Chronic condition

From Wikipedia, the free encyclopedia

https://en.wikipedia.org/wiki/Chronic_condition

A chronic condition (also known as chronic disease or chronic illness) is a health condition or disease that is persistent or otherwise long-lasting in its effects or a disease that comes with time. The term "chronic" is often applied when the course of the disease lasts for more than three months. Common chronic diseases include diabetes, functional gastrointestinal disorder, eczema, arthritis, asthma, cancer, chronic obstructive pulmonary disease, Lyme disease, autoimmune diseases, genetic disorders and some viral diseases such as hepatitis C and acquired immunodeficiency syndrome. An illness which is lifelong because it ends in death is a terminal illness. It is possible and not unexpected for an illness to change in definition from terminal to chronic. Diabetes and HIV for example were once terminal yet are now considered chronic due to the availability of insulin for diabetics and daily drug treatment for individuals with HIV which allow these individuals to live while managing symptoms.

In medicine, chronic conditions are distinguished from those that are acute. An acute condition typically affects one portion of the body and responds to treatment. A chronic condition, on the other hand, usually affects multiple areas of the body, is not fully responsive to treatment, and persists for an extended period of time.

Chronic conditions may have periods of remission or relapse where the disease temporarily goes away, or subsequently reappears. Periods of remission and relapse are commonly discussed when referring to substance abuse disorders which some consider to fall under the category of chronic condition.

Chronic conditions are often associated with non-communicable diseases which are distinguished by their non-infectious causes. Some chronic conditions though, are caused by transmissible infections such as HIV/AIDS.

63% of all deaths worldwide are from chronic conditions. Chronic diseases constitute a major cause of mortality, and the World Health Organization (WHO) attributes 38 million deaths a year to non-communicable diseases. In the United States approximately 40% of adults have at least two chronic conditions. Living with two or more chronic conditions is referred to as multimorbidity.

Types

Chronic conditions have often been used to describe the various health related states of the human body such as syndromes, physical impairments, disabilities as well as diseases. Epidemiologists have found interest in chronic conditions due to the fact they contribute to disease, disability, and diminished physical and/or mental capacity.

For example, high blood pressure or hypertension is considered to be not only a chronic condition itself but also correlated to diseases such as heart attack or stroke. Additionally, some socioeconomic factors may be considered as a chronic condition as they lead to disability in daily life. An important one that public health officials in the social science setting have begun highlighting is chronic poverty.

Researchers, particularly those studying the United States, utilize the Chronic Condition Indicator (CCI) which maps ICD codes as "chronic" or non-chronic".

The list below includes these chronic conditions and diseases:

In 2015 the World Health Organization produced a report on non-communicable diseases, citing the four major types as:

• Cancers
• Cardiovascular diseases, including cerebrovascular disease, heart failure, and ischemic cardiopathy
• Chronic respiratory diseases, such as asthma and chronic obstructive pulmonary disease (COPD)
• Diabetes mellitus (type 1, type 2, pre-diabetes, gestational diabetes)

Other examples of chronic diseases and health conditions include:

• Alzheimer's disease
• Atrial fibrillation
• Attention deficit hyperactivity disorder
• Autoimmune diseases, such as ulcerative colitis, lupus erythematosus, Crohn's disease, coeliac disease, Hashimoto's thyroiditis, and relapsing polychondritis
• Blindness
• Cerebral palsy (all types)
• Chronic graft-versus-host disease
• Chronic hepatitis
• Chronic kidney disease
• Chronic osteoarticular diseases, such as osteoarthritis and rheumatoid arthritis
• Chronic pain syndromes, such as post-vasectomy pain syndrome and complex regional pain syndrome
• Dermatological conditions such as atopic dermatitis and psoriasis
• Deafness and hearing impairment
• Ehlers–Danlos syndrome (various types)
• Endometriosis
• Epilepsy
• Fetal alcohol spectrum disorder
• Fibromyalgia
• HIV/AIDS
• Hereditary spherocytosis
• Huntington's disease
• Hypertension
• Lyme Disease
• Mental illness
• Migraines
• Multiple sclerosis
• Myalgic encephalomyelitis (a.k.a. chronic fatigue syndrome)
• Narcolepsy
• Obesity
• Osteoporosis
• Parkinson's disease
• Periodontal disease
• Polycystic Ovarian Syndrome
• Postural orthostatic tachycardia syndrome
• Sickle cell anemia and other hemoglobin disorders
• Substance Abuse Disorders
• Sleep apnea
• Tick-borne illness
• Thyroid disease
• Tuberculosis
• And many more.

Risk factors

While risk factors vary with age and gender, most of the common chronic diseases in the US are caused by dietary, lifestyle and metabolic risk factors that are also responsible for the resulting mortality. Therefore, these conditions might be prevented by behavioral changes, such as quitting smoking, adopting a healthy diet, and increasing physical activity. Social determinants are important risk factors for chronic diseases. Social factors, e.g., socioeconomic status, education level, and race/ethnicity, are a major cause for the disparities observed in the care of chronic disease. Lack of access and delay in receiving care result in worse outcomes for patients from minorities and underserved populations. Those barriers to medical care complicate patients monitoring and continuity in treatment.

