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Here's How To Trigger A Bank Run

Tyler Durden's picture




 

Submitted by Tim Price via SovereignMan.com,

On August 6, 1979, Paul Volcker as the new Chairman of the Federal Reserve was determined to eliminate the terribly high inflation that had taken hold of the system. And he succeeded.

The Fed’s primary interest rate stood at 11% when Volcker entered office. By June 1981 he had hiked them all the way to 20%.

Corporate America was not impressed. Indebted farmers blockaded his building.

But the pain was relatively short-lived. And as Volcker’s victory over inflation became more apparent, markets applauded. As bond prices started to rise, stock prices joined them.

Both credit and equity markets began a multi-decade bull run.

The trend in interest rates for years has been in the other direction; rates in the US are now effectively zero, though Janet Yellen is widely expected to announce a modest tightening next month.

Over here in Europe, zero has not marked the lower bound for rates. The European Central Bank’s deposit rate stands at negative 0.2%. And they’re widely expected to cut the deposit rate even further.

These policies have consequences. One of those consequences is that government bond yields throughout Europe have gone negative.

Government bond yields with durations up to two years are now negative in Switzerland. As well as Germany. Finland. The Netherlands. Austria. Belgium. Denmark. France. Ireland. Sweden. Italy. Spain.

Regardless of how heavily and unsustainably indebted those governments are, bond investors in all of those countries are still buying bonds even though they are now guaranteed to lose money.

But if this weren’t odd enough, the weirdness has spread from bonds to cash.

From January, depositors in Alternative Bank Schweiz in Switzerland will earn negative 0.125% on bank deposits. Depositors with over 100,000 Swiss francs will earn negative 0.75%.

If you wanted to trigger a bank run, this is certainly how you might go about it.

First, drive interest rates down to zero. Then cut rates even more. At the same time, start talking about banning cash altogether.

And if you’re in the euro zone, make sure you squander seven years doing precisely nothing to restructure your banking system after its near-death experience of 2008.

What should the rational investor do in an environment of ongoing financial repression?

To know the answer, we need to know whether central banks will be successful in their increasingly quixotic efforts.

We think the ultimate outcome will be an inflationary mess on a scale perhaps unprecedented in financial history, but not, perhaps, before a deflationary crisis happens first.

Either way, western market government bonds no longer offer any margin of safety, only the prospect of guaranteed loss. They have once again become certificates of confiscation.

For us, the logical solution is to focus only on the highest quality businesses trading at the lowest possible multiples – which invalidates most western markets, notably those of the US, from consideration.

And notwithstanding the price action of the last four years, we continue to see merit in precious metals.

Think of gold, for example, not as a commodity (given that gold is rarely, if ever, consumed), but as a special type of bond.

In the words of Charlie Morris, formerly of HSBC Global Asset Management, think of gold as an irredeemable bond that pays no interest, but has no credit risk, where the issuer is God or the universe itself.

 

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Mon, 11/30/2015 - 19:10 | 6858644 SILVERGEDDON
SILVERGEDDON's picture

The only bond I trust - is Gold Bond foot powder.

Because it is useful.

And, it always holds it's value.

Mon, 11/30/2015 - 19:16 | 6858692 TeamDepends
TeamDepends's picture

"Whadayamean insolvent?" "One days cash." "A banking holiday?"

Mon, 11/30/2015 - 19:49 | 6858799 coinhead
coinhead's picture

Bank runs caused by Billion-dollar Bitcoins!

Mon, 11/30/2015 - 23:07 | 6859489 stacking12321
stacking12321's picture

when bitcoin is outlawed, only outlaws will have bitcoin!

Tue, 12/01/2015 - 02:03 | 6859839 turtle
turtle's picture

A perpetual zero coupon bond with zero default risk and zero currency risk.

Tue, 12/01/2015 - 03:43 | 6859923 Macchendra
Macchendra's picture

The endgame is worldwide currency collapse.

Tue, 12/01/2015 - 08:48 | 6860146 kralizec
kralizec's picture

And that won't happen until the blinders come off and fear is defeated.

