yes, but the contagion is more likely the more integrated the system. On Wed, Sep 18, 2002 at 08:52:45AM -0700, Devine, James wrote: > Michael Perelman writes: > > The local monopolies of banking -- especially in rural areas -- also > > tended to make the risks of banking failure more local. Sort > > of like an electricity grid. When it is more local, failures are more > > common, but localized. When a more national system goes down .... > > I don't know if this is true or not. Back in the 1930s before the 1933 bank > holiday, there was a massive "contagion effect" even though US banking was > very localized: if any bank failed, it undermined faith in the entire > system, encouraging withdrawal from all banks. > > Of course, what happens depends on macroeconomic conditions. In the 1930s, > the macro-economy was in really bad shape, encouraging bank failures (which > in turn made the macro-situation worse). > > Jim
-- Michael Perelman Economics Department California State University Chico, CA 95929 Tel. 530-898-5321 E-Mail [EMAIL PROTECTED]