In the US, Minorities and low-income populations are less likely to access and receive preventive services necessary to detect conditions at an early stage.

The majority of US health care and economic costs associated with medical conditions are for the costs of chronic diseases and conditions and associated health risk behaviors. Eighty-four percent of all health care spending in 2006 was for the 50% of the population who have one or more chronic medical conditions (CDC, 2014).

There are several psychosocial risk and resistance factors among children with chronic illness and their family members. Adults with chronic illness were significantly more likely to report life dissatisfaction than those without chronic illness. Compared to their healthy peers, children with chronic illness have about a twofold increase in psychiatric disorders. Higher parental depression and other family stressors predicted more problems among patients. In addition, sibling problems along with the burden of illness on the family as a whole led to more psychological strain on the patients and their families.

Prevention

A growing body of evidence supports that prevention is effective in reducing the effect of chronic conditions; in particular, early detection results in less severe outcomes. Clinical preventive services include screening for the existence of the disease or predisposition to its development, counseling and immunizations against infectious agents. Despite their effectiveness, the utilization of preventive services is typically lower than for regular medical services. In contrast to their apparent cost in time and money, the benefits of preventive services are not directly perceived by patient because their effects are on the long term or might be greater for society as a whole than at the individual level.

Therefore, public health programs are important in educating the public, and promoting healthy lifestyles and awareness about chronic diseases. While those programs can benefit from funding at different levels (state, federal, private) their implementation is mostly in charge of local agencies and community-based organizations.

Studies have shown that public health programs are effective in reducing mortality rates associated to cardiovascular disease, diabetes and cancer, but the results are somewhat heterogeneous depending on the type of condition and the type of programs involved. For example, results from different approaches in cancer prevention and screening depended highly on the type of cancer. The rising number of patient with chronic diseases has renewed the interest in prevention and its potential role in helping control costs. In 2008, the Trust for America's Health produced a report that estimated investing $10 per person annually in community-based programs of proven effectiveness and promoting healthy lifestyle (increase in physical activity, healthier diet and preventing tobacco use) could save more than $16 billion annually within a period of just five years.

A 2017 review (updated in 2022) found that it is uncertain whether school-based policies on targeting risk factors on chronic diseases such as healthy eating policies, physical activity policies, and tobacco policies can improve student health behaviours or knowledge of staffs and students. The updated review in 2022 did determine a slight improvement in measures of obesity and physical activity as the use of improved strategies lead to increased implementation interventions but continued to call for additional research to address questions related to alcohol use and risk. Encouraging those with chronic conditions to continue with their outpatient (ambulatory) medical care and attend scheduled medical appointments may help improve outcomes and reduce medical costs due to missed appointments. Finding patient-centered alternatives to doctors or consultants scheduling medical appointments has been suggested as a means of improving the number of people with chronic conditions that miss medical appointments, however there is no strong evidence that these approaches make a difference.

Nursing

Nursing can play an important role in assisting patients with chronic diseases achieve longevity and experience wellness. Scholars point out that the current neoliberal era emphasizes self-care, in both affluent and low-income communities. This self-care focus extends to the nursing of patients with chronic diseases, replacing a more holistic role for nursing with an emphasis on patients managing their own health conditions. Critics note that this is challenging if not impossible for patients with chronic disease in low-income communities where health care systems, and economic and social structures do not fully support this practice.

A study in Ethiopia showcases a nursing-heavy approach to the management of chronic disease. Foregrounding the problem of distance from healthcare facility, the study recommends patients increase their request for care. It uses nurses and health officers to fill, in a cost-efficient way, the large unmet need for chronic disease treatment. They led their health centers manned by nurses and health officers; so, there are specific training required for involvement in the programmed must be carried out regularly, to ensure that new staff is educated in administering chronic disease care. The program shows that community-based care and education, primarily driven by nurses and health officers, works. It highlights the importance of nurses following up with individuals in the community, and allowing nurses flexibility in meeting their patients' needs and educating them for self-care in their homes.

Epidemiology

The epidemiology of chronic disease is diverse and the epidemiology of some chronic diseases can change in response to new treatments. In the treatment of HIV, the success of anti-retroviral therapies means that many patients will experience this infection as a chronic disease that for many will span several decades of their chronic life.

Some epidemiology of chronic disease can apply to multiple diagnosis. Obesity and body fat distribution for example contribute and are risk factors for many chronic diseases such as diabetes, heart, and kidney disease. Other epidemiological factors, such as social, socioeconomic, and environment do not have a straightforward cause and effect relationship with chronic disease diagnosis. While typically higher socioeconomic status is correlated with lower occurrence of chronic disease, it is not known is there is a direct cause and effect relationship between these two variables.