Mon, 11/30/2015 - 19:22 | 6858716 HedgeAccordingly
HedgeAccordingly's picture

Fed to limit bailouts... this could amplify a run... 

Federal Reserve Curtails Bailout Power
Mon, 11/30/2015 - 20:11 | 6858873 philosophers bone
philosophers bone's picture

Interesting. The article doesn't say that the Fed won't do bailouts, just not specific ones. This could provide them with an excuse to give free money to every financial institution, whether or not it needs a bailout, since it won't be allowed to discriminate.

Also coming down the pike for mid-2016 are the freshly minted "bank bail-in laws". Now there's the real reason to start your own personal bank run......

Mon, 11/30/2015 - 20:46 | 6859007 Abitdodgie
Abitdodgie's picture

There will be no back run people are to stupid to see what is going on and most people have a nervous breakdown if they don't have a bank account so no matter what happens they will keep their money in the bank.

Mon, 11/30/2015 - 22:14 | 6859315 willwork4food
willwork4food's picture

Got to upvote you on that. A lot of transactions are through debit cards, smart phones, pay pal, credit cards. Very little is done by cash. Most have to have balances in their banking checking account to pay bills online. They have us by the balls.

Mon, 11/30/2015 - 19:45 | 6858781 coinhead
coinhead's picture

You probably do have stank feet (like most other cavemen).

Mon, 11/30/2015 - 19:08 | 6858645 SILVERGEDDON
SILVERGEDDON's picture

MOTHERFUCKERS GONNA BUZZ LIGHTYEAR US !

How, you ask ?

So fucking obvious.

They're gonna keep printing.

" To Infinity, And Beyond ! "

Mon, 11/30/2015 - 19:08 | 6858658 123dobryden
123dobryden's picture

and on top of this start a war... just to make sure :)

Mon, 11/30/2015 - 20:30 | 6858949 Reichstag Fire Dept.
Reichstag Fire Dept.'s picture

Is there some sort of looming financial crisis or something?

Should I be worried?

Is now the time to buy Apple?

Mon, 11/30/2015 - 20:59 | 6859056 Crocodile
Crocodile's picture

do not worry, saying, 'What shall we eat?' or 'What shall we drink?' or 'What shall we wear?'

For after all these things the Gentiles seek. For your heavenly Father knows that you need all these things. But seek first the kingdom of God and His righteousness, AND all these things shall be added to you. Therefore (summarizing what ws just said) do not worry about tomorrow, for tomorrow will worry about its own things. Sufficient for the day is its own trouble.
Hope and a future with great purpose all nailed to one nasty cross; open to everyone.
Tue, 12/01/2015 - 09:16 | 6860241 ThanksChump
ThanksChump's picture

Marginalyzer. Going all schizophrenic in an economics article... What are you? NSA? DIS? FBI?

 

This article must be close to truth.

Mon, 11/30/2015 - 19:18 | 6858697 tarabel
tarabel's picture

 

 

Why would governments ever voluntarily abandon a system that allows them to spend money that idiots hand them for free?

Here, take my money. Promise you'll give 93% of it back in ten years.

I mean, WTF, who can't make money on a deal like that?

Answer: GOVERNMENTS

But, boy, are they gonna give it the old college try.

Mon, 11/30/2015 - 19:18 | 6858702 Vlad the Inhaler
Vlad the Inhaler's picture

The issuer is God, but so is the redeemer unfortunately.    

Mon, 11/30/2015 - 21:25 | 6859145 JLM
JLM's picture

Hey, you get to walk on streets of gold in heaven if you need an extra kicker.

Mon, 11/30/2015 - 19:22 | 6858717 Danno Anderson
Danno Anderson's picture

We are about to have a massive debt induced deflationary period because of all the margin calls on the mountain of debt that can no longer be serviced. 

  Look at the price of oil and gold decline. 

Factor in the increased purchasing power of a currency during the upcoming deflation and voila that negative interest rate becomes has postive outcome.

 

Mon, 11/30/2015 - 20:46 | 6859004 Demdere
Demdere's picture

https://thinkpatriot.wordpress.com/2015/10/27/ignoring-the-absolutely-in...

