Has anyone ever heard of an Electronic run on the bank?greenspun.com : LUSENET : TimeBomb 2000 (Y2000) : One Thread
This is how it works.
You dont have to call the bank or even go to it.
Your a business man or wealthy and your company has an account at XYZ Bank. Now you want to move it out but secretly and quietly. All you have to do is call your broker and he can move it to a cash account thru the brokerage. It is now available for anything the person wants to do with it. If enough people or business do just that thing whoa! It can even earn better interest than the bank. He can now buy precious metals if he wishes.
Just a thought.
-- Susan Barrett (firstname.lastname@example.org), November 29, 1999
And electronic money at a brokerage has WHAT advantage over electronic money at a bank??? (unless you are the broker of course)
Buying precious metals? But you could do that by having a wire transfer to your coin dealer.
-- Linda (email@example.com), November 29, 1999.
There is a good point here. The most likely final nail in a modern bank's coffin isn't a cash run or closed doors, it's massive electronic lifeboating, mostly by it's corporate customers, triggered by (e.g.) a loss of confidence resulting from a cash drought.
-- Colin MacDonald (firstname.lastname@example.org), November 30, 1999.
Susan, Electronic Bank-runs can lead to insolvency of a bank. Regulators require "x" amount of deposits to loans ratio. A bank must have so much on deposit inorder to make so many loans. Should a bank lose an appreciable amount of deposits, they are then in violation of regulations governing them. This has happened before.
Continental Bank of Chicago had a similar fate; foreign wire-transfers for huge amounts caused Continental to need a Fed. bailout. Had relatives near the top during this fiasco; they were blindsided. This happened in early 70's.
This is an unseen threat to the system. Only the bankers and regulators would know this is happening. When Continental got into trouble, one day it was solid, and the next day it was in very grave trouble.
My point: We won't be able to gauge our actions on appearances at teller windows. Once there are rampant unseen runs, decisions will be made and policies announced. There will be no warning. I figure what you hold,physically, is what you own.
Also, Too many folks think money will quickly lose value(paper money)as a result of banking meltdowns. I disagree. Walked Downtown Chicago during Thanks= giving weekend. Too many folks to think "everybody" will suddenly throw their paper money in the trashcans. Folks who say such things do not live near big population centers and "get out and about" around lots of folks. Erosion of confidence in greenbacks is not going to happen overnight; there are huge amounts of folks who have no clue that anything is coming our way. Many, many people will accept green cash for quite awhile. It is too radical to think that "one day soon" NOBODY will take a paper dollar. Physical money carries an emotional element with it. This "bond" will not be easily broken. Think about your reactions when you are surprised to find a five or ten-spot lying on the floor or in the street; it is a magic moment.
There are huge numbers of poor, illiterate or disconnected folks living in our country. Those who "have", can read, and can think are not in the great majority. There are many older folks who you could never pry a paper dollar from their hands. Again, I think folks saying that papermoney is going to be quickly "ditched" for gold and silver have ignored the points I've made.
-- (he who)Rolls with Punches (JoeZi@aol.com), December 01, 1999.