Heres a couple more stories on the bigger 'bank run' taking place in the financial markets:
Shouting fire in a crowded theatre
We are, in effect, suffering from a giant bank run, albeit on financial institutions that aren’t called banks — and aren’t regulated like banks.
Bank runs come in two kinds.
In some cases, the bank run is a pure self-fulfilling prophecy: the bank is “fundamentally sound,” but a panic by depositors forces a too-hasty liquidation of its assets, and it goes bust. It’s as if someone calls “fire!” in a crowded theater, provoking a stampede that kills many people, even though there wasn’t actually a fire.
In other cases, the bank is fundamentally unsound — but the bank run magnifies its losses. It’s as if someone calls “Fire!” in a crowded theater, and there really is a fire — but the stampede kills people who would have survived an orderly evacuation.
We’re in the second case. The Fed has spent the last 7 months trying to assure people that there isn’t any fire. But there is.
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