No weapons, no blood
December 2, 2010 4:41 AM Subscribe
Will December 7, 2010 be remembered as the day the banking system collapsed? Probably not, but if it does, you'll have to praise or blame revolutionary (football, movie, kung fu master, deodorant model, philosopher) icon Eric Cantona, whose Youtube mumblings are currently inspiring a European-wide bank protest.
If this doesn't work, maybe we could try ninja kicking the trader scum?
posted by londonmark at 4:51 AM on December 2, 2010 [1 favorite]
posted by londonmark at 4:51 AM on December 2, 2010 [1 favorite]
the only french athlete whose recommendations i would follow is Michel Platini .
posted by 3mendo at 4:59 AM on December 2, 2010
posted by 3mendo at 4:59 AM on December 2, 2010
Awesome. So Catona takes his $13,000,000 out in cash, and I take my $135 out. When the bank is then unable to honor my next paycheck or social welfare payment because they no longer have Eric's 13 mil or anyone else's, what happens?
1. Bank run
2. ????????
3. Profit!
posted by DarlingBri at 5:11 AM on December 2, 2010
1. Bank run
2. ????????
3. Profit!
posted by DarlingBri at 5:11 AM on December 2, 2010
It's great theater, though.
posted by mediareport at 5:12 AM on December 2, 2010
posted by mediareport at 5:12 AM on December 2, 2010
Here's their website (they've got bankrun2010.com but it just loads the mac.com personal page in a frame so links won't work)
Can anyone lend some informed comment on the actual reality of the US Federal Reserve system - I feel like I can't wrap my head around how the modern financial system actually works, and the only ones out there explaining it in relatively understandable terms are conspiracy theorists
posted by crayz at 5:13 AM on December 2, 2010 [1 favorite]
Can anyone lend some informed comment on the actual reality of the US Federal Reserve system - I feel like I can't wrap my head around how the modern financial system actually works, and the only ones out there explaining it in relatively understandable terms are conspiracy theorists
posted by crayz at 5:13 AM on December 2, 2010 [1 favorite]
the only french athlete whose recommendations i would follow is Michel Platini .
He is not a French athlete. He is Cantona.
"when the seagulls follow a trawler, it's because they think sardines will be thrown into the sea"
/leaves press conference. (from the 'philosopher' link).
posted by Infinite Jest at 5:20 AM on December 2, 2010 [2 favorites]
He is not a French athlete. He is Cantona.
"when the seagulls follow a trawler, it's because they think sardines will be thrown into the sea"
/leaves press conference. (from the 'philosopher' link).
posted by Infinite Jest at 5:20 AM on December 2, 2010 [2 favorites]
Don't look now, but there's something funny going on over there at the bank, George.
posted by pracowity at 5:39 AM on December 2, 2010 [3 favorites]
posted by pracowity at 5:39 AM on December 2, 2010 [3 favorites]
Can anyone lend some informed comment on the actual reality of the US Federal Reserve system - I feel like I can't wrap my head around how the modern financial system actually works, and the only ones out there explaining it in relatively understandable terms are conspiracy theorists
Money is what's left over when people have an uneven exchange of goods. It's a promise to even it up at some later date. People used to carry around gold to make things even, because it was rare, fungible and convenient. Now people use dollars because federal law requires that people take it in payment for debts -- that is, if you agree to pay someone $100 at a later date, they need to accept $100 US dollars to pay off the debt and can't demand gold or yen. As long as you have something that everyone excepts as a token of value, it doesn't matter whether it's gold or dollars or cowrie shells.
Banks basically operate by converting dollars to notes on a ledger. So instead of dollars, you have a note saying the bank owes you a certain amount of money once you deposit your check. Your bank then loans out your money at interest, while paying you less interest on the money you deposited. Because people don't actively need most of the money that's 'in the bank' at a given time, the bank is able to loan out more money than they actually have in reserve, which 'creates' money. This is called fractional reserve banking. This is nothing new and has been going on for centuries. Even when there was a gold standard, banks were doing fractional reserve banking.
