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Monday, October 13, 2008

The Bank Run

Injecting capital (nationalising) into banks is all very well. However, there are two further steps that governments need to take:

1 Guarantee all deposits (deposits are the bedrock of the banking system, without a guarantee depositors will continue to withdraw their money)

2 Cut interest rates by at least another 1% in all major economies

Do the above and the run on banks will be halted, fail to do the above and the run will continue.

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