Guys/Gals, what's going on?? Are we all on the same page here????

A few threads have been posted recently making thorough analysis of the FDIC-sponsored Gallup poll on bank runs. But none of them mention or discuss the following key findings:

GALLUP POLL, page 14: 47% of Americans (almost half) consider it likely that people will panic and withdraw ALL their funds PRIOR to year's end. (this involves 47 million households, right?)

Do you read meeeee???? Hellooooooo??? Anybody hooooome??

GALLUP POLL, page 16: 20% of respondents believe that the entire banking system will be forced to shut down by computer problems on Jan.1, 2000.

Is anybody listening? Is everybody on Prozac???

Has anyone considered FOREIGN bank runs and their impact upon the US banking system and monetary policy????

Oh, you don't understand the implications! I see. O.Kay, I'll buy some more gold coins while you keep thinking.

Heeeello?? Anybody out there??????????

-- George (jvilches@sminter.com.ar), July 04, 1999

Answers

watch where you, flash them gold-coin,s. you may end-up'being-followed.GOT BODY-GUARD??

-- tipper (dogs@zianet.com), July 04, 1999.

Yes George, I am out here, I fully agree with you - there is a gigantic disconnect worldwide, never mind the USA, the BIS thread spoke volumes alone. All you can do is try and protect yourself - just read the signs and do the necessary - just do it ahead of everyone else or your savings, 401k, pension, stocks may just end up in the bit bucket. Time is running out for most of us to make these arrangements - if you haven't done anything yet you'll only have yourself to blame. There is still a *little* time left so get cracking!

-- Andy (2000EOD@prodigy.net), July 04, 1999.

I presented both of these statistics, along with virtually all the other ones in the Gallup Poll that was released June 2nd; see my previous thread. The actual numbers of respondents either agreeing with or unsure about the statement "People will panic and withdraw all their funds" were as follows: 11% said definitely that would happen; 36% said probably that would happen; 15% were unsure (the rest said it definitely or probably would not happen). As for the statement "The banking system will shut down," 5% said that definitely would happen; 17% said it probably would happen; 16% were unsure (the rest said it definitely or probably would not happen).

So yes, there's obviously a very serious problem here: we all know it, including the banks and the FDIC. But as I pointed out before, the actual sampling (possible error of plus or minus 2.2%) was conducted back in early March, so we don't know how much those numbers may have changed since then. With the June 30th deadline now past for Y2K compliance of all mission-critical bank computer systems, and the great majority of U.S. banks having reportedly met that deadline, you will probably see a much greater publicity campaign now by the banks, FDIC, and Federal Reserve to convince depositors that their money is safe. Again, how much impact this will actually have on public perceptions is open to debate, which is why I hoped in my earlier thread that Gallup would continue to track this issue very closely and very frequently.

A couple of other notes. Gallup commented that most respondents did not seem to have really firm responses to many of the poll questions and statements; the impression was that most people were still in a very tentative, uncertain, confused state of mind about all this. This might suggest to the banks and FDIC that most people who are considering withdrawals are nonetheless still open to being convinced to keep their money in the banks, though you might debate how much impact this policy will have on the "definite" pessimists. (Will those folks still be "definite" pessimists at year's end? Maybe yes, maybe no.) There was some good news for the banks and the FDIC in the revelation that 36% of respondents said "definitely" and 41% said "probably" in response to the question "Will your own bank have its Y2K problems solved in time?" I suspect those percentages will continue to climb as each bank works hard to convince its depositors that it is ready for Y2K.

Again, nobody is pretending that there isn't a very serious problem here. In an even earlier thread, I did a bit of analysis of just how fractional the fractional reserve banking system really is, and noted especially how limited, relatively speaking, bank cash reserves are. If you look at the relevant Gallup poll numbers in these areas, once again you find cause for concern.

I have no idea how this is finally going to play out psychologically, though naturally I continue to hope for the best. How much will people worry about the safety of their deposits vs. how much will they worry about the risks/problems involved in withdrawing their funds--that's obviously the critical issue.

IF major bank runs do develop, the federal govt. will no doubt step in almost immediately to freeze accounts or severely limit withdrawals, especially cash withdrawals. Even without actual bank runs, if the situation were to appear especially threatening, the govt. might take such steps as preemptive measures. People wouldn't like this, naturally, but there is no way the federal government would stand idly by and watch the U.S. banking system collapse through bank runs. What would happen to the stock market and economy in the meantime, though, should be obvious.

-- Don Florence (dflorence@zianet.com), July 04, 1999.