I cannot tell whether you believe that or are being ironic, but no, the important margin call is not stock market.

And stop using 'deflation' for the sake of our language's continued usefulness. 'Deflation' should logically be the reverse of 'inflation'.  It's current misuse has no explanatory value whatsoever, it means 'down side of the business cycle when there are many bad debts, banks can't lend even if they have cash because of borrowers not being creditworthy and creditworthy not wanting to borrow.

We did not need a new word for that, especially not one that had a Keynesian 'solution' associated with it.

This is what is important, btw.  The crash will be converted to some social discord so our Israeli-neocons excape the noose.

https://thinkpatriot.wordpress.com/2015/11/30/the-next-false-flag/

Mon, 11/30/2015 - 19:25 | 6858728 scintillator9
scintillator9's picture

Here are the results of the Nov. 30 Fed meeting about emergency bank lending:

http://www.foxbusiness.com/economy-policy/2015/11/30/fed-to-take-up-emer...

The new rules would allow for emergency lending only in the event of “broad-based” systemic issues affecting a number of banks rather than tailoring emergency loans to the individual needs of a single failing bank.

 

Under the new rules, at least five banks would have to be impacted and in need of emergency loans for the Fed to step in.

Mon, 11/30/2015 - 19:40 | 6858760 seek
seek's picture

So they'll let four Lehmans happen before stepping in? (I don't think so...)

And that was an emergency meetinging?

Sounds like someone big asked for a second helping of free Fed money and got told no.

Which means the poker game goes on another round and that bank raises and calls the Fed's bluff.

 

Mon, 11/30/2015 - 19:49 | 6858796 scintillator9
Mon, 11/30/2015 - 19:55 | 6858819 pitz
pitz's picture

The Douche Bank strikes again?

Mon, 11/30/2015 - 20:31 | 6858956 Crocodile
Crocodile's picture

It could be a smaller bank that causes the domino effect...but it is coming..just when?

Mon, 11/30/2015 - 20:12 | 6858890 Augustus
Augustus's picture

Just remember that the US taxpayer made a very nice profit on the TARP and other bailout assets.

Mon, 11/30/2015 - 20:49 | 6859022 Vint Slugs
Vint Slugs's picture

You forgot the /s tag, right??

Mon, 11/30/2015 - 21:01 | 6859065 swmnguy
swmnguy's picture

Yes, of course, that was the "limited hangout" we were allowed to see.

How much has the US taxpayer made on the real bailout operations?  ZIRP for 8 years?  So-called "Quantitative Easing" for nearly that long, at over $1 Trillion per year?  The ongoing and nearly complete transfer of mortgages to the taxpayer via the Treasury, at full face value?  How about the student loan bubble, also fully backed by the taxpayer, also in a bubble not unrelated to or dissimilar to the housing finance bubble?  How about the phenomenon of stock buybacks, funded by miniscule-interest lending made possible by the FED?

That's where the real money was, and is.  Just as Foreign Aid and Welfare are pennies to the $1 Trillion per year (in current dollars) spent on the Pentagon and off-budget war spending, going back to about 1965, which is why we have a National Debt in the first place.

Mon, 11/30/2015 - 19:55 | 6858817 pitz
pitz's picture

You do realize that most banks in the United States are structured as multiple legal entities, right?  The 'failure' of Lehman Brothers was actually the correlated failure of a significant number of legal "banks" under the Lehman banner.

So 5 banks failing, sheesh, that's nothing. 

 

 

 

Mon, 11/30/2015 - 20:07 | 6858863 Uchtdorf
Uchtdorf's picture

In that case, I'll volunteer the Bank of Uchtdorf now to be one of the 5. I could use me a good ol' bailout.  

Mon, 11/30/2015 - 20:30 | 6858945 Crocodile
Crocodile's picture

That just means ALL the banks are intertwined and all are "Systematically Too Important"; that is what they have been working on since 2008...making them all "Systematically Too Important".  Another ominous sign in which we have been forewarned.

