The phrase “banking collapse” is nothing more that a specific kind of economic collapse.
A nationwide collapse in the banking system is a catastrophic event that would send shockwaves through the entire economy. If enough banks fail, it could trigger a bank run, causing people to withdraw all their money at once. This would cause an economic collapse that would affect everyone. Credit and debit cards would be useless; looting and riots would become commonplace. Social unrest could lead to martial law being enforced, which we haven’t seen since The Great Depression.
To prepare for an SHTF scenario like this, it’s crucial to stockpile food and supplies, especially if grocery stores become too expensive or run out of stock. Consider bartering for goods and services, as hyperinflation could cause prices to skyrocket. A prepper garden and precious metals could be valuable assets, especially if job loss and financial crisis lead to political upheaval and civil unrest.
Emergency preparedness should be a part of everyday life, especially in urban areas where resources are limited. Being self-reliant and well-stocked with a survival kit can help you survive in the days immediately following a banking collapse. In rural areas, growing your own food and being prepared for limited resources can increase your chances of survival.
In this guide, we’ll cover how to cope with a nationwide banking collapse, including preparing for the collapse, surviving the immediate aftermath, and long-term survival strategies. Additionally, we’ve written a post on financial preparedness strategies for preppers that is quite helpful.
Explanation of the Recent Bank Failures
This is what the beginning of a banking crisis looks like…
Bank failures and Bank Runs are random events; they spread like a contagion. There’s a herd mentality to them and they’re mostly driven by fear and uncertainty. The recent failures of SVB on the West Coast and Signature Bank in New York are perfect examples of how two seemingly disconnected banks can be made to fail because of panic and fear.
SVB’s clients were mostly businesses and not everyday people. In 2022 nearly half of its client portfolio was made up of venture-backed companies. Because of the recent rapid increases in interest rates by the Federal Reserve, the investors who normally supported SVB’s client companies were more comfortable putting their money in fixed-income assets like bonds than they were with giving the money to a technology company. This caused those same tech companies to withdraw cash quickly from SVB in order to fund their operations.
The same interest rates that cooled venture investments also caused lending to cool off as retail clients couldn’t afford the higher borrowing costs. With no clients to lend to SVB put its money into mortgage-backed securities and treasuries. The difficulty here is that when the Fed raises rates this decreases the face value of a government bond.
What happened next was that SVB lost money on the government bonds they had to sell to meet the withdrawal needs of their client companies. Once that large loss was made public that caused depositors who had money in the bank to suddenly withdraw over $42 Billion in one day. Regulators had to assume control of SVB.
What does this have to do with Signature Bank out in New York failing just a few days later? Signature bank was primarily focused on real estate, legal, and some crypto. Not exactly the same portfolio structure as SVB. Regardless, enough Signature depositors were spooked that they made a run on the bank and pulled enough money out of it in one day that Signature’s balance sheet went negative and the bank failed.
Banking collapses occur when the public’s confidence in the banking system declines to the point where they withdraw their funds en masse; a bank run. They’re unpredictable. Once customers panic and try to withdraw their money all at once, the banks run out of paper money. A domino effect follows, leading to an economic collapse, looting, riots, and social unrest.
How Would the Banking Collapse Happen?
News travels fast; bad news travels even faster. Imagine the following scenario…
The real events of SVB and Signature Bank have just occurred and you’re sitting at work when your financial advisor calls you and asks, “Don’t you bank at ‘Such-n-Such Local Bank’?” and you confirm that you do. As a follow up your advisor tells you that because of the recent bank failures he’s been double-checking the stability of banks where his clients’ money is and he’s calling all of them and recommending that they move their cash no later than Friday this week.
You hang up and immediately call your wife and tell her what you were just told. You each call a friend and your family members who bank there and tell them that you’re moving your money tomorrow morning and they should too.
Now imagine these conversations being had about 20 other banks around the country in the same week for similar reasons. What would the headlines read the following Monday? They might read something like “Feds Seize the Accounts of Twenty-one Banks Over The Weekend”.
