Run on Banks, when's it going to happen here?

PeadarCo · 20-05-2012 2:56pm

hatrickpatrick wrote: »

This is one of the first things I'd change in terms of overhauling the monetary system: We need a system in which a bank run doesn't matter, as a bank has enough money to either be equal or more than the current sum of total deposits.

Sound ridiculous? It's actually not. There should be a type of bank which simply holds your money for you, completely separate from any lending business.
If you think it sounds impossible, that's because you're thinking within the parameters of the current financial and monetary system, which would be irrelevant if we're tearing that up and starting anew :P

A large number of people taking out their own money from banks, which they have every right to do, should not have the capability to put other depositors' money at risk. It's a bit ludicrous.

Question where would you get the money to lend to people? Currently this come from deposits. If banks retains all deposits instead of just a certain percentage as they do now where does the money for loans come from? Since a banks make money from loan interest rates where does the money for deposit interest come in.

amacca · 20-05-2012 9:12pm

mike65 wrote: »

There will only be a run on the banks if enough people are panicked into withdrawing money. Lets try to not be that stupid.

It has come to my attention in recent years that a surprisingly large amount of people are exceedingly stupid (at least in areas of life pertinent to this topic) unfortunately

inda_kenny · 20-05-2012 9:21pm

i dont think banks in ireland are any less safe than anywhere else in the EU , the whole banking system is inextricabley linked which is why little greece is such a disproportionate threat to the bigger economys of europe and indeed the world , i myself had money outside the state for about six months but i brought it back a year ago , the way i see it , if the proverbial does hit the fan , no one will escape the fall out , gold has been mentioned but even it will see a fall as people will be liquidating everything , all we can do is hang on and hope sense prevails

Amberman · 21-05-2012 11:49am

Heres a nice article about central banks claims...which shows that Ireland and Greece, since @2007 have removed roughly the same levels of deposits from their respective banking systems.

The most sharply accelerating withdrawals in the last year are happening not in Greece or Ireland, but in Italy and Spain, (and their banking systems are already remarkably fragile).

The outflows in the past few weeks begun to grow very considerably ...while Irelands deposits have actually increased recently. All roads naturally lead to Berlin.

http://globaleconomicanalysis.blogspot.com/2012/05/full-fledged-european-bank-run-ecb.html.

Amberman

Amberman · 21-05-2012 12:05pm

PeadarCo wrote: »

Question where would you get the money to lend to people? Currently this come from deposits.

Actually, that isn't strictly true in the current banking system.

http://www.youtube.com/watch?v=qIxhsF6JLEA

Chris Martenson explains in the above video.

Amberman

DoesNotCompute · 21-05-2012 12:42pm

drunkmonkey wrote: »

I know we had a run at the start of the crisis but the Euro Zone crisis has spilled over to the UK today with over 1 billion withdrawn yesterday.

Is my money safe with AIB with the bank guarantee scheme? I'm thinking I should put it somewhere else in case they go bang. I've got stung before with other businesses when they closed the doors.
Where should I put the money?

Any opinions?

I wouldn't worry. The govt will not let AIB fail. The government bailed out AIB in the 80's, they pretty much nationalised AIB in 2010, and they'll keep pumping more and more money into it to keep it afloat. I don't see any sane government refusing to do so for the forseeable future.

Not that it's neccessarily a good thing.

PeadarCo · 21-05-2012 1:11pm

Amberman wrote: »

Actually, that isn't strictly true in the current banking system.

http://www.youtube.com/watch?v=qIxhsF6JLEA

Chris Martenson explains in the above video.

Amberman

The video makes the same point I'm making. Banks need deposits to make loans. As I said they only retain a certain percentage of each deposit and can loan the rest out.

Unrealistic · 21-05-2012 1:35pm

DoesNotCompute wrote: »

I wouldn't worry. The govt will not let AIB fail. The government bailed out AIB in the 80's, they pretty much nationalised AIB in 2010, and they'll keep pumping more and more money into it to keep it afloat. I don't see any sane government refusing to do so for the forseeable future.

Not that it's neccessarily a good thing.

