Bank runs.
There aren't many words in economics that provoke as much fear and unease.
That terrifying specter looms in Europe, as we learned yesterday that depositors in Greece withdrew almost $900 million from the country's banks on Monday.
The trigger: the ongoing euro crisis made worse by Greece's rapidly deteriorating political mess, and the growing possibility of Greece leaving the euro zone — or what economists with verbal flair call a Grexit.
That giant pile of withdrawn cash comes from regular Greek citizens, as well as buy orders from Greek banks for German bunds, according to Greek President Karolos Papoulias.
Papoulias also warned of "a great fear that could develop into a panic," as reported by Reuters.
The one-day withdrawal arrives as Greeks have already been pulling their money from banks at a rapid clip.
Outflows from bank deposits have averaged between $2.5 billion and $3.8 billion per month so far this year, though as the Wall Street Journal reports, that number topped $6 billion in January.
So what does all of this mean? And how worried should the rest of us be?
To be sure, what's happening in Greece is troubling. But most analysts are downplaying the immediate fears.
"We have witnessed periods of tension before when the banks experienced large outflows. In my view, the majority of people with these concerns would have done so by now," Alex Tsirigotis, Greek banks analyst at Mediobanca told the Telegraph.
But the possibility of panic means that the Greece crisis is, of course, serious and growing ever more so.
The failure of the Greek government to form a new coalition this week — combined with the split across Europe about the purported benefits and painful downsides of austerity, as well as this week's new leadership in France — represents a possible turning point in the future of the euro.
When ordinary citizens start pulling money from banks, it is cause for concern.
That's because confidence is the whole game in economics, no matter where you live: Consumers need it to spend. Banks need it to make loans and borrow for investments. Business owners need it to hire new workers and buy new equipment. Investors need it. We all need it.
Bank runs are so unsettling because they represent the Hobbesian view of economics where each person is out for himself or herself, driven by fear, panic and naked self-interest.
Of course, bank runs also have a dark history in economics that rattles the amygdala.
In fact, they played a key role in one of the most grim moments in economic history — the Great Depression.
Because humans have a short memory — particularly when it comes to complex matters like banking and economics — this seems like a good moment to review that past.
Here's the nutshell version:
Follow us: