Does anyone feel we could see a run on the bank, as what happened in England last September with Northern Rock? I don't see this as a joke. I think it could happen very easily and in a matter of months.
My Question: If the public starts to lose confidence in their high street bank, does outstanding credit (such as on credit cards) have to be paid back immediately to an insolvent bank? (I don't recall seeing this as a condition on the back of my credit card statement)
Last September Northern Rock was bailed out by the Bank of England after 1 billion (5%) of bank deposits was withdrawn in a day.
About one year ago, when I used to ask people around me if a run on the bank could happen, (similar to times of the 1930's Great Depression) I was laughed at. Now, unfortunately, it seems to be more of a reality. Today, the Disney ABC news station (Most mainstream) has the following headline: http://abcnews.go.com/Business/Economy/story?id=4544872&page=1
Are We Heading Into a Depression?
'Automatic' Economic Recovery Isn't Certain, Says Economist Robert Parks
Here are more in depth articles showing how serious our situation has gotten:
http://www.latimes.com/news/printedition/front/la-fi-depression20mar20,1,1097237.story
A new Great Depression? It's different this time
And, as in the Great Depression, the financial system is in disarray. It was symbolized back then by the failure of thousands of banks, mostly small, local outfits -- 2,300 in 1931 alone. The parallel today is the crippling of one time giants such as Bear Stearns Cos., Countrywide Financial Corp. and Ameriquest Mortgage Co. Many economists believe that the U.S. will find it almost impossible to avert a recession, if one has not started already. Housing remains mired in a deep slump,with some analysts projecting that Southern California home values could plunge 40% from their peaks last year.
http://www.nytimes.com/2008/04/01/business/01regulate.html?ref=business
WASHINGTON — As Treasury Secretary Henry M. Paulson Jr. laid out an ambitious plan to overhaul the regulatory apparatus that oversees the nation’s financial system on Monday, lawmakers and lobbyists from an array of industries opposed to the plan predicted that most of it would be dead on arrival.
http://www.latimes.com/news/opinion/sunday/commentary/la-oe-schiff31mar31,0,1983693.story?
The economic crisis enters a new and more dangerous phase daily, and Americans of all levels of economic sophistication are scrambling to make sense of the myriad remedies and proposals that are springing from Washington.
The government is worried for good reason. The value of the trillions of dollars of mortgage-backed bonds that course through the American financial system is a function of homeowners' capacity -- and willingness -- to repay their mortgages. To an extent not widely understood, this is all tied to home prices.
http://www.nytimes.com/2008/03/31/business/31credit-1.html
But what investors fear is that financial companies’ pain will not end with the troubled mortgages, which by some estimates have already resulted in more than $200 billion of losses. Car loans, home equity loans, credit card debt, small business loans — any of that might run into trouble as the economy stalls.
“A year ago, we were told the problems were in subprime, ” said David Rosenberg, chief North American economist at Merrill Lynch, “and what is becoming increasingly apparent is that the participation in the credit bubble was far greater than just that.”
http://www.washingtonpost.com/wp-dyn/content/article/2008/03/17/AR2008031702150.htmlhttp://www.nytimes.com/2008/03/30/business/30regulate.html?em&ex=1207022400&en=fdd8c4dcdee4a685&ei=5087%0A
This is no April Fools day, except maybe an accumulation of many foolish days of everyone trying to join a world of unregulated unprecedented, unsustainable and irrational bubbles!
(Just my intuition)
Happy April Fools Day!
Don't forget to laugh about it, this is only money after all!
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