"you will probably see a much greater publicity campaign now by the banks, FDIC, and Federal Reserve to convince depositors that their money is safe."

Don,

Much as the herd can be incredibly self-centred, greedy and stupid (!), I think this plan will backfire.

JQP will smell a rat. Don't know how, don't know why, just my gut feeling.

-- Andy (2000EOD@prodigy.net), July 04, 1999.

"47% of Americans consider it likely that people will panic and withdraw all their funds prior to year's end."

If this is the way the question was asked, then it is an extremely ambiguous answer. On its face, I don't think it can be taken as any more than most everyone thinks that SOMEONE out there (a completely unquantified "someone") will take all their money out, not that the 47% who responded may take all their money out. It does, however, suggest that a lot of people are aware of the possibility.

I happen to believe there will be some substantial withdrawals, I just don't believe that this extremely poorly worded survey has done anything to quantify that likelihood.

-- Brooks (brooksbie@hotmail.com), July 04, 1999.

for what its worth observation...practicing surgery for 30 years in the SE , at least half my patients are medicare senior citizens. Over the last few months i have been asking the seniors about y2k. all have basic knowledge of the problem but few hard facts. 90 % of hundreds sampled say they are going to take their savings out of the bank. they talk of their remberences of the great depression when the banks closed and their parents lost everything. it is etched in their minds and they will all react like their parents did 60 years ago despite the spin from the aarp and gov. the most interesting case was several seniors from a local retirement community who have organized the mini-vans to take all the residents around on a particular day to each bank to withdraw and then back to the senior retirement village. maybe this is just a local phenomenon, but if it is wide spread across the country, your guess is as good as mine what will happen.

-- drdon (don29681@aol.com), July 04, 1999.

I am still on the fence with regards to bank runs for one reason: The vast majority of Americans live paycheck to paycheck - even the people earning high wages. They have a low or non-existant savings rate, with one exception:

401K's and other retirement vehicles. Automatic payroll deductions and deposits into mutual funds and stocks for the bulk of savings at this time.

If these people decide to switch from dollar cost averaging into mutual funds, etc. and instead direct their automatic deductions to money market accounts or other FDIC insured accounts, then we will see a stock market crash for sure, but will we see bank runs? Are their enough Americans with enough bank savings to crash the system?

Automatic investments account for BILLIONS of dollars per week invested in the market.

-- (Minuteman@Concord.com), July 04, 1999.

minuteman...you're assuming the majority of Americans with liquidity play 'the market'. It won't take many of us who 'do not', to run up a cash shortage. They will be forced to take drastic measures, like withdrawl limits, can you say p p p p pan....icccccc?

-- Will continue (farming@home.com), July 04, 1999.

Anyway you look at it, the numbers are 10 times the amount needed to crash the fractional banking system. My guess has been/still is we're see a market crash & bank run no later than December '99. But our household already has 90% of our money out.

peace, Dan

-- Dan G (thepcguru@hotmail.com), July 04, 1999.

Because of the level of mistrust in our society today, one thing is ASSURED: the more hysterical the PR and ad campaigns become, the MORE likely that people will pull their money out.

Personally, I think it's the best thing to happen to America since 1776. Crash the banks & IRS, thereby choking the federal gov't, and start over, back in the CONSTITUTIONAL mold. Yes, it will cause great hardship, but I'm sure the citizentry of the soon-to-be United States suffered greatly for awhile. ANYTHING worth having is worth sacrificing for....

Just my opinions.

-- Dennis (djolson@pressenter.com), July 04, 1999.

There's already been a thread that just about beat this topic into the ground.

here it is

I don't know from where you hail, drdon, but it's been my experience that 90% (at the minimum...more likely 100%) of the folks at my mom's type-B facility have their children or other relatives controlling their funds. I have the honor of sharing lunch or dinner regularly with the folks at my mom's particular table and I brought up the subject of Y2k once. One of mom's table-mates later told me that she'd discussed the issue with her son and he said she shouldn't worry about it. All I could say was, "He's right. Don't worry about it." Who the hell am I to tell someone else's mom that she should worry? These folks have enough to worry about thinking about waking up on this side of the grass each day.

I can't access the original gallup poll right now, but the 47% figure WAS discussed in this thread. Oddly enough, however, when folks discussed what they personally were going to do, only 6% said they would withdraw money for several weeks and only 2% for a year or more.

It's up to y'all whether you want to see Gary North's lifetime dream come true, but I'm not buying into it, and neither is anyone that I know outside of the internet acquaintances.

