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The world economy was ‘hours’ from collapse

Thanks to Paul Kedrosky’s Infectious Greed and Scott Loftness for linking me up with this video:

At 2 minutes 10 seconds into the video, Paul Kanjorski of Pennsylvania explains how the Federal Reserve told Congress members about a “tremendous draw-down of money market accounts in the United States, to the tune of $550 billion dollars.”

According to Kanjorski, this electronic transfer occured over the period of an hour or two. 

As the Treasury saw what happened, it pumped $105 billion into the system, but that would not stop the electronic run on the banks so they closed it all down.

If they had not, $5.5-trillion would have been withdrawn by 14:00 that day which would have caused the U.S. economy to collapse and, within 24 hours, the world economy.

Jeez …  ’nuff said.

p.s. no wonder Lord Myners, the City Minister, said the UK banks were hours from going under …

About Chris M Skinner

Chris M Skinner
Chris Skinner is best known as an independent commentator on the financial markets through his blog, the Finanser.com, as author of the bestselling book Digital Bank, and Chair of the European networking forum the Financial Services Club. He has been voted one of the most influential people in banking by The Financial Brand (as well as one of the best blogs), a FinTech Titan (Next Bank), one of the Fintech Leaders you need to follow (City AM, Deluxe and Jax Finance), as well as one of the Top 40 most influential people in financial technology by the Wall Street Journal’s Financial News. To learn more click here...

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  • Why would the world economy collapse? The $5.5 trillion taken out of the US would still be there, it just wouldn’t be in the US. So the US economy might collapse, but the rest of us would just put the money under another mattress.

  • Chris Skinner

    This assumes you have removed your money from the system to place under the mattress Mr. Birch … which may prove challenging under the very short-term circumstances, n’est pas?

  • Whoa, and some economists pretend that money is just a veil. Would have my mattress disappeared as well? I would have lost sleep if I knew about it.
    But beyond the joke, there would surely have been ripple effects if US would have defaulted on that day. But I’m not sure that politicians shouting how the end was nigh on that day and how they saved our souls is really comforting. They’d better say that they did not understand then, and they don’t understand much more now. BUT that they have realized that there is a deficit issue and that they will strive to do something about it.