A professor at Texas A&M University says not to worry, there will not be bank runs. The Federal Reserve is too smart for that. Second, people will simply move threir money to y2k-compliant institutions.
I ask, of course: What can the Federal Reserve do about it? It can't print money. The Bureau of Engraving printing is operating at 24 hours a day now. There is no spare capacity. Second, what compliant institiutions does he have in mind? No bank on earth is compliant yet.
Take away his premise -- there will be lots and lots of compliant banks for people to shift their money to -- and the bank run becomes inevitable. Take away paper money on demand, and the fractional banking system collapses.
This man does not like the thought of bank runs. He has therefore made up reasons without any foundation in order to justify what he wants. Then he adds his comment about a meteor.
The good professor should find out if Texas A&M is compliant. (It isn't.) Think of 44,000 students who will not be able to get their grades. Think of all the graduates who will not be able to get their transcripts. Think of 10 million American college students who, in 2000, will not be able to get anything scheduled. Think of all these people forced back into paper and ink systems, assuming governments can still collect taxes and banks are still open. And they think the system is chaotic now.
Housewives in Japan will figure out how to save themselves long before free market professors of economics do. The economists, who say that the validity of an economic theory is its ability to predict, -- i.e., their ability to predict -- will not survive the Year 2000. If they all think that y2k is no problem, there is a problem with their theory.
I use Christian economics to predict the y2k phenomenon (e.g., Deuteronomy 8). Let's see in 2000 whose system worked best.
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However, Thomas Saving, an economics professor and director of the Private Enterprise Center at Texas A&M University in College Station, Tex., said “the public may perceive the need to move their funds to institutions where there is no Year 2000 problem. “But I can’t imagine that the whole money transfer system would be affected. Presumably, the federal reserve has smarter people around than in the 1930s who could respond easily and make more money available.” As far as he is concerned, “I think it is a lot more likely that the Earth will be hit by a meteor than for this scenario, because we can take steps to avoid it,” Saving said.