MoMajic Mo Money
I was speaking with Mo the other day regarding the state of the economy and he told me a ton of things but one really stuck out: “If I was anyone in this country right now I’d pull no less than 20% of my money out of my bank in cash and find a nice place to hide it.” Turns out he actually did that.
Let’s examine the nature of that statement. At the tail end of last week Washington Mutual (WaMu for short), the largest commercial bank in the USA went under. If not for JPMorgan-Chase (who by the way is near the top of the evil list to me, right next to Hitler, Satan and Ho-Hos) buying up the company at a nice cheap rate the company and all her little friends would be totally dead. Today we find out another commercial bank is about to topple as well - Wachovia. So by the “HOLY CRAP BANKS ARE FAILING” score - Mo is totally correct.
Economists would argue that his suggestion is a bad one as there exists this concept that banks fold when all their customers actuall want their money back. The process is called a “Run on the Bank” as all the customers are running to the doors to see if they can get any of their cash back. If you have seen “It’s a Beautiful Life” then you have witnessed this happen in a film - and even in a film the entire action wasn’t pretty with people throwing stuff, yelling epitaphs etc.
So what happens when there is a run on a bank for roughly 20% of all the cash in the bank? About the same thing. As I indicated in a previous post about Banking, banks are strenuosly strapped for their actual value - meaning they have lent out loads of cash and expect people to not actually ask for any of it back, at least not in droves. You may have encountered a bank not wanting to give you your money back before if you went in and ask for a large sum of money - yeah I don’t have any either but I have heard rumor that people do try to do this and are often rebuked.
Given that GlazedNConfused always thinks I write rubbish with no point, here is the point - crap I don’t have one. I am all for pulling my money out of the bank, in fact my wife and I are discussing doing so, but I also realize that if everyone does this then, well, we may actually help close more banks.
What to do? What to do?
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Yep, that’s how shit usually hits the fan in these situations. However, I think the Iraq War has warmed us up to for this newest “crisis”, and everyone is skeptical of this new potential “meltdown”. By the way Thraxxus, my new policy is to ignore your misguided generalizations on how I view your posts.
Why do you hate me so!?!?!
Wait.. that was a generalization wasn’t it?