Invisible, Silent Bank Runs During The Great Recession

A Game Changer

Recently, I came across the term silent bank run for the first time in an article. Investopedia.com has already an entry for it: “A silent bank run is much like a normal bank run, except withdrawals are made by customers in the form of electronic fund transfers and wire transfers, rather than going into the bank and withdrawing cash or a bank draft.” (http://www.investopedia.com/terms/s/silent-bank-run.asp).

Convenience, Electronic Funds And Global

Historical bank runs were rather inconvenient. Often, they involved withdrawing cash from a bank branch, which then was deposited at other regional banks or stashed at home.

Now, in the age of the Internet, it sure is more convenient from the comforts of your home or using even your smart phone to be able to transfer your money instantly with a push of a button using a computer to any bank anywhere in the world.

It Started In 2008

Every economist knows of bank runs of earlier times where masses of people lined up in front of banks. Since the financial crisis of 2008, “… many financial institutions faced silent bank runs, as depositors feared losing their deposits if banks were to collapse. Across America and Europe, particularly in the U.K. and Iceland, silent bank runs drained banks of their reserves …”.

Could Invisible And Silent Mean Less Panic?

Unlike historical bank runs, where throngs of people where on the street and newspapers would feature front page pictures of panicked bank customers, invisible and silent bank runs probably do not get the media attention nor will they be as publicly noticed. No sensation, no media attention!

Greece May Be Experiencing A Silent Bank Run

Citizens of Greece ,if not other distressed countries of the Euro Zone are perhaps engaged in an ongoing silent bank run as they fear a massive devaluation following an exit from the Euro. If anybody knows in what bad a shape Greece is, then ask their citizens. Over decades, many smart Greeks have already voted with their feet and left.

If History Is Any Guide

According to the Concise Encyclopedia of Economics historical evidence suggests that bank runs did not always lead to massive bank failures. On the contrary, in many instances only a few banks collapsed (http://www.econlib.org/library/Enc/BankRuns.html).