The federal reserve is basically banker to the banks. Since they're so huge, they essentially control the US money supply, because they can control how much money that the entire banking system ultimately creates.
posted by empath at 5:42 AM on December 2, 2010 [16 favorites]
Money is what's left over when people have an uneven exchange of goods. It's a promise to even it up at some later date. People used to carry around gold to make things even, because it was rare, fungible and convenient. Now people use dollars because federal law requires that people take it in payment for debts -- that is, if you agree to pay someone $100 at a later date, they need to accept $100 US dollars to pay off the debt and can't demand gold or yen. As long as you have something that everyone excepts as a token of value, it doesn't matter whether it's gold or dollars or cowrie shells.
Banks basically operate by converting dollars to notes on a ledger. So instead of dollars, you have a note saying the bank owes you a certain amount of money once you deposit your check. Your bank then loans out your money at interest, while paying you less interest on the money you deposited. Because people don't actively need most of the money that's 'in the bank' at a given time, the bank is able to loan out more money than they actually have in reserve, which 'creates' money. This is called fractional reserve banking. This is nothing new and has been going on for centuries. Even when there was a gold standard, banks were doing fractional reserve banking.
The federal reserve is basically banker to the banks. Since they're so huge, they essentially control the US money supply, because they can control how much money that the entire banking system ultimately creates.
posted by empath at 5:42 AM on December 2, 2010 [16 favorites]
"He's French, he's flash, he's fookin' Leslie Ashe taking out his cash..."
posted by Abiezer at 5:44 AM on December 2, 2010 [3 favorites]
posted by Abiezer at 5:44 AM on December 2, 2010 [3 favorites]
Paul Grignon's 47-minute animated presentation of "Money as Debt" tells in very simple graphic terms what money is and how it is created.
posted by mahershalal at 5:50 AM on December 2, 2010 [1 favorite]
posted by mahershalal at 5:50 AM on December 2, 2010 [1 favorite]
France has a deposit insurance agency, the Fonds de Garantie des Dépôts, which should theoretically prevent bank runs by reassuring depositors that even in the event of a bank failure, their deposits would be secured. Looking at the English version of their website, it looks as if their coverage limit is €70,000 (far less than the FDIC's $250,000 limit, but still higher than most of Europe).
However, what is interesting is that the FGD looks to be a private entity, and not a government agency, which raises the question of whether the French government would provide financial backing if the deposit insurance fund is completely drained by the failure of many banks. My guess is that they would have no choice but to provide those funds, so the only thing this bank protest will cause, if it succeeds, is the expenditure of more public funds to bail out banks - presumably not something Cantona supports.
posted by thewittyname at 5:58 AM on December 2, 2010
However, what is interesting is that the FGD looks to be a private entity, and not a government agency, which raises the question of whether the French government would provide financial backing if the deposit insurance fund is completely drained by the failure of many banks. My guess is that they would have no choice but to provide those funds, so the only thing this bank protest will cause, if it succeeds, is the expenditure of more public funds to bail out banks - presumably not something Cantona supports.
posted by thewittyname at 5:58 AM on December 2, 2010
Also, check out the Khan Academy's finance videos.
posted by empath at 5:59 AM on December 2, 2010 [3 favorites]
posted by empath at 5:59 AM on December 2, 2010 [3 favorites]
Cool! All the world's cash out of the banks and at home. What could possibly go wrong?
