% of your transactions via credit cards, or paper checks. But I suspect that most people still regard "true" money as cash, especially if it is their primary method of buying and selling, which it still is for many people. Even if Y2K should suddenly, magically, disappear as a concern, I do not think that electronic promises to pay are going to be any substitute for what John Q. Public considers The Real Thing.

-- Jack (jsprat@eld.net), August 02, 1999.

Dear Jack,

Thanks for your thoughts. Two things come to mind. On your first point, I think a "cash shortage" would indeed be a motivating factor for some people; the same way any shortage of anything seems to motivate people to "get mine!". But I'm thinking the MAIN reason they want cash is to buy stuff in anticipation of a shortage of "stuff" -- hey, I've got to get some "whatever" before it's all gone! I've got to use MONEY. My point is that, if it's not TEOTWAWKI, their check or debit card will do as well as cash at the store. Plus, I just thought, if "whatever" is flying off the shelves, they're not going to want to waste time standing in line at the bank when they could be standing in line at the store's checkout register with checkbook or debit card in hand! Along this same line (sort of) I'm thinking that most stores' profits are a tiny percentage of sales. If they were to offer steep discounts for cash, wouldn't they go broke? If there is a payment system in existance, why would they need to when their account gets credited promptly when they deposit "approved" checks and debit/credit card transactions? I'm thinking these are more reasons for "business as usual". If, however, it is TEOTWAWKI, who in their right mind would be running a register in the middle of a "looting binge"? Not many people would be stopping to hand over a cash OR a check! Only problem, the store wouldn't have much incentive to "restock for the looters"!

On your second point, I agree that lots of people prefer cash. I do. I use ATM's a lot. I'm a single guy who likes to have a pocket full of money. My biggest problem is that it's too easy to spend that way! My background is one of "small business". I LIKE counting money -- when it's mine that is! Much nicer and more fun indeed than just calling up my banks automated voice system and hearing my account balance! It's especially nice after a "good" poker game! Ever think about how whipping out the wallet is like how they used to whip out their "communicator" on star trek -- ah, yes, my "communicator"! May it ever be full of "communications"!

I'm thinking though, that what I and other people like most is the feeling of having the "ability to buy/spend as we will". Due to habit, that's most "tangible" as "soft, warm, pliable cash -- flutering away, usually on some spur of the moment urge"! However my point is that wether the "shortage" is pennies or $100 bills, "doing the (transaction) deed" is what gives "satisfaction" -- and if that's with a checkbook or bank/debit card -- that's what will impress those "material girls" -- not standing in a line outside of a bank in Janurary! And if it's TEOTWAWKI, I don't think I would like to be venturing forth if I could stay nice and warm under the covers -- or at least nice and snug inside of a couple of sleeping bags that "mate" together at their zippers, if you know what I mean :)

Gee, my tone sure did change...I guess it's because I'm going home to my nice warm bed now. Signing off for tonight...be back to read all your replies tomorrow. Thank you all for your replies -- and most of all, please don't take anything I say as any kind of personal attack -- I'm just discussing my viewpoint; remaining an advocate until and unless I think I am wrong -- at which time I'll change it to whatever I then regard as true -- or until I get tired of this thread. Thank you all for sharing. Sweet dreams :))

With a smile on my face (another day closer to the weekend),

-- Louis (StLouisLouis@Yahoo.com), August 03, 1999.

Louis...Sir I am speaking for Joe Sixpack

Being above all else a construction worker (I don't drink LOL). One of our first unwritten rules is that you do not ever mess with a Person's money!!!By that, heaven help a contractor who's pay checks are no good. And when it is pay day...Don't be late with the pay checks either.

By extension, I/they want our hard earned money in a roll that we can put in our collective pockets. Most of us do not deposit our checks, we cash them first. Then put money in a bank account to cover our debt payments...If we put the money into a bank at all. You have suggested that I/or they would settle for working for even one week with out being able to cash our checks...I WOULD NOT WORK for that contractor one day, much less a week.