The epidemiology of communicable chronic diseases such as AIDS is also different from that of noncommunicable chronic disease. While Social factors do play a role in AIDS prevalence, only exposure is truly needed to contract this chronic disease. Communicable chronic diseases are also typically only treatable with medication intervention, rather than lifestyle change as some non-communicable chronic diseases can be treated.

United States

As of 2003, there are a few programs which aim to gain more knowledge on the epidemiology of chronic disease using data collection. The hope of these programs is to gather epidemiological data on various chronic diseases across the United States and demonstrate how this knowledge can be valuable in addressing chronic disease.

In the United States, as of 2004 nearly one in two Americans (133 million) has at least one chronic medical condition, with most subjects (58%) between the ages of 18 and 64. The number is projected to increase by more than one percent per year by 2030, resulting in an estimated chronically ill population of 171 million. The most common chronic conditions are high blood pressure, arthritis, respiratory diseases like emphysema, and high cholesterol.

Based on data from 2014 Medical Expenditure Panel Survey (MEPS), about 60% of adult Americans were estimated to have one chronic illness, with about 40% having more than one; this rate appears to be mostly unchanged from 2008. MEPS data from 1998 showed 45% of adult Americans had at least one chronic illness, and 21% had more than one.

According to research by the CDC, chronic disease is also especially a concern in the elderly population in America. Chronic diseases like stroke, heart disease, and cancer were among the leading causes of death among Americans aged 65 or older in 2002, accounting for 61% of all deaths among this subset of the population. It is estimated that at least 80% of older Americans are currently living with some form of a chronic condition, with 50% of this population having two or more chronic conditions. The two most common chronic conditions in the elderly are high blood pressure and arthritis, with diabetes, coronary heart disease, and cancer also being reported among the elder population.

In examining the statistics of chronic disease among the living elderly, it is also important to make note of the statistics pertaining to fatalities as a result of chronic disease. Heart disease is the leading cause of death from chronic disease for adults older than 65, followed by cancer, stroke, diabetes, chronic lower respiratory diseases, influenza and pneumonia, and, finally, Alzheimer's disease. Though the rates of chronic disease differ by race for those living with chronic illness, the statistics for leading causes of death among elderly are nearly identical across racial/ethnic groups.

Chronic illnesses cause about 70% of deaths in the US and in 2002 chronic conditions (heart disease, cancers, stroke, chronic respiratory diseases, diabetes, Alzheimer's disease, mental illness and kidney diseases) were 6 of the top ten causes of mortality in the general US population.

Economic impact

United States

Chronic diseases are a major factor in the continuous growth of medical care spending. In 2002, the U.S. Department of Health and Human Services stated that the health care for chronic diseases cost the most among all health problems in the U.S. Healthy People 2010 reported that more than 75% of the $2 trillion spent annually in U.S. medical care are due to chronic conditions; spending are even higher in proportion for Medicare beneficiaries (aged 65 years and older). Furthermore, in 2017 it was estimated that 90% of the $3.3 billion spent on healthcare in the United States was due to the treatment of chronic diseases and conditions. Spending growth is driven in part by the greater prevalence of chronic illnesses and the longer life expectancy of the population. Also, improvement in treatments has significantly extended the lifespans of patients with chronic diseases but results in additional costs over long period of time. A striking success is the development of combined antiviral therapies that led to remarkable improvement in survival rates and quality of life of HIV-infected patients.

In addition to direct costs in health care, chronic diseases are a significant burden to the economy, through limitations in daily activities, loss in productivity and loss of days of work. A particular concern is the rising rates of overweight and obesity in all segments of the U.S. population. Obesity itself is a medical condition and not a disease, but it constitutes a major risk factor for developing chronic illnesses, such as diabetes, stroke, cardiovascular disease and cancers. Obesity results in significant health care spending and indirect costs, as illustrated by a recent study from the Texas comptroller reporting that obesity alone cost Texas businesses an extra $9.5 billion in 2009, including more than $4 billion for health care, $5 billion for lost productivity and absenteeism, and $321 million for disability.

Social and personal impact

There have been recent links between social factors and prevalence as well as outcome of chronic conditions.

Mental health

Specifically, the connection between loneliness and health and chronic condition has recently been highlighted. Some studies have shown that loneliness has detrimental health effects similar to that of smoking and obesity. One study found that feelings of isolation are associated with higher self reporting of health as poor, and feelings of loneliness increased the likelihood of mental health disorders in individuals. The connection between chronic illness and loneliness is established, yet oftentimes ignored in treatment. One study for example found that a greater number of chronic illnesses per individual were associated with feelings of loneliness. Some of the possible reasons for this listed are an inability to maintain independence as well as the chronic illness being a source of stress for the individual. A study of loneliness in adults over age 65 found that low levels of loneliness as well as high levels of familial support were associated with better outcomes of multiple chronic conditions such as hypertension and diabetes. There are some recent movements in the medical sphere to address these connections when treating patients with chronic illness. The biopsychosocial approach for example, developed in 2006 focuses on patients "patient's personality, family, culture, and health dynamics." Physicians are leaning more towards a psychosocial approach to chronic illness to aid the increasing number of individuals diagnosed with these conditions. Despite this movement, there is still criticism that chronic conditions are not being treated appropriately, and there is not enough emphasis on the behavioral aspects of chronic conditions or psychological types of support for patients.