Nothing at all. Now let me just put my savings into this burlap sack conveniently marked with a dollar sign and OH NO THE BEAGLE BOYS WHO COULD HAVE FORSEEN THIS.
posted by griphus at 6:24 AM on December 2, 2010 [4 favorites]
Nothing at all. Now let me just put my savings into this burlap sack conveniently marked with a dollar sign and OH NO THE BEAGLE BOYS WHO COULD HAVE FORSEEN THIS.
posted by griphus at 6:24 AM on December 2, 2010 [4 favorites]
I understand that Diego Maradona is publishing an economics book he has called The Invisible Hand of God.
posted by pracowity at 6:42 AM on December 2, 2010 [8 favorites]
posted by pracowity at 6:42 AM on December 2, 2010 [8 favorites]
Can anyone lend some informed comment on the actual reality of the US Federal Reserve system - I feel like I can't wrap my head around how the modern financial system actually works, and the only ones out there explaining it in relatively understandable terms are conspiracy theorists
First, look up fractional reserve banking. The reserve requirement that they speak of is controlled by the Fed. The Fed says "you need to have a 10% reserve, and keep 5% with us, and 5% in your vault."
When it looks like the economy is in need of cheaper money, the fed can say "alright, your reserve is only 8% now. Go in peace." Now they have 2% of their deposits suddenly extra that they can loan out to people and businesses who will use that money to buy, consume and most importantly, grow. When things look too hot, the fed says "alright, knock it off for a while, start building back up to 10%."
Meanwhile, the FDIC, a government sponsored private company, sells insurance to the banks. They pay a premium, on behalf of the depositors, so that any depositor will get their $250,000 back. This is key. The reserve banking system only works when people trust it. When the public trusts that they won't lose their money, they won't create runs on banks, and fewer banks go under. The FDIC guarantees this.
At the same time, the fed does a couple of other more mysterious things. For example, if a bank is a little short in their nightly reserves, they can borrow money from another bank, or the Fed themselves, to make up for the shortfall. (This isn't necessarily a bad thing, as long as it is a temporary cash flow thing. The next night they might have extra.) The rate at which the Fed loans this money out is one of the key interest rates. They raise the rate, and more money gets pulled out of the economy. Lower it and money goes out.
Then they sell bonds. They sell bonds all the time, for different rates. They sell them at auction- "We need to borrow $40,000,000 today, for a period of 10 years, and we will start at 1.4% per year interest. Who's got any for us?" If nobody takes that price, they raise the price. This is how they control the interest rates- buying a bond from the Fed is the lowest paying, but safest, investment there is. So any other investment's price is going to work off of that price. They change their target price based on what they want to do with the economy- lower it to encourage, raise it to put the brakes on.
And then they also buy and sell bonds that are already out there. If the rate is at 1.4% now, and there are a bunch of bonds out there that they are paying 4% on, they would like to have them back. So they tell the holders "tellya what, we will give you face value plus 2% right now to sell that bad boy back to us." Because they want to quit paying out that big percentage rate, and they also want that investor to use that money for something that will cause growth, rather than just let it sit with the Fed. Depending on the type of bond, they can also force the investor to take early payment. (Just like we can pay off loans early.)
Plus, the Fed acts as the central accounting and paper shuffling authority for the banking system. It's where our retail banks have *their* corporate checking accounts. They used to operate a tremendously large overnight check processing operation. All the banks process the checks, then send them to the local Fed, where they are re-processed and distributed to the other banks for payment. This part of the operation is dwindling as paper checks are less and less common.
posted by gjc at 6:54 AM on December 2, 2010 [8 favorites]
First, look up fractional reserve banking. The reserve requirement that they speak of is controlled by the Fed. The Fed says "you need to have a 10% reserve, and keep 5% with us, and 5% in your vault."
When it looks like the economy is in need of cheaper money, the fed can say "alright, your reserve is only 8% now. Go in peace." Now they have 2% of their deposits suddenly extra that they can loan out to people and businesses who will use that money to buy, consume and most importantly, grow. When things look too hot, the fed says "alright, knock it off for a while, start building back up to 10%."