Mon, 11/30/2015 - 19:44 | 6858779 22winmag
22winmag's picture
The more you tighten your grip, the more star systems will slip through your fingers.
Mon, 11/30/2015 - 19:51 | 6858801 A Lunatic
A Lunatic's picture

Looks like the Choom Wagon is running on empty......

Mon, 11/30/2015 - 19:53 | 6858812 Niall Of The Ni...
Niall Of The Nine Hostages's picture

Volcker didn't whip inflation. All he succeeded in doing was proving that allowing interest rates to reach the levels they would attain naturally in the absence of fractional-reserve banking---government approved counterfeiting by banks---would quickly cause another Great Depression, because few businesses would be left with the wherewithal to keep the lights on after servicing debt at market interest rates on top of their tax bill---if they could cover the taxes and usury at all.

In the meantime, the monetarist experiment caused a financial crisis that left the elites two choices---declaring a debt jubilee and acquiescing to the reduction of the financial industry and government to sizes compatible with the free market economy of a free people, or ordering Volcker to pull the plug on monetarism.

No prizes for guessing which they chose.

What brought inflation down was the outsourcing revolution that allowed corporations to move factories to China rather than give Americans a cost-of-living allowance. 

Mon, 11/30/2015 - 20:00 | 6858825 pitz
pitz's picture

Chartered banks don't counterfeit.  They borrow every dime they lend out.  Its the central bank that emits notes backed and redeemable into nothing that's the counterfeiter. 

Volcker was given way too much credit for the deflationary trends that were being unleashed on the US economy in the 1970s and early 1980s.  Namely, a large number of new nuclear power generating plants coming on-line, the adoption of fuel injection in cars, and Saudi Arabia opening the taps to flood the world market with oil.  A lot of people hold Volcker out as a genius, but he mostly got lucky.

 

Mon, 11/30/2015 - 20:52 | 6859030 Demdere
Demdere's picture

When you cease the use of 'deflation' in polite economic discussions, I will think you have some clue.

That word has prevented understanding for 20 or so years now, long after Keynesian thought was dead and buried for the 2nd or 3rd time, depending on who is counting.

You are apparently incapable of grokking the difference between normal progress in increasing wealth and Volker's actions, both just happening to be denominated in dollars of varying value as measured by wealth.

Mon, 11/30/2015 - 22:15 | 6859314 pitz
pitz's picture

I make no apologies for stating the fact that capacity additions to an economy (ie: nuclear power plants coming on-line after their massive up-front investments, and an abundance of cheap Mideast oil) are deflationary.   As is the reduction in demand (ie: lower oil demand caused by the de-industrialization of the USA, adoption of technology to improve fuel efficiency).

Volcker is hailed as some sort of hero, but really, he just happened to show up at the peak of the exhaustion of a trend.  The decision to develop nuclear power in response to the energy crisis, the technology for fuel injection, mideast foreign policy was entirely outside his scope as a central bank president, and no late 1970s Fed policy drove the long-term investments required to make those things happen. 

Tue, 12/01/2015 - 08:36 | 6860123 herkomilchen
herkomilchen's picture

Chartered banks don't counterfeit.

Depends what your definition of counterfeit is.

Mon, 11/30/2015 - 20:00 | 6858813 Kirk2NCC1701
Kirk2NCC1701's picture

TPTB will 'trigger' the pre-planned Collapse/Reset with a bank-run that they will initiate, but blame on someone else.  

Then, after the Big Crisis and ensuing Bank Holiday, they will step forward to... "Save the day" and come out as heroes, rather than as the Treasonous Organized Criminals and Socoipaths that they are.  This is all SOP for them.

The ONLY question is: "Will We The Sheeple" be dumb and malleable enough again, to let them get away with it?  Smart betting money says "Yes".  But since nothing's certain, and they anticipate some level of "controllable blowback", they are hedging their bets with the Police-Surveillance State, backed by the DOD.  

I'm planning and hedging accordingly, with a Plan A in the US, and a Plan B abroad: "Have papers, global skills, PM, BTC, Laptop & HD backups, G&A, and friends. Will travel**."