The mental toll of chronic illness is often underestimated in society. Adults with chronic illness that restrict their daily life present with more depression and lower self-esteem than healthy adults and adults with non-restricting chronic illness. The emotional influence of chronic illness also has an effect on the intellectual and educational development of the individual. For example, people living with type 1 diabetes endure a lifetime of monotonous and rigorous health care management usually involving daily blood glucose monitoring, insulin injections, and constant self-care. This type of constant attention that is required by type 1 diabetes and other chronic illness can result in psychological maladjustment. There have been several theories, namely one called diabetes resilience theory, that posit that protective processes buffer the impact of risk factors on the individual's development and functioning.

Financial cost

People with chronic conditions pay more out-of-pocket; a study of the United States found that people spent $2,243 more on average. The financial burden can increase medication non-adherence.

In some countries, laws protect patients with chronic conditions from excessive financial responsibility; for example, as of 2008 France limited copayments for those with chronic conditions, and Germany limits cost sharing to 1% of income versus 2% for the general public.

Within the medical-industrial complex, chronic illnesses can impact the relationship between pharmaceutical companies and people with chronic conditions. Life-saving drugs, or life-extending drugs, can be inflated for a profit. There is little regulation on the cost of chronic illness drugs, which suggests that abusing the lack of a drug cap can create a large market for drug revenue. Likewise, certain chronic conditions can last throughout one's lifetime and create pathways for pharmaceutical companies to take advantage of this.

Gender

Gender influences how chronic disease is viewed and treated in society. Women's chronic health issues are often considered to be most worthy of treatment or most severe when the chronic condition interferes with a woman's fertility. Historically, there is less of a focus on a woman's chronic conditions when it interferes with other aspects of her life or well-being. Many women report feeling less than or even "half of a woman" due to the pressures that society puts on the importance of fertility and health when it comes to typically feminine ideals. These kinds of social barriers interfere with women's ability to perform various other activities in life and fully work toward their aspirations.

Socioeconomic class and race

Race is also allegedly implicated in chronic illness, although there may be many other factors involved. Racial minorities are 1.5-2 times more likely to have most chronic diseases than white individuals. Non-Hispanic blacks are 40% more likely to have high blood pressure that non-Hispanic whites, diagnosed diabetes is 77% higher among non-Hispanic blacks, and American Indians and Alaska Natives are 60% more likely to be obese than non-Hispanic whites. Some of this prevalence has been suggested to be in part from environmental racism. Flint, Michigan, for example, had high levels of lead poisoning in their drinkable water after waste was dumped into low-value housing areas. There are also higher rates of asthma in children who live in lower income areas due to an abundance of pollutants being released on a much larger scale in these areas.

Advocacy and research organizations

In Europe, the European Chronic Disease Alliance was formed in 2011, which represents over 100,000 healthcare workers.

In the United States, there are a number of nonprofits focused on chronic conditions, including entities focused on specific diseases such as the American Diabetes Association, Alzheimer's Association, or Crohn's and Colitis Foundation. There are also broader groups focused on advocacy or research into chronic illness in general, such as The National Association of Chronic Disease Directors, Partnership to FIght Chronic Disease, the Chronic Disease Coalition which arose in Oregon in 2015, and the Chronic Policy Care Alliance.

Narratives

• Final Negotiations: A Story of Love, Loss, and Chronic Illness by Carolyn Ellis
• Beyond Words: Illness and the Limits of Expression by Kathlyn Conway
• Ordinary Life: A Memoir of Illness by Kathlyn Conway
• The Wounded Storyteller: Body, Illness, and Ethics by Arthur W. Frank
• Tender Points by Amy Berkowitz
• Illness as Metaphor by Susan Sontag
• Regarding the Pain of Others by Susan Sontag
• Bodies in Protest: Environmental Illness and the Struggle Over Medical Knowledge by Steve Kroll-Smith and H. Hugh Floyd
• Inside Chronic Pain: An Intimate and Critical Account by Louis Heshusius and Scott M. Fishman
• The Nearness of Others: Searching for Tact and Contact in the Age of HIV by David Caron
• Narrative Medicine: Honoring the Stories of Illness by Rita Charon
• Good Days, Bad Days: The Self in Chronic Illness and Time by Kathy Charmaz

Coinage Act of 1792

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https://en.wikipedia.org/wiki/Coinage_Act_of_1792 

 

Coinage Act of 1792

Long title	An Act establishing a Mint, and regulating the Coins of the United States.
Enacted by	the 2nd United States Congress
Citations
Statutes at Large	1 Stat. 246
Legislative history
Signed into law by President George Washington on April 2, 1792

The Coinage Act of 1792 (also known as the Mint Act; officially: An act establishing a mint, and regulating the Coins of the United States), passed by the United States Congress on April 2, 1792, created the United States dollar as the country's standard unit of money, established the United States Mint, and regulated the coinage of the United States. This act established the silver dollar as the unit of money in the United States, declared it to be lawful tender, and created a decimal system for U.S. currency.

