As most of us would probably concur, bank runs may be inevitable.

Due to human nature and the already discussed fractional reserve system.

what I am interested in gleaning from Forum Readers is YOUR best analysis of how it could (hypothetically) play out.

In 30 words or less!!

Example: I surmise, that stocks are being artifically sustained. Soon they will fall. As that starts to take place ---- people will head to the banks and pull money. At that point gov. will step in and limit withdrawals, which will create panic. Can't see much after this point!! Maybe public will acquiesce to limits, maybe not!!

-- David Butts (dciinc@aol.com), September 20, 1999

Answers

Bank runs can only happen if the Federal Reserve allows banks to remain open. (14 words)

-- Ken Decker (kcdecker@worldnet.att.net), September 20, 1999.

David,

Most lower-income people have no money in banks, most middle-income people have their wealth in the stock market. Hence, any panic will start on Wall Street first.

29 words...

Ed

-- Ed Yourdon (HumptyDumptyY2K@yourdon.com), September 20, 1999.

If withdrawals were limited, I'm not sure you would see the panic that not only some here expect, but even hope for.

Banks would be told to honor all debit card and credit card transactions as normally. The public would be instructed to use their cards temporarily instead of cash.

This is not 1929. The public are much better informed and understand the nature of fractional reserve banking. Most people grasp that their dollars are in fact electronic and don't want huge wads of bills.

If things got bad enough the banks could even tag on a surcharge for depositing and withdrawing cash which would encourage its customers to use electronic banking.

Again, it is not in anyones best interest to see a run on the banks........obviously for the sake of national security, the government and the banks will do WHATEVER necessary to avoid the situation.

Seems to make far more sense for those that are worried to stock up on some basic supplies which are always in demand, as opposed to cash which you can't eat or drink.

-- Craig (craig@ccinet.ab.ca), September 20, 1999.

When Joe Public sees bank runs in Asia, Russia and South America on the evening news in January, he'll be in line at his bank the next morning.

28 words, David

-- cody varian (cody@y2ksurvive.com), September 20, 1999.

The next two weeks are the last chance for changing 401K allocations. Stocks will fall, people will begin to have doubts. The depression- veteran elderly will lead the bank lines.

Thirty words, neener neener.

-- ariZONEa (in.line@the.bank), September 20, 1999.

Can't you just see poor Flint, ITCHING to comment, but can't because there is NO WAY he could post within thirty words!!! BWAHAAAAAAAAAAAAAAAAAHAAAAHHHHAAAAAAAAHHHAAAAAAA!!!!!!!!!!

23.5 words

-- King of Spain (madrid@aol.com), September 20, 1999.

Agree with Decker and Yourdon. OUCH! Now I need prozac to keep from having this fact turn me into a total schizophrenic. Also agree with KOS about Flint. (28 words)

-- BigDog (BigDog@duffer.com), September 20, 1999.

I RAN to the bank this morning and withdrew Large!

-- Bubbles pop (beat@the .crowd), September 20, 1999.

As someone said--the runs are in process. A lot of cash is out now. Panic runs? They will limit withdrawls, for sure. Expect much more spin control after.

29 words

-- Mara Wayne (MaraWayne@aol.com), September 20, 1999.

As y2k approaches, people will become increasingly nervous about the readiness of banks. At some point this nervousness will reach a peak and numerous people will simultaniously withdraw their money...

Ha! 30 on the money.

-- John Ainsworth (ainsje@cstone.net), September 20, 1999.

Won't.

-- Trollyanna (r@t.com), September 20, 1999.

Why!

Because, for those who did not prepare, withdrawing money is the easiest prep of all!

15 words

-- Brooks (brooksbie@hotmail.com), September 20, 1999.

Craig, Just a couple comments on your post.

"If withdrawals were limited, I'm not sure you would see the panic that not only some here expect, but even hope for."

-- If withdrawls are limited I believe you would immediately see the panic. Nothing makes people act faster than telling them they can't do something. Not only that, the news of withdrawl limits alone would create the very publicity the banks are trying to avoid.