Meanwhile, the FDIC, a government sponsored private company, sells insurance to the banks. They pay a premium, on behalf of the depositors, so that any depositor will get their $250,000 back. This is key. The reserve banking system only works when people trust it. When the public trusts that they won't lose their money, they won't create runs on banks, and fewer banks go under. The FDIC guarantees this.
At the same time, the fed does a couple of other more mysterious things. For example, if a bank is a little short in their nightly reserves, they can borrow money from another bank, or the Fed themselves, to make up for the shortfall. (This isn't necessarily a bad thing, as long as it is a temporary cash flow thing. The next night they might have extra.) The rate at which the Fed loans this money out is one of the key interest rates. They raise the rate, and more money gets pulled out of the economy. Lower it and money goes out.
Then they sell bonds. They sell bonds all the time, for different rates. They sell them at auction- "We need to borrow $40,000,000 today, for a period of 10 years, and we will start at 1.4% per year interest. Who's got any for us?" If nobody takes that price, they raise the price. This is how they control the interest rates- buying a bond from the Fed is the lowest paying, but safest, investment there is. So any other investment's price is going to work off of that price. They change their target price based on what they want to do with the economy- lower it to encourage, raise it to put the brakes on.
And then they also buy and sell bonds that are already out there. If the rate is at 1.4% now, and there are a bunch of bonds out there that they are paying 4% on, they would like to have them back. So they tell the holders "tellya what, we will give you face value plus 2% right now to sell that bad boy back to us." Because they want to quit paying out that big percentage rate, and they also want that investor to use that money for something that will cause growth, rather than just let it sit with the Fed. Depending on the type of bond, they can also force the investor to take early payment. (Just like we can pay off loans early.)
Plus, the Fed acts as the central accounting and paper shuffling authority for the banking system. It's where our retail banks have *their* corporate checking accounts. They used to operate a tremendously large overnight check processing operation. All the banks process the checks, then send them to the local Fed, where they are re-processed and distributed to the other banks for payment. This part of the operation is dwindling as paper checks are less and less common.
posted by gjc at 6:54 AM on December 2, 2010 [8 favorites]
We discussed artist Paul Grignon's "Money as Debt" animation here, some were unimpressed.
posted by TheophileEscargot at 7:08 AM on December 2, 2010 [1 favorite]
posted by TheophileEscargot at 7:08 AM on December 2, 2010 [1 favorite]
"But destroying these institutions in one fell swoop would serve nobody. "
Actually, a bailout would serve the interest of the banks who would double their money when participants eventually reopened accounts so they could pay bills.
posted by clarknova at 7:10 AM on December 2, 2010
Actually, a bailout would serve the interest of the banks who would double their money when participants eventually reopened accounts so they could pay bills.
posted by clarknova at 7:10 AM on December 2, 2010
Is this something I'd have to have a bank account to be part of?
posted by koeselitz at 7:34 AM on December 2, 2010 [1 favorite]
posted by koeselitz at 7:34 AM on December 2, 2010 [1 favorite]
As far as I'm concerned, if Eric Cantona says it's Wednesday, it is Wednesday, and if Le Roi wants me to withdraw all my money from the bank, I will find some money, put it in the bank, and then withdraw it.
posted by Infinite Jest at 7:43 AM on December 2, 2010 [2 favorites]
posted by Infinite Jest at 7:43 AM on December 2, 2010 [2 favorites]
You know, banks do serve a useful purpose in our economy. Sure, they need to be regulated so that they don't go off the rails, but trying to shut them down this way is as short-sighted as chasing quarterly profits at the expense of long-term financial health.
If there really was a run on the banks, the average working stiff would get screwed. All their money would be frozen.
posted by demiurge at 7:45 AM on December 2, 2010
If there really was a run on the banks, the average working stiff would get screwed. All their money would be frozen.
posted by demiurge at 7:45 AM on December 2, 2010
Fractional reserve banking and deposit insurance measures aside, it is almost impossible to conceive of this working, simply because individuals don't actually have all that much money deposited in banks as cash.
