Bank Runs

Discussion in 'Markets & Economies' started by TreasureHunter, Oct 20, 2019.

  1. TreasureHunter

    TreasureHunter Well-Known Member

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    There will be. The average man is getting his salary on this account. Some regularly "travel" to the ATM's to take their money out.

    I can see more and more lines at the ATM's nowadays and it worries me, because those people I see are part of those "dumb masses"... so, they either feel something (insecurity, fear) or something is going on (with the economy or the bank's equipment!).
     
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  2. sgbuyer

    sgbuyer Well-Known Member Silver Stacker

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    I won’t read too much into the shortage of cash or broken ATMs. It costs too much money to deliver cash to ATMs and having them serviced 24/7. Even in Singapore, we can withdraw in $10, $50 and $100 notes. The ATMs are often out of $10 notes as the majority of people withdraw only $20 each time. In China the biggest note is 100 yuan, usd14 so the ATM in expensive cities like Shenzhen will run out of cash very quickly if they do not ration withdrawals.
     
    Last edited: Nov 1, 2019
  3. TreasureHunter

    TreasureHunter Well-Known Member

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    Bank runs are generated by hysteria (usually due to news and nowadays with social media it just spreads like smallpox), frequency online banking errors, unreliability of payment (account gets blocked, POS system is down, online banking system under maintenance), negative news about the economy, word-of-mouth (I remember a few discussions with colleagues who complained about a certain bank and the fact that they immediately withdraw their cash after they receive salary - so, after that the other colleagues started doing the same thing and kept boasting about it)...

     
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  4. TreasureHunter

    TreasureHunter Well-Known Member

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    When they say "everythin's OK, don't panic", that's when you have to withdraw 98 % of all your money in cash. Buy food, PM's, medicine, etc.

    Create a plan for a bank run scenario - this way you'll have a "what to do" checklist and won't get tangled up when "it" hits the fan!
     
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  5. Ipv6Ready

    Ipv6Ready Well-Known Member Silver Stacker

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    In Australia bank are fine, however if you hear of bad news move it.

    I wouldn’t have more than $250,000 in any single subsidiary of banks. Once you reach that level start looking overseas.

    Note government guarantee is great but you should only be over $1,000,000 in cash saving once all easy Australian loop holes are filled
     
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  6. alor

    alor Well-Known Member Silver Stacker

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  7. TreasureHunter

    TreasureHunter Well-Known Member

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    Milton Friedman about the Fed, banks and bank runs:



    Indeed, there must be some things put in place in order to keep people from taking their money out of the bank. Cash withdrawal limits, for instance...

    But there is something else: interest rates. It must be worth keeping your money in the bank, otherwise, why would you keep it there?

    Now that they've shrunk interest rates to near zero, why would you keep it there?

    One bank in my area has come up with an even worse idea than negative interest rates: they are now charging additional fees for the "service". Mainly for online banking and for "account administration". MONTHLY, of course. The fees are worse than negative interest rates and interest is minuscule (somewhere in the 0.20% area). It's the fees that are eating people's money away.

    If you want to withdraw, it can take days for "larger" sums, they never have more than 1,000-3,000 USD in their office.

    Yet, a good reason for keeping your money at the bank is for safety. Countless reasons why you don't want a pile of cash at home.

    So, we can regard banks as "safe" places, where you can deposit your money. But otherwise, the bank has little or no function (you can effectuate transactions, of course...).

    An alternative to banks are bullion storage places. For example, you can rent a deposit box and leave your PM's there. You still have to pay fees, just like fiat banks will eat fees from you. Just that PM's retain value, whereas fiat money's value goes down over time...
     
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  8. alor

    alor Well-Known Member Silver Stacker

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  9. sammysilver

    sammysilver Well-Known Member Silver Stacker

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    Nnnnnooooo, not my Uncle Joe!!!
     
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  10. milled

    milled Active Member

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    SDP will be 400+ (uninsured) for a small one in a good vault, but you can fit a lot of stacks of $100 in there. I guess that may be the tilt point. If the net return on your fiat is worse than minus 500 dollars per annum, the benefits of storing bills in an SDP might look attractive.
     
  11. TreasureHunter

    TreasureHunter Well-Known Member

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    When you say "SDP", you mean "secure deposit" or "safe deposit" + something with a "p..."?

    For some reason I can't recall the "SDP" service you're referring to.

    I'm thinking of secure deposit boxes/storage for which you pay for at a bank or bullion vault etc. Might be a good idea, indeed. :D
     
  12. TreasureHunter

    TreasureHunter Well-Known Member

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    I think banks are "good" for storing up to 30,000 $, in the worst case 50,000 $, but no way more. It'll eat your money away with negative interest rates. And, if you have negative interest rates, then the more money you have put there, the more you have to pay (for them to "take care" of your money).

    But perhaps PM's are not the only choice - for those who have more money (for example: 100,000+$).

    You can go into "venture capitalism", start a business and go for cash flow. Perhaps easier money would come from renting a property out to Airbnb. There are firms that bulk-rent your properties out to end clients and will charge you "only" a (heavy) fee for managing (cleaning, equipping, arranging, renting out...) your properties.

    If you can buy a home to rent it out (prolly a vacation home) or a few garages, a workshop, storage facility, then do so.