There are other contractors out there needing skilled craftsmen, may be one of them had the fore sight to stock up on hard currency...If not then this old boy is out for the duration (untill my pay check is cashed...And I know that the coming ones will be also).

~~~~~~~~~~~~~~~~~~~Shakey~~~~~~~~~~~~~~~~~~

-- Shakey (in_a_bunker@forty.feet), August 03, 1999.

Louis,

I too am a long time programmer and my "fine little slices of logic" tell me that people are going to freak if they can't get the cash when they want it.

As to rioting if people can't get their money in cash, I'm thinking three things. First, I remember reading about the Russian situation last summer. People did want their money in cash. But all they could have was what was available. I'm not saying this is Ok -- I'm just making an observation.

You must have missed the news footage of armed guards pushing back hordes (literally) of Russians trying to get into the banks. It hasn't gotten much better there since.

Second, would rioting "get" them their "cash"? I'm thinking not, because thirdly, rioting would simply not magically change their "money on the books" into "cash in hand".

So what? You think people are going to act rationally? Think again. Unless they have armed guards here protecting the banks expect quite a few to go up in flames. I'd bet money (cash!!) on it.

...I'm not sure I would want to trade my "direct deposit" paycheck for a business that MUST have CASH ONLY right now!

Ya lost me here...

As to fraud, I'm thinking that, again, assuming that it's not TEOTWAWKI -- or at least the phone lines still work -- that businesses might either use some kind of "check verification" type service or rapidly insist people get some kind of "debit card".

Ok, think about that for a minute. How long do you think the lines at the gas station will be if some guy making minimum wage has to call in to check the validity of just about every transaction. I doubt you'd be able to fill the tanks of more than a handfull of cars in an hour. Check validation takes much longer than credit cards as any department store clerk working the xmas shift will tell you.

Debit Card

I don't have a debit card and no business can 'demand' that I 'rapidly' get one. I don't want anyone having the 'authorization' to take money out of my account. If your credit card number is stolen, most likely the cc company will eat the loss. If your debit card number is stolen, you can be cleaned out before you know it. YOU will be eating that loss.

If my bank WERE to become "temporarily out of order", but the payment system still operated, I would have to open an account right away with a "good bank", or imagine the powers that be would "merge" or "assign" my account to a healthy bank, with the "temporarily closed" bank having a bunch of "permanantly unhappy" share holders!

Not to be rude here but that is laughable and impossible to implement in any meaningful timeframe. C'mon, you work at a bank (as have I) as a programmer and you KNOW data exchanges with other departments, let alone other banks, ain't that easy. Besides, what bank is going to start giving you money from their coffers (even if it ain't cash) if YOUR bank is "temporarily out of order". You think they'll just hand another bank a printout of how much you 'have' and they'll just start giving you money?? Not plausible.

How long do you think it'll be before the FDIC actually gets you your money should your bank fail? A few MONTHS if there's not a lot of failures. A few YEARS if there are.

-TECH32-

-- TECH32 (TECH32@NOMAIL.COM), August 03, 1999.

Louis 

My scenario does not require a catastrophic breakdown of the banking systems computers either, though a money supply contraction on the scale of the 1930s would be TEOTWAWKI for all of us. Yes, "money" will still exist in whatever form people determine by their acceptance; and multiple "currencies" may trade simultaneously at various ratios of value.

Peter asks: "And whose fault would it be? I suggest that the pin- headed bureaucrats that tried to 'control' Americans' access to their money would be a good place to start looking."

Peter probably has read many of the brief descriptions of fractional- reserve banking on these threads, and knows that a 10% reserve system is risky enough in a turbulent world. But bankers have found they could squeeze a little more profit out of the system by shaving reserve levels even lower. The < 2% reserve level we have now is an accident waiting to happen, which can be triggered by any of several events, and cannot be adequately "insured" by government agencies. Y2k anxiety is merely the most likely finger that pulls that particular trigger. It seems to me that, in the case of banking and the financial system, its institutions are more at risk from their own normal business practices than from either their computers or the public. They will, of course, attempt to blame any but themselves.

You wrote:>> "my analysis depends on the continued existence of the "payment system". If banks, financial institutions, businesses, ect lose the ability to engage in commerce with whatever passes for "money" -- be it cash, check or whatever"

Even with that "ability," i.e., functioning computer systems, they cannot pass money around for very long that is effectively shrinking in its quantity and velocity (or, staying at a level quantity, unable to meet the higher prices being demanded by sellers of goods.)

You wrote:>> "I'm thinking that the reason why the payment system will continue to exist is because financial institutions will continue to honor checks, etc. from other financial institutions because there is some institution acting as the "guarantor of last resort" -- such as a country's central bank."

This, of course, is the "third party" who is watching this entire slide and making its contingency plans. More to follow.

>>"I'm a computer programmer/analyst, not a banker or economist"

"Dammit Jim, Im a doctor."

As a former programmer, I picture as a quick image of money supply contraction a database being read and re-written by a procedure that obediently but mistakenly lops off 10% of the records (or one of the fields) each time it goes around and re-writes. When you discover the mistake, there are 2000 records, instead of 12,000. Data destruction city!

>>"that the reason things will be OK is because considering the sheer unimaginable transaction volume of commerce, I think when people are faced with deciding between "having confidence" in the present system versus abandoning it for a cash, gold or barter system with a "unit of exchange" that presents problems of unavailability, indivisibility of a "unit" (ounce gold coin, etc.), opportunity cost of waiting to complete the transaction on securing enough cash, gold or whatever -- I'm thinking people will just say, collectively, oh, what the heck, what other choice do we have...might as well just go back to what we've always been doing/using, etc. "

Will that be "decided" at a national town meeting, perhaps? Hosted by President Bill?

Sounds like youre saying "It wont fail because we cant afford to let it fail. Its just too BIG for anyone to let it fail!" Im sure the slaves carrying the granite stones felt that way if one of the pyramids got behind its construction schedule. This type of situation is also where Tonto is said to have delivered his famous parting shot: "What do you mean we, Kemo Sabe?"

Louis, you pay for the use of a particular system, and you pay for this one. There are some very rich people and a lot of their employees who get a cut out of your labors in return for the "convenience" they provide you. If they prove to be not-so-good at conveniencing your life, will you still keep them on your payroll, for old times sake?

Actually, in most financial near-collapses in our lifetimes (post- 1971), it has been a large bank, brokerage, hedge fund, arbitrage player, central bank, Shah, or just greedy rich so-and-so who has triggered the crisis, not Joe Public. When a financial institution smells trouble in the payments stream, it rarely says "oh what the heck, what other choice do I have" and pays the suspicious claim until it is sure of its own safe repayment. That is why the central bankers have frequently had to step in and "referee" these discrepancies, and usually buy the systems way out of a crisis with the publics money.

You get your players mixed up, Louis. You have Joe Purchaser saying "what the heck, I think Ill write a check instead of waiting around to earn some gold or cash" but Sally Seller, quite oblivious to Joes personal inconvenience and deepest wishes, calls the tune and may likely say "Hey, keep that wallpaper to yourself. Im waiting for the real stuff," as is a sellers prerogative. More likely the sign at the cashier will read: "Checks OK. Cash 75% off. Gold ounce = $2000 checkbook dollars. Today's rates only." And each day, bank account dollars slip further below currency dollars and gold.

>>"people are not going to want to suffer the inability of conducting commerce/trading that a loss of the payment system would involve. I'm thinking that people as a whole will not be able to "throw away the present system" for a new one -- or would want to trade in their current "money on the books" for some new currency at "pennies on the dollar" if they can help it"

Whos going to suffer what inability? Sure, the people of Korea supposedly reached into their personal treasures and gave up gold jewelry to support their national currency. (Staged photographs?) I mean, WHA? Are you going to be first to offer to sell your previously-$100,000 house for only $100,000 checkbook dollars when everyone else has jacked up their houses to $400,000 of the slippery little buggers -- just so that the payment system will not be afflicted beyond its capacity?