The difference now is that our government is insolvent. If it really came to it they would not be able to keep AIB afloat. AIB is currently being kept afloat by a combination of direct ECB money, Troika money provided via the Irish State and Emergency Liquidity Assistance from the Irish Central Bank. It's not a question of the government either "pumping more and more money into it" or "refusing to do so". The government doesn't even have enough money to pay salaries and social welfare. It has to borrow €15 billion a year to cover that. Anything on top that needs to go into AIB will also have to be borrowed. So it's not even down to our government, it's down to whether the ECB/Troika want to keep AIB going or not. For now, thankfully, they do.

Amberman · 21-05-2012 1:50pm

Unrealistic wrote: »

The difference now is that our government is insolvent. If it really came to it they would not be able to keep AIB afloat. AIB is currently being kept afloat by a combination of direct ECB money, Troika money provided via the Irish State and Emergency Liquidity Assistance from the Irish Central Bank. It's not a question of the government either "pumping more and more money into it" or "refusing to do so". The government doesn't even have enough money to pay salaries and social welfare. It has to borrow €15 billion a year to cover that. Anything on top that needs to go into AIB will also have to be borrowed. So it's not even down to our government, it's down to whether the ECB/Troika want to keep AIB going or not. For now, thankfully, they do.

Precisely, its out of Irish hands now and if Germans in particular get even more bailout fatigue, watch out. Their AAA credit rating is already looking wobbly.

Finnbar01 · 21-05-2012 4:56pm

According to this chap it has been happening for quite a while now.

http://globaleconomicanalysis.blogspot.com/2012/05/full-fledged-european-bank-run-ecb.html

kennyb3 · 21-05-2012 5:09pm

Again no run - a run happens in a matter of days, but as i've said previously there is large scale capital flight

If you look at boards or askaboutmoney and other such sights in Q3 & Q4 in 2011, this is fairly evident given the queries raised.

Amberman · 21-05-2012 5:17pm

I know what you're trying to say about the definition of a classic bank panic and what it looks like, with queues of grannies and taxi drivers getting their 5 grand out, but capital flight is a pre-requisite for a run. Happens every time.

Smart money always exits first. Runs are caused by the masses...dumb money.

Unrealistic · 21-05-2012 8:05pm

kennyb3 wrote: »

Again no run - a run happens in a matter of days, but as i've said previously there is large scale capital flight

If you look at boards or askaboutmoney and other such sights in Q3 & Q4 in 2011, this is fairly evident given the queries raised.

It was actually Q4 2010 when we came closest to a run. Take a look at the graph in the post above. That was when the Irish banks started implementing withdrawal restrictions or at least strictly enforcing withdrawal limits that had previously only existed on paper.

Amberman · 22-05-2012 6:49am

Heres an excellent rundown of the actors and scenarios at play in Greece right now.

If I was Greek, (or had Euros in Portugal, Italy, Spain...or Ireland for that matter) my Euros would be long since moved. Zero upside, potentially huge downside.

Why risk it? I can't think of a single reason to leave money in the periphery...like a fast growing number of European citizens.

http://www.zerohedge.com/news/forget-bazookas-here-come-tomahawks-and-howitzers-r-rated-walk-thru-greek-endgame

RoverZT · 22-05-2012 2:51pm

Amberman wrote: »

Heres an excellent rundown of the actors and scenarios at play in Greece right now.

If I was Greek, (or had Euros in Portugal, Italy, Spain...or Ireland for that matter) my Euros would be long since moved. Zero upside, potentially huge downside.

Why risk it? I can't think of a single reason to leave money in the periphery...like a fast growing number of European citizens.

http://www.zerohedge.com/news/forget-bazookas-here-come-tomahawks-and-howitzers-r-rated-walk-thru-greek-endgame

What would you transfer it to?

US dollars?

Sterling?

If you had 40k euro in your bank account what would someone do with it?

Amberman · 22-05-2012 3:33pm

Dollars or Norwegian Krona would be my flight to safety picks...gold could get hammered in a Grexit...but you should seek expert advice before you do anything.