Before those conversations happened, no one was really worried about the banking sector. The issue was confined to a couple of banks. But now they’re worried about economic collapse. They have fears of hyperinflation and unemployment.
Bank runs cause banks to fail due to a lack of liquidity. If a large enough number of people walk into a bank and withdraw enough money in just a day or two, most banks operate on narrow margins and it’s enough to trigger a collapse.
A collapse can happen suddenly or develop over time. Different warning signs will become more apparent as the events unfold. Limited access to the necessities of life, looting, and social unrest could occur, leading to panic and chaos. The breakdown of law and order and the possibility of martial law can’t be ruled out.
What happens to my money if the Banks Collapse?
Our banking system is backed by the FDIC and as of this writing bank deposits are insured up to $250,000 per account. Beyond that, it’s likely that many people will lose the extra money. Deposits may become inaccessible, at least for a short time, and even if they can be withdrawn, they may not be worth much due to hyperinflation.
Credit and debit cards may no longer work, limiting access to goods and services. While your deposits are insured to some degree, it may take several days or even weeks before the government releases your insured deposits to you. You may have to resort to bartering food and other necessities for a short time.
Warning signs to look out for
There are a number of warning signs that can indicate a potential banking collapse…
One major red flag is a high rate of bank failures or closures. Another red flag is a sudden increase in the number of people withdrawing their money from banks, which is commonly known as a bank run.
Beyond those two, be on the lookout for an increase in inflation, interest rates, and unemployment rates which can signal a potential financial crisis. Pay attention to the news and economic indicators, and have a plan in place for emergency situations.
A timeline of the banking collapse
A timeline of the collapse is unknowable because many different entities that contribute to the pace. The added wildcard is that bank runs are driven in part by emotion. You can look out for anecdotal evidence that it’s happening. The early signs of a banking collapse include a significant number of loan defaults, mass withdrawals, and a decline in the stock market.
If you notice the banks are closed or have limited hours, it could be a sign that the government is attempting to stabilize the financial system. As things worsen, panic buying and hoarding become common, resulting in food shortages and skyrocketing prices. A bank run is likely to occur when people try to withdraw their money simultaneously.
If the government fails to intervene, the banks will eventually become insolvent, leading to a complete economic collapse. It’s essential to have a plan in place and stock up on essentials before things get out of control.
What Society Will Be Like in the Days Immediately Following the Banking Collapse
Emergency preparedness will be tested…
In the days immediately following a national banking collapse, society will likely be in a state of chaos. Without access to paper money or credit, people won’t be able to buy basic necessities like food and water. Within 4 or 5 days most families will use up their food storage. This could lead to looting and riots as the social order breaks down and people struggle to survive.
In urban areas, where resources are limited, there may be shortages of food and other essential supplies, which could drive up prices and lead to hyperinflation. It’s likely that martial law will be implemented to restore order and everyday life as we know it may be disrupted for an extended period of time.
In contrast, rural areas may fare slightly better, as they may be more self-reliant and have access to resources like their own food, water wells, and well-stocked survival kits. What rural citizens view as everyday skills, city preppers view as survival skills. Small towns with close communities will likely be able to protect themselves better.
Panic and chaos in the financial system
In the days following a banking crisis, panic and chaos are inevitable. Without access to cash and food people will act irrationally. Long lines at ATMs and banks will be normal, and people will try to withdraw as much money as they can. This will lead to a shortage of physical cash, making it difficult for people to purchase even the basics.
Federal regulators will step in and take control of the banks. Central banks around the globe will take steps to add liquidity in an effort to prevent the contagion from spreading to their shores. Here, the size of financial transactions will be limited and banking hours will likely be reduced in an effort to allow money to flow, but at a reduced rate. The economy will appear to stall.
The Fed will take action to add and subtract liquidity as it needs to as their actions will be focused on getting the banking system to function normally again. Significant sums of money will have been lost because many people have deposits above the FDIC insured limit.
