The Cashless Society or The New Liquidity crisis With all the talk of the liquidity crisis at the major banks and mortgage lenders these days, maybe it’s a good time to talk about something that is a little closer to home for all of us. I’ve been ranting about the Big Wells Fargo outage last week and it seems, so far, that I’m the lone madman in the wilderness. While the outage last week was bad, the effects were short lived and relatively minor. And while I’ve gone at length about the bone-headedness of wells Fargo for letting this happen, it s nothing compared to what could happen in our not so distant cashless future.

So what happens if a major bank was to go offline for a week? Or god forbid, several major banks. While this would seem to be unfathomable, so was or 9-11 before it happened. What if there was a concerted attack on our financial infrastructure by terrorists, criminals, or a foreign government. Look what Katrina did to Hibernia bank, based in New Orleans. Last’s weeks debacle which took the nations 5th largest bank out for a day, was caused by basically nothing, a “routine maintenance upgrade” if we are to believe the Wells Fargo PR machine. Their little “routine maintenance” took 23 million people financially offline and with limited access to their funds for as much as a day. That’s almost 10% of the US population. What’s going to happen when two or three major banks go down during a major disaster or attack? I shudder to think. Given our normal American cool headed approach during disasters (think Katrina), people are going to FREAK. I was in Houston for Hurricane Rita, which was a non-event for most of the gulf coast and you couldn’t get cash at ATM machines. And this is in an interior suburban area, not along a major route. It was like everyone sucked up all the cash for miles around. And this was in an area totally unaffected by the storm and unlikely to be affected. Now imagine a region devastated by a huge hurricane or earthquake, or worse, a city terrorized by a dirty bomb. Everyone’s trying to get cash or get the family car gassed up to head the heck out of Dodge, and the ATMs are down, either through active sabotage or the bank system being down due to the disaster. Now you have a real movie of the week disaster. This is something for the federal and state authorities to look at when examining banks. We are seeing the tip of the a huge financial iceberg here. How about some more news stories on that?