By the Act, the Mint was to be situated at the seat of government of the United States. The five original officers of the U.S. Mint were a Director, an Assayer, a Chief Coiner, an Engraver, and a Treasurer (not the same as the Secretary of the Treasury). The Act allowed that one person could perform the functions of Chief Coiner and Engraver. The Assayer, Chief Coiner and Treasurer were required to post a $10,000 bond with the Secretary of the Treasury.

The Act pegged the newly created United States dollar to the value of the widely used Spanish silver dollar, saying it was to have "the value of a Spanish milled dollar as the same is now current".

History

Although some of the provisions in the 1792 Coinage Act were adjusted as time went by, the majority of the rules specified in this Act remained in effect for decades. Essentially, it provided the framework for all subsequent coinage design and production. The Act called for an image emblematic of liberty as well as the word "liberty", and the year of the coinage. It further declared that on the reverse of each gold and silver coin there would also be the representation of an eagle, with the inscription, "UNITED STATES OF AMERICA". On the reverse of the copper coins, there express the denomination of the coin as one-cent or half-cent. The Act specified the issuing of three gold coins comprising a $10 gold coin called an "eagle", a $5 coin called a "half eagle", and a $2.5 coin called a "quarter eagle". The Act also authorized construction of a mint building in Philadelphia, the nation's capital at the time. This was the first federal building erected under the United States Constitution. Mint director David Rittenhouse laid the building's cornerstone on July 31.

On May 8, 1792, An Act to Provide For a Copper Coinage was signed into law by President George Washington. It followed the precedent of the Fugio cent of 1787 in establishing the copper cent, from which descends today's one-cent piece. The Act also stipulated that "the director of the mint... be authorized to contract for and purchase a quantity of copper, not exceeding one hundred and fifty tons... to be coined at the mint into cents and half-cents... and be paid into the treasury of the United States, thence to issue into circulation." Furthermore, it said that "no copper coins or pieces whatsoever except the said cents and half-cents, shall pass current as money, or shall be paid, or offered to be paid or received in payment for any debt, demand, claims, matter or thing whatsoever."

Effects

Merchants and bankers were reluctant to bring silver bullion to the Mint because of the disclosure of the illegal silver standard that was previously in effect. The silver coins produced in 1794 & 1795 honored the official overall weight of the coin (at 416 grains), but employed a 0.900 fine standard instead of the Spanish dollar 0.8924 fine standard as prescribed in the Mint Act of April 2, 1792 (Heritage Coin Auction #390, Vol III, p. 117). Since the overall weight of the coin remained the same, but the purity was increased, each coin had an excess of precious metal content (416 * 0.9 = 374.4 grains; vs. 416 * 0.8924 = 371.2384 grains; thus: 374.4 - 371.2384 = +3.1616 grains); but since the value of the coin was determined by its face value, this excess precious metal was essentially wasted. The most immediate effect of this practice was that depositors ended up paying an additional 3.1616 grains (0.205 grams) of silver bullion (almost 1% extra; 3.1616 / 371.2384 = 0.8%) for every dollar they received (Taxay, 1966, p. 89). When this became widely known, bullion deposits brought to the mint declined significantly in 1796 and 1797.

Authorization and free coinage

The Act authorized production of the following coins:

Eagles	$10.00	247+4⁄8 grain (16.04 g) pure or 270 grain (17.5 g) standard gold
Half eagles	$5.00	123+6⁄8 grain (8.02 g) pure or 135 grain (8.75 g) standard gold
Quarter eagles	$2.50	61+7⁄8 grain (4.01 g) pure or 67+4⁄8 grain (4.37 g) standard gold
Dollars or Units	$1.00	371+4⁄16 grain (24.1 g) pure or 416 grain (27.0 g) standard silver
Half dollars	$0.50	185+10⁄16 grain (12.0 g) pure or 208 grain (13.5 g) standard silver
Quarter dollars	$0.25	92+13⁄16 grain (6.01 g) pure or 104 grains (6.74 g) standard silver
Dismes	$0.10	37+2⁄16 grain (2.41 g) pure or 41+3⁄5 grain (2.70 g) standard silver
Half dismes	$0.05	18+9⁄16 grain (1.20 g) pure or 20+4⁄5 grain (1.35 g) standard silver
Cents or Pennies	$0.01	11 pennyweights (17.1 g) of copper
Half cents	$0.005	5+1⁄2 pennyweights (8.55 g) of copper

The coins were to contain the following markings:

• One side was to have an impression emblematic of liberty, with the inscription "Liberty", and the year of the coinage.
• The reverse side of each of the gold and silver coins was to have the figure or representation of an eagle with the inscription "UNITED STATES OF AMERICA".
• The reverse of the copper coins was to have an inscription expressing the denomination.

