I have been saying that the Global Financial Meltdown was just around the corner for years now! It finally looks like we are on the verge of this happening this year. I would not be surprised if this happens in October 2012! This is a case of history repeating itself! “Those who cannot remember the past are condemned to repeat it.” George Santayana
A bank run occurs when a large number of bank customers withdraw their deposits because they believe the bank might fail. As more people withdraw their deposits, the likelihood of default increases, and this encourages further withdrawals. This can destabilize the bank to the point where it faces bankruptcy.
The stock market crash of October 1929 left the American public highly nervous and …at the time, making it the largest single bank failure in American history.
In December 1931, New York’s Bank of the United States collapsed. The bank had more than $200 million in deposits at the time, making it the largest single bank failure in American history.
The bank runs of 1930 were followed by similar banking panics in the spring and fall of 1931 and the fall of 1932. In some instances, bank runs were started simply by rumors of a bank’s inability or unwillingness to pay out funds. In December 1930, the New York Times reported that a small merchant in the Bronx went to a branch of the Bank of the United States and asked to sell his stock in the institution. When told the stock was a good investment and advised not to sell, he left the bank and began spreading rumors that the bank had refused to sell his stock. Within hours, a crowd had gathered outside the bank, and that afternoon between 2,500 and 3,500 depositors withdrew a total of $2 million in funds.
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The Global Financial Meltdown has dramatically worsened as Corporations and China Jump Aboard The “Institutional” Global Bank Run As Banks Fall Apart As Their Seams.
Earlier today the world saw a global financial meltdown as investors dumped everything from stocks to commodities and literally everything in between.
Major Stock Market Indexes, Commodities, Currencies And Everything In Between Is Being Dumped By Investors Across The Globe In The Midst Of A Global Financial Meltdown.
The financial markets across the globe are facing one of the most massive sell-offs in recent memory.
The Dow Jones Industrial average has sold off over 467 points today. When and when you add that on top of 284 point drop following yesterday’s crash FED’s statement, which announced operation ‘twist’ and warned of significant downside risk and strains in global financial markets, we have a 751 point drop in the DOW since 2:45 PM est yesterday, which is the largest 2 day slump since 2008.
There are an endless parade of economic statistics many of which are the worse since the Great Depression and World War 2 era. We have also seen 111 of the s&P 500 hit fresh 52 week lows, a drop in global currencies – beside the dollar, oil dropping into the high $70 per barrel range and gold plummeting over 5% to trade in the low $1,700 per ounce range.
Business Week points out the massive crash in U.S. stocks immediately below while CNBC points out further below that this in fact a global meltdown – investors are dumping everything.
While today’s sell off was monumental and in fact is on course for the 3rd worse week on Wall Street ever, the sell-off was on the heels of the FED’s economic outlook. Today’s Global Financial Meltdown is about to become much worse as a slew of news reports out today reveal the run on the European banks has spread to include corporations and institutions pulling their money out of banks and China finally arriving at the party.
As a backdrop, the IMF warned the entire global financial systems is more vulnerable to collapse than at any other time since the 2008 financial crisis. The alarm is being sounded with the stern warning the European debt crisis could trigger the complete collapse of the entire global financial system at any minute. On the other hand, the alternative media and independent economists warn we are in fact in of a great depression style collapse. The only difference is this time around we would be facing a global depression. But as the ship their countrymen sail on continues to sink, bureaucrats continueto play politics and put their partisan interests above the interest of their constituents.
The run on European banks has already began with from the customers pulling their money from banks some time ago. While the corporate media kept the run on the Greece banks on the hush the media blackout didn’t stop the run nor did it stop the run from spreading to other nations. Simply put, the public is learning they can’t trust their governments and they can’t trust the media. Indeed the withdrawal of deposits from the banks in Greece has quietly spread across the other European nations only to spread into some of the supposedly most stable banks in the Euro-zone, the French banks.
