People Need Not Panic

From The Washington Post

Karzai urges Afghans not to panic as bank withdrawals accelerate

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.


We have recently seen just how safe some banks are, if the Anglo Irish example is considered.  While this Afghan bank is hardly a big player in the banking system, it is symptomatic of the festering problems throughout the globe.  Once depositors lose confidence, a bank run, whether it is obvious in long line ups, or subtle through on line transfers, can quickly gather momentum.
When officials, politicians, or executives feel the need to tell people not to panic, we know the situation must be very serious as we recently referred to in our post OK, Panic.


  1. Mr Bailey,

    Apart from gold and PM's, what other vehicles or strategies would you endorse for the everyday citizen as a hedge against deflation? Particularly if they are living outside the US, or Europe.



  2. Thank you for your comments JT. In my view, the goal in deflation is to preserve capital, rather than make a large return on capital. I like gold stocks, if the price to earnings is right, particularly some gold juniors as they can employ leverage to boost share prices. Several Canadian companies meet this criteria, and I am sure there are some in Australia and Asia. I am on the lookout for a rare earth play in Mongolia. I also like quality farmland - given steady global population growth. A higher portion than usual of my portfolio I keep in cash under these circumstances. I say this with a qualifier. If central banks act even more irresponsibly down the road, the danger of a period of rapid inflation could rise, threatening the store of value of the cash portion of a portfolio. The final strategy I like is an investment with some pricing power - a utility company that does not carry much debt.
    Best wishes in fortifying your portfolio.


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