Author Topic: "A Bank-run Reality Check"  (Read 3192 times)

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Online Pandora

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"A Bank-run Reality Check"
« on: March 04, 2011, 07:16:03 PM »
Quote
After reading the letters about banking reality, I would like to add what I have learned from working at a reputable bank in the Midwest.  The bank never has enough cash on hand to supply all their “demand “ or checking accounts, no matter what their legal fine print says.   

The amount of cash is mandated by the Federal Reserve for the banks in their region.  Each week the Fed tells the branch how much cash they can order, how much excess cash must be sent back to them, and how much cash they will need to fill the ATM.  The branch has no control over this process. 

The branch is under extreme pressure to maintain the least amount of cash in the vault needed for expected customer volume because the Fed charges compounding -interest on the entire amount.  Every penny in the vault and teller drawers is earning interest for the Fed while in the possession of the branch.   If your branch has a high customer and cash transaction volume the Fed will increase their allotment of currency.  But, a small town branch with limited transactions, such as mine, will be given less.

...

What can go wrong?

H/T nbpundit

The very interesting rest.
"Under certain circumstances, profanity provides a relief denied even to prayer." - Mark Twain

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Online IronDioPriest

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Re: "A Bank-run Reality Check"
« Reply #1 on: March 05, 2011, 09:20:31 AM »
"Another reality is money in a bank is only a number on a computer screen, and it can vanish without warning if the internet were to go down.  That paper currency hiding in a house may be practically worthless, but it is still better than a computer number accessed by a plastic card."

<snip>

"There have been rumors of giving the President the power to control the internet, for our own safety of course.  What if that power is granted and the person in that office enacts the “kill switch” for whatever reason."

<snip>

"Set up your finances with the bank, but just know that they are subject to the same supply-chain disruptions as a grocery store and take precautions to keep cash and coin on hand."
"A strict observance of the written laws is doubtless one of the high duties of a good citizen, but it is not the highest. The laws of necessity, of self-preservation, of saving our country when in danger, are of higher obligation. To lose our country by a scrupulous adherence to written law, would be to lose the law itself, with life, liberty, property and all those who are enjoying them with us; thus absurdly sacrificing the end to the means."

- Thomas Jefferson

Offline rickl

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Re: "A Bank-run Reality Check"
« Reply #2 on: March 05, 2011, 09:30:13 AM »
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"Set up your finances with the bank, but just know that they are subject to the same supply-chain disruptions as a grocery store and take precautions to keep cash and coin on hand."

I remember talking with an older person once who told me that the Depression wasn't too bad as long as you had cash.  The problem was that many people didn't.

So I've already been working on this for awhile.
We are so far past and beyond the “long train of abuses and usurpations” that the Colonists and Founders experienced and which necessitated the Revolutionary War that they aren’t even visible in the rear-view mirror.
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Online Pandora

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Re: "A Bank-run Reality Check"
« Reply #3 on: March 05, 2011, 12:13:38 PM »
Yes, small bills and coin.

And copper and brass.
"Under certain circumstances, profanity provides a relief denied even to prayer." - Mark Twain

"Let us assume for the moment everything you say about me is true. That just makes your problem bigger, doesn't it?"

Offline rickl

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Re: "A Bank-run Reality Check"
« Reply #4 on: March 05, 2011, 12:29:06 PM »
Yes, small bills and coin.

And copper and brass.

On the other hand, they didn't have hyperinflation in 1930s.  That's a real risk today.

People still lived under Judeo-Christian ethics.  The vast majority were white and English-speaking.  They had a cultural tradition of self-reliance.  Even the poorest people knew how to grow vegetables, raise chickens, mend clothes, and fix things.

They also didn't have generations of people raised to believe that "society owes me" and "whitey is to blame for all my problems".  Big difference.
We are so far past and beyond the “long train of abuses and usurpations” that the Colonists and Founders experienced and which necessitated the Revolutionary War that they aren’t even visible in the rear-view mirror.
~ Ann Barnhardt

Offline Predator Don

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Re: "A Bank-run Reality Check"
« Reply #5 on: March 06, 2011, 12:36:34 AM »
This a little off subject, but i'm surprised banks haven't teamed up with insurance companies to create an insurance product to cover deposits. Imagine a self insured bank in no need of FDIC......and thus no regulators within thier business.

We need to get gov't out of our businesses.
I'm not always engulfed in scandals, but when I am, I make sure I blame others.