Now we have learned the run on the banks that was originally limited to customers has now spread to include corporate and institutional clients withdrawing their money from the banks. First, we caught wind of the rumor that Siemens pulled its cash from one of the French banks. Then came theconfirmation came that Siemens pulled $500 million Euros from Societe Generale. Siemens of course is a huge conglomerate. For such a huge corporation to lose trust in one of the supposedly most stable of the French banks is clearly a very significant development. To be clear, the ramification have simply rocked the markets and the many more corporations soon will follow. In fact, some corporations and nations have followed their lead.
Consider the breaking news that The Bank of China has stopped doing business with four major European banks. To be exact thy have stopped trading swaps and foreign exchange forwards with the Societe Gnerale, BNP Paribas, Credit Agricole and the Swiss banking giant UBS.
Speaking of BNP Paribas, Reggie Middleton – who long predicted the collapse of Lehman’s and Bear Stearns far ahead of anyone else because of their shady banking practices – has been warning for months BNP Paribas is ripe for a Lehman style collapse. Reggie argues that BNP Paribas is engaging in the same practices and fraud that caused Lehman’s and Bear Stearn’s to collapse.
While on the subject of China, we learn today they are not immune to the bank run either. China Securities Journal reveals that 420 billion yuan have been pulled out of the big four state-owned Chinese bank during the 15 days of September. Even bank employees are pulling their deposits from the banks as it is estimated that three trillion yuan has been diverted to illegal money lenders which pay interest rates 10 times higher than the one-year Chinese bank deposit rate.
Today we also learn that Insurer Lloyd’s of London confirmed it’s withdrawing deposits from all of the European banks for fear they may collapse. The rationalization for their withdrawal is quite simple – if world is worried about the European governments themselves collapsing then on must assume the sovereign debt collapse will also cause the banks themselves to collapse.
Still that message doesn’t seem to be reaching the retail banking client and the corporate owned media is to blame for repeatedly assuring the public there bank deposits are safe because the banks are insured by their respective European government.
When we see corporations not buying the propaganda being pushed by the media and instead withdrawing their deposits that should be a clear sign to the retail client it is time to withdraw their deposits. Unfortunately, too many people believe their governments and the media would never lie to them so some of them will unfortunately need to learn the hard way.
However, anyone keeping up with the details of latest financial news that doesn’t quite make the headlines knows that banks across the world have been hit with a parade of credit rating cuts warning of their risk of collapse. Those same cuts have been coupled with recent credit rating cuts of the sovereign of nations themselves, most notably the credit downgrades of the United States and Italy.
Adding to the bleak reality a global financial collapse may be imminent is the fact that 9 Banks failed last years EU stress test and another 16 barely passed the test. Yet instead of being proactive and shoring up capital to assure the survival of financial turmoil, we have seen many banks continue to conduct business in absolute denial they were at risk. In ignorance of reality the banks have sat around for over a year knowing they are at risk of collapse while doing little to nothing the improve their situation. Why should they act? They know when shit hits the fan taxpayers will be bent over the barrel and be forced to give the banks billions in bailouts from which the executives will collect lavish bonuses.
Now we have warnings from top economists and the FED that there is significant downside risk and strains in the global financial system that threatens the entire system. The is coupled with warnings from the IMF and EU leaders to immediately recapitalize the banks or face collapse. The calls for recapitalization have persisted for weeks with no action taken to stave off the collapse. Meanwhile, the consequences of not acting immediately continue to become more severe by the day.
The EU credit markets have frozen up and the situation is now beyond the point of dire. The question is which bank will be the first to collapse.
While all eyes seem to be focused on the Euro banks across the pond, banks back in the US are not immune from the crisis and neither are the Chinese banks.
In fact, Bank of America has been hammered by the alternative media as needing capitalization but BAC has denied those allegations and the corporate media has dismissed the alternative media reports as comments from fringe blogs. Until today that is.
Pimco’s Mohamed El-Erian raised the alarm today about the health of French banks and went on to point out there is an institutional run on thosebanks.
CNBC, went on to use the metrics El-Erain used to measure the health of the French banks to measure the health of US banks and found US banks aren’t nearly as healthy as Wall Street would like to believe.