But pennies on the dollar  hmmm, you got that about right, somewhere down the line. After all, these ARE the people who brought you Social Security.

>>"But once a check is accepted, clears the bank, and they then want to write a check on those "cleared/available" funds, do write a check, have it accepted, and the cycle thus continues like it does now, that the worries will subside, and the payment system will continue to hold, and the cash shortages will subside"

Yes, that check. And the next maybe. But theres a cash flow/ credit crunch going on behind that "payments system." The money supply now has multiple pressures tending to reduce it and eventually default the payment of checks.

Avoiding that contraction would be the central banks aim in any rescue plan. It might work; psychology might swing in time (but new money would have to follow quickly behind it). Keep those checks clearing, as long as possible. Keep that money supply up, keep those loans going out, keep those loan payments coming back in. Because any hitch in the whole cycle tugs at the other points on the Economic Wheel. And once the Wheel starts to roll backwards, why then, everyone will sit back and wait till it stops rolling that way, rather than throwing themselves individually under it to try to stop it. Sauve qui peut. Of course it is the central banks function to throw some public money (OPM) under the wheel to slow the snowball, reverse it if they can ("Squeeze the dollar shorts.") Greenspans been through a couple of those. '87 was a doozy.

You can bet theyll play the Patriotism card in its most promising facades. Itll be a wonder to behold the spin!

>>"our national/global financial system is like a big ship that one is not going to find "turning on a dime" or being "tossed out" for some physical bartering unit "

Anyone know the name of that big ship? Clue: Number One movie of all time.

>>"some "physical unit" that everybody values equally. What would that physical unit be? I'm thinking it would BOTH have to be scarce enough to have adequate value for a given physical unit AND plentiful enough to be readily available to facilitate rapid, fluid commerce on a global scale. These two -- a physical "unit" of something that is both scare enough and plentiful enough at the same time seems like a contradiction in terms (to me at least). And if there were such a "physical thing, I'm thinking it would probably have to have "utility value", like being edible or useful in some basic manufacturing process or it would lose it's "value" appeal -- but then it would be "consumed" and most likely cease to be available in sufficient quantities to be useful as a "universal unit of exchange/money". "

OK, Louis, I can see where Tech 32 questioned just where you were coming from. Youre pulling our collective leg with this naivete shtick, arent you? Youve just defined GOLD for us. And theres $1 trillion of it today. Go figure.

Or maybe youre just an average (and passably intelligent) modern American whos grown up immersed in a particular system that stuffs itself into just about every pore and synapse youve got until you dont know whether you could even retch it up or just go drink gasoline and set yourself on fire to clean it out of you.

Education may come slowly, and appear radical when it contradicts mass opinion. But it begins with honest inquiry, and follows some empirical rules of observation. Its just that this is August, 1999  how much time do YOU have to learn Macroeconomics, Microeconomics, and Money and Banking?

(But what a JOY when understanding comes, however slowly!)

>>"First, I remember reading about the Russian situation last summer. People did want their money in cash. But all they could have was what was available. "

Good! I was just going to mention the Russians, our 50-year partners in deadly dancing.

>>"I'm thinking they would most likely just use checks or debit cards while waiting for more paper currency to be printed up and distributed -- and would probably get tired of waiting and standing in line for "cash" when they could go get what they want and be benefiting from whatever they buy by using a check or debit card. "

They dont have cards or even checking accounts in any quantity. They use currency, and for real value preservation, they use U.S. currency. Last year their government printed paper rubles in extra quantity because it couldnt collect much in taxes, then the banks folded with nearly everyones savings wiped away. Most people have learned to survive outside the official financial system as a legacy of Soviet years, and they also take care of family and friends with a generosity and loyalty we should hope to equal.

Russians may be our psychic twins, having leapt (or been pushed) into the financial fires only slightly ahead of us.

Now back to that central bank

What might their rescue plan be? What do they have to offer? Who will join them in matching offers? And what effects do you think it might have?