Images of Liberty would remain a standard part of US coinage through the 19th century and into the early 20th. While European coins typically included a portrait of the reigning monarch, the idea of depicting a real, as opposed to an allegorical, figure was considered unacceptable in the republican United States. The image of Liberty used on US coins generally reflected contemporary standards of female beauty, and was redesigned every few decades to reflect the changing times, although the Seated Liberty image which graced coins starting in 1837 would end up being used for over half a century. Not until the Lincoln cent, issued in 1909 to commemorate the centenary of President Lincoln's birth, would a real person be depicted on a US coin.

The Act defined the proportional value of gold and silver as 15 units of pure silver to 1 unit of pure gold. Standard gold was defined as 11 parts pure gold to one part alloy composed of silver and copper. Standard silver was defined as 1485 parts pure silver to 179 parts copper alloy. The Act also specified the dollar as the "money of account" of the United States, and directed that all accounts of the federal government be kept in dollars, "dismes", cents, and "milles", a mille being one-tenth of a cent or one-thousandth of a dollar. The silver content of a dollar under this act was almost exactly equal to ¹/₅ of the silver content of the contemporary British pound sterling, or 4 British shillings.

Under Sec.14, any person could bring gold or silver bullion and have it coined for free or later for a small fee, exchange it immediately for an equivalent value of coin. The paragraph summary states: "Persons may bring gold and silver bullion, to be coined free of expense;"

Quality control measures were implemented in that from each separate mass of gold or silver used to produce coins, three coins were set aside by the treasurer. Each year on the last Monday in July, under the inspection of the Chief Justice, the Secretary and Comptroller of the Treasury, the Secretary of State, and the Attorney General, the coins were to be assayed and if the coins did not meet established standards, the officers were disqualified from office. The meetings later became formalized as the United States Assay Commission, which continued meeting until it was disbanded in 1980.

Section 19 of the Act established a penalty of death for debasing the gold or silver coins authorized by the Act, or embezzlement of the metals for those coins, by officers or employees of the mint; this section of the Act apparently remains in effect and would, in theory, continue to apply in the case of "any of the gold or silver coins which shall be struck or coined at the said mint". (At present the only gold or silver coins struck by the US mint are the American Silver Eagle and the American Gold Eagle coins, some proof coinage at the San Francisco Mint, such as the silver US State Quarters, and much of the Commemorative coinage of the United States.) All other sections of the act have been superseded, as the Coinage Act of 1834 changing the silver-to-gold weight ratio. Various acts have subsequently been passed affecting the amount and type of metal in U.S. coins, so today there is no legal definition of the term "dollar" to be found in any U.S. statute. Current statutes regulating coinage in the United States may be found in Title 31 of the United States Code.

Kondratiev wave

From Wikipedia, the free encyclopedia

https://en.wikipedia.org/wiki/Kondratiev_wave

A rough schematic drawing showing growth cycles in the world economy over time according to the Kondratiev theory

In economics, Kondratiev waves (also called supercycles, great surges, long waves, K-waves or the long economic cycle) are hypothesized cycle-like phenomena in the modern world economy. The phenomenon is closely connected with the technology life cycle.

It is stated that the period of a wave ranges from forty to sixty years, the cycles consist of alternating intervals of high sectoral growth and intervals of relatively slow growth.

Long wave theory is not accepted by most academic economists. Among economists who accept it, there is a lack of agreement about both the cause of the waves and the start and end years of particular waves. Among critics of the theory, the consensus is that it involves recognizing patterns that may not exist (apophenia).

History of concept

The Soviet economist Nikolai Kondratiev (also written Kondratieff or Kondratyev) was the first to bring these observations to international attention in his book The Major Economic Cycles (1925) alongside other works written in the same decade. In 1939, Joseph Schumpeter suggested naming the cycles "Kondratieff waves" in his honor. The underlying idea is closely linked to organic composition of capital.

Two Dutch economists, Jacob van Gelderen and Salomon de Wolff, had previously argued for the existence of 50- to 60-year cycles in 1913 and 1924, respectively.

Since the inception of the theory, various studies have expanded the range of possible cycles, finding longer or shorter cycles in the data. The Marxist scholar Ernest Mandel revived interest in long-wave theory with his 1964 essay predicting the end of the long boom after five years and in his Alfred Marshall lectures in 1979. However, in Mandel's theory long waves are the result of the normal business cycle and noneconomic factors, such as wars.

