Bill sez: China & Japan are buying... What about USA/Y2K goldbugs?
OPEN QUOTES
7% PUTTING THEIR MONEY UNDER THE MATTRESS (*source at bottom of post)
You might think that 7% is a small number. Unfortunately, it's a huge
number. As mentioned here many times before, if 7% of the American
people pull out their money and put it under the mattress (or bury it,
or whatever), this collapses the entire banking system. Why? Because
there isn't enough cash in the system.
If you'd like to see the numbers yourself, here's our classic banking chart:
y2ksupply.com
You'll see that banks hold about one dollar and seventeen cents for every $100 they owe customers in deposits. That is not a healthy ratio, especially when you get poll results saying 7% are going to pull out everything. The ZD poll revealed that 20% would pull out all their cash. To organizations like the Federal Reserve, these numbers are more than just alarming: they are life-threatening. While the reseve ratios of our banking system are not publicized, they are well-known by the Fed, and they realize the significance of what could happen here.
Fortunately, in order to avoid the worst-case scenario, the Fed is hard at work printing additional cash and readying an extra $150
billion in their sub-vaults. Throughout 1999, they will be able to
inject an additional $200 billion in cash into the banks.
Will this be enough? Maybe.
But we're talking about $3.7 TRILLION in deposits. You can do the math here: how much cash is needed if people take out 10% of their money? That would be $370 billion in cash, right? How much does the Fed have ready? $200 billion. How much do the banks hold right now? $44 billion. That's $244 billion available, but $370
billion demanded. Oops.
Some people say, "No problem. My account is FDIC insured." Now you
can get a whopping one dollar and twenty five cents for every hundred
dollars the bank owes you. The FDIC strives to maintain a 1.25% ratio
of insurance reserves to covered deposits. And that's not in cash:
that's mostly stored as electronic records (funny money). Want to look
at the numbers yourself? Check out:
y2ksupply.com
This chart shows how the FDIC is "promising" to cover $2 trillion in
deposits with a mere $29 billion in reserves. Here's what that's like:
suppose you loaned me $100, and I then went out and spent it. You'd be
worried about whether I could pay it back, right? So to calm your
worries, I set up an insurance fund to cover the $100 I owe you. How
much money do I put in the insurance fund? One dollar and twenty five
cents. There, do you feel better now?
Of course not. The numbers don't add up. But why do millions of
American depositors "feel better" when they think their deposits are
protected by the FDIC? The answer, of course, is because they don't
know the real numbers.
END QUOTE
*REF:
A just-released CIO KnowPulse(TM) poll offers yet another glimpse of
what high-tech executives are thinking about Y2K (on top of the ZD /
Harris poll released last week). In case you thought the results of
the ZD poll were just a fluke, here come the numbers from CIO Magazine. The poll was taken of 330 high-tech executives, many of whom are actually responsible for solving Y2K problems at their own companies. |
