Long queues at ATMs in Russia and Ukraine | Threaten to explode the Great Depression

Russia has attacked Ukraine in an all-round way. The news shows that Ukrainian people who are eager to withdraw funds have long queued at bank ATMs, and even Russian people have rushed to the ATM because they are worried that they will not be able to withdraw cash. According to foreign media analysis, the impact of bank runs on the economy can be borrowed from the Great Depression of the US economy in the 1930s.

The Wall Street Journal reported on the 24th that the day after Russian President Vladimir Putin ordered a “special military operation” against Ukraine on the 24th, there were long queues in front of ATMs in Moscow banks, and people were worried that the government may restrict people from withdrawing cash. News of the cash being withdrawn from banks flooded social media.

Reuters reported that Ukrainian residents who chose to stay in Kiev also formed long queues outside banks and shops, hoping to withdraw cash and stock up on supplies. Others hurriedly packed their bags and looked around for transportation out of the city.

Business Insider reported on the 24th that local Ukrainian banks have decided to set a cash withdrawal limit. The Donetsk People’s Republic (DPR), located in the Udon region, this week restricted people to withdrawing 10,000 rubles (about $129) a day from ATMs. The National Bank of Ukraine also set the daily withdrawal limit at 100,000 Ukrainian hryvnia (about 3,339 U.S. dollars) on the 24th.

In order to avoid a domestic disaster, the Russian central bank announced emergency response measures on the 23rd, and the Russian stock market plummeted 38% on the same day due to the war between Russia and Ukraine. The Russian central bank’s plan includes closing the stock exchange and buying hundreds of millions of rubles, but it has not yet set a limit on people’s withdrawal of cash.

The fear of a run caused by these phenomena could eventually become a “self-fulfilling prophecy”, leading to bank failures, the report said. During the Great Depression in the United States from 1929 to 1939, there was a bank run incident, which eventually led to a large wave of unemployment and no way for people to get loans.

David Wheelock, senior vice president and special policy adviser to the president at the Federal Reserve Bank of St. Louis, pointed out in 2013 that locations with high rates of bank failures in the United States also saw larger declines in consumer spending.

After the Wall Street crash in October 1929, anxious Americans went around withdrawing cash, and many banks were forced to fail. With limited daily deposits in bank vaults, there was a sudden run on the bank, forcing the bank to sell assets in exchange for cash to customers who wanted to withdraw money, and then collapsed and went bankrupt.

The Federal Reserve Bank of St. Louis reported thousands of bank failures, leading to shrinking lending activity, business closures and rising unemployment. The crisis also sparked deflation, as bankers decided to build up cash reserves and people struggled to hoard cash. As deposits dwindled, so did the amount banks could lend, meaning people had less money to pay for goods and services, and the prices of those goods and services dwindled.

According to the St. Louis Fed report, deflation has further forced banks, businesses and debtors into bankruptcy, reducing consumption and ultimately driving up unemployment.

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