Sjeltur

On October 9 last year this blog brought you a story about failing banks. It read: “While governments and financial authorities try to convince the public they should trust the banks to prevent a bank run, the banks themselves don’t trust each other at all, that’s why the financial system freezes up globally. If other banks don’t trust my bank, is it a good idea to believe the government I can trust my bank?”

Only a few days ago it was revealed that the banks in the UK were just hours away from a complete meltdown. City Minister Paul Myners disclosed that last year on October 10, the country was “very close” to a complete banking collapse. Major depositors attempted to withdraw their money at the same time, the Treasury was considering to shut the doors of the banks to all customers, terminate electronic transfers and even block ATM cash withdrawals to prevent a bank run. Imagine the panic that would have caused! Frantic behind-the-scenes efforts averted the meltdown, the Bank of England contacted major creditors around the world begging them not to withdraw their funds.

The question is, can this happen again? After the crisis surfaced, tons of money were thrown at it. The probability of banks failing seems much lower now than it was during those days in October 2008. Unfortunately, the crisis is far from over and your money is still at risk.

The trillions of dollars, euros and pounds pumped in the financial system the last months didn’t make the crisis go away, it just delayed it. All that money clearly didn’t prevent the negative effects of the crisis in the real economy, you hear about skyrocketing unemployment everywhere right now. And the financial system is still at risk to collapse, it’s likely that those trillions will cause massive inflation at some point in the future, but this crisis has fundamental causes that can’t be solved by just throwing money at it.

Several analysts expect a new wave of market crashes like we saw in October 2008. Some think this can happen already in March or April. Another round of crashes will push the financial system again closer to the edge of the cliff. And the financial position of countries like the US and UK has become much worse since October, even a debt default is now a serious possibility. The chance that the financial system can be “saved” again is getting less by the day. It’s up to you to decide what all this means for your money at the bank…