Seriously, almost no one has more than a few tens of thousands of dollars in cash. There's just no reason to do that. Money markets, stocks, bonds, a host of other financial instruments or investments, but not cash.
Furthermore, corporations do have large amounts of money in cash. Take, say, Proctor & Gamble. They do about $79 billion in revenue a year. They employ 127,000 people. Say their employees get paid an average of $50,000 a year, including benefits, which doesn't strike me as an unrealistically high number. That's $122 million a week that the company needs to have, in cash, basically at all times. And that's just one company, just for salaries. The company spends a total of at least $60 billion a year on expenses, or $1.15 billion a week. That's cash money.
That's just one company. Wal-Mart spends about $8 billion a week, all of which it has in a bank somewhere.
Trying to start a bank run by encouraging individuals to make withdrawals all at once just displays massive ignorance of the banking system. I seriously doubt that if the entire population of the France made a simultaneous withdrawal that the total decrease in deposits would be much more than what Airbus, which spends two and a quarter billion euros a month, has on hand right now.
I'm glad this guy has found something to do with his time, but seriously, get an XBox or something.
posted by valkyryn at 7:56 AM on December 2, 2010
Seriously, almost no one has more than a few tens of thousands of dollars in cash. There's just no reason to do that. Money markets, stocks, bonds, a host of other financial instruments or investments, but not cash.
Furthermore, corporations do have large amounts of money in cash. Take, say, Proctor & Gamble. They do about $79 billion in revenue a year. They employ 127,000 people. Say their employees get paid an average of $50,000 a year, including benefits, which doesn't strike me as an unrealistically high number. That's $122 million a week that the company needs to have, in cash, basically at all times. And that's just one company, just for salaries. The company spends a total of at least $60 billion a year on expenses, or $1.15 billion a week. That's cash money.
That's just one company. Wal-Mart spends about $8 billion a week, all of which it has in a bank somewhere.
Trying to start a bank run by encouraging individuals to make withdrawals all at once just displays massive ignorance of the banking system. I seriously doubt that if the entire population of the France made a simultaneous withdrawal that the total decrease in deposits would be much more than what Airbus, which spends two and a quarter billion euros a month, has on hand right now.
I'm glad this guy has found something to do with his time, but seriously, get an XBox or something.
posted by valkyryn at 7:56 AM on December 2, 2010
Well, I'm going to withdraw my money the day before.
*evil laughter*
posted by mahershalal at 7:59 AM on December 2, 2010
*evil laughter*
posted by mahershalal at 7:59 AM on December 2, 2010
"The French, they are a funny race.
They make war with their feet and love with their face."
posted by pianomover at 9:05 AM on December 2, 2010 [1 favorite]
They make war with their feet and love with their face."
posted by pianomover at 9:05 AM on December 2, 2010 [1 favorite]
If there is financial chaos on Dec. 7, it won't be because of this guy. It will be because Ireland fails to pass a budget, effectively rejecting the "bailout" that would require years of Irish austerity to pay off largely German debt. The article doesn't say explicitly, but that vote is scheduled for Dec. 7.
posted by rkent at 9:28 AM on December 2, 2010
posted by rkent at 9:28 AM on December 2, 2010
Sorry, I take all my financial advice from Vinnie Jones.
posted by TheWhiteSkull at 10:04 AM on December 2, 2010 [1 favorite]
posted by TheWhiteSkull at 10:04 AM on December 2, 2010 [1 favorite]
If there is financial chaos on Dec. 7, it won't be because of this guy. It will be because Ireland fails to pass a budget
Yeah, I'd say that one sovereign government messing with its finances will have a vastly larger effect than even millions of individuals messing with theirs.
posted by valkyryn at 10:04 AM on December 2, 2010
Yeah, I'd say that one sovereign government messing with its finances will have a vastly larger effect than even millions of individuals messing with theirs.
posted by valkyryn at 10:04 AM on December 2, 2010
Instead of this, we should just all move our money out of large, "too big to fail" institutions and into smaller local banks and credit unions. There's a good resource for this at Move Your Money - they can help you find a local bank.
posted by heathkit at 12:51 PM on December 2, 2010
posted by heathkit at 12:51 PM on December 2, 2010
griphus: "Cool! All the world's cash out of the banks and at home. What could possibly go wrong?
