Broad Oak: your emotional support animal

Monday, February 09, 2009

September 15, 2008: the secret bank run and corralito

According to Paul Kedrosky (htp: Tim Iacono), Hank Paulson and Ben Bernanke scared the wits out of Congress with references to a potential $5.5 trillion electronic cash withdrawal from the US banking system, which would have led immediately to economic and political Armageddon. Electronic money accounts were closed down to stop the flight and collapse.

I said a month later that Paulson looked like a bully. But when Congress threw out the first bailout plan, he had also looked scared-angry, turning his head this way and that, like a bull throwing off dogs.

Perhaps the scare story was true. Perhaps not. Shame it took the ex-head of Goldman to drive the Bill through. I assume that rescuing the banks also rescued much of his personal $500 million wealth.

It's time for us to leave off discussing the affairs of the Gods, and return to our own interests. We ordinary mortals don't have the luxury of that kind of money transaction facility. If the system had gone down, presumably it would have taken our little all with it. And is anyone so brave as to say that it's been fixed?

Be prepared; don't be panicked (as it seems Congress was), but take what sensible precautions you can.

7 comments:

Wolfie said...

Its a deal with the devil but the US has been sleeping with Satan for years now so its not like some virgin on a first date now.

Anonymous said...

Such sensible precautions as, oh I don't know, how about taking all our money out of the banks, turning it into Kruger-Rands, and hiding them under the bed?

Anything less seems unlikely to be effective, no?

Sackerson said...

Hi, Wolfie. All those many-many billions spent on a nuclear deterrent and yet how little attention paid to a system that could bring down civilisation in an afternoon. Will we learn and apply any lessons?

Anon - gold isn't the only thing with intrinsic value. Food, medicine...

Anonymous said...

...guns and ammo. Oh, and with the latter you can protect what you have of the other things with intrinsic value.

cash back real estate said...

This is unsettling, hope we can turn the corner on this.

cash back real estate said...

He said Thursday, wouldn't that be September 11th?

Sackerson said...

We're always looking for patterns. I just think we need to install/check the financial eqivalent of the fire alarm and fire axe.