"Banks would be told to honor all debit card and credit card transactions as normally. The public would be instructed to use their cards temporarily instead of cash. "

-- Okay, I'm JQP, and I have no cash balance in my accounts, but I need cash anyways. What do I do? I BORROW against my cards. I have a hard time believing that the flood of easy credit would continue if the issuers started to believe that they might not get their money back. I could see situations where virtually all credit transactions grind to a halt. Besides, this assumes that the ATM networks continue to function properly. Ever do a debit/credit transaction during the holiday shopping season?

"This is not 1929. The public are much better informed and understand the nature of fractional reserve banking."

-- Most people don't even know how to spell fractional reserve banking, let alone understand the concept.

"If things got bad enough the banks could even tag on a surcharge for depositing and withdrawing cash which would encourage its customers to use electronic banking. "

--Too little, too late if it gets to this point. WHen the local ATM's started charging fees to withdraw money on a "foreign" account, I began to withdraw larger amounts of money at a time to keep the fees down.

"Again, it is not in anyones best interest to see a run on the banks........obviously for the sake of national security, the government and the banks will do WHATEVER necessary to avoid the situation. "

-- I wholeheartedly agree.

"Seems to make far more sense for those that are worried to stock up on some basic supplies which are always in demand, as opposed to cash which you can't eat or drink."

-- And you can't pay the mortgage with beans and rice.

-- ariZONEa (not@canada.gov), September 20, 1999.

Yesterday, my neighbor who works at a major Oil company credit union, said they will have an extra $500,000 on hand for the rollover. This is just ONE branch!

29! One to spare! :-)

-- Gayla (privacy@please.com), September 20, 1999.

1.47% cash reserve held by banks, all people withdraw greater than 1.47% of their cash or greater than 1.47 % people withdraw all of their cash. Look at the polls.

-- steve (sh@sh.com), September 20, 1999.

I agree with Ed. (Fed Metrics: 2 words)

-- Dave (aaa@aaa.com), September 20, 1999.

I believe bank run will begin when small businesses don't make their usual bank deposits. I wonder just what percent of deposits this encompasses?

-- y2k dave (xsdaa111@hotmail.com), September 20, 1999.

Ed said it best. The far majority have no money to pull out - including me (well, maybe $1000 from kids accounts). Follow the money: stock market in Nov./Dec.

29 to 32 words depending on your cryptological viewpoint.

-- Jon Johnson (narnia4@usa.net), September 20, 1999.

Stock Market Crash, October.

-- Claire (shortandsuccinct@aol.com), September 20, 1999.

Pack it up...

Pack it in...

At Wall Street it begins...

Ed Yourdon is right...

so grab yo' money and pre-pare

to take flight!!

24+LOL

-- (Rapmaster)Billy-Boy (Rakkasn@Yahoo.com), September 20, 1999.

You have only 10 days to get your money out of the bank.

October 1st, the Fed will change interest rates and roll into the 2000 fiscal year.

Only 10 days.

30 wrds

-- Joe Martin -- Buffalo, Ny (nospam@nospam.com), September 20, 1999.

For anyone who hasn't seen it.. the Y2K CASH COMPUTER

-- Linda (lwmb@psln.com), September 20, 1999.

Becuse shit walks and money talks! (6words)

-- old kahuna (surfsup@paradise.com), September 20, 1999.

Sheeple too stupid and lazy to remove money. They believe in FDIC and brain numbing radio ads. Everyone who got it already took theirs out. Sheeple will lose everything. Idiots.

(30 words - kritter)

-- kritter (kritter@adelphia.net), September 20, 1999.

Closing Banks = Bank Run = Violent People = Chaos.

Ray

-- Ray (ray@totacc.com), September 20, 1999.

"Sons avoid the mistakes of their fathers, but make the mistakes of their grandfathers." - unknown

14 words

-- Homer Beanfang (Bats@inbellfry.com), September 20, 1999.

Hidden runs have already started by those of us that cash checks rather than deposit.

15 words

-- Joe Stout (joewstout@iswt.com), September 20, 1999.

