First of all, what is a bank run? Simply put, it is when people ‘run’ to the bank to withdraw their deposits because an event happened that broke the trust people have with their banking institution. When a run happens, that is when people discover that the bank does not hold their deposits entirely and the ones who made their withdrawals first get their currency where the ones who were last, received nothing. When the bank restricts how much cash can be withdrawn, one could surmise that there is a shortage at that particular bank. Ultimately the bank(s) in question will have to close temporarily to return order back to the bank as people tend to get very upset if they cannot access their deposits.


What is happening in Canada? From a 45,000-foot view this is what is going on; the government declared an emergency order that includes freezing individual’s bank accounts. Now, not only can some people not access their funds, because the government declared so, others are beginning to realize that their currency could be frozen as well (without probable cause) and they now have a sense of urgency to remove whatever they have from their accounts. If enough people do this, they quickly discover that the banks are not holding deposits at 100%. Five major banks in Canada had to close suddenly this week. The reasons are speculative at the moment, but the end result is the same, no cash withdrawals for anyone. Could this happen in the US? Could this happen in other countries? Of course, the banking systems are very similar around the world.


In my book, I painted the picture of the financial system and where it seems to be heading. Because of this, I also recommended that the time to prepare for any crisis is now, not during the crisis. If you wait, you risk finding that there will be no cash in the bank, even though you have the statement stating that you do. In simple terms, you should always have a comfortable stash of cash in a safe place outside of the banks. Of course, that amount is different for everyone.


Now if you really paid attention to Money Plain and Simple, you may be thinking, “Keeping cash around the house will only lose value”. And you are right! That is why you must tweak the amount and keep just enough on hand. That amount is for you to decide. For me, I replaced a portion of the cash into precious metals. Still, this is not a guarantee of increasing in value, but it will not go to zero, like fiat currency will. These are things to consider in these times.


How are you set when your bank closes for a day, or how about a week? One may choose to believe that a bank run will not happen to them, but what about a major natural disaster? Snow and ice storms can close banks, or hurricanes close down banks as well. Are you at least prepared for this? Things to ponder…hmmm!


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