[wildjo]

just wondering what a "run on" banks would mean for us in terms of preparing.

Won't it mean that the system is about to collapse? Once the "news" informs us of such a phenomena, won't the collapse be imminent? Won't paper money be useless at that point? Or, will it retain its value at some point as people try to horde as much as they can for lack of any other outlet for their panic?

Just wondering as I sit here and my money sits over "there".

 

[Grub]

It means everyone in this country will run as quickly as possible and get all of their money out. This would be a huge mess for the bank because they make money by using your money as liquidity by which to make loans, in which the interest is their primary form of revenue.

 

[Peter]

First off there is not enough paper money to cover a run on the banks...It would be a mess on the order of several magnatudes and the banks would be forced to close their doors. There is only enough paper in circulation and in reserve to cover routine commerce but not enough to cash out even a fraction of the accounts. I suppose debit cards would be the only way to access funds in your account.
Peter

 

[chaosbutterfly]

Almost, but not quite...

It means everyone in this country will run as quickly as possible and get all of their money out. This would be a huge mess for the bank because they make money by using your money as liquidity by which to make loans, in which the interest is their primary form of revenue.

Our banking system is a fractional reserve system, meaning that banks only hold 10% on every 100% they loan out.

Let's put it this way: I deposit $100, my bank loans out $1,000.

There is only so much money being held for liquidity, and once that money is gone, there is none left for the people last in line.

"Won't the FDIC give me what the bank didn't have on hand to fulfill their obligation to me?"

Well, in June, the FDIC only held $46 Billion to cover bank failures, and that was before IndyMac went under. There is over $300 Billion on deposit that they would need to cover if everyone wanted to pull their money out of all the banks at once.

A more frightening thought? Consider those checks that credit card companies send out. Say you take them up an offer for $1,500. Well, for that to work, someone would have had to deposit $150 for you to get the $1,500. Say you take that $1,500 and deposit it to your bank account. Then your bank loans someone else $15,000. Then they deposit it to their bank account, and their bank loans out $150,000.

Our currency has no intrinsic value (save for the value or faith you place in it), as we are a fiat currency system- not backed by a gold standard or the ilk.

We don't know how much money is in circulation because The Fed quit publishing M3 reports some time ago, for fear that the public would figure out how bad things really are.

To make matters worse, there will never be enough currency in circulation to pay off the national debt, as each dollar in circulation represents debt plus interest owed to the Federal Reserve.

I digress. If you're interested, search the following:
~The Federal Reserve Act
~Fractional Reserve Banking
~Gold Standard
~Fiat Currency
~The Weimar Republic

The conclusion? Buy gold or silver. Or tangible goods. With the bailout, the value of our currency is about to plummet to $0- it may not be within days or weeks, but it is only a matter of time. How much time is anybody's guess.

As with every fallen economy, eventually, the money will be replaced with something. At that point, I am sure we will openly embrace the Amero.

 

[chris]

Well, in June, the FDIC only held $46 Billion to cover bank failures, and that was before IndyMac went under. There is over $300 Billion on deposit that they would need to cover if everyone wanted to pull their money out of all the banks at once.

$300 billion isn't even close.

 

[DownInABunker]

I would imagine that credit and debit cards would continue working, since using them does not require use of cash. Same with online banking and wire transfers - it's a matter of some information being sent from one place to another, no cash involved. The big question is, will merchants, especially small ones (big ones may be bound by various corporate rules) continue accepting debit and credit cards once the bank runs begin. It is a good idea to have a couple of weeks to a month worth of expenses as cash on hand (in your house, not in a safe deposit in the bank) in case credit and debit cards seize to work.

 

[DownInABunker]

$300 billion isn't even close.

It's actually in the trillions, over 3 trillion I think.

 

[chaosbutterfly]

Good catch, chris and DownInABunker- 3 Trillion is more like it.

It's not the first time I've made that mistake- perhaps it's the (little shred of) hope I still have left coming out. :-/

 

[rridgeoutlaw]

IF a run started on the banks, why would you think your debit card would work? Maybe for a day until someone hit the "freeze" button.

 

[dayliterun]

I think it is a sure sign of the S hitting the F. Yes your debit card may work for a day or two before they are shut off. Businesses would soon be cut off from credit. Major deposits from them cease. paychecks...worthless. see where I am going? It's a circle. If it is broken, it all collapses. Not too mention the runs on grocery stores, gas stations, pharmacies, etc.

 

[wildjo]

I guess this is why I'm not so concerned about a run on the bank, other than as a sign that the shyt is about to hit the fan, or is in the process of doing so.

It seems to me, once it happens, that paper money will quickly become pretty worthless. No sense in pulling it out now so you can have some in such an event, unless you need kindling.

 

[scarcherpilot]

Bank runs are bad obviously. Buying gold and silver will protect your wealth until the fiat currency situation is resolved, but it likely won't buy you food to make it until that point.

