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There's a bank run going on in Afghanistan. Afghanistan wants the US to bail out the bank.

DUBAI, UNITED ARAB EMIRATES - As depositors thronged branches of Afghanistan's biggest bank, President Hamid Karzai told Afghans on Thursday not to panic shortly after his brother, a major shareholder in the beleaguered Kabul Bank, called for intervention by the United States to head off a financial meltdown.

"Kabul Bank is safe," Karzai said at a joint news conference at the presidential palace in Kabul with Defense Secretary Robert M. Gates. "People need not panic, need not be worried."

Earlier in the day, Mahmoud Karzai voiced concern over Kabul Bank's ability to withstand an onslaught of depositors demanding their money back. "America should do something," he said in a telephone interview. He suggested that the Treasury Department guarantee the funds of Kabul Bank's clients, who number about 1 million and have more than $1 billion on deposit with the bank.

The rush to withdraw funds from Kabul Bank, which handles salary payments for soldiers, police and teachers, began Wednesday, a day after news that Afghanistan's Central Bank had removed the bank's top two executives and installed a Central Bank official as chief executive.

Depositors withdrew $85 million Wednesday and $109 million Thursday, leaving Kabul Bank with about $300 million in liquid cash, said the bank's ousted chairman, Sherkhan Farnood.

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And what do they get when they withdraw "funds"?

I don't think they get gold or silver coins, so they likely get a piece of paper which says "legal tender".

Since they have a Central Bank in Afghanistan, I bet what they get are Afghanistan Central Bank Notes, the equivalent of Federal Reserve Bank Notes that our central bank issues. In other words, they are exchanging their savings and checking account balances (liabilities of their local banks) for Central Bank Notes (liabilities of the central bank redeemable in nothing and only as valuable for trade as the market decides).

What does this do the the local bank? It wipes out their reserves because they hold Central Bank Notes in their vaults to meet such demands for check cashing and check clearing and withdrawals from savings accounts. They don't have anywhere enough of these Central Bank Notes in their vaults and they usually only have small bank accounts themselves with the central bank to cover clearing of interbank checks; this is what fractional reserve banking means, i.e., you only keep a fraction on hand (in reserve) of what might be demanded of you. Banks that are being run like this certainly cannot make loans to customers, because they need reserves to do that, and their reserves would be disappearing as a result of the run.

Theoretically the central bank could print up huge amounts of new Central Bank Notes and loan them to local banks so that local banks would have enough to cash out their customers' checking and savings accounts, but that would not increase the money supply because instead of having a mix of cash, checking account balances and saving account balances used as the total money supply, you would just have 100% of the money supply as cash; the total would not change. The cash would be outside the local banks, not inside them so for all practical purposes banks would have no further function than to collect what loans are owed them and take those collections to repay what they owed the central bank.

As a practical matter the panic would accelerate because the central bank could not physically print up enough central bank notes quickly enough and at some point the local banks would need a holiday, which would create even more panic. And panic means that people would hold on to whatever cash they had instead of spending it. Commerce would slow to a crawl as the velocity of money movement slowed to a crawl. And this would then mean that people would have even less ability to repay what they owed banks, causing massive losses to the banks from bad debts on what the people and businesses owe the banks. Prices in the market place would shrink and shrink and shrink.

In effect you are seeing in Afghanistan the beginning of a deflationary collapse. If they cannot control it it will spread both within Afghanistan and to other countries.

But even more instructive, this is how the financial collapse can easily unfold in the US. We already have very weak, or negative money supply rates of growth depending on which measure of money you use. We know the FDIC is broke and must borrow from the federal government to meet its obligations. We know the federal government is broke and must borrow from the banking system (either the federal reserve bank and/or local banks) or from other countries. We know the banks are broke because they have resorted to fraudulent accounting to make it look like they are solvent when if fact they are not, else they could would not to cook their books. In other words, the FDIC, the federal government, and the banks are insolvent, i.e., their liabilities are larger than their assets. But they can keep operating temporarily until some crisis forces their hands. Even though they can't pay everyone, they can pay what is currently due until they get in even worse shape.

A bank run might force their hands though, because bank customers can demand their "money" which means that suddenly the bank debts are due in full. This creates a huge liquidity problem since they don't have sufficient liquid cash to hand out, and must close their doors or severely limit withdrawals. But once this starts, the economy is driven further down the deflation spiral for lack of sufficient available money to hold up prices.

Interesting times, but at least you should take some precaution now by holding your "money" as Federal Reserve Notes you keep at home instead of holding it in your checking or savings accounts or as bank CD's. And of course temporarily gold and silver are good alternatives.

I strongly suspect that the US government and Federal Reserve Bank are busy as bees putting their fingers in this new leak in the dike.

"Bend over and grab your ankles" should be etched in stone at the entrance to every government building and every government office.


From the appearance

of the average Afghani shown on TV, I think it's a safe bet that they aren't the ones who had the $200 million in the bank.

Of course Karzai's brother is involved

& bad investments in Dubai are a part of the losses.

The big question is how much will be withdrawn today?


then get a website up.

here is the info on who owns the domain jefffersonparty.org


Who is....

Who is Ronald Blumenthal?

That's a good question and with all these fakers out there I'm sure no one minds digging around.

northstar's picture

Not sure who pasted the article into my thread

I wanted to go with 1 paragraph or less. I originally used just 1 word in protest "As...". Maybe it's frivilous to think like that. I'm just not a happy camper right now with DP's current situation.

Real eyes realize real lies

We want our country back

Every year is a year for Ron Paul!

"WAR will Bankrupt Us"

Its true even if its not on TV - "War will Bankrupt Us"

Now spread that message....across all the towns. You'll get people pounding the pavement.


"Kabul Bank is safe," Karzai said at a joint news conference at the presidential palace in Kabul with Defense Secretary Robert M. Gates. "People need not panic, need not be worried."

If I had a dollar for every time I heard some lyin' POS say "no problem"...

Shouldn't the Tea Party be protesting?

Where are all their flags now over this ultimate desecration of the United States.

Bailing out foreign banks in Afghanistan, after a partial audit showed the Feds have bailed out all of Greece's richest banks & created a depression.

What is the definition of insanity?

Start pinning it to all their doors: "The problem is the FED. The problem is Legal Tender Law. REPEAL and revoke Legal Tender Law."

I got a facebook invite from

I got a facebook invite from Rock The Conservative Vote. It is kind of a new age tea party group. The had a post with that girl from Afghanistan who had her nose cut off in Time magazine. I said "At least she didn't get blown up by the US military"... That would of been a sicker picture if they took photographs of the civilians we killed and put that on the front page...

Anyways, this group seems to be pro-war conservatives so I pointed out how we will be bankrupt because of the obvious laws of predictable consequences and the leader of the group conceded he couldn't argue against that.

We need to stress that our economy will fully and completely collapse if we continue to bankroll an empire.

I just left them in my

I just left them in my non-accept or ignore zone. That way they can't keep contacting me. I know where the true freedom movement is that this country needs.

But anyways... isn't this why we need an Audit of the Federal Reserve? Who knows maybe they already got the money and are just playing coy about it all until the US govt steps in and "bails" them out. It would be political suicide for Obama or any party to suggest we should bail out Afghanistan.

Wars will Bankrupt us

New slogan: Wars will Bankrupt us

1 Trillion a day is unsustainable. Every candidate we have for office runs on this...

Wars will Bankrupt Us, they are a pipedream fantasy.