Approximately a month ago my favorite economic website, www.zerohedge.com had a story about one of Russia’s major banks, ‘My Bank’ who made the decision to ban customers from withdrawing cash for one week. Similarly, last month in Britain, HSBC implemented a policy restricting their customers from withdrawing their own money. The policy, which was put into place with no notice to customers, required that customers provide the bank a sufficient reason to withdraw their own cash. In other words, the bank would decide if your reason for attempting to withdraw your own money was sufficient. In a first hand account reported by the BBC, Stephen Cotton recounted how he went to his bank, and HSBC branch to withdraw £7,000 from his instant access savings account. The bank declined to fulfill his request to withdraw his own money.
“When we presented them with the withdrawal slip, they declined to give us the money because we could not provide them with a satisfactory explanation for what the money was for. They wanted a letter from the person involved.”
These stories struck a chord with me, not just because Phoenix Republic is about an economic contagion spiraling into an all-out collapse, but because the frequency that these stories are appearing in the news cycle. In the fictional world of my novel, these types of stories are exactly the sorts of occurrence that preceded a complete economic collapse in the west.
It seems that the credit markets are under some strain these days. Even at the national level it isn’t just Greece having issues. China is backing off on buying US treasuries. In 2013, China dumped the second largest amount of its US currency ever, selling off $48 billion dollars of debt. Japan is doing the same. Some smaller countries are buying some of it for now, but how long that will continue is uncertain.
Today I see that bank runs are again in the news, this time in Thailand. Thailand’s Government Savings Bank admitted that customers have withdrawn approximately one billion dollars in deposits. My point is that the world is a really connected place, especially from a financial perspective. Americans love to think that we are immune to the sort of financial ruin that have historically affected other nations, but do you really think that these are all isolated incidents? Maybe they are, but all that I know is numerous news accounts related to bank runs and liquidity issues faced by individuals, companies and even by nations are in the news. Just last month the American President talked about a brand new program, “myRA” in his State of the Union Address. He claims that he is trying to help hard-working Americans with a secure way to invest their hard-earned income with the government for some so-call guaranteed return when they retire.
My question is do you seriously trust the same people that brought you Obama-Care and Social Security with your even more of your money?
I can’t tell you when, and I am no financial guru. All I can offer for your consideration is what used to be known as common sense. It is clear to anyone with the IQ of a toaster that America in general, and the US government in particular, have not created some vast new source of wealth, over the last few decades, but we have created vast amounts of debt… 17 trillion dollars worth of debt, with much, much more on the way. For this reason the government must find ways to finance it’s spending in a world where absolutely nobody wants to take the risk. China is no longer keen on new debt, Japan too is backing away, & the Fed, which holds like 4 trillion dollars of US debt, is finding it difficult to continue with financing US debt with fictional dollars created out of thin air.
What is a desperate credit card junkie to do? The answer will inevitability be to take out a new credit card from anyone gullible enough to loan them the money. If that doesn’t work they may have to just steal it by forcing people to loan them the money.
For those of you who read Phoenix Republic, you’ve seen this sort of thing before.
Watch your wallets, friends. I think we may be beginning the ride of a lifetime.
Additional Resources:
http://www.zerohedge.com/news/2014-02-18/bank-runs-spread-thailand
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