_Kaiser_ · 22-05-2012 3:55pm

Here's a question then... say I have a loan with AIB and it goes under - what happens to that loan?

Amberman · 22-05-2012 4:30pm

Kaiser2000 wrote: »

Here's a question then... say I have a loan with AIB and it goes under - what happens to that loan?

The loan book will be sold by the administrators for the highest price they can get to try and return some money to the creditors. You're loan doesn't go to money heaven if thats what you're getting at.

_Kaiser_ · 22-05-2012 4:38pm

Amberman wrote: »

The loan book will be sold by the administrators for the highest price they can get to try and return some money to the creditors. You're loan doesn't go to money heaven if thats what you're getting at.

No.. that only happens if you owe BILLIONS in this country

As I've posted before though, unlike seemingly a lot of other people I don't believe that my/an individual's personal financial choices should be (made) the responsibility of others, but that answers my question so cheers

RoverZT · 22-05-2012 7:47pm

Amberman wrote: »

Dollars or Norwegian Krona would be my flight to safety picks...gold could get hammered in a Grexit...but you should seek expert advice before you do anything.

Thanks Amberman

Any experts here?

Doesn't Seamus work for a bank?

Amberman · 22-05-2012 8:04pm

Kaiser2000 wrote: »

No.. that only happens if you owe BILLIONS in this country

As I've posted before though, unlike seemingly a lot of other people I don't believe that my/an individual's personal financial choices should be (made) the responsibility of others, but that answers my question so cheers

They sell the book...all the loans together...not your individual loan. You'll still be responsible for the loan...as they will be sold on en masse by the bankrupt banks administrators.

This happens every Friday night in the US. Small banks are going bust left and right and the loan and deposit books are being taken over by stronger banks...often at large discounts to intrinsic value, but thats besides the point.

Dan_Solo · 22-05-2012 8:54pm

mike65 wrote: »

There will only be a run on the banks if enough people are panicked into withdrawing money. Lets try to not be that stupid.

Ah yes, the confidence thing. If you think things are grand then they really are.
As was said before, the banks have everybody's money as long as they don't all want it back.

Scofflaw · 23-05-2012 7:47am

Dan_Solo wrote: »

Ah yes, the confidence thing. If you think things are grand then they really are.
As was said before, the banks have everybody's money as long as they don't all want it back.

That is true at all times, which is why confidence is important. If people only withdraw what they usually use, the bank has enough money to cover it - if they all withdraw it at once from exactly the same bank, the bank fails.

Similarly, a piece of paper or a lump of metal are only worth something as long as people are confident they are.

cordially,
Scofflaw

Nothingbetter2d · 23-05-2012 11:19am

RoverZT wrote: »

What would you transfer it to?

US dollars?

Sterling?

If you had 40k euro in your bank account what would someone do with it?

swiss francs,

canadian dollars (has a stable banking system)

currencies i wouldn't change to

us dollar - if the euro goes it will pull the usa into recession again

uk pound - again if the euro goes the uk too will be fecked.

dsmythy · 23-05-2012 11:38am

Damn, I have no plan to get my money out quickly. Luckily I've only got about a fiver in there to be worried about.

What would happen to people receiving and spending weekly cash say, if the punt were to be reintroduced and rapidly devalue? Would their weekly earnings suddenly collapse or would it be irrelevant as the cost of goods and debts would collapse at the same time?

kermit_the_dog · 23-05-2012 12:21pm

Nothingbetter2d wrote: »

swiss francs,

canadian dollars (has a stable banking system)

currencies i wouldn't change to

us dollar - if the euro goes it will pull the usa into recession again

uk pound - again if the euro goes the uk too will be fecked.

if the euro were to crash and i dont think it will for a second , the american dollar would be the safest place to be , the american dollar is the ultimate safe haven , why else would it have soared in value this past nine months , its economy is nothing special , the euro was buying 1.45 dollars last august , today it will buy you 1.27 dollars

Unrealistic · 23-05-2012 2:00pm

dsmythy wrote: »

Damn, I have no plan to get my money out quickly. Luckily I've only got about a fiver in there to be worried about.

