The case for an Irish corralito

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feargach

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In many statements we keep hearing that a deposit guarantee was the only reasonable thing that could have been done.

Unfortunately, reality begs to differ. You can't really guarantee deposit if there is a run of people, as few as 6 per cent, trying to withdraw their money. Anyone who's seen It's a wonderful life should know that.

Every penny you place in a bank is only safe in the absence of a large-scale cluster of withdrawals. Every penny you have ever placed in a bank is at risk, and always has been, and always will be, until the end of fractional-reserve banking.

So with that in mind, time to look at Argentina again. They managed things by putting a formal block on withdrawals above a certain small amount. They did this because despite all their attempts, people kept on pulling money out.

Could you survive if you and everybody else were limited to EUR200 a month?
 


SideysGhost

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Didn't you start this very thread about a year ago, and got roundly laughed at that time too (and as usual)?

Yer a special one feargach.

Edit: ah yes, here we go. Only 5 months ago, seems much longer....
 

feargach

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Well, yes, they did laugh because they think that their savings can survive a bank run.

How do you save your deposits in a bank run situation, where people are free to withdraw all they have?

You can try to fight your way to the head of the queue, goo luck with that. But after the first 4percent of depositors have withdrawn their cash, there's nothing left, the bank is kaput.

So if you weren't among that lucky one in twenty, you have nothing but your regrets.

My net worth isn't in banks, so I don't care, but if you're laughing, even if you're dependent on the bank's staying solvent, it can only be from stupidity and failure to understand what happens to a bank when a lot of people try to withdraw money in the same week.
 

feargach

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For everyone else, you need to look up bank runs.

Say a bank has EUR1m in deposits.

What happens, do you reckon, if a bunch of depositors all try to withdraw a total of 60,000 on one day?

Well if you're ignorant like Sidewinder, you probably think the answer is "well, they go to the bank, receive their 60K, and everything continues as normal".

Unfortunately that isn't how it works. What happens is the bank collapses. The other depositors, who thought they had 940,000 have, in fact, nothing at all.

If you recall the Frank Capra movie I mentioned above, that is why the Jimmy Stewart character was trying to persuade everybody to withdraw less money. He wasn't doing it for the exercise.
 

feargach

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Oh, and before anyone says anything stupid, the Jimmy Stewart character was based on thousands of real-life US bank managers all over the USA. That part of the movie was actually somewhat realistic. The bit about the angels, I can't vouch for.
 

SideysGhost

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Don't you ever get tired of yelling and bleating and churning out these hysterical posts that nobody can be bothered to read any more?
 

feargach

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Don't you ever get tired of stalking men you've never met online?

Instead of pestering me, why don't you hire yourself a rent boy with your prudently-amassed savings and work out your tensions with him?

If you pay him enough, he'll pretend not to be grossed out.
 

SideysGhost

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:lol:

Because by me merely making a few mildly disparaging comments you consistently manage to make a holy show of yourself and reveal what a nasty little turd you actually are. I consider it a public service, lest any newbies be sucked in to engaging with your innumerate hysteria.

You can thank me some day, if the men in white coats ever get round to signing your release forms.
 

feargach

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The "Stalking as a Public service" defence. Now I've heard it all. What a joke. As for the turd reference, I really didn't want to know that that's the kind of stuff you fantasize about.

Now, have you any argument against the topic?

Have you any means of ensuring that your deposits are magically safe in the event of a bank run?

<Mod> This topic is being discussed here </Mod>
 
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