Nothing at all. Now let me just put my savings into this burlap sack conveniently marked with a dollar sign and OH NO THE BEAGLE BOYS WHO COULD HAVE FORSEEN THIS"
Damn you, now I have the Duck Tales theme song in my head! Woo-ooo...
posted by symbioid at 4:27 PM on December 2, 2010
Nothing at all. Now let me just put my savings into this burlap sack conveniently marked with a dollar sign and OH NO THE BEAGLE BOYS WHO COULD HAVE FORSEEN THIS"
Damn you, now I have the Duck Tales theme song in my head! Woo-ooo...
posted by symbioid at 4:27 PM on December 2, 2010
This is France, so, they don't have bank runs.
They have bank parkour.
posted by armage at 7:54 PM on December 2, 2010
They have bank parkour.
posted by armage at 7:54 PM on December 2, 2010
Instead of this, we should just all move our money out of large, "too big to fail" institutions and into smaller local banks and credit unions.
Again, the problem is one of scale. Every single individual moving their money from a major bank is very, very unlikely to cause them a liquidity crisis. I work for a medium-sized business with about 275 employees. We never have less than $2 million in cash, and right now we've got about $12 million, because there isn't a much better place to put it right now, interest rates being what they are. Other companies are in similar situations. It would take hundreds if not thousands of individual clients to equal what just my employer has on deposit at that bank.
I mean, do what you feel, but don't think that this is going to actually accomplish anything.
posted by valkyryn at 8:20 AM on December 3, 2010
Again, the problem is one of scale. Every single individual moving their money from a major bank is very, very unlikely to cause them a liquidity crisis. I work for a medium-sized business with about 275 employees. We never have less than $2 million in cash, and right now we've got about $12 million, because there isn't a much better place to put it right now, interest rates being what they are. Other companies are in similar situations. It would take hundreds if not thousands of individual clients to equal what just my employer has on deposit at that bank.
I mean, do what you feel, but don't think that this is going to actually accomplish anything.
posted by valkyryn at 8:20 AM on December 3, 2010
I'm glad this guy has found something to do with his time, but seriously, get an XBox or something.
He is not a guy...he is Cantona. [genius footballer responsible for the resurrection of Manchester United, passable actor, cod Philospher and occasional kung fu-kicker of racist fans].
I mean, intellectually, you're right. But emotionally, I'm 100 with King Eric.
(Bonus clip from Looking for Eric where Cantona explains his favourite moment on the field: "it wasn't a goal....it was a pass")
posted by Infinite Jest at 2:01 PM on December 5, 2010
He is not a guy...he is Cantona. [genius footballer responsible for the resurrection of Manchester United, passable actor, cod Philospher and occasional kung fu-kicker of racist fans].
I mean, intellectually, you're right. But emotionally, I'm 100 with King Eric.
(Bonus clip from Looking for Eric where Cantona explains his favourite moment on the field: "it wasn't a goal....it was a pass")
posted by Infinite Jest at 2:01 PM on December 5, 2010
For the record, it didn't happen. The small group of activists pictured get extra Black Bloc points for dressing as ersatz Beagle Boys.
posted by chavenet at 11:36 PM on December 7, 2010
posted by chavenet at 11:36 PM on December 7, 2010
Whoops, linked to wrong article. Here is the one intended.
posted by chavenet at 11:37 PM on December 7, 2010
posted by chavenet at 11:37 PM on December 7, 2010
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