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I’m sure many of you have read about the Bear Stearns sale to JP Morgan this Sunday. If the fed hadn’t helped to put this deal together quickly Bear Stearns would have needed to declare bankruptcy. That of course would cause major hysteria and as a result more investment banks would have gone bankrupt quickly. This shouldn’t be too much of a surprise to many of you that research mainstream and non-mainstream financial news regularly. Rumors had been circulating for a while about Bear Stearns, being in trouble. Bear Stearns of course vehemently denied being in trouble, they even claimed they might pull a profit soon.

The part that many will find really surprising and scary is how quickly things fell apart for Bear Stearns. Now, because of this deal they are valued at $2 a share. About a year ago their shares were selling around $170. The buyout at $2 a share represents around 1 percent of what Bear Stearns was valued just 16 days ago. The fact that they dropped in value by 99% in sixteen days is just frightening. This shows us how quickly banks can fail. Not only did the shares become almost worthless, but the fed had to guarantee to JP Morgan the risk on $30 billion of the troubled assets that caused the problem in the first place. This bank survived the Great Depression, but now goes belly up? This should tell critical thinkers that things are much worse in the US and global economy than the government want us to know.

Obviously the markets are spooked at the time of the writing of this article. Gold has already spiked to $1030 or so an ounce, oil prices went up again, and the dollar dropped even more in value in comparison to other currencies. Asian markets are open now and dropping like a brick. I’m sure we’ll see similar reactions in other stock markets as they open.

Just as the CEO of Bear Stern’s had to come out and lie about the stability of the company so must governments about their economies and banks. No, government would want mass panic and selling of stocks, bonds, municipal bonds and stock piling of cash or gold. They will put on a public positive face to the citizens, because that is their only option. The one thing we should learn from the Bear Stearns example is that you cannot believe everything that is being told to you by those with vested interests including government economic leaders.

Many people will think this irresponsible to suggest. But, I believe a big run on deposit banks is likely imminent. It might not be this week, this month, this quarter, or this year. After all people can be a little slow to process, then react to the news around them. I do however believe that statistically there is a pretty good chance of one. Not many people in the US have cash savings anymore, so maybe I’m wrong. Of, course that’s an even scarier prospect… what happens when the banks cancel all the credit cards of the people that have no cash, because they no longer have cash to loan since they made bad mortgage bets? Things will really fail quickly then. But, for those that do have cash in the bank, I think it is possible that the time will come when many try to pull out their cash at once. If there is an old fashioned run on the bank you want to be the first in line, not the last.

To those that say, “Why worry, I’m FDIC insured”. The FDIC does not have enough reserves to bail out very many banks. Yes, they can likely handle a couple hundred small banks failing. But, they do not have a 1 to 1 ratio of dollars in their reserves to match the dollars they are insuring. Many people do not realize this. In America, if enough banks fail because of panic and a run on the banks the FDIC cannot insure all of the funds. If the US starts printing more money to make up the difference the dollars they give back to you will be worthless.

Just this weekend my wife went to the mall and it was packed. When she came back she said, people sure aren’t getting what you’re talking about. That place is packed! Well, I do have the distinction of usually calling things out a bit too early. I saw the real estate bubble being ready to pop much earlier than most, and people thought I was crazy then because real estate ‘always goes up’. Six months ago I sold all of the stocks in my 401k, most of my coworkers thought I was over reacting, but they have since seen their portfolios drop over 25% with no end in sight. Yes, I’m not always right… who is? I hope I’m not, but what if I am? Am I really doing any harm by pulling my cash out of the bank now? Sure, I’ll lose out on a whopping 1.5% APR on my savings at the bank. But, I’d rather have the peace of mind.

My advice is to be the first one at the bank teller window not the last. Consider having emergency cash in a safe at home, along with some gold, silver, and items for bartering. For other ideas on being ready for a declining economy, Peak Oil and Peak World please check out some earlier articles I wrote outlining various preparations to take.

Preparing for the Rapid Decline of our World

Social Collapse and Peak Oil

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