What would happen to people receiving and spending weekly cash say, if the punt were to be reintroduced and rapidly devalue? Would their weekly earnings suddenly collapse or would it be irrelevant as the cost of goods and debts would collapse at the same time?

Their weekly earnings would collapse in real terms. The cost of goods that have any imported element (and that includes local agricultural produce that uses imported energy and fertiliser) would rise. What would happen to debts (whether or not they would be redenominated to the new currency or not) would need to be mandated by the government of the day.

Farmer Pudsey · 23-05-2012 10:47pm

Unrealistic wrote: »

Their weekly earnings would collapse in real terms. The cost of goods that have any imported element (and that includes local agricultural produce that uses imported energy and fertiliser) would rise. What would happen to debts (whether or not they would be redenominated to the new currency or not) would need to be mandated by the government of the day.

Even though agriculture uses imported oil and fertlizer we export 90% of what we produce in agriculture also the SFP is denominated in euro's so it would be worth more in real terms. Our tourism industry would get the compedtive edge it needs if we got a 20% devaluation compared to France, Germany, Great Britian the US and the Scandanavian countries. Irish people would have no choice but to holiday at home for 2-3 years. Fishing would also get a boost as well as Fish farming.

And maybe like they did from 1970-1985 well off people from GB and central europe would be back buying houses in the West and South of Ireland again,

Scofflaw · 24-05-2012 4:15pm

Farmer Pudsey wrote: »

Even though agriculture uses imported oil and fertlizer we export 90% of what we produce in agriculture also the SFP is denominated in euro's so it would be worth more in real terms.

Doesn't that make it nearly pointless? The net value added in Irish agriculture is not large, I think - see here, for example.

Farmer Pudsey wrote: »

Our tourism industry would get the compedtive edge it needs if we got a 20% devaluation compared to France, Germany, Great Britian the US and the Scandanavian countries. Irish people would have no choice but to holiday at home for 2-3 years. Fishing would also get a boost as well as Fish farming.

All of which doesn't change the fact that people's material quality of life would fall dramatically as the cost of anything imported (and that's a lot) rose.

Farmer Pudsey wrote: »

And maybe like they did from 1970-1985 well off people from GB and central europe would be back buying houses in the West and South of Ireland again,

That would be a good thing because...? I'm not saying it's a bad thing, it just seems an odd thing to cite as a positive.

cordially,
Scofflaw

Unrealistic · 24-05-2012 8:13pm

Farmer Pudsey wrote: »

Even though agriculture uses imported oil and fertlizer we export 90% of what we produce in agriculture also the SFP is denominated in euro's so it would be worth more in real terms.

Rather optimistic to assume the SFP would still exist, especially a Euro denominated one, in a scenario where Ireland had to exit the Euro.

Amberman · 25-05-2012 11:03am

Scofflaw wrote: »

All of which doesn't change the fact that people's material quality of life would fall dramatically as the cost of anything imported (and that's a lot) rose.

This is true. But your statement is incomplete. You neglect to mention the time horizon back to growth which is usually quite short.

You can have a long, drawn out gradual decline, or a very short sharp declice like the UK when they exited EMU, Iceland when they "defaulted" or ...you can be Greece.

Its a choice.

Amberman · 25-05-2012 1:40pm

Ireland has second largest google search volume for the term "bank run" in the world.

http://www.zerohedge.com/news/google-shows-why-status-quo-powers-be-should-be-scared-very-scared

Seems the cat is now out of the bag.

_AVALANCHE_ · 25-05-2012 1:52pm

Amberman wrote: »

Ireland has second largest google search volume for the term "bank run" in the world.

http://www.zerohedge.com/news/google-shows-why-status-quo-powers-be-should-be-scared-very-scared

Seems the cat is now out of the bag.

singapore, united states, canada, india, Australia,

You could shorten that graph right up and just put in a pic of the world.

Pointless, no?

Amberman · 25-05-2012 2:19pm

Sure...move along, nothing to see here.

Run on Banks, when's it going to happen here?

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