In 1996, George Modelski and William R. Thompson published a book documenting K-Waves dating back to 930 AD in China. Separately, Michael Snyder wrote: "economic cycle theories have enabled some analysts to correctly predict the timing of recessions, stock market peaks and stock market crashes over the past couple of decades".

The historian Eric Hobsbawm also wrote of the theory: "That good predictions have proved possible on the basis of Kondratiev Long Waves—this is not very common in economics—has convinced many historians and even some economists that there is something in them, even if we don't know what".

US economist Anwar Shaikh analyses the movement of the general price level - prices expressed in gold - in the US and the UK since 1890 and identifies three long cycles with troughs ca. in 1895, 1939 and 1982. With this model 2018 was another trough between the third and a possible future fourth cycle.

Characteristics of the cycle

Kondratiev identified three phases in the cycle, namely expansion, stagnation and recession. More common today is the division into four periods with a turning point (collapse) between expansion and stagnation.

Writing in the 1920s, Kondratiev proposed to apply the theory to the 19th century:

• 1790–1849, with a turning point in 1815.
• 1850–1896, with a turning point in 1873.
• Kondratiev supposed that in 1896 a new cycle had started.

The long cycle supposedly affects all sectors of an economy. Kondratiev focused on prices and interest rates, seeing the ascendant phase as characterized by an increase in prices and low interest rates while the other phase consists of a decrease in prices and high interest rates. Subsequent analysis concentrated on output.

Explanations of the cycle

Cause and effect

Kondratiev waves present both causes and effects of common events that have recurred in capitalistic economies throughout history. Although Kondratiev himself made little differentiation between cause and effect, understanding the cause and effect of Kondratiev waves is a useful discussion and academic tool.

The causes documented by Kondratiev waves primarily include inequity, opportunity and social freedoms. Often, much more discussion is made of the notable effects of these causes as well. Effects are both good and bad and include, to name just a few, technological advance, birthrates, populism and revolution—and revolution's contributing causes which can include racism, religious and political intolerance, failed freedoms and opportunity, incarceration rates, terrorism, etc.

When inequity is low and opportunity is easily available, peaceful, moral decisions are preferred and Aristotle's "Good Life" is possible (Americans call the good life "the American Dream"). Opportunity created the simple inspiration and genius of the Mayflower Compact, for example. Post-World War II and the post-California gold rush 1850s exemplify times of great opportunity and low inequity, and both resulted in unprecedented technological and industrial advances. On the other hand, 1893's global economic panics were not met with sufficient wealth-distributing government policies internationally, and a dozen major revolutions resulted, which some argue were significant causes of World War I. Few would argue against the assertion that World War II began in response to the economic strictures of World War I's Treaty of Versailles and the failure to create government policy that supported economic opportunity during the Great Depression.

Technological innovation theory

According to the innovation theory, these waves arise from the bunching of basic innovations that launch technological revolutions that in turn create leading industrial or commercial sectors. Kondratiev's ideas were taken up by Joseph Schumpeter in the 1930s. The theory hypothesized the existence of very long-run macroeconomic and price cycles, originally estimated to last 50–54 years.

In recent decades there has been considerable progress in historical economics and the history of technology, and numerous investigations of the relationship between technological innovation and economic cycles. Some of the works involving long cycle research and technology include Mensch (1979), Tylecote (1991), the International Institute for Applied Systems Analysis (IIASA) (Marchetti, Ayres), Freeman and Louçã (2001), Andrey Korotayev and Carlota Perez.

Perez (2002) places the phases on a logistic or S curve, with the following labels: the beginning of a technological era as irruption, the ascent as frenzy, the rapid build out as synergy and the completion as maturity.

Demographic theory

Because people have fairly typical spending patterns through their life cycle, such as spending on schooling, marriage, first car purchase, first home purchase, upgrade home purchase, maximum earnings period, maximum retirement savings and retirement, demographic anomalies such as baby booms and busts exert a rather predictable influence on the economy over a long time period. The Easterlin hypothesis deals with the post-war baby-boom. Harry Dent has written extensively on demographics and economic cycles. Tylecote (1991) devoted a chapter to demographics and the long cycle.

Land speculation

Main article: Georgism

Georgists such as Mason Gaffney, Fred Foldvary and Fred Harrison argue that land speculation is the driving force behind the boom and bust cycle. Land is a finite resource which is necessary for all production and they claim that because exclusive usage rights are traded around, this creates speculative bubbles which can be exacerbated by overzealous borrowing and lending. As early as 1997, a number of Georgists predicted that the next crash would come in 2008.

Debt deflation

Main article: Debt deflation

Debt deflation is a theory of economic cycles which holds that recessions and depressions are due to the overall level of debt shrinking (deflating). Hence, the credit cycle is the cause of the economic cycle.