Online Pandora

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Re: "A Bank-run Reality Check"
« Reply #6 on: March 06, 2011, 02:54:33 AM »
This a little off subject, but i'm surprised banks haven't teamed up with insurance companies to create an insurance product to cover deposits. Imagine a self insured bank in no need of FDIC......and thus no regulators within thier business.

We need to get gov't out of our businesses.

Hear!  Hear!
"Under certain circumstances, profanity provides a relief denied even to prayer." - Mark Twain

"Let us assume for the moment everything you say about me is true. That just makes your problem bigger, doesn't it?"

Offline Libertas

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Re: "A Bank-run Reality Check"
« Reply #7 on: March 06, 2011, 12:26:41 PM »
None of these risks are new, they've been with us for decades.

I am not going to try and tell someone they should not have a stash of cash on hand for emergencies, but realize that will be good only in short-term emergencies.

In a prolonged situation you'll need alternative items of value.

I like Don's idea of private insurance.  Of course many participants will have to come on board to lower premiums, but the theory is sound.  However, the Fed's would still manage the money supply, so cash restrictions and such will never be alleviated.  For that latter part, allowing states to set up supplemental credit reserves would be one way, but that would require the national congress to amend banking laws allowing it.  (The states would act as intermediaries between banks and the Fed, eating the lending charge so banks could increase their cash on hand)  Plus, solvent states would have an added advantage over their financially troubled counterparts, another inducement for fiscal responsibility can only be a good thing!
We are now where The Founders were when they faced despotism.

Online IronDioPriest

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Re: "A Bank-run Reality Check"
« Reply #8 on: March 06, 2011, 03:08:00 PM »
I have no idea what the law is, but I wonder - are banks even allowed by law to purchase insurance on deposits apart from the FDIC insurance regime?
"A strict observance of the written laws is doubtless one of the high duties of a good citizen, but it is not the highest. The laws of necessity, of self-preservation, of saving our country when in danger, are of higher obligation. To lose our country by a scrupulous adherence to written law, would be to lose the law itself, with life, liberty, property and all those who are enjoying them with us; thus absurdly sacrificing the end to the means."

- Thomas Jefferson

Online Pandora

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Re: "A Bank-run Reality Check"
« Reply #9 on: March 06, 2011, 03:26:30 PM »
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I am not going to try and tell someone they should not have a stash of cash on hand for emergencies, but realize that will be good only in short-term emergencies.

Exactly.  The piece's author described one such type.

Quote
In a prolonged situation you'll need alternative items of value.

Yes.  Certain items are a surety; others require a bit of speculation.  What may be of value to one will be of no value to another.  I'm not a big candy-eater, but a "Survivalblog" contributor advises to store some for the morale-boosting/trading value.
"Under certain circumstances, profanity provides a relief denied even to prayer." - Mark Twain

"Let us assume for the moment everything you say about me is true. That just makes your problem bigger, doesn't it?"

Offline Libertas

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Re: "A Bank-run Reality Check"
« Reply #10 on: March 06, 2011, 03:40:35 PM »
Quote
I am not going to try and tell someone they should not have a stash of cash on hand for emergencies, but realize that will be good only in short-term emergencies.

Exactly.  The piece's author described one such type.

Quote
In a prolonged situation you'll need alternative items of value.

Yes.  Certain items are a surety; others require a bit of speculation.  What may be of value to one will be of no value to another.  I'm not a big candy-eater, but a "Survivalblog" contributor advises to store some for the morale-boosting/trading value.

Yup.

And more of that morale boosting/trading value - toilet paper!  (Think about the alternative!)
We are now where The Founders were when they faced despotism.

Online Pandora

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Re: "A Bank-run Reality Check"
« Reply #11 on: March 06, 2011, 03:42:46 PM »
That'd be a "surety" item and nobody's getting my t.p. unless they've got something I need a whole heckuva lot more.  8)
"Under certain circumstances, profanity provides a relief denied even to prayer." - Mark Twain

"Let us assume for the moment everything you say about me is true. That just makes your problem bigger, doesn't it?"

Offline Glock32

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Re: "A Bank-run Reality Check"
« Reply #12 on: March 08, 2011, 02:21:25 PM »
I think alcohol is another such item. Just a generic vodka. It could have good trade value. Plus it is also a reasonably good disinfectant for first aid.
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charlesoakwood

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Re: "A Bank-run Reality Check"
« Reply #13 on: March 08, 2011, 09:27:26 PM »
I think alcohol is another such item. Just a generic vodka. It could have good trade value. Plus it is also a reasonably good disinfectant for first aid.

Easy long term storage and it retains it's value.