It is not panic if you are first out the door

Sam Rogers: You are panicking.
John Tuld: If you’re first out the door, that’s not called panicking.

— Margin Call

For the most part, people have two desires and fears in life, and in many ways both rule their choices, actions, and decisions.  The first one is that they both crave and fear security, and are willing to give up responsibility over their own future to others who promise to provide it to and for them.  Secondly, people have a subconscious fear of the end of the world, which leads them to a dichotomy of either fighting this internal demon like Don Quixote, or laying down with their arms wide open to embrace it.

‘Everyone, deep in their hearts, is waiting for the end of the world to come.’

— Haruki Murakami

From the beginning of our lives we live a fine line of reliance upon others, and reliance upon ourselves.  For the first 18 years of life we rely upon our parents to provide for us, teach us, get us out of trouble, and council us when our actions result in outcomes that are both good and bad.  We rely upon schools to teach us to think and learn, and we rely upon local governments to protect us from criminals and entities that would rob or harm us.

But in most older cultures there comes a certain time when society and nature expect each individual to take responsibility for themselves, and shake off the security blanket of absolute reliance upon others.  In the time of Jesus that age was around 13 years, and is even symbolically represented today by the Bar Mitzvah where one of the benedictions in the ceremony is the father of the child thanking God that he is no longer responsible for raising the boy.  And in many native American cultures a young man would go on a 'Vision Quest' to discover his totem and purpose for life going forward.

Yet ironically many in the civilized world continue to act as if responsibility is not theirs and theirs alone, and society has in fact helped to entrench this paradigm.  It begins with the fact that only a small remnant create their own businesses while the vast majority put their reliance in working for others, and place their livelihoods in the hands of a boss.  That reliance carries over to reliance upon governments to provide security and safety nets for when we willingly or unwillingly leave one reliance, or trade an older reliance for another.  And complimentary to this, we also place our reliance upon experts to take care of our money rather than grow it ourselves, and trust in the system and government to ensure our money is cared for properly and available for us when we need it.

This is a microcosm of society today, and it is a programming that has distilled our ability to make necessary choices ourselves because fear and desire are no longer motivating factors in self-reliance since we have voluntarily given up the power of choice in exchange for reliance upon others.

In 2008, government leaders, central banks, and the mainstream media lied constantly to the American people on just how bad circumstances were in regards to debt, the housing industry, jobs, banks, and the overall economy.  And even when there were signs out there such as rising defaults in the mortgage market, runs on banks such as Northern Rock in Britain, and over 1000 point drop in stock markets between October 2007 and March of 2008, people still trusted their 'experts' to either tell them what was happening was just an anomaly, or that in the end these same institutions would protect them from any adverse fallout.  Ultimately however, all of these 'revered' entities failed, leaving retirees out over 40% of their nest eggs, and tens of millions out of a job, out of a home, and bankrupt.

Yet history has a way of repeating itself when people and institutions do the same things over and over and expect different results.  And as we enter fully into 2016, people once again have the opportunity to break old habits and take responsibility for their futures by getting out of the system before it collapses, or doing what they did eight years ago and simply wait until those that they rely upon force them into a result they might not like.

Like in 2007-08 we have seen stock markets fall by more than 2000 points, and industries such as the oil sector replace the housing market as the current bubble.  We are experiencing bank runs in Italy that mirror those done in the UK, and banks so on the verge of insolvency that central banks are calling for both negative interest rates and the elimination of cash.  Yet people in the U.S. sit and do nothing, and trust that their government and financial system will stop the collapse before it happens, or be there to bail them out in the advent it does.

Making a clear cognitive choice that goes against the mainstream is not a form of panic if you do it beforehand, and with the understanding that it is the best course of action to protect your security and fears of an 'end of the world' scenario.  But doing so as the collapse occurs where everyone else is rushing out the door is very much a form of panic as you find it hard to sell at any price, and have fewer choices of where to move your money as safe havens become filled up, or locked out.

However, just because negative rates have not been passed on to savers yet or just because cash still has not been made illegal, that doesn’t mean it won’t be.

The question at this point is twofold: what happens after the savings of ordinary depositors in the bank officially taxed and/or cash becomes phased out, and more importantly, what happens just before.

In other words, will there be a run on physical cash?

The truth is that if society panics and there is a full blown rush out of existing electronic bank deposits and into physical currency to avoid negative rate taxation, only those who panic first will be safe. Why? Because of the “magic” of fractional reserve banking - there is simply not enough physical currency in circulation to satisfy all savers’ claims.

Here is HSBC’s Steven Major trying to explain the problem:

Based on the evidence so far, households have not rushed to withdraw cash and put it into a safe or, more significantly, pay for someone else to store it for them. This is because retail deposit rates have stayed at or above zero as banks have opted to not pass the lower market rates on.

The assumption that bank deposits can be rapidly converted into cash does not hold up, in our opinion. If everybody wanted to take their cash out of the bank at the same time, the system would soon run out as there are simply not enough notes in circulation. It would take a considerable time to print the currency needed to meet the demand. A central bank could enforce a negative rate for a considerable period of time under these conditions. For example, in the US, even if the production rate is doubled – and assuming the pace of retirement of old notes is unchanged and there is demand for USD3trn of new notes - printing would take 20-years.

To explain this, consider the demand for currency created if savers tried to remove cash from the US banking system. This demand could total anything between USD2.5trn (of excess reserves) and USD4.5trn (the Fed’s total balance sheet). Currently there is USD1.5trn of currency in circulation and the total annual production had a face value USD149bn in 2014, suggesting the 20 years it would take to print the cash.

— Zerohedge

The world's population is at a nexus or crossroads, and what they do over the next few weeks or months will determine if they survive or thrive during the next financial collapse.  For as we see above, there is only so much currency to cover the total amount of deposits held by people, and the first ones out the door will be able to get theirs.  And deciding now with all the information available if you want to bet your future and wealth through reliance upon yourself or reliance upon others who's track records are not very good, could mean the difference between prosperity and insolvency, and a future of security or poverty.