I run a small business, and I have not been making my "usual" deposits. I predict a tremendous change/herd movement by mid- October.

-- jeanne (jeanne@hurry.now), September 20, 1999.

Been running to the bank for 18 months and it hasn't collapsed yet! But I do agree with Ed!

-- money bags (moneybags@moneybaggs.com), September 20, 1999.

2 issues. Not enough cash in circulation to cover even modest needs for every household. This generation of investors has never seen a bear market. Last one was in the '70s. (made it in 30)

-- Nancy (wellsnl@hotmail.com), September 20, 1999.

When people see a line of depositors trying to get their money out of the bank, the people will join the line...

-- Mad Monk (madmonk@hawaiian.net), September 20, 1999.

I agree with Big Dog

-- Flint (flintc@mindspring.com), September 20, 1999.

If AlanG and JohnK can keep the lid on till last second,there will be no bank runs because all banks will be closed until crisis is over.

-- Stanley Lucas (StanleyLucas@WebTv.net), September 20, 1999.

"When a majority of depositors become convinced that a majority of depositors intend to withdraw their money from the banks simultaneously, a majority of depositors try to withdraw their money from the banks simultaneously" (paraphrased).

This old aphorism is over 30 words, but what the heck, it's relevant.

my site: www.y2ksafeminnesota.com

-- MinnesotaSmith (y2ksafeminnesota@hotmail.com), September 20, 1999.

The prudent have been withdrawing. Gubmint sees this and winds up the presses. No banks close, but now our money is worth less and less. < than 30.

-- TM (mercier7@pdnt.com), September 20, 1999.

Why are the people on this forum so correction-proof.

One more time, everyone all together now: Exchanging electronic money for paper money does NOT increase the money supply. It's an exchange. Only the FORM of the money changes, NOT the amount.

Sheesh.

-- Flint (flintc@mindspring.com), September 20, 1999.

Damn it, Flint, what does THAT have to do with the price of eggs in Yugoslavia? If Joe Sixpack wants his money in CASH because he is AFRAID of what Y2K is going to do to electronic money, THAT WILL CAUSE MUCHO BIG PROBLEMS BECAUSE THERE IS ONLY A PIDLY AMOUNT OF IT!

-- King of Spain (madrid@aol.com), September 20, 1999.

KOS:

Why criticize me because TM said something dumb? Wouldn't it be better to correct a mistake, than to attack those who point out the mistake? On second thought, never mind.

If too many people tried to drain their accounts, in theory we'd run out of cash. But even before that, there would be delays. If you have a large bank account right now, most banks will ask for prior notification before you withdraw it (in any form). The banking system, like the inventory in stores, is based on normal variations in demand. Neither can handle demand outside normal limits immediately -- both take time to handle.

In practice, Decker is correct. The banks will enjoy an enforced holiday to forestall any genuine bank run. If the banking software is in as good shape as the banks claim, people will soon realize this and the runs won't materialize. If banking software is as bad as Andy dreams, it really won't matter one way or the other. I personally would much rather start absolutely broke in a world with a working banking system, than with a huge bundle of greenbacks in a world where the banking system has collapsed.

-- Flint (flintc@mindspring.com), September 20, 1999.

Flint, KOS I confess!! I blundered and posted prematurely. You are absolutely correct. The gubmint printing to meet the increased demand for greenbacks is not inflationary, My most humble apaologies!!

-- TM (mercier7@pdnt.com), September 20, 1999.

That's APOLOGIES.. as in SO Sorry!!

-- TM (mercier7@pdnt.com), September 20, 1999.

TM:

No problem. Many here have made the same mistake, and I had to have it explained to me as well.

-- Flint (flintc@mindspring.com), September 20, 1999.

I still believe that the banks will attempt to stay open at all costs. Any banking holidays, however short-lived will only aggravate public fear. That's why the massive "we're OK!" campaign by banks everywhere; to soothe the masses, while the Fed buys time and sets the presses at full speed. Anyone notice how ratty existing paper money is getting. I suspect that they've stopped the furnaces to keep more bills in circulation.