-- Anita (spoonera@msn.com), July 04, 1999.

Sure was nice to see that we still have some plain common sense randomly distributed out there!

Still, as this specific subject matter is the MOTHER of all y2k matters I believe it requires further analysis and constant surveillance. I fully agree with Don Florence and the rest of you.

In passing, I can assure you guys/gals that at the very least, SOME foreign central banks monitor everything said on this forum concerning bank runs. I wouldn't be surprised if MANY OTHER central banks do the same, including our glorious Fed and many lurking journalists.

Don (Florence), yes indeed, you have previously posted and discussed just about full Gallup poll results on this matter, but without specific emphasis on these two KEY responses. And that was precisely the point of this new thread. 'Cause sure enough, Gallup Inc. asked many questions, but none as relevant as these two, which because of their importance deserve separate analysis all on their own. Hope you agree.

Still, don't get me wrong Don: your input has been most valuable, and we should all agree with you on the importance of the weakness of the fractional reserve banking system, people's reaction to the unfolding problem, etc., etc. We shall see allright! To me, IMHO it is pretty clear that everything indicates that we shall see bank runs, here and abroad.

Brooks, I don't agree with you. The Gallup poll question was not poorly worded. As a matter of fact I believe it reveals a key aspect of y2k bank runs. The answer was clear too: 47% of respondents stated that either themselves or somebody else ("people") will withdraw all their money. This involves 47 million households. Some with two dollars and fifty five cents in their savings account, others with thousands, and still others with millions of financial instruments net worth. Guys, money is the most coward thing on the surface of planet Earth, trust me on this one.

Will Continue, I agree.

Andy, thanks, I agree with you too. Furthermore, the disconnect you perceive includes people's reactions in Brazil, Japan, Switzerland, etc., as they do exist indeed! People don't need to withdraw cash per se to break the backbone of the fractional reserve banking system. They only need to switch to gold or any other precious metal.

Thanks for the input guys/gals. Keep'em coming.

-- George (jvilches@sminter.com.ar), July 04, 1999.

Still don't agree, George. The "or somebody else" could all be the same person. Probably most everyone by now has read at least one of the "head for the hills" articles that includes the notion that there are people cashing out their bank accounts. So, 47% know it is possible, but that says nothing about how many will do it. It is a straightforward *qualitative*, not *quantitative* statement by those surveyed. It simply means there is high enough awareness that the banking industry better mount a serious PR campaign.

-- Brooks (brooksbie@hotmail.com), July 04, 1999.

George,

"People don't need to withdraw cash per se to break the backbone of the fractional reserve banking system. They only need to switch to gold or any other precious metal."

If by "switch to gold or any other precious metal" you mean that people might use their bank account balances to buy gold or other precious metals, then if the sellers of that gold or precious metals put the proceeds in the bank, the bank cash position would be unchanged.

If by "switch to gold or any other precious metal" you mean that people might stop using the current paper/digital currency and use precious metals instead, that scenario, aside from its difficulties with evolving a new constellation of prices in terms of the new currency, as well as its difficulties with "legal tender" matters, would, to the extent that people did it, reduce any tendency toward a run on the banks.

The are interconnections and more interconnections. Economics is chock full of them.

Jerry

-- Jerry B (skeptic76@erols.com), July 04, 1999.

Forget the polls. What anyone says is immaterial. The fact is, there is only enough cash IN EXISTENCE to cover maybe 2% max of all the demand deposit claims (checking and regular savings accounts).

To paraphrase an old Chicago saying about voting, converted to the banking area: "Withdraw early and withdraw often."

That is, if you are number 3 (or further back) in a line of 100 wanting to withdraw your "money" in cash, you're S.O.L.

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

There is a handy tool online to help you decide if the banks will run out of cash.... based on YOUR assumptions.

Y2KNEWSWIRE.COM cash computer.

Will banks run out of cash? You decide!

You've been wondering whether the banks will really run out of money or if the Y2K cash scare is just hype. Well now's your chance to find out what will really happen, based on your own assumptions. We've researched bank deposit obligations and cash reserve numbers from the Federal Reserve. We've nailed down workforce statistics, average hours worked, and average hourly wages. We've checked and double-checked all the numbers here, and we're giving you the web link to every source we quote. .... more.....

-- Linda (lwmb@psln.com), July 04, 1999.

George --

Of course some are sleeping, but in my case (anyone else?) I'm still trying to collect some significant dinero from a business associate -- how would you like to enter November 1999 with a 20k IOU and the banks locked down?