The breakdown of law and order
With the loss of financial stability, people will become desperate and may resort to illegal activities to survive. Criminals will take advantage of the chaos and prey on vulnerable individuals. That polite soccer mom at Starbucks will suddenly develop an aggressive personality to feed her kids.
Law enforcement will be overwhelmed and unable to maintain order. Given how many police departments have been de-funded in recent years, this will be an even bigger problem. Hospitals and fire departments may also be impacted, making the situation worse.
Prepare for this SHTF scenario by stocking up on essential supplies, making sure your first aid kit is complete, and learning basic self-defense skills. Remain vigilant and stay away from any dangerous situations. It’s also important to form alliances with neighbors and work together to maintain some semblance of order until help arrives.
Limited access to goods and services
Without a functioning banking system, people won’t be able to withdraw cash, businesses may not be able to operate, and the economy will simply cease to function properly. Supply chains could be disrupted, or halted, leading to shortages of goods, food, and medicine. Transportation could be disrupted because fuel may become scarce.
These issues could lead to long lines and rationing, making it difficult for people to get basic necessities. As the situation worsens, looting and theft could become more common, making it even harder for people to get the goods they need to survive.
Making it Through an Economic Collapse
The first few months following a financial collapse will undoubtedly be tough. Without the ability to withdraw paper money or access basic goods and services, people will have to rely on their survival skills to get by.
In the immediate aftermath, there’ll likely be panic, chaos, and a breakdown of law and order. It’ll be challenging to find food, water, and even toilet paper. People will have to adapt to a world without electricity or communication.
As time goes by, people will start to form small communities and work together to rebuild their lives. Bartering and trade will become the new currency, and people will have to learn to be self-sufficient. It won’t be easy, but with determination and resourcefulness, people will be able to rebuild their lives over time.
Preparing for economic collapse in 2023
Preparing for a banking collapse isn’t an easy project. We’ve already seen 18 months of increased inflation and an economic crisis like this will only cause it to continue.
The first step is to save money and try to build up an emergency fund you keep in your house, not a bank, to help cover your expenses for at least six months. Don’t bother with $100 bills or $1 bills. In a situation like this, twenties will be best if you’re going to use cash money. Assume that everything from canned goods to toilet paper will be even more expensive than it is now, and that’s if you can find it.
Consider putting some money into precious metals, like gold or silver, to hedge against inflation. In World War II and the Gulf War, soldiers carried gold coins of a known karat and weight. Some even had gold bracelets and cutters to remove a link. They did this so they could easily carry a usable emergency currency with them wherever they went.
Stock your pantry with enough non-perishable food to last several weeks. Take whatever time you have to learn new skills that can be useful in a crisis, such as learning to grow food or first aid. Purchase some emergency water storage barrels so you can store some water.
Surviving the immediate aftermath
Surviving the immediate aftermath of an economic collapse will be a challenge. There are steps you can take to increase your chances of staying safe and secure.
One of the most important things you can do is to stock up on essential supplies like food, water, and medical supplies. You should also have a plan to protect your home and family, including investing in security measures like locks, alarms, and cameras.
To stay informed about the situation and to avoid panic and rash decisions you should purchase an old-style radio. Remain calm and level-headed, and work together with your community to share resources and support each other through the difficult times.
Long-term survival strategies
The first step is to gather information about available resources, including natural sources of food and water. Learning how to farm, hunt, and fish will be required to survive for several years.
It’s also essential to make sure your home is in good condition and learn basic survival skills like first aid and self-defense. Building a community of like-minded individuals will provide a sense of safety and support.
Learning valuable skills like carpentry, mechanics, and medicine can help in bartering goods and services. Preparing for the long term is the key to survival, and being mentally prepared for the challenges that lie ahead is equally important.
What Life Will Be Like in the 9 Months After the Banking Collapse
The first few months following a banking collapse will undoubtedly be tough. Without the ability to withdraw money or access basic goods and services, people will have to rely on their survival skills to get by.