Well, with all that sleeping bag stuff you posted since I started writing this, I can only close the evening with my best non-rendition of "Louie Louie, oh baby, me gotta go. " I guess Im just behind on my Austin Powers movies, hey baby?

-- Mr Gresham (wh@t.century.is.it?), August 03, 1999.

You know, I could have said, or at least summarized, all that so much more simply.

Your savings will probably gain purchasing power if converted into precious metals or goods that will undergo price inflation under a y2k or Depression scarcity.

Your savings will retain their purchasing power (or even gain somewhat, but with some longterm risk of depreciation of paper's value) if you convert them into paper currency, safely stored. Also retained by purchasing ahead the goods that you normally use, if they are likely to be in future shortage.

Your savings may lose half -- three-quarters -- 90%? of their purchasing power if they are trapped in bank accounts by bank runs.

The central bankers will likely contrive some system of crediting you with value related to those accounts, in order to calm public outrage.

Your stock market wealth may lose half its value -- and THEN be decimated by passing through a bank account as above.

-- Mr Gresham (wh@t.century.is.it?), August 03, 1999.

Excellent discussion!

A few thoughts if I may. I agree with Shakey, the first thing you absolutely MUST do as a contractor is make your payroll. Even if it means borrowing the money to pay your workers. If they are told they have to wait for their paycheck, you will not have any workers within a week. That lesson indicates strongly to me that people will want their money if they are fearful about the solvency of the banks, and they will want it in greenbacks, and they will want it NOW.

Bankers are well aware of this and are deathly afraid of it, so it follows that they must already have a plan to deal with it. And I'm talking about something other than the extra 50 billion being printed up, that's only a few extra hundred for each of us.

So what could that plan be?

Higher denomination currency? "Here's your $12,542 Mr. Smith, twelve thousands, five hundreds, four tens and two ones"?

A waiting period? "You can have your money in fourteen days, sorry that's the new nationwide policy, we're hoping this all blows over by then. In the meanwhile...."

Withdrawal limits? "You may withdraw up to two hundred dollars per day in cash."

Secret cash reserves? I don't think they could have enough, but what the hell do I know.

Certified checks backed by the full faith of the U.S. government? "Due to the cash shortage, you can have all of your money only in the form of these checks backed by Uncle Sam, so you may as well leave it here." Guards with M-16s to make sure that this is acceptable?

The finest minds in banking and government have, I'm sure, figured out which of these options is the most palatable to average folks, and have planed accordingly. One thing that I am sure of is that they will not let the banks fail from a run on currency, and it will be stopped by force if deemed necessary.

-- Uncle Deedah (unkeed@yahoo.com), August 03, 1999.

Uncle Deedah, please give your idea more thought.

(1) If the Fed tries to stop the POSSIBILITY of a bank by force, it will INDUCE a bank run. That is, to ensure a bank run all the Fed needs to do is apply force.

(2) The Fed cannot STOP a live-and-kicking bank run by force. A bank run is a bank run. If the Fed applies "force" it will perpetuate the bank run as per point (1) above.

The best you can do to understand bank runs is go to the following live link:

www.y2knewswire.com/cashc omputer.asp

I would add a lot more, but I'll wait for your response and see your reaction. Just one more little thing: the rest of the world counts guys, and the 50 billion the Fed is currently printing not only isn't enough to cover US cash demands, but once that the-rest-of-the-world demands are factored in, 50 billion cash is chickenfeed. Remember: the US dollar is the "store of value" currency worldwide.

Take care

-- George (jvilches@sminter.com.ar), August 03, 1999.

George,

No luck with your link.

As to point one, understood, correct. Point two leads back to point one, which of course takes us back to how to stop a bank run. How? My guess is that an honest to God bank run cannot be stopped, but, eventually, it must be dealt with. Which takes me back to my above points....

-- Uncle Deedah (unkeed@yahoo.com), August 03, 1999.

True, my live=link doesn't work. Sorry for that.

Please try to type in the URL which does work by the way.

Take care

-- George (jvilches@sminter.com.ar), August 03, 1999.

Louis (and everyone else), if you have not yet seen the movie THE TRIGGER EFFECT, please do so soon (its a couple of years old, you can rent it). THIS is what a society that has no working banking system ('cause no electricity nor phones) will be like -- CASH and/or BARTER (in the midst of chaos). And THIS is what everyone fears, and why once confidence is lost, bank runs are inevitable.

Louis, one more thing to add (to this really great thread): Not everyone who becomes "Y2K aware" will immediately jump to the conclusion that they need preps such as stored food, extra this, a years supply of that, etc., etc., and thus conclude that cash is not all that important. That may seem perfectly logical to most of us, but to someone who just becomes aware that the system may go down big time, the FIRST thing that they are going to worry about is WHAT THEY HAVE NOW. Chances are, they have enough FOOD now; enough TOILET PAPER now; etc., etc. BUT when it comes to their hard earned money -- WHICH COULD "DISAPPEAR" IN A HEARTBEAT IF THE BANKS "RUN OUT OF MONEY" (as Joe Sixpack might view it) -- thats a completely different story. Thus, the inevitable bank runs and collapse of the banking system (I think...).

-- King of Spain (madrid@aol.com), August 03, 1999.

OK George, we're doomed if anyone does anything differently.

What I was trying to determine is what is the next logical step for TPTB? I doubt that they are going to stand idly by and watch the whole thing flush down the crapper. And faced with a run, why would they not suspend banking for a period of time, or limit withdrawals, or any other method to try to keep things afloat until the masses calm down. Do you think they will just sit on their collective asses and watch Rome burn?

-- Uncle Deedah (unkeed@yahoo.com), August 03, 1999.

Quote:
"You know payroll can be done by hand. Its a pain - but it can be done and often is by one person. Even for business of up to 75-100 people. If the tax structure was simpler it would be even easier.
-- R (riversoma@aol.com), August 02, 1999.

Payroll can be very easy to do by hand -- no problemo. Example: Joe Sixpack worked 40 hours @ $12/hour. 40 * $12 = $480. Cut a check for $480 or pay in cash $480.

Simplistic, you say?
Let Joe pay for his own medical insurance (which is getting more and more to be a crock of crap, anyway.
No taxes "withheld" or required to be withheld (including "Social Security).

For more information, see http://goodbiz.com/tbks/

-- A (A@AisA.com), August 03, 1999.

In the interests of covering all the bases for different Y2K scenarios, make sure you reorder extra checks from your bank before 12/1.

US Postal Money Orders could be used somewhat like cash. You have to pay for them with currency. They are "bearer instruments" until you fill in the name of the person who will cash them (which could be you). They can be purchased in any denomination up to $700. The purchaser doesn't have to show ID or put their name on the MO. But they're only good for 6mos(?) from date of issue.

-GWP

-- GW Post, Esq. (going@pos.tal), August 03, 1999.

Uncle Deedah, everybody:

This matter has been analyzed and studied to death, sideways, cross-ways, from top down, bottom up, vertically, horizontally, operational research-wise, scenario-wise, you name it, believe me.

If "anybody does anything differently from current averages and/or expectations we are doomed", correct. And if "in face of" a bank run TPTB does "anything differently", we are also doomed. There is nothing that just about anybody can do, not even Bill Clinton, the US Senate, and the US military Armed Forces put together, plus anyone else who cares to try to help. It's pretty much being on the Titanic. Mankind screwed up, period! Guys, save your asses any one way you deem fit or appropiate. The chances of TSHTH are very very high. Please go to my y2knewswire suggested link (above) and convince yourselves. Trust me on this one.

Take care

-- George (jvilches@sminter.com.ar), August 03, 1999.

Link?

-- Uncle Deedah (unkeed@yahoo.com), August 03, 1999.

Just got a break at work; read the above posts.

Interesting...seems like the biggest difference in opinion/outlook seems to be how people will react. Most of my analysis involves the kind of thinking that goes like this: "OK, people will feel this way, but only have these options; other options would most likely be thwarted by TPTB, ect; now what is the most probable behavior..." -- and repeating the process a cycle or two.

