Is a Run on Our Banks Next?


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We are hearing a lot about how the U.S. economy these days is based upon our government’s ability to just print money. Never mind whether there is anything backing that money – in fact there isn’t. Oh sure, the full faith and credit of the USA backs it, just like FDIC insurance on bank savings, but with the disclosure of the fact that we have a multi-trillion dollar pile of debt, and that is growing daily with no hope on the horizon of reversing that trend much less ever paying off the debt, the existence of a house of cards is coming into focus.

A few years ago there were bank failures in Britain. It did not get a lot of publicity, but a friend of mine on vacation in Britain then said he saw firsthand lines around the block as people sought to remove their money from banks, fearing the collapse of the banks and the economy in general. A bank holiday of several days was reportedly in place in some parts of Scotland, according to this friend. So, it can happen.

Here in the USA we experienced runs on banks and banking holidays – when banks were closed and no one could get their money – in the Great Depression of the 1930’s. A panic existed when people could not get their own money deposited in banks.

Today FDIC insurance is supposed to assure depositors that this scenario could never be repeated. After all the full faith and credit of the USA is there to assure that the money people put in banks was safe. Yeah, right.

The events of the last few months concerning the burgeoning debt of the U.S. government and the inability of our government to pare back its expenditures to be anywhere near its revenues has in the last few weeks produced some panic selling of stocks and a dramatic decline in the DOW nearing 20%. People are cashing in their stocks and looking for a safe place to park the money that remains. To some extent this phenomenon includes money in IRA’s and 401k’s – in fact reports are that increasingly people are pulling their money out of their retirement accounts in order to meet their daily living expenses. So much for saving for retirement.

The question is – does such a safe place exist? Increasingly there are worries that it may not exist, even in our banks and savings institutions, even with the FDIC insurance and the so called full faith and credit of the U.S. behind deposits. Stay tuned to see if people start pulling their money out of those institutions as well, producing a run on the banks. Do you know where your money is? Really?

 


About Over But Not Out

A retired Orange County employee, and moderate Republican. The editor seriously does not know OBNO's identity as did not the former editor, but his point of view is obviously interesting and valued.