[roccman]

$this->bbcode_second_pass_quote('Twilight', 'T')he next few years could look as though we will inflate our way out of it.

[Twilight]

Should be a fun ride.

[cube]

My head is starting to spin with this inflation/deflation debate.

I want MrBill to come back from his vacation and put in his 2 cents. There is no one else on this forum whom I have greater confidence in their knowledge of banking then MrBill.

[Twilight]

Yes, I would like MrBill's input too, specifically on whether economic fundamentals already make one outcome inevitable (if so, which one), and if not, which one the US would be wisest to choose if it aimed to expand its reach and confront the energy situation.

[roccman]

Governments will wreck their currencies to save banking system

[CrudeAwakening]

I guess it comes down to whether a credit deflation is inevitable, which I think it is, and whether this can be overcome by inflation of the monetary base, which I'm less certain of. If the economy is in the shitter, the money multiplier may not produce the expansion of credit that would normally accompany reserve injections by the central bank.

It's impossible to analyse on economic fundamentals alone because the final outcome depends on political decisions about which we can only speculate.

It would seem that deflation is the worst outcome for the banking industry and the government, and that they will try to avoid this at all costs.

[CrudeAwakening]

deleted

[Twilight]

Very likely true, CA. So long as we are speculating, it makes more sense to me to let much of the banking industry go to the wall, but I admit that is my bias.

[CrudeAwakening]

I agree, Twilight. Flush the crud from the system. As long as I can get my money out first..

[Koyaanisqatsi]

$this->bbcode_second_pass_quote('Twilight', 'I')ndeed,
I endorse patience's view. I make only one automated payment: my rent. For everything else, I mail a cheque or pay cash in person.

[Twilight]

That's a tricky one. If a company screws up on its way out, you can have a struggle explaining things to the new management. Not to mention any third parties it involves. I have already been in that position with an ISP and I can confirm it takes months to sort out. In the meantime, the bill grows.

Guess what, now I'm with a new ISP whom I can pay by cheque.

I can only imagine how bad that would be if your accommodation payments slipped through the cracks after a bank collapse. Those are big sums. Although my rent is paid automatically, I have gotten on good personal terms with the landlord, so I should have little trouble sorting it out with the big cheese in person and not through a call centre 'Debbie'. If you can arrange to pay by cheque at the bank, do it.

Otherwise, to minimise the pain of the experience should it happen, archive all correspondence obsessively. Even the stupid mailshots, to avoid having to extract a dated record of a change in terms and conditions from archived internet pages. You will be glad you took the time if the worst ever happens.

[Koyaanisqatsi]

Thanks, Twilight, that's good advice. Now at least I know that my worries are justified.

[patience]

I wouldn't waste any time preparing for a bank run.

Analysts say pre-crash indicators are in place, the UN warns that the world economy could go to 0 growth this year, and gold hit$878 on the NY spot market today.

Worst of all, the St. Louis Fed's "Free or Borrowed Reserves" graph fell like a stone, with conspicuously no one talking about it. The banks appear to be in deep doo-doo about now, as bond insurers are teetering on failure.

The DOW fell 238 today, down for 5 days in a row, the TV said, putting it at 12589.

Like they say, He who panics first, panics best".

[Koyaanisqatsi]

$this->bbcode_second_pass_quote('patience', 'I') wouldn't waste any time preparing for a bank run.

[SchroedingersCat]

If I remember my history, the runs on banks in the Great Depression (called a depression to avoid calling it a panic) were usually started by the banks themselves. A bank would start running short of liquidity. They would call other banks and ask for loans to be repaid. When that failed, they would call in the loans of businesses and individuals -- most of whom did not have the cash to pay off their loans.

The customers of the bank would hear about this activity and rush to the bank to get their deposits out before the bank closed its doors. Of course, the bank didn't have their money as it was illiquid.

Anyone see any similarity to today's situation?

Just to brighten the scenario, let me mention 'sweeps.' Today's banks don't need to keep a fractional reserve for all their deposits -- only cash accounts. That CD or money market or savings account? The bank is required to have 0% reserves on hand against them. For cash or checking accounts -- 1.2% is the number I've seen tossed about. Banks will even offer 'sweep' accounts to customers as a product! Sweep your non-interest paying checking deposits into overnight accounts and earn money. Of course, they're earning 5 or 6 pc to your 2%.

Everyone still comfortable with where their money is parked?

[I_Like_Plants]

$this->bbcode_second_pass_quote('Tyler_JC', '
')Most of a bank's cash is tied up in financial products like CDs and treasury bills.

People can't instantly cash out of those things without incurring expensive penalities so it seems unlikely that anyone would be willing to do so.

[I_Like_Plants]

$this->bbcode_second_pass_quote('Tyler_JC', '
')Most of a bank's cash is tied up in financial products like CDs and treasury bills.

People can't instantly cash out of those things without incurring expensive penalities so it seems unlikely that anyone would be willing to do so.

[patience]

By the time most of the public "get it", it will be too late. A meltdown/siezing of the bank system could happen very quickly. I'm afaid a lot of people will lose in this debacle.

[Iaato]

Mentally I've got assets sitting in two piles; the physical assets like a house, preps and barter goods, gold in pile A, and paper assets/the cashless society in the other pile B. As Patience has pointed out, the paper/electronic piece could go poof in a puff of smoke overnight, basically. So I've been working on expunging pile B, and moving stuff from it to pile A in the form of real stuff in some sort or another.

Pile B is getting simpler, smaller, and more local, so it is accessible. It's a nice mental game to see the process occurring, and helps me emotional work through the loss issues with the "old economy." Recurring electronic payments are part of Pile B, and they are one by one going away.

[Iaato]

doh! Only press the button once if you only desire one transaction.