Your Money in the Bank

[hobie]

One of the members in a forum put up a interesting post...

'Every night banks have to check their cash reserves and if they do not have enough to cover their expenses they are not allowed to open the next day..... to insure everyone is ok there are banks that loan banks enough daily loans that they pay back after opening to keep things going on....

Thursday night at midnight the Federal Reserve loaned the banks that make these loans 500 billion dollars.... literally nothing of this magnitude or even close to it has ever happened in the long history of fractional banking.... its a serious sign that something very serious is wrong...

Like toilet paper, cash will not be available to everyone should we all panic and want money at the same time.... worse than that the banks really don't have to give you the money in your account if they don't have it go give..... the money you have in your accounts is a debt the bank has..... but the actual money there belongs to them according to the law.

You are right... there is a lot more wrong than a virus here and the virus may well push the other problems over the cliff.' https://www.thebalance.com/reserve-requirement-3305883

I just finished putting up solar panels for the house with some money I received. I now understand why God led me to do that and not store it in the bank.

 

[tango]

This is always a problem with banks - they only keep so much physical cash on hand. It makes sense - the more physical cash they have the more security they need and it's pretty well known that not every single person will want to withdraw all their cash at once. It's not even a problem related to fractiona reserve banking - if a few very wealthy people were to attempt to withdraw their entire balances in cash any branch would run out of physical cash. It doesn't mean the bank is broken, merely that they don't have physical cash.

It would be akin to your credit card company approaching you and demandng you pay your balance, right now, in cash.

If the bank doesn't have enough funds (i.e. cash on hand combined with deposits elesewhere) to pay everyone if they all decided to close their accounts at once, that's a different story.

It sounds like you're describing the Fed putting money into the repo market and that's been going on for a while now. It's concerning - any time the Fed has to intervene to stop things going south it suggests something is wrong - but I wouldn't be worried in the way you are describing.

 

[hobie]

This is always a problem with banks - they only keep so much physical cash on hand. It makes sense - the more physical cash they have the more security they need and it's pretty well known that not every single person will want to withdraw all their cash at once. It's not even a problem related to fractiona reserve banking - if a few very wealthy people were to attempt to withdraw their entire balances in cash any branch would run out of physical cash. It doesn't mean the bank is broken, merely that they don't have physical cash.

It would be akin to your credit card company approaching you and demandng you pay your balance, right now, in cash.

If the bank doesn't have enough funds (i.e. cash on hand combined with deposits elesewhere) to pay everyone if they all decided to close their accounts at once, that's a different story.

It sounds like you're describing the Fed putting money into the repo market and that's been going on for a while now. It's concerning - any time the Fed has to intervene to stop things going south it suggests something is wrong - but I wouldn't be worried in the way you are describing.

What are the chances that controls come into place like what happened when the Greek government was forced to close Greek banks for almost 20 days, and put limits on cash withdrawals to like $50 dollars.

 

[tango]

What are the chances that controls come into place like what happened when the Greek government was forced to close Greek banks for almost 20 days, and put limits on cash withdrawals to like $50 dollars.

No way of knowing, but a pretty sure way of making it happen would be for everyone to rush to the bank and withdraw lots of cash.

 

[hobie]

Here is the latest this morning...
"Dow Jones in Freefall as Wall Street Begs for Stock Market Shutdown
Asset managers reportedly urged the Bank of England to shut the stock market to stop panic selling. Will the U.S. follow suit?"...Dow Jones in Freefall as Wall Street Begs for Stock Market Shutdown

 

[tango]

Sooner or later the market will find a new level. At some point bargain hunters will rush in and stem the losses. If the market is closed all that happens is that finding the new level is delayed. It might take out some of the whipsaw action where markets are down 10% one day and up 9% the next day but that sort of thing doesn't affect the long term investor. The short term speculator doesn't get sympathy if they are just trying to turn a fast buck and get burned, it goes with the territory.

If people are determined to sell and the market is closed today what stops them selling tomorrow when the market reopens? The only thing that would stop them is if they lose the desire to sell, so unless something changes to make them lose that desire closing the market just delays the inevitable.