-- TM (mercier7@pdnt.com), September 20, 1999.

OK Flint...Educate me... I'm a little thick. (1) Please define "Money" in the potential upcoming scenario...

(2) You stated that "exchanging electronic money for paper money does not increase the money supply...only changes the FORM"

If I remember my basic accounting, for every debit entry there must be a credit entry. If "Paper" is printed how would the accounting entries be posted....what will be "credited" and what account would be "debited"...(ie. if I buy a piece of capital equipment with my cash. I would debit my cash account and credit my capital equipment account. What is the new FORM this paper (Fiat) money would take so as not to create more money in circulation? Not trying to be argumentative.... just don't understand ...Thanks

-- Larry (Rampon@cyberramp.net), September 20, 1999.

Does anyone care to venture an opinion on the effect of pulling $99,000,000,000 out of circulation for one to three months will have on the economy.

Seems I remember from Econ 101 that every $1 in circulation is like $20 to the economy when factoring the "multiplier effect". Electronic cash is in circulation, but cash in your mattress is not. So it appears as if there will be a Two Trillion dollar hit to the economy!

-- Hawthorne (99@00.com), September 21, 1999.

Larry,

The bank trades in some of its electronic reserves to the FED for more paper money. However, if the bank is short on reserves due to high withdrawal demand, it will have to borrow some more reserves from the FED, and this would be inflationary.

If this money is withdrawn and then goes into hiding for any length of time, it's probably a wash, inflation-wise, but only if most of it is eventually redeposited by the account-holder. If this money, is withdrawn, stored for a while, and then later spent, then I would think it would be modestly inflationary.

I say "modestly" because the amount of money that all the banks' clients would be able to withdraw pales in comparison to the rate at which the FED has been inflating the money supply for most of this decade.

-- Nathan (nospam@all.com), September 21, 1999.

Craig wrote:

This is not 1929. The public are much better informed and understand the nature of fractional reserve banking. Most people grasp that their dollars are in fact electronic...

Craig, of the many silly things you have written on this forum, that ranks as one of the most ridiculous. I work in banking, and even most bank employees (including a lot of bank officers) don't understand fractional reserve banking. Needless to say, the general public is pretty much oblivious to fractional reserve banking and how it works.

-- Nabi (nabi7@yahoo.com), September 21, 1999.

I must agree...just ask a few of your friends if they have a clue regarding fractional reserve banking. Then ask them how much currency they figure the banks have to cover their deposit obligations. Fact is, when most "realize" the problem...don't even want to think about it...

-- Watching (moneygone@bank.com), September 21, 1999.

David Butts:

Banks runs: unexpectedly sooner than most anticipate and ubiquitous when the masses panic.

-- Randolph (dinosaur@williams-net.com), September 21, 1999.

Randolf's post mentions the word panic.

Perhaps this is worth an entirely new thread (although it is by no means a new topic), but what will cause people to panic? No doubt panicking people will precipitate a bank run. But what will cause the panic pre 2000?

-- Johnny Canuck (j_canuck@hotmail.com), September 22, 1999.

Even if Craig is right and most people happily understand that electronic money is Just As Good as greenbacks -- which I do not for one minute believe -- you still have the following problem: What will people do if they believe that they will no longer be able to trust electronic money come 1/1/2000?

The obvious answer is to convert electronic money into something safe, something immune from the threat that they perceive. Clearly, cash -- and only cash -- is the most natural "substitute".

-- Jack (jsprat@eld.net), September 22, 1999.

THERE WILL BE NO BANK RUNS! There's too many credit card holders and too many ATM holders. People will simply use their credit cards to spend, spend and spend. Credit card holders DON'T have ready cash! Millions live paycheck-to-paycheck. No paycheck, no savings, but OH, we have CREDIT CARDS! NO CREDIT CARDS, NO money, no spending, no nothing! What a position to be in. P.S. Read the fine print on your credit card agreement, they can CANCEL you credit card at their own discretion!

-- money bags (moneybags@moneybagggs.com), September 22, 1999.