Imagine showing up at Kroger, Publix, or where ever you shop and trying to pay with a gold coin. The teller probably won't have the slightest clue how much it is really worth or even if it is real and thus will likely not take it as payment. People will still cling to the cash they have for goods and services in a short term (less than a few months) situation. Those with cash on hand will be the ones doing fine (in the short term) unless tehy are robbed by those without cash to buy things which is the greater threat IMHO.

Gold and silver for an EOTW scenario will likely become more valuable for trade....unless goods are more important (trading bullets for eggs, etc.)

Gold and silver are good for wealth protection as a haven to run to when the fiat money is tanking and as a hedge against inflation.....not so much for basical food buying and trades.

Use gold to secure your future buying power...keep some cash on hand for emergencies.

 

[Dwind]

My fiance are going to be 'investing' in many different things, including a bug IN location, vehicles, preps, basic farming, ect. basically the beginnings of a MAG. we have enough to keep in maybe a few offshore accounts, but I think some coins would be helpful as well.

In the not too distant future, a bushel of wheat will be a wise investment indeed. I'm glad that most people haven't thought of that yet. In fact- I'm glad there are as many sheeple as there are compared to us. After the collapse theres no possible way a population like ours could be sustained.

There will be starvation and lots of fighting, but if all of us can hold what we've got, we might just have a chance if is REALLY hits the fan

 

[ExecuteQuery]

A run on the banks would be a sure sign of teotwawki. However, it would most likely come too late to be of much help. In other words, when the bank runs starts, you should have already bugged out.

What would happen is that the FDIC would be forced to honor all of those accounts, so the federal government would have no choice (and would not have to get permission from anyone to do it) but to borrow enough money to cover it. There's no way of knowing just how much money is FDIC insured, but I'm certain the number is staggering. Of course, as the people willing to loan money to the government start to dwindle, they will have to offer higher and higher interest rates to get the money. All this time, the value of the dollar is going down farther and farther, and prices are going higher and higher. Once inflation reaches a certain threshold, somewhere in the triple digits, it will begin to grow exponentially.

Before you know it, 300% inflation will grow to 6000%. Paper money will have no value whatsoever. That's the sign that the end is already here. If you still haven't bugged out, then God have mercy on your soul.

 

[jleverin]

I can see some serious limits put on withdrawals in cash and even use of debit or credit cards in some instances. Banks would only have so much on hand so they would limit the amount one could take out at one time. Would seriously hamper last minute preppers, you wouldn't be able to buy as much. I hope it doesn't come to that, I have bills to pay in the next few days......

 

[DownInABunker]

Actually the credit card business may cease altogether. Who would want to loan money at an annual rate of 30% when inflation is in the hundreds of percents or more?

 

[DaveyDoes]

I think if bank runs started the Federal government would declare an immediate "bank holiday" and shut them down until the panic wore off a little. That of course means you wouldn't have access to any of your money except (maybe) ATM's which would quickly run out of money. Closing the banks for a few days or a week would protect its assets and keep rampant inflation from happening (in theory). I would assume they would also put price freezes in effect to stop gouging.

 

[tb84]

A bank run is when people withdraw their savings from a bank.

http://en.wikipedia.org/wiki/Bank_run

There have been a few recently, with WaMu and Indymac.

It doesn't mean paper money is about to become worthless - if it did, people wouldn't care about taking out their paper money. Back in the day it did mean that because if the bank went under any left over notes issued from that bank couldn't be redeemed for gold.

 

[CountryBoy71]

Technically that is correct. However, when bank runs happen on a massive scale, a banking holiday can be declared. Such was the case in 1929. Then your money is frozen and you can't get to it, period.

I wouldn't think that it would be necessary to bug out before a nation-wide bank run. But once it starts, that would be a serious consideration.

 

[citizenscotty]

word is...Bank of America is closing individual credit Cards for people with scores of 750 or less. Wether this is true or not is beside the point. Already international shipping companies are finding it difficult to find short term credit to maintain operations. goods are parked on docks around the world. I am no professional on the subject matter...just an advid reader...but it is my understanding that any given city only has three days of food on the shelves. If there is a bank run, credit cards will freeze, atm machines will be depleted in hours, late preppers will panic, and "oppurtunistic predators" will begin the madness. it will not be the normal middle class hard working american that panic...they will simply go home an watch MSM for a solution. It will be people who have already lost everything who will break into a riot. It will start in isloated urban neighborhoods where abject poverty has run rampent for years, and then it will spread as the panic creeps into middle class neighborhoods. I would have never considered myself a conspiratorial doomsdayer, but the events unfolding today are reality and i personally refuse to be part of the herd when the culling arrives.
I do not have a cabin in the woods...I don't have that kind of money...but i have made preperations should something terrible happen.