Anatomy of the Bank Run
If your eyes glaze over at the mere mention of economics, read this article about what’s really going on at your bank! (We love this Mr. Rothbard’s picture – he looks like a cross between our Econ professor in college and our Grandad!)
By Murray N. Rothbard
It was a scene familiar to any nostalgia buff: all-night lines waiting for the banks (first in Ohio, then in Maryland) to open; pompous but mendacious assurances by the bankers that all is well and that the people should go home; a stubborn insistence by depositors to get their money out; and the consequent closing of the banks by government, while at the same time the banks were permitted to stay in existence and collect the debts due them by their borrowers.
In other words, instead of government protecting private property and enforcing voluntary contracts, it deliberately violated the property of the depositors by barring them from retrieving their own money from the banks.
Our favorite line and the key to all of this –
Obviously, such a system, which is considered fraud when practiced by other businesses, rests on a confidence trick: that is, it can only work so long as the bulk of depositors do not catch on to the scare and try to get their money out.
Read the entire article here.