USATODAY reports that worried investors are pulling out billions of USD from the plunging stock markets. The economic crisis in the US is causing many people to move their savings from tumbling stock markets and not so strong banks.
“People are panicked, and they want something as close to the mattress as they can find,” says Mark Zandi, chief economist at Moody’s Economy.com. “What we’re experiencing now is something we have not seen since the Depression era.” It goes without saying that a further increase in widespread fear is the worst situation for any economy. Can you imagine thousands, hundreds of thousands lining up outside US banks to pick up their savings, take them home and putting them under the matress? That would definitely be the end of a number of banks.
Another interesting point made in the article by Sandra Block and Kathy Chu is this: “Complicating matters, the government’s injection of up to $700 billion in the financial system has stoked confidence in some institutions while breeding uncertainty about the survival of others that aren’t getting this financial lifeline.” The bailout plan recently implemented by the US government definitely had it’s opponents, but as can be seen there were quite logical and worthile reasons for such opposition.
Image by The Consumerist with CreativeCommons
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