    Go for the cash flow.

    This way:
    - you preserve your assets (mostly) through real estate
    - you generate income with minimum effort

    Cash flow is great, because PM's just sit and you have to hope for their price to rise (which will rise in parallel with inflation) etc.
     
  13. milled

    milled Active Member

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    yes that was a bit of lysdexia on my behalf!
     
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  14. TreasureHunter

    TreasureHunter Well-Known Member

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  15. TreasureHunter

    TreasureHunter Well-Known Member

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    Recent events in Hong Kong spark bank runs (from Zerohedge):

    As Hong Kong ATMs Run Out Of Cash, Central Bank Steps In To Prevent "Panic Among The Public"

    As the violence in Hong Kong escalates with every passing week, culminating on Friday with what was effectively the passage of martial law when the local government banned the wearing of masks at public assemblies, a colonial-era law that is meant to give the authorities a green light to finally crack down on protesters at will, one aspect of Hong Kong life seemed to be surprisingly stable: no, not the local economy, as HK retail sales just suffered their biggest drop on record as the continuing violent protests halt most if not all commerce:


    [​IMG]

    We are talking about the local banks, which have been remarkably resilient in the face of the continued mass protests and the ever rising threat of violent Chinese retaliation which could destroy Hong Kong's status as the financial capital of the Pacific Rim in a heart beat, and crush the local banking system. In short: despite the perfect conditions for a bank run, the locals continued to behave as if they had not a care in the world.

    Only that is now changing, because one day after a junior JPMorgan banker was beaten in broad daylight by the protest mob, a SCMP report confirms that the social upheaval has finally spilled over into the financial world: according to the HK publication, the local central bank, the Hong Kong Monetary Authority, was forced to issue a statement warning against a "malicious attempt to cause panic among the public" after rumors were spread online about the possibility of the government using emergency powers to impose foreign-exchange controls.

    And while the de facto central bank stressed that the banking system remained robust and well positioned to withstand any market volatility, some of the statistics it provided gave a rather troubling impression: the monetary authority said that not only were more than 10% of 3,300 ATMs damaged and could not function, but that banks were negotiating with logistics firms to refill cash machines as 5% of them had run out of money, adding that banknote delivery was affected by the closure of shopping malls and MTR stations.

    Will this be enough to prevent a bank run on the remaining ATMs? The answer will largely depend on what happens in the next 24-48 hours in Hong Kong, although the signs are grim.

    Earlier in Saturday, Hong Kong’s embattled leader, Chief Executive Carrie Lam Cheng Yuet-ngor, appealed to the public to condemn protest violence and disassociate themselves from rioters, saying the chaos they unleashed across the city the previous night after the announcement of a ban on the wearing of face masks at public assemblies was the reason such a controversial restriction had to be imposed in the first place.

    In a five-minute taped video released on Saturday afternoon, a grim-faced Lam, flanked by 14 of her top officials, slammed those who were responsible for the “outrageous” rampage. After rioting mobs trashed MTR stations, set a train on fire and assaulted railway staff on Friday night, the entire network remained closed on Saturday, depriving citizens of their primary mode of public transport. It remained uncertain whether it would open on Sunday.

    “Horribly violent incidents took place in various districts in Hong Kong last night. The extreme acts of the masked rioters were shocking and the level of vandalism was unprecedented,” Lam said.

    “The extreme acts of the rioters brought dark hours to Hong Kong last night and half-paralysed society today. Everyone is worried, anxious and even in fear.”

    [...]

    Read full article here:
    https://www.zerohedge.com/geopoliti...central-bank-steps-prevent-panic-among-public


    I think bank runs go along with a collapse of retail sales. I also think that the sale of anything "not really necessary" (like iphones, laptops, digital cameras etc.) will collapse for the longer term when a banking crisis kicks in.
     
  16. Ipv6Ready

    Ipv6Ready Well-Known Member Silver Stacker

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    Nothing story really. Zero hedge gave HK two days before collapse..... a month ago

    A handful of atm running out of money when tens of thousands protesters are taking cash out to go home on taxis after trashing the area which stopped public transport lol.
     
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  17. TreasureHunter

    TreasureHunter Well-Known Member

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    ^
    Zerohedge is a bit of a "scaremonger" publication. But panic did indeed cause some turmoil at the HK banks.

    It's very difficult to understand exactly what's going on in Hong Kong, because of so much manipulation.
     
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  18. madaw1

    madaw1 Active Member

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    They testing something before big crush/ a gay working in the bank has told me/-this is no coincidence!
     
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  19. TreasureHunter

    TreasureHunter Well-Known Member

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    Sounds funny :D

    Anyway, they're indeed testing! Local banks are doing the same thing. Since around spring, I've noticed more and more ATM's not working, mobile banking systems "under maintenance" or just delivering error messages.

    I literally went down to the bank and found myself in front of a queue. Not too long, but around 10 people in front of me. Just 1-2 ATM's working out of 3-4.

    And this kept repeating again and again. Throughout the past summer and earl autumn.

    You are VERY right. They are testing.
     
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  20. TreasureHunter

    TreasureHunter Well-Known Member

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    Jim Rickards - bank runs are starting globally:

    (the sound volume is very low, you will have to set it to maximum)
     

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