Bank Runs, Bullion, and Bitcoin: Safeguarding Your Wealth in Uncertain Times
Bank runs are back, baby! And that isn’t a good thing, or is it?
I remember exactly where I was back in the 2008 financial crisis when there was a run on the banks and Bear Stearns and Lehman Brothers Bank went under. The rest of the banking system got bailed out with our money. Cans were kicked down the road, and now it seems the crows have come home to roost.
In the current era of economic uncertainty, it’s crucial to understand the risks associated with the traditional banking systems and explore alternative ways to preserve your wealth.
This blog post will delve into the phenomenon of bank runs, the consequences of creating money through fractional reserve banking (or fictional reserve banking as I like to call it), and the historical failures of fiat currencies. We’ll also discuss the merits of investing in silver, gold, and Bitcoin as a means to protect your assets and provide an overview of recent banking collapses.
Let’s begin by understanding what a bank run is and how the digitalisation of money has amplified its potential impact. Hang on to your hat, it’s going to be a wild ride!
What is a Bank Run?
A bank run occurs when a large number of customers withdraw their deposits from a bank simultaneously due to fears about the bank’s solvency. As more people withdraw their funds, the probability of default increases, which can cause even more people to withdraw their deposits. In some circumstances, the bank’s reserves may not be sufficient to cover the withdrawals, leading to the collapse of the institution.
The digitisation of money has put bank runs on steroids, as online transactions make it easier for customers to access their funds en masse, exacerbating the situation. No more queuing up outside a locked bank trying to get your money out (I never understood that). So I guess that’s progress!
What Percentage of Depositors’ Money do UK Banks Keep on Reserve in 2023?
In 2023, UK banks, along with banks in Canada, New Zealand, Australia, Sweden, and Hong Kong, will have no specific reserve requirements. This means that there is no mandated percentage of depositors’ money that they must keep on reserve. However, this does not imply that banks can create money without limits. Banks still need to maintain a certain level of liquidity and capital to ensure their financial stability and meet regulatory requirements. How they are supposed to do that with no reserve requirements is beyond me.
The Biggest Bank Run in History
Throughout history, there have been several notable bank runs, including those during the Great Depression and the 2008 financial crisis.
More recently, the closure of Silicon Valley Bank in 2023 marked the largest bank run in history, with a staggering $42 billion withdrawn by customers in a matter of days.
Other significant bank collapses include those at Washington Mutual Bank, Wachovia Bank, and the ongoing issues faced by Silvergate, First Republic Bank, and Credit Suisse. I’m also hearing about Blackstone as I write this. (Honestly, it’s hard for me to keep up.)
These events serve as a stark reminder of the fragility of the traditional banking system and the potential for contagion to spread.
The Historical Consequences of Creating Money (Fractional Reserve Banking)
Fractional reserve banking is the practice of banks holding only a fraction of their customers’ deposits as reserves while lending out the rest. This system allows banks to create money by extending credit, which can lead to inflation and the erosion of savings and purchasing power. Throughout history, the creation of money has often resulted in economic instability, as seen during periods of hyperinflation and currency devaluation.
How Every Fiat Currency Throughout History Has Gone to Zero
Fiat currencies, or government-issued currencies not backed by a physical commodity like gold, have a long history of failure. From the Roman denarius to the Zimbabwean dollar, EVERY fiat currency throughout history has eventually collapsed to ZERO. This is due to factors such as inflation, economic mismanagement, and loss of confidence. This highlights the inherent risks associated with relying solely on fiat currencies to store wealth.
The Argument for Silver and Gold Bullion
Silver and gold bullion have long been considered safe-haven assets due to their intrinsic value and historical role as a store of wealth. Unlike fiat currencies, precious metals cannot be created at will, making them less susceptible to inflation and currency devaluation. Additionally, silver and gold have a track record of maintaining their purchasing power over time, making them attractive options for those looking to preserve their wealth.
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Bitcoin is Sound Money
Bitcoin, a digital currency built on blockchain technology, has emerged from the 2008 financial crisis as a viable alternative to traditional currencies and precious metals. With a fixed supply of 21 million coins, Bitcoin is resistant to inflation and offers a level of scarcity similar to gold. Its decentralised nature also means that it is not subject to the whims of governments or central banks. This makes it an appealing option for those seeking to protect their assets from the risks associated with traditional banking systems.
What You Can Do to Protect Your Family Now
To protect your wealth in uncertain times, consider diversifying your investments across various asset classes, including precious metals and cryptocurrencies like Bitcoin.
Diversification helps reduce risk and increase the probability of making a positive return on your investments. By spreading your investments across different asset classes outside of the fiat banking system, you can minimise the impact of losses in one area while potentially benefiting from gains in another.
Bank Runs, Bullion, and Bitcoin: Safeguarding Your Wealth in Uncertain Times
Perry Stevens is the founder of BIGPriceDrops and a long-time digital marketer with a practical interest in helping UK shoppers find better value online. He focuses on clear, no-nonsense money-saving content, Amazon UK deal insights, and buyer guides that help readers spot genuine savings without falling for misleading discounts or impulse-buy traps.
When he is not working on BIGPriceDrops, Perry runs Blend Local Search Marketing and works on digital projects covering SEO, AI tools, and online business growth. His approach is simple: help people make smarter decisions before they spend their money.
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