6 months in 2009 we have had 42 banks closed.
By Daniel at 25 June, 2009, 2:21 am
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The top-performing letter that predicted the Crash of 2008 now predicts a confiscatory Franklin D. Roosevelt-style “bank holiday.” But it’s surprisingly sanguine about stocks — in the (very) short term. TRUE
An extended banking holiday would freeze all digital money. Perhaps many businesses would continue to operate for a few days on the faith that the banks would re-open soon. But smart people & smart businesses will freeze all physical cash expenditures (if they even have physical cash to spend) and usage of in-stock materials & labor as soon as a banking holiday is declared. I’m assuming that credit card companies will also freeze all credit accounts as their bank accounts needed for purchase transactions will be frozen too.
Anyway, within several days or so I think all commerce will come to a grinding halt as shelves, fuel pumps, etc. will go empty and not be restocked, & company paychecks will no longer be issued. Some will probably issue vouchers or other IOU’s.
It would seem that physical currency during such a crisis would appreciate in value as there are a whole lot less physical dollars floating around than digital dollars that would be locked down in banks. It would be an instant and massive dollar deflation. You might even be able to auction off your physical dollars to merchants & tradesmen who are desperate for food, fuel, and other expendable necessities.
That is, unless the .gov screws all the currency up by implementing some draconian scheme that completely trashes the currency during the crisis. Or, who outlaws the currency in favor of a new currency, etc.
No matter what happens, a street-level barter system can flourish in such a crisis. “I’ll give you a dozen eggs for that gallon of fuel…”
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