Former Harvard Professor of Economics Terry Burnham fears starting a “run” on Bank of America after he made public his decision to withdraw $1 million dollars from his checking account as a protest against Janet Yellen beginning her term as Federal Reserve head this month.
Image: Bank of America (Wikimedia Commons).
In an article for PBS entitled Is your money safe at the bank? An economist says ‘no’ and withdraws his, Burnham, an ardent critic of the Fed, writes, “Why do I risk starting a run on Bank of America by withdrawing my money and presuming that many fellow depositors will read this and rush to withdraw too? Because they pay me zero interest. Thus, even an infinitesimal chance Bank of America will not repay me in full, whenever I ask, switches the cost-benefit conclusion from stay to flee.”
Burnham explains that Bank of America may be “unwilling or unable” to return his money should one of a number of different circumstances arise, such as depositors demanding their money back en masse, or if the investments on which 90% of depositors’ money Bank of America has loaned out to cover go bust.
In addition, Burnham points out that the FDIC, which guarantees to insure deposits up to $250,000, only has about $41 billion in reserve against $6 trillion in insured deposits.
The Harvard economist pins the blame of economic uncertainty on government intervention, and specifically Ben Bernanke and the Federal Reserve for pursuing absurd quantitative easing policies which will “unravel in the U.S. as it has every other time it has been tried from Weimar Germany to Robert Mugabe’s Zimbabwe.”
Burnham’s words are sure to send another ominous chill through markets already beset with paranoia following a drop of 1000 points on the Dow Jones since its height in December. Global markets are also getting crushed with the Nikkei falling over 4% yesterday and European markets also suffering drastic downturns.
A recent spate of banker suicides has stoked fears that a major financial crash could be just around the corner, one indication of which could be banks like HSBC imposing capital controls on customers attempting to withdraw larger sums of money. Last week, Russian lender ‘My Bank’ also temporarily banned all cash withdrawals.
As Mac Slavo highlights, Grady Means, economist and advisor to Vice President Nelson Rockefeller, predicted that the 4th of March 2014 would be the date on which the economic collapse accelerated, followed by, “A run on the bank (that) will start suddenly, build quickly and snowball.”
“The doomsday clock will ring then because the U.S. economy may fully crash around that date, which will, in turn, bring down all world economies and all hope of any recovery for the foreseeable future — certainly over the course of most of our lifetimes,” wrote Means in a 2012 Washington Times editorial.