** Be it from Kamchatka to Patagonia.  I.e. almost anywhere not dominated by Muslims or Africans.  Just can't cope with their worldviews or culture, and refuse to adapt to them. 

Mon, 11/30/2015 - 20:27 | 6858917 Crocodile
Crocodile's picture

Yes we will be dumb enough because history has already been written in stone; so to speak.

 

Also, note that 50% of the earths population WILL BE destroyed in an upcoming 7 year period; also in stone..so to speak. 

 

Can anyone see this coming?  Of course you can because it is becoming obvious that people that are desperate and have mega weapons can pretty much accomplish that and we see we are headed in such a direction.  They will divide us more and more and let us kill of each other for a while.

 

Not to mention the correlation between debt, debt default and population, population decrease.

Mon, 11/30/2015 - 22:18 | 6859333 Charming Anarchist
Charming Anarchist's picture

Meh.  1st world problems.

Mon, 11/30/2015 - 20:46 | 6859009 Angus McHugepenis
Angus McHugepenis's picture

My Dear Kirk,

Banks… They are the reason I have not had a bank account since around the year 2002. Whether it’s extra transaction fees or other forms of robbery, they get nothing from me.

Everything I own is either not registered, or it is registered under a business name from somebody I trust. But who can you trust you ask?? Certainly not the banks who will do everything to rape and rob you of your livelihood along with their psycho pals in government… a few extra fees at a time, along with putting all your private info on their computer systems for the PTB to hack or subpoena anytime the want to fuck with you. And don’t even think about taking out $5k in your own cash without alarm bells going off.

It is possible to live well (not rich for sure) by circumventing the banking industry and their counterfeit currencies backed by nothing, but it does require skills and self-reliance, along with pure malice towards the fraudulent money changers who produce NOTHING of value.

Would you buy anything, or do business with, somebody who just picked your pocket, raped your goat, and raided your fridge for a snack afterwards? (rhetorical question)

Corporations (paper humans) are “people” too, but law enforcement needs a physical human to prosecute or go after. Paper just gets lost or burned, which is why John Corzine and others are still running free. Their “paper” people can’t be jailed.

Mon, 11/30/2015 - 22:02 | 6859276 Kirk2NCC1701
Kirk2NCC1701's picture

Which is why I have a saying:  "Give unto Caesar, that which is Caesar's, and unto Kirk which is Kirk's"

Sound familiar?  ;-)

 

As long as I have kids in Middle and High school, and a mainstream Am. wife, I have to "play their game" -- by their rules and whatever loopholes they allow.  

Cash, PM, BTC, and foreign RE are adequate loopholes/vehicles for my budget and tastes.  These won't make me rich (in spite of shills who claim otherwise), but their sum total will hopefully preserve my net worth better than any one of them individually.  That's the theory and my 'working assumption'.

Mon, 11/30/2015 - 22:16 | 6859323 Angus McHugepenis
Angus McHugepenis's picture

Kirk, we are all different and should adjust accordingly to our own needs. I have several friends that are in similar situations as you (wife, kids, etc) and they are ALL wanting to get out of the Matrix, but can't. We are the ones waking up, not their parents before them.

All I can say is start thinking about how you can still live with a certain degree of comfort while divesting yourself of bankster controlled currencies and other PTB trappings. I stopped a long time ago, never regretted it. Life is simpler and easier without being hog-tied by the Matrix.

Cheers!

Mon, 11/30/2015 - 23:17 | 6859523 stacking12321
stacking12321's picture

kirk you're a hypocrite, you talk of not wanting to be around africans but we know you are boinking uhura in the storage closet

Mon, 11/30/2015 - 20:08 | 6858851 Publicus_Reanimated
Publicus_Reanimated's picture

"Either way, western market government bonds no longer offer any margin of safety, only the prospect of guaranteed loss. They have once again become certificates of confiscation."

No, no, no, no, no.  They are secure instruments upon which the holders and their creditors and their creditors' creditors ad infinitum may build a chain of hypothecation.  It is their security that is their value, not the return.  Governments returning zero or below are simply skimming off a portion of the purchasers' profit before they earn it.

 

Note I am not saying this is a good thing.  

