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An Inconvenient Life is the Key to Ensuring Your Financial Life

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This past week, in this article, I wrote that the reason for simultaneous withdrawals from a small percentage of bank customers, perhaps as small as 5% to 10%, is irrelevant and that only the resultant outcome is significant. That such an action would still cause a big bank collapse the same as Silicon Valley Bank or Signature Bank. I also made the point clear that it doesn’t matter that such a situation has not happened with a big bank we all know during our lifetime, because the risk exists and is very real. And just because it has not happened does not mean it will not or cannot. Thus, such a scenario must be considered. A “bank run” in reality is simply triggered by a loss of confidence, plain and simple, and not by too many clients trying to withdraw too much of their deposits at the same time because bank clients never try to withdraw most of their deposits from their bank if they do not lose confidence in it. If Citibank’s customers lose confidence en masse, there is absolutely nothing Citibank can do to prevent a bank run, such is the false nature of our banking system. Of course the visible symptoms of a bank run are bank clients forming long lines outside of banks waiting to withdraw their deposits. However, the cause is always a loss of confidence.

Furthermore, even though I’ve spent a lot of time in the past week to explain why the US Federal Reserve is bailing out all the G-SIBs (Global Systemically Important Banks) right now, even if their greatly expanded bailout facilities

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John Kim