Now I think we on this forum are a flea on a gnat on a bird on the elephant's ass, and TPTB may read us as a bellwether of the public opinion. I doubt that WE feed back into the public opinion very much at all.

But -- it ain't gonna take a lot to get this thing rolling, and that Gallup poll looks pretty definite to me.

So, George, I agree with you. And I love to talk, too. About economics, about banking, about exciting scenarios. But most of all, George, I want to be ahead of the crowd and not lose what I've worked so hard for. It's PART OF MY PREPARATIONS, DAMMIT!

No, I'm not telling you or anyone else here to be quiet. What's gonna happen is gonna happen without much help from us. I just need it to happen a few months later than I fear it will. Why should I feed even a little bit of commentary into the "bank run" scenario against my own interest?

I'll have been "right" on the scenario but unable to do much about speeding up someone else's finances to pay me back.

Then of course, there's my family, whom I just might be able -- with time -- to influence to get a little bit out ahead of the crowds. Again, George, I'm not gonna blame you for playing Paul Revere here. We're sharing information, helping each other, great. But I'm needing and hoping for more time to complete MY preparations, OK?

We know that only about 2% of the money can get out of the system as cash. Like you probably, I'd rather have that be a lot of poor or average people like ourselves, rather than a few rich honchos getting to the bank first. But some of mine is still stuck in the system, and I can't do very much about it right away.

If we assume there's some extra virtue residing in the people reading us on this forum above the average person out there, then fine to blow the trumpet. But, otherwise, why push it? Preparations in GOODS stored ahead of rollover are good overall for society; I'm not sure you can make the case for cash being anything more than neutral overall. Great for the individual (that's why I'm trying to do it); neutral for the overall society (unless you can get it into the hands of the people YOU somehow favor).

I never really thought through my attitudes and actions about this till I wrote this here; call it my reality check. I appreciate your level of insight, George.

-- Mr Gresham (moi@encore.alarme), July 04, 1999.

Linda, thanks!

The "Y2KNEWSWIRE.COM" link above is excellent.

I would call it the MOTHER of all bank run tools simply because it is (a) solid and (b) available to anyone.

Actually, it is a very benign, conservative tool, simply because it does NOT take into account the rest of the world. But the rest of the world DOES exist, and the US dollar is the world's most important currency (70% of transactions!) and the 'store of value' currency abroad if you allow the term.

This means that the rest of the world will also stress the demand for US dollars, as much as US citizens at least. The above tool does NOT take this into account. So the cash scarcity problem is FAR more serious than what it may look otherwise.

Thanks again Linda!

-- George (jvilches@sminter.com.ar), July 04, 1999.

Thank you for your valuable comments Mr. Gresham and sure hope that you can collect your 20K IOU before December 1999.

As far as who do I want to help out in view of current circumstances, that's easy for me to answer, and would expect it should also be very easy for anybody else to answer too, that is

In view of current y2k circumstances, I want to help out those that want to help themselves.

Take care

-- George (jvilches@sminter.com.ar), July 04, 1999.

I have seen reports, sorry forgot where, that Henry KISS-myassenger, has promised to remove all his money from banks. The question is, where will he put it? Wonder what Bill Gates, Ted Turner, Bill Soros, and the rest of the trillionaires will do with theirs. Maybe they will buy some Islands and hire private armies to protect their loot. What do you think?

-- Betty Alice (Barn266@aol.com), July 04, 1999.

Minuteman,

Sorry, you are wrong by saying that

"The vast majority of Americans live from paycheck to paycheck - even the people earning high wages. They have a low or non-existant savings rate..."

Simply not true as 71.1% of the 102.5 million households in America own interest earning assets at banks (primarily savings accounts) of approximately $3000. Furthermore, 8.6% own approximately $13,000 in other interest-earning money market funds, securities, etc., which amounts to an approximate GRAND TOTAL in hands of individuals of $335 billion dollars, plus employers and business deposits, foreigners, etc, for $3.1 trillion dollars. These are official US Census Bureau figures, 1993. Today, these figures are far higher.

Also, these figures DO NOT include cash demands produced by other currencies throughout the world in the event of a bank run. That is, people in Japan or Brazil may very well cash in their local currencies seeking US dollars at their whatever rate of exchange. The only way out of that part of the US cash problem is massive, unbearable devaluations everywhere. Don't even think of it, please!!! (It would mean instant default of the-rest-of-the-world's foreign debt)

Take care

-- George (jvilches@sminter.com.ar), July 04, 1999.