4 ms·

nope. nuh uh. wrong. the right thing for any individual to do in a potential bank run is always to withdraw. this is basic game theory. you expect someone to ta

nope. nuh uh. wrong. the right thing for any individual to do in a potential bank run is always to withdraw. this is basic game theory. you expect someone to take a junk bond level of risk for 0.5% interest? miss me with that there is one possible way to solve the coordination problem: just stop allowing withdrawals. the chinese figured this out. but you have to limit withdrawals on ALL banks because you bet your ass if one bank gets frozen, everyone will think another one is next and run that one too. the only time we've rushed a serious contagion before was by instituting a bank holiday and basically putting in 100% deposit insurance. and that was when we had someone in charge whom most people trusted (FDR). biden, yellen, powell aren't so loved.

paulgb 4y ago
Well yeah, everyone is a genius in retrospect. If you know it’s going to be a bank run, you get out. The problem is that by the time you know a bank run is happening it’s probably too late. The logical conclusion of this thinking is a system where any rumor about any bank can cause a bank run, because people who take the time to figure out if the rumors are true lose out.
- collegeburner 4y ago
  no, a credible rumor that a bank with an odd deposit structure and a hole in its balance sheet causes a bank run. the horror! also, given that the cost to me is negligible, why wouldn't i just pull my money as soon as there were rumors? i get literally 0 benefit but could lose a third of my money if i don't. as for timing... i guess that's the benefit of being terminally online, you get a chance to get out :D
  - paulgb 4y ago
    > also, given that the cost to me is negligible, why wouldn't i just pull my money as soon as there were rumors Right, that’s my point. It doesn’t make sense to try to figure out if the rumors are true, by the time you do it may be too late. This makes sense for you as the individual, but is dangerous for the overall stability of the system.
    - collegeburner 4y ago
      you're literally blaming the prisoner in a prisoner's dilemma. it makes no sense to bet with 0.7:1 odds that only a few times above normal withdrawal volumes will actually occur. that is a shitty be to make, especially since every time people do, it usually works out against them. we can opine about how to resolve confidence and coordination issues but you can not go victim-blame people who just don't wanna get fucked over. one of the core values banks provide is confidence and peace of mind. if my bank can no longer provide that, i am full sending my cash somewhere else.
      - paulgb 4y ago
        No, I’m not blaming them at all! In retrospect they made the right move. Companies that moved funds early had a duty to their employees and investors, and did right by them. I do, though, worry about the message it sends to say that everyone who didn’t flee is SOL. Fortunately, the fed seems to have played the same scenario out and did the right thing.

paulgb 4y ago

Well yeah, everyone is a genius in retrospect. If you know it’s going to be a bank run, you get out. The problem is that by the time you know a bank run is happening it’s probably too late. The logical conclusion of this thinking is a system where any rumor about any bank can cause a bank run, because people who take the time to figure out if the rumors are true lose out.

collegeburner 4y ago
no, a credible rumor that a bank with an odd deposit structure and a hole in its balance sheet causes a bank run. the horror! also, given that the cost to me is negligible, why wouldn't i just pull my money as soon as there were rumors? i get literally 0 benefit but could lose a third of my money if i don't. as for timing... i guess that's the benefit of being terminally online, you get a chance to get out :D
- paulgb 4y ago
  > also, given that the cost to me is negligible, why wouldn't i just pull my money as soon as there were rumors Right, that’s my point. It doesn’t make sense to try to figure out if the rumors are true, by the time you do it may be too late. This makes sense for you as the individual, but is dangerous for the overall stability of the system.
  - collegeburner 4y ago
    you're literally blaming the prisoner in a prisoner's dilemma. it makes no sense to bet with 0.7:1 odds that only a few times above normal withdrawal volumes will actually occur. that is a shitty be to make, especially since every time people do, it usually works out against them. we can opine about how to resolve confidence and coordination issues but you can not go victim-blame people who just don't wanna get fucked over. one of the core values banks provide is confidence and peace of mind. if my bank can no longer provide that, i am full sending my cash somewhere else.
    - paulgb 4y ago
      No, I’m not blaming them at all! In retrospect they made the right move. Companies that moved funds early had a duty to their employees and investors, and did right by them. I do, though, worry about the message it sends to say that everyone who didn’t flee is SOL. Fortunately, the fed seems to have played the same scenario out and did the right thing.