A Run On The Global Banking System - How Close Are We?

ZeroHedge cited from Gonzalo Lira

Nine weeks after its bankruptcy, the general public still hasn’t quite realized the implications of the MF Global scandal.

My own sense is, this is the first tremor of the earthquake that’s coming to the global financial system. And how the central banks and financial regulators treated the “Systemically Important Financial Institutions” that had exposure to MF Global—to the detriment of the ordinary, blameless customer who got royally ripped off in its bankruptcy—is both the template of how the next financial crisis will be handled, and an accelerator that will make the next crisis happen that much sooner.

Next section discusses what happened to MF Global and how poorly the bankruptcy was managed, including customer money being stolen in the process.

Now, what does this mean?

It means that nobody’s money is safe. It means that regulators care more about protecting the so-called “Systemically Important Financial Institutions” than about protecting Ordinary Joe investors.It means that, when crunchtime comes, central banks and government regulators will allow SIFI’s to get better, and let the Ordinary Joes get #ed.

So far, so evil—but here comes the really troubling part: It is an open secret that there are more paper-assets than there are actual assets. The markets are essentially playing musical chairs—and praying that the music never stops. Because if it ever does—that is, if there is ever a panic, where everyone decides that they want their actual asset instead of just a slip of paper—the system would crash.

How does a bank run get started?

Answer: When enough participants no longer trust the system. It is the classic definition of a tipping point. It’s not that all of the participants lose faith in the system or institution. It’s not even when most of the participants lose faith: Rather, it’s when a mere some of the participants decide they no longer trust the system that a run is triggered.

And though this is completely subjective on my part—backed by no statistics except scattered anecdotal evidence—but it seems to me that MF Global has shoved us a lot closer to this theoretical run on the system.

As I write this, a lot of investors whom I know personally—who are sophisticated, wealthy, and not at all the paranoid type—are quietly pulling their money out of all brokerage firms, all banks, all equity firms. They are quietly trading out of their paper assets and going into the actual, physical asset.

The integrity of the systems has been completely shattered. If in the face of one medium-sized brokerage firm going under, the regulators will openly allow ordinary people to be ripped off for the sake of protecting the so-called “Systemically Important Financial Institutions”—in this case JPMorgan—what will happen if there is a system-wide run? What if two or three MF Globals happen simultaneously?

The consequences of such a run, given what happened with the bankruptcy of MF Global, paints a very ominous picture of what could happen, as two tribes (banksters and customers) go to war against each other - one to save its “Systemically Important Financial Institution”, the other seeking to get their money back.

And there will be such a run on the system: It’s only a matter of time. In fact, the handling of the MF Global affair has sped up the timeframe for this run on the system, because the forward-edge players—such as Demeester, myself, and my other acquaintances who understand the implications of the bankruptcy—realize that the regulators will side with the banksters, and not the ordinary investors: So we are preparing accordingly.

Please refer to links for the full article.

The money is safe.

The US is under Martial Law. Congress gave the PResident authority to kill Americans without a trial. The National Defense Bill of 2012 that just passed....Congress gave the PResident authority to detain any American indefinintely without a trial.

You've got bigger things to worry about now that America no longer has a Constitution.

US Dept of Education bought a bunch of 14" barreled shotguns....they must be planning on collecting the $1 Trillion in outstanding student loans.

The Military transferred some of its machine guns to civilian police departments.......hmmmmm...why?

You need to seriously think about this. What would be the point of a run on the banks when the fiat currency has no actual value? During the depression, our currency had precious metal backing it's value. It was worth having then. Now there is no real difference between toilet paper and our fiat currency. There is ONLY the BELIEF that it still has some value. That belief is eroding quickly. When the time comes where the people would normally try to pull a run on the banks, it will be way too late. It could go a couple different ways. When the system finally hits rock bottom, they either declare the "dollar" invalid and issue the amero(or other replacement currency equally valueless), or they institute a cashless economy doing away with cash altogether. Get your money now and get the things you need to have. Our purchasing power is already hugely diminished, soon it will be non-existent.