Bank financial panic coming. Are we seeing signs of A possible bank financial panic coming soon. Let’s be clear about what happens during the coming financial bank panic .. and what it means to you and your money.  Does a possible bank financial panic means a disruption in our banking system and if so how does that work?

During a bank financial panic, one part of the financial system cannot be shut down in isolation. A contagion beginning in one part spreads to the entire system. That’s because the minute one part shuts down, everybody runs for a different part in a quest to get their money back.

It speaks to the best description I’ve ever heard of a the coming financial panic: everybody wants their money back at once.

During the coming financial panic, the process soon grows out of control. Everyone sells stocks, sells bonds, sells real estate, sells everything. They all want their money back at once. Of course, people think they can get their money back. But they can’t. They’ll discover that what they actually have are stocks, bonds, and real estate, and money markets, so called, and they can’t get their money back.

Bank financial panic coming — no more money?

If we do see a bank financial panic coming soon, then what happens to your money.  Well, let’s Imagine the money market funds are shut down. No one can get their money out of them. Then everyone runs to the banks to get their money. But the banks are closed. Then, everyone tries to sell their stocks, but the stock market’s shut down. And so on.

In other words, the minute one part of the system shuts, all of the demand for liquidity moves to another part. But it dries up. And that part of the system has to be shut that down, too. Soon the entire system is shut down because it’s all so deeply interconnected.

The serious point is that pressure just moves from one part of the system to another. You can’t just shut down one part. You have to shut down the entire system. And that’s what could happen during a bank financial panic.

For what it’s worth, the safest place to put your money during the upcoming financial panic is in the bank, up to the insured limit. I believe the federal government will have to honor FDIC insurance, which guarantees money up to $250,000 per account.

If you have more than that amount, you can divide your money between two banks. If you’re a lone individual with, say $500,000, you can put $250,000 in one bank and $250,000. Not in a different branch of the same bank, but a different bank altogether. Both accounts will be insured to the full amount. That is what happened in Cyprus. The government honored its insurance to the stated amount. But everything over the insured amount was confiscated and turned into bank equity.

A bailout is when the government uses the printing press and taxpayer money to save a financial institution. All the people who have transactions with this financial institution, whether it’s depositors, bondholders, etc., are preserved. They all keep their money.

You can learn more about the upcoming financial panic by going here.

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