In the immediate aftermath, there’ll likely be frustration and uncertainty, and a breakdown of law and order. It’ll be challenging to acquire food, water, and medical supplies, and people may have to adapt to a world without reliable electricity or regular communication.
As time goes by, people will start to form small communities and work together to rebuild their lives. Bartering and trade will become the new currency, and people will have to learn to be self-sufficient. Those who have access to precious metals may find it easier to manage their finances. It won’t be easy, but with determination and resourcefulness, people will be able to rebuild their lives over time.
Adjusting to a new way of life
After a banking collapse, life will be vastly different from what people are used to. Many will struggle to adjust to the new reality. However, humans have a remarkable ability to adapt.
In the first few months after the collapse, people will begin to develop new routines and habits. The focus will shift from materialistic possessions to basic necessities such as food, water, and shelter. People will have to learn to live with less and do more for themselves. They may also need to rely more on their community for support.
It will be a challenging time, but those who can adapt and embrace the change will have a better chance of surviving in the long term.
The emergence of a new economic system
The collapse of the banking system could lead to the emergence of a new economic system. In the immediate aftermath of the collapse, bartering may become a common practice as the traditional currency may lose its value. People will rely on a skill set that produces a basic need that can then be bartered.
Cash will be less trusted in the near term. Gold, silver, and other precious metals will be used as currency because they will be trusted.
As time goes by, a new system of trade may emerge. This could be in the form of a new currency or even a resource-based economy. In this new economy, goods and services would be exchanged based on their inherent value rather than their perceived value in the market. Those who control land will be in a better financial position than those who control production as food will be more important than possessions.
Rebuilding society after a catastrophic event like this will be a daunting task that requires careful planning, coordination, and dedication. Restoring the social order will not doubt bring in new governmental structures with the implementation of different law enforcement mechanisms. Restoring critical infrastructure such as transportation, communication, and healthcare systems first will need to happen so that people’s basic needs are met.
In addition to these critical infrastructure needs, there will be a need for significant investment in education, training, and job creation to help people adapt to the new economic realities of a post-collapse world. Developing new skills and professions will be essential to creating a more durable economic system that can support a growing population.
Rebuilding society will require a team effort from all members of the community. Collaboration, innovation, and creativity will be key to creating a new system that is more resilient and responsive to the needs of the people.
The importance of being prepared
In the aftermath of a financial collapse, it becomes clear how important it is to be prepared for such events. Those who took steps to build up their food storage, water, and other essentials before the collapse will be much better off than those who didn’t. The importance of being prepared cannot be overstated, as it can mean the difference between life and death.
Having a plan in place for how to cope with an economic crisis is crucial. Knowing what to do and how to do it can help prevent panic and chaos from taking over. It’s important to educate yourself on survival skills such as first aid, self-defense, and basic construction.
In addition to individual preparation, communities also need to come together to restore social order or hope. Cooperation and collaboration will be center stage in rebuilding society. Having leaders who are knowledgeable and able to guide the community through the crisis will also be critical.
In conclusion, being prepared for a banking collapse or any other disaster is essential for survival. Having a plan in place and the ability to work together can’t be emphasized enough. By taking the necessary steps to prepare for a crisis, we can help ensure that society won’t just survive but thrive in the face of adversity.
The potential consequences of not being prepared
In the days following this scenario, you may find yourself without access to food, medical care, or the ability to protect yourself. You may feel desperate, and could even resort to violence. Without a plan for long-term survival, you may struggle to provide for yourself and your family members, and you may have to rely on others who may not have your best interests at heart.
This particular SHTF scenario could have far-reaching consequences for the economy and the country as a whole. It can lead to widespread unemployment, poverty, and civil unrest. Without the ability to access your savings or financial resources, you may find it difficult to rebuild your life in the future.
Take action now
While there are people on Wall Street who bet on which banks will collapse every day, these sorts of events are unpredictable. Start working on building up your emergency fund in cash and precious metals immediately. You can start small with your pantry and add a few extra long shelf-life items every time you go grocery shopping. Make sure you’ve got a good first aid kit in the house, and then look to set up a water storage method.