Obi-Wan Kenobi
/ 178.36.50.* / 2010-03-03 20:15
Murray Rothbard never tired of pointing out that in a free society plain citizens could bring inflationary fractional reserve banks to heel through a deliberate and concerted campaign to get people to withdraw their deposits in cash. “Antibank Leagues,” as he called them, would be formed by those “who know the truth about the real insolvency of the banking system” to “urge bank runs.” The bank runs or their very threat would “be able to stop and reverse monetary expansion.”
Now we have the first stirrings of the formation of such a league in the Move Your Money campaign. This modest but growing movement is urging people to move their money from big banks to small community banks and credit unions. Establishment media such as Time, Newsweek, The Nation, Salon and CBS News have already taken note of the campaign. The organizers are urging people to lobby their friends, organizations, and municipal governments to move their money and to use online social networks to propagate the idea.
The organizers of the Move Your Money campaign of course are superficially focused on the fact that big banks and financial institutions were at the eye of the recent financial storm. They do not understand that it is the entire system of fractional reserve banking, which has been cartelized, regulated and bailed out by the Federal Reserve System for nearly a century, that is mainly at fault for the financial meltdown. Still, the idea underlying Move Your Money is a sound one that needs to be expanded to include mass deposit withdrawal from all banks.
Depositors have more power over banks than customers have over normal businesses in a market economy. The reason is that banks are permitted by law today to hold only about ten percent of demand deposits and zero percent of so-called “saving” deposits in ready cash reserve, even though they are contractually obligated to redeem these deposits in cash whenever the depositor requests. Thus the banking system would not be able to withstand a concerted campaign to withdraw cash and the Fed would have to shut down the banking system (including ATMs) to sort things out. It would take months, if not a year, before the Fed could print up and deliver sufficient quantities of cash to the banks to meet all of their depositors’ demands in full. In the meantime cash withdrawals might be limited to small quantities biweekly or monthly as occurred in Argentina during the last meltdown of the peso in 2000–2001.