There are many reasons the American, and then global, banking system will collapse. When faced with so many choices it's wise to look at the least complicated. For want of a nail the horse was lost logic is the best way to look at things. Underneath every complex disaster, every catastrophic failure there is usually one simple reason that underlies all. When the Space Shuttle Challenger blew up in January of 1986, it was traced to a faulty o-ring gasket. When New York City had its November 1965 electrical blackout, it was traced back to a ten cents (in 1965 dollars) relay switch. Likewise, I believe the global banking collapse will be traced back to something equally simple.

There is much discussion of how many people will withdraw cash and thus collapse the banking system. There is much discussion about cascading defaults and Long Term Credit Corporation. All of this misses the Y2k point. Most people will not withdraw enough cash to seriously impact the system because they are not rich enough. The system is quite able to handle the peons taking out their $2500 each, because there aren't enough peons around to matter. The only serious threat to the banks from cash withdrawal would be if small business decided to stash 30 days of the green stuff. Or if Bill Gates went up to the window and said give me 10 billion in 100's please. The rest of us don't amount to a hill of five dollar bills in a global economy of trillions. Besides, the vast majority of Americans will do nothing until December 31st anyway.

I'm on a roll here. It was yours truly who advised against buying gold in February since the price would be collapsed by the elites and there was no gold shortage. Now I'm taking on the conventional wisdom that all us paycheck to paycheck types will withdraw enough cash to destroy the global banking system. Dream on! They will just print more! Isn't that why they call it FIAT money. Fiat by the way is the name of an Italian car company which stands for Fix it again Tony or @#$%$# Italian attempt at transportation according to a high school friend of mine. Personally, in economic terms, I think FIAT should stand for FAILED IN ALL TRIES, but to each his own.

There is no doubt in my mind the banking system will go down big time. Absolutely certain of this 132%. I just don't think cash withdrawal will have much to do with it. Most people don't use cash anymore much, at least in the United States. They use credit cards, debit cards or for small transactions cash in amounts under $50. If you don't believe me stand in line at a grocery store; most of the people buying most of the groceries use either debit or credit cards. Or go to a bar and watch 90% or transactions above $20 conducted via credit or debit card. I could go on, but there is a certain threshold above which cash is simply not used in economic transactions. Each passing year that threshold gets smaller. If there really is a cash withdrawal crisis the powers that be will simply eliminate cash. Or more accurately they will try to. Their attempt to do this will be what collapses the system.

I'm speaking from personal experience, very recent experience, here. I'm currently involved in a nightmarish battle with one of my banks. This bank, WACHOVIA of North Carolina, issued me a credit card last October and things went well until they did a March 31st 1999 Y2K test of their "external systems." My April bill, due April 5th didn't arrive. I called them. They sent another with a late fee and a doubled minimum payment. I sent it back saying, "send me the right bill." They didn't send me the May bill so I called them again and they send me a bill with two late fees on it and a tripled minimum payment. The same day, June 1st, my May bill got there they cranked out the heavy stuff. Letters from the account management department and nasty phone calls from the minimum wage drones with heavy foreign accents. I transferred the balance to another credit card company, Capital One, but WACHOVIA still hadn't processed the transfer after 24 days.

A simple Y2k test led to all this. Now I've written my Congressman, talked with lawyers, written emails to hopelessly incompetent Office of the Comptroller General and finally canceled my account. Do you think I will ever do business with WACHOVIA bank again. Do you think I will warn every person I know that when WACHOVIA's credit card application shows up in their mail box they need to put garlic on it and drive a stake through it? I do. Consider yourself warned by the way.

What I am describing is what will happen the first six months of 2000. It will happen to enough people, thousands, tens of thousands, hundreds of thousands, millions?, that it will clog the system. People will do what I did. They will try and call to deal with it, or write and deal with it. By doing this they will overwhelm the system. Then they will get angry, just like I did, and refuse to pay the bill. By this time next year there may well be millions of bankruptcies for the system to deal with. All those paycheck to paycheck types defaulting en masse will take the system down with them. They won't or can't use their credit or debit cards, either because the banks have defaulted them or the computer systems have toasted, which leaves only gold, paper cash or barter. At least that's the way I see it. This time I just transferred the balance to another card. If it had been June 2000, what incentive would I have to pay it off? Or even keep playing the game? None. As soon as people figure that one out kiss the credit system good bye.

The bankers need to understand that next year will be different. The reason being that the politicians will be terrified, absolutely terrified, of the voters. Even if martial law is declared, no one in power will want to have anything to do with banks foreclosing on widows and orphans. These foreclosures would spark violent reactions from desperate people with nothing left to lose. Any politician or authority figure who sided with the banks attempting to collect on these debts would be dead meat.

Mr. Greenspan won't need to wait until then to need his pair of Depends Plastic Diapers. The massive credit bubble he created last fall is now exploding throughout the economy. The FED will now have to raise interest rates, or risk disaster. Once they raise interest rates the weak global economy, you remember Asia and Russia don't you?, will begin to collapse. As the American economy slows and reverses its role as a giant trade import vacuum cleaner, this will further collapse the global economy. Then, Y2k will hit and devastate the global economy. The company line is now that the United States will make it but all those other continents, excuse me I meant countries, won't. But don't worry because all that stuff about the global economy only works when times are good. Who cares if we can't import shoes from China or Indonesia for six months? You will if your shoes wear out in March.

The only thing the FED has done successfully is engage in a conspiracy to keep the price of gold from reflecting economic reality. If I had any extra money, I'd send him a box myself. The man will need them soon enough. Considering his quote about Gold, and how he has betrayed his beliefs, I won't feel too sorry for him.

June 30th is soon upon us. The usual spin will try and hide yet another failed Y2k deadline. The next one is August 22nd with the Global positioning satellites. Then there is the unknown of 9-9-99 and the September 30th deadline. After that one, there is only the final one of 12-31-99. Did you see on the news Washington, D.C. is mobilizing thousands of people to deal with Y2k?