Coronavirus Consequence

US Dollar Bill


bank run

What's a 'bank run'?

A bank run occurs when many clients withdraw their money from a bank, because they believe the bank may cease to function in the near future. As more people withdraw their funds, the probability of default increases, prompting more people to withdraw their deposits. In extreme cases, the bank's reserves will not be sufficient to cover the withdrawals.

This video can better explain a 'Bank Run': (click here if video doesn't load)

Six months ago, we saw Hong Kong banks running out of cash COMPLETELY and Turkey mass freezing accounts. Then, a month ago, New Yorkers started hoarding cash. A Bank of America branch in Manhattan saw lines of people at its ATMs. Desperate BoA customers were draining cash from their accounts, “sometimes tens of thousands of dollars at a time.” The bank ran dry of $100 bills from multiple requests.

This, is when a cash crisis crack started to show .... The demand was so great that the branch could not cope. In short, people couldn’t access their money.

Since then, subtle things at the banks have started to occur...

(1) Have you noticed that some of your local bank branches have quietly closed down? Mine did. A big sign on the door said that I had to go to another location to do my banking.

(2) Have you noticed the scaling back of operations and bank hours considerably reduced? My bank used to be open weekdays 7am-8pm and open Sundays Now, the hours are 10am-6pm weekdays, CLOSED on Sundays. They said it's due to the coronavirus.. really?

(3) Have you noticed the new bank withdrawal restrictions? Banks don't want you emptying your accounts. Chase and Bank of America have set new restrictions.. see how much money you can now withdraw at your bank or your ATM.. You'll get a rude awakening. I could withdraw $1000 daily from the ATM,.. now it's $500.

Money in our bank accounts is not under our control. The money you deposit in a bank is not yours anymore, it belongs to the bank. There is only 5 to 10% real physical cash available for withdrawal. This is the reality. All of our cash isn't actually there. It's NOT tangible. It doesn't exist physically.

The New York bank run was enough to scare the FDIC. They put out this video begging people to keep their money in the bank: (click here if video doesn't load)

Wait.. what?? I wasn’t afraid of money NOT being in the bank until the insurer of bank deposits had to go on air and assure us all that our money’s fine. Why is the FDIC asking us to NOT withdraw our savings? If the financial system is so safe, it shouldn’t matter to them whether or not people keep their money in the banks.

McWilliams said, “We are living in unprecedented times. At the time of a pandemic like this it is way too easy to get confused. And to have fear about what you should be doing with your money. With your accounts, especially as you’re looking at the volatility in the stock market and the financial sector.” CONFUSED???! Lady, the market is a shit show right now and no one has ANY idea where the trillions of dollars is coming from to prop up the "volatile" US economy! When you keep printing money like it's toilet paper, we don't trust the “In God We Trust” printed on the US dollar bill.

The US national debt just reached the new high, currently exceeding $24 trillion. TWENTY FOUR TRILLION DOLLARS! That includes: student debt, housing debt, credit card debt, government debt, corporate debt, etc. Let’s be honest, some of that debt is simply not going to be paid. Millions of people have already lost their jobs. They are using up their emergency savings and their $1200 stimulus check might cover some past bills..NOT current or future. Many Americans have said 'it's not enough' so that tells you where the economy is heading. As a matter of fact, not everyone will receive the full $1,200 payment and some won't get a stimulus check at all. And as it stands, that is a ONE TIME PAYMENT.

A LOT of people are going to stop paying their mortgages, credit cards, auto loans, etc. And that will directly impact the banks.

That occurred back in 2008– millions of people across the country stopped paying their mortgages, and the banking system nearly collapsed as a result.

Banks WILL lose money. No one is sure how much but it’s not going to be ZERO. The FDIC only has $109 billion to insure the entire $13 trillion US banking system. That’s less than 1%! Remember, once you put the money in the bank it no longer belongs to you. Banks turn around and lend YOUR money to someone else so when YOU want YOUR money, they take it from someone else, to give back to you. They only have so much money to go around so, a BANK RUN would be a disaster!

Banks are going to take a hit. It’s preposterous to think that banks are immune to the Corona virus, or to assume that not a single bank is going to run into problems.

Case in point .. did you see this?? Last week, the FDIC announced the First Coronavirus-Fueled Bank Failure in the United States (article link)

Yeah, the bank went under..

But the FDIC insists that there’s nothing to worry about .. ummm sure...

The FDIC, nor any bank, has ever had to deal with a complete shutdown of the economy. Assume that things will get ugly.. or.. uglier..

People are fearing that some banks will go bankrupt and rightly so. They want to have cash on hand in case quarantines get so strict that they cannot go to the bank. For those who barely have money in the bank, they will take it out so that direct withdrawals don't take what little money they have for food.. OR.. they don't want to deal with NSF fees cutting into their survival money.

McWilliams can beg all she wants to but the truth of the matter is that our money isn't really so safe in the banks... not now.. YES, I WANT a WAD OF CASH under my mattress! I need food on the table and a roof over my head.

And, as a final note... the Federal Reserve has reduced bank reserve requirements to 0%, meaning banks do NOT have to keep any funds in reserve.

You know what that means??? When you go to the bank, you might not get ANY money.

This creates a dangerous situation for savers, especially if there is a bank run.

Enough said!

photo credit: qimono

photo credit: investopedia