Mon, 11/30/2015 - 20:42 | 6858991 samsara
samsara's picture

Yes , basically.

If you have a few billion dollars or what ever, you have it somewhere 'safe', So you put it in someone's 'safe'. And pay him to keep it 'safe'.

Most average joes with $3,439 to their name in cash, would say fuck you, give me my money, I have my own 'safe', and I have a 45 to keep that 'safe'.

A few million average joes would be a serious drain in physical bills.

Many ATMs already run out of cash before the next restocking. And you know most banks only have a few thousand in a branch.

Mon, 11/30/2015 - 20:15 | 6858901 Noplebian
Noplebian's picture

The music is about to stop and there are no chairs!

WW3 is now unavoidable......

http://beforeitsnews.com/conspiracy-theories/2015/11/us-gives-their-prox...

Mon, 11/30/2015 - 20:18 | 6858913 Thorny Xi
Thorny Xi's picture

Yes. They will be that dumb.

Mon, 11/30/2015 - 20:47 | 6859011 AgeOfJefferson
AgeOfJefferson's picture

Here's the real way to cause the run on the banks & the Fed:

Inform and Empower the average citizen.

Restoring the Lost Republic

https://mega.nz/#F!J5EEXCDK!_LD4hgaBI3aUqqJc2Ng14A

Spread the word and let's get his done once and for all!

Mon, 11/30/2015 - 21:02 | 6859068 Crocodile
Crocodile's picture

Too late; it is a moral crisis more than a physical crisis.  Men love the darkness because their thoughts & deeds are evil and the Light exposes the darkest of deeds.  People don't like the truth; rather live the lie.

Mon, 11/30/2015 - 21:05 | 6859076 Dragon HAwk
Dragon HAwk's picture

Damn i thought this was going to be one of those Anarchist Cookbook primers, where they tell you to run around town screaming the banks are going to Fail..  Start rumors the banks are in Trouble.. advise people to pull their money because the banks are going to Devalue and confiscate..  Silly Me...

 

BTW where is the Coat and Tie version of Occupy Wall Street.

Mon, 11/30/2015 - 21:56 | 6859131 honestann
honestann's picture

The good:  When the music stops, everyone has a chair.
The bad:  The chairs are made of wimpy paper.
The ugly:  Consequences of human predator actions.

-----

And the fabulous:  Those who moved all their savings into physical gold and silver (hidden and secured by themselves) won't even be in the room when the music stops, and will FINALLY get what they deserve (solid value) while those who hold so-called paper assets sit down on their paper chairs... then fall on their butts on the cold, hard floor of destitution.

Honest, prudent, rational folks who kept their savings in PMs have been trashed the past 4~5 years by predators-DBA-centralbank manipulators.  Hopefully they can hold on a bit longer, and not bail out just before they are vindicated in spades.

Mon, 11/30/2015 - 22:02 | 6859278 WillyGroper
WillyGroper's picture

@HA,

Stumbled on to this nugget of history Sunday.

@ about 21:00 in, I'd like your take.  It's an angle I've not thought of.

If the bastids say trade is in salt...well?

https://www.youtube.com/watch?v=PvnNYA7TYr8

Mon, 11/30/2015 - 22:03 | 6859280 83_vf_1100_c
83_vf_1100_c's picture

Just twatter all your Facetwat friends and have them do the same and do a flash mob on the banks. Everyone shows up at an appointed time to withdraw $1k. Don't forget to like me on Facetwat me if you like my idea. /s

Mon, 11/30/2015 - 22:08 | 6859285 Himself
Himself's picture

First quarter of the year I was yanking amounts like $6000.00 in cash out of my credit union to build my business/getting ready for the recent boating accident and just within the past 3 weeks I heard a teller inform a customer that they could only withdraw up to $1000.00. That caught my ear!

Tue, 12/01/2015 - 04:46 | 6859960 3Wishes
3Wishes's picture

But one point not to be missed, We all know what these Bankers are upto, So we will hunt them and their supporters down and Kill every last one of them THIS Time.

Do NOT follow this link or you will be banned from the site!