Heck, I don't know for sure what will happen. That's why I posted my analysis. I figured 'yall would help me flesh it out. And most of all point out any flaws in my logic. At this point (and I've got to do some Y2K prep data processing work for yet another running of the 12/31/1999-01/03/2000 rollover tomorrow and Wednesday in a few minutes) it seems that both my analysis and the others offered are equally valid, but for different scenarios of human behavior "en mass".

Since I think that peoples reaction to whatever happens will probably make Y2K about three times worse than it would otherwise be, peoples reaction is of interest to me. If my analysis of whatever the behavior of the "herd" is, I figure I might be able to stay out of the way and keep from getting hurt or trampled! Also might help my personal timing of paying off my remaining debt vs. buying more preps before "the rush", ect.

I find it interesting that, like those analyzing a companies stock or business area, we can look at the same data, have similar but slightly different suppositions, and come up with quite different "forcast". My only exposure to econ, money and banking, ect were the few classes I had in colledge for my 4 year business degree. I have/do work in the financial services industry, the stock market industry, the defense industry, ect., but never have and still don't care about the "widget" I'm slinging code for. If it were not for a physical injury, I would have quit my job and moved to Colorado last winter (time for new places and faces -- and a jump in my pay!). I won't say what part of the financial services industry I work in, because I'm worried that something I say here might be construed as some sort of "official pronouncement", twisted or missinterpreted in some way, or just seen as "divulging inside information" by the "internet police" of the organization I work for -- then I wouldn't be working here! They would probably fire me and replace me with another "tech grunt".

The one point I wanted to ask 'yall about, was one person's comment on GOLD. My comments were taken as a good "definition" of gold as money. To me, my "definition" would preclude gold as a "universal standard of money" due to there not being enough of it to finance total, global, world commerce. The figure quoted was $1 trillion worth of gold. I don't know how much there is worldwide or how much global commerce amounts to on a daily, let alone annual basis, but would it really work -- is there enough -- to finance total world trade? I'm thinking the short time frames of transactions would make having currency pegged to any hard asset quite burdensome. Plus, while my personal net worth is low, I'm wondering if there are any "mega plays" worthy of a George Soros that may take place -- and how that might act as a monkey wrench in the plans of TPTB. I've never been invested in the stock market, although I DO understand a lot about the markets, and don't have enough extra "money on the books" OR "money in hand" to try and make any money off such a play, but am interested since I might well be affected! I'm thinking of that PBS documentary "after the crash" that aired several weeks ago. Take care. Gotta get back to work so I have another paycheck on "Friday the 13th"!

One more point. I've never seen an Austin powers movie. My comments about the sleeping bag were just my *sometimes* "wondering mind" at work as I comptemplated "snuggling in" over new years (hey, I'm a guy, what can I say?...still gotta buy a sleeping bag...I'm thinking of buying two...with zippers that "mate" :) )...Thanks again everybody. I'll think about your points and post more when I get another break.

Cordially,

Sincerely,

-- Louis (StLouisLouis@Yahoo.com), August 03, 1999.

Louis: I haven't seen it, but I've heard that Ludwig von Mises (a dead white guy economist) outlined an expeditious way that gold could be rapidly reintroduced as money, getting rid of fiat (funny) money.

A problem with that for the "powers that be" is that an honest money system would really put a crimp in their ability to screw the average person and to engage in "social engineering."

Also, they would really hate for the few of us who are fans of gold to come out ahead on the deal.

For now, withdraw early and withdraw often. Convert a portion to real stuff -- food, gold, ammo... And read up on hiding and burying stuff.

-- A (A@AisA.com), August 04, 1999.

Thanks one and all for sharing your points of view with me. Now I've got more to think about. Whose version of how people will react is most probable. That's it for me on this thread. I guesss time will tell in 'bout 150 days! Take care, and best wishes!

Thanks again 'yall!

-- Louis (StLouisLouis@Yahoo.com), August 05, 1999.