he world is on now on the brink of a global credit crisis that could be far worse than the tumultuous events of 2008. The ongoing sovereign debt crisis in the southern reaches of the Eurozone indicate that bank runs in the region will continue, and that more bank closure “holidays” will be declared. Under a bank holiday, virtually all deposits could be frozen and irredeemable for days, weeks, or even months. The key question is: Will this crisis spread to the rest of Europe and then even to the United States? I urge SurvivalBlog readers–particularly those in Europe–to be proactive, to stay “ahead of the power curve.” While the Generally Dumb Public (GDP) wakes up some morning to hear news of a bank holiday, you will have long hence prepared yourself.
Digits Lost in the Ether–Redeemable Mañana?
Most people don’t realize that printed U.S. currency and minted coins amount to less than $800 billion, worldwide. That is just a small portion of the aggregate Money Zero Maturity (MZM) money supply that now exceeds $7 Trillion. So what is in your bank account is just electronic money, and there is absolutely no way that even a fraction of depositors could get physical cash to redeem the digits in their accounts. If there is a bank holiday declared, there will undoubtedly be severe restrictions on cash withdrawals when banks re-open. Given the precedent of the limits on withdrawals of a few institutions during the Savings and Loan crisis of the 1980s and 1990s, I predict that withdrawal restrictions could go on for many months.
Here are 20 Reasons why America’s next bank holiday will be a nightmare:
- A bank holiday will create a virtual blackout of information on not just checking and saving accounts, but also automated mortgage payments, CDs, and more. Our presently quite transparent banking system will suddenly become opaque. Your bank balance will become invisible. Your handy-dandy online banking web page will be replaced by a “Service Temporarily Unavailable” notice. The willingness to accept checks will evaporate in less than a day. The FUD factor (Fear, Uncertainty and Doubt) will be overwhelming.
- Most businesses will no longer honor personal checks, corporate checks, or bank money orders. Showing a merchant your most recent bank statement isn’t likely to sway him. Again, the FUD factor will rule.
- All checks in the U.S. are cleared through the automated clearinghouse (ACH)network. Most of this network is inside of banking system firewalls. Many Federal, State, and local tax payments are also handled through ACH. (A similar network exists for European banks–the Pan-European Automated Clearing House (PE-ACH), under the Single Euro Payments Area (SEPA) system).
- Credit cards might not be accepted. The FUD factor will dictate that anything even peripherally related to the banking system will be suspect. (Even though the credit card companies have their own credit clearing mechanisms that are only attached to the banking milieu.)
- Except for a few grandfathered recipients, Social Security payments are now made exclusively via bank direct deposit.