The Worst Is Yet To Come

Ken AshfordEconomy & Jobs & DeficitLeave a Comment

Scary thoughts from Billmon:

So think of it this way: What happened last week was a giant run on the bank, with people lining up to get their money back — like that scene in It’s a Wonderful Life, except in cyberspace, not Bedford Falls, and with Ben Bernanke and Hank Paulson, not Jimmy Stewart, standing in the electronic doorway and explaining to people that they their money isn’t in the bank, because it’s been loaned to a hedge fund in London, which loaned it to a Wall Street investment bank, which loaned it to a mortgage banker in Nevada, who stole it and deposited it in a numbered bank account in the Cayman Islands. (OK, so maybe it’s not like that scene in It’s a Wonderful Life — it’s more like the scene where Jimmy Stewart comes back to find he was never born and Mr. Potter owns the whole town. But you get the idea.)

What we saw today, however, was something different: a dawning suspicion among the customers that the bank is paying them off in counterfeit bills.

If this suspicion takes hold and spreads, it could open up broad new avenues for financial disaster.

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