The theory was developed by Irving Fisher following the Wall Street Crash of 1929 and the ensuing Great Depression. Debt deflation was largely ignored in favor of the ideas of John Maynard Keynes in Keynesian economics, but it has enjoyed a resurgence of interest since the 1980s, both in mainstream economics and in the heterodox school of post-Keynesian economics and has subsequently been developed by such post-Keynesian economists as Hyman Minsky and Steve Keen.

Modern modifications of Kondratiev theory

Inequity appears to be the most obvious driver of Kondratiev waves, and yet some researches have presented a technological and credit cycle explanation as well.

There are several modern timing versions of the cycle although most are based on either of two causes: one on technology and the other on the credit cycle.

Additionally, there are several versions of the technological cycles and they are best interpreted using diffusion curves of leading industries. For example, railways only started in the 1830s, with steady growth for the next 45 years. It was after Bessemer steel was introduced that railroads had their highest growth rates. However, this period is usually labeled the age of steel. Measured by value added, the leading industry in the U.S. from 1880 to 1920 was machinery, followed by iron and steel.

Any influence of technology during the cycle that began in the Industrial Revolution pertains mainly to England. The U.S. was a commodity producer and was more influenced by agricultural commodity prices. There was a commodity price cycle based on increasing consumption causing tight supplies and rising prices. That allowed new land to the west to be purchased and after four or five years to be cleared and be in production, driving down prices and causing a depression as in 1819 and 1839. By the 1850s, the U.S. was becoming industrialized.

The technological cycles can be labeled as follows:

• Industrial Revolution (1771)
• Age of Steam and Railways (1829)
• Age of Steel and Heavy Engineering (1875)
• Age of Oil, Electricity, the Automobile and Mass Production (1908)
• Age of Information and Telecommunications (1971)

Some argue that this logic can be extended. The custom of classifying periods of human development by its dominating general purpose technology has surely been borrowed from historians, starting with the Stone Age. Including those, authors distinguish three different long-term metaparadigms, each with different long waves. The first focused on the transformation of material, including stone, bronze, and iron. The second, often referred to as industrial revolutions, was dedicated to the transformation of energy, including water, steam, electric, and combustion power. Finally, the most recent metaparadigm aims at transforming information. It started out with the proliferation of communication and stored data and has now entered the age of algorithms, which aims at creating automated processes to convert the existing information into actionable knowledge.

Several papers on the relationship between technology and the economy were written by researchers at the International Institute for Applied Systems Analysis (IIASA). A concise version of Kondratiev cycles can be found in the work of Robert Ayres (1989) in which he gives a historical overview of the relationships of the most significant technologies. Cesare Marchetti published on Kondretiev waves and on the diffusion of innovations. Arnulf Grübler's book (1990) gives a detailed account of the diffusion of infrastructures including canals, railroads, highways and airlines, with findings that the principal infrastructures have midpoints spaced in time corresponding to 55-year K wavelengths, with railroads and highways taking almost a century to complete. Grübler devotes a chapter to the long economic wave. In 1996, Giancarlo Pallavicini published the ratio between the long Kondratiev wave and information technology and communication.

Korotayev et al. recently employed spectral analysis and claimed that it confirmed the presence of Kondratiev waves in the world GDP dynamics at an acceptable level of statistical significance. Korotayev et al. also detected shorter business cycles, dating the Kuznets to about 17 years and calling it the third harmonic of the Kondratiev, meaning that there are three Kuznets cycles per Kondratiev.

Leo A. Nefiodow shows that the fifth Kondratieff ended with the global economic crisis of 2000–2003 while the new, sixth Kondratieff started simultaneously. According to Leo A. Nefiodow, the carrier of this new long cycle will be health in a holistic sense—including its physical, psychological, mental, social, ecological and spiritual aspects; the basic innovations of the sixth Kondratieff are "psychosocial health" and "biotechnology".

More recently, the physicist and systems scientist Tessaleno Devezas advanced a causal model for the long wave phenomenon based on a generation-learning model and a nonlinear dynamic behaviour of information systems. In both works, a complete theory is presented containing not only the explanation for the existence of K-Waves, but also and for the first time an explanation for the timing of a K-Wave (≈60 years = two generations).

A specific modification of the theory of Kondratieff cycles was developed by Daniel Šmihula. Šmihula identified six long-waves within modern society and the capitalist economy, each of which was initiated by a specific technological revolution:

1. Wave of the Financial-agricultural revolution (1600–1780)
2. Wave of the Industrial revolution (1780–1880)
3. Wave of the Technical revolution (1880–1940)
4. Wave of the Scientific-technical revolution (1940–1985)
5. Wave of the Information and telecommunications revolution (1985–2015)
6. Hypothetical wave of the post-informational technological revolution (Internet of things/renewable energy transition?) (2015–2035?)

Unlike Kondratieff and Schumpeter, Šmihula believed that each new cycle is shorter than its predecessor. His main stress is put on technological progress and new technologies as decisive factors of any long-time economic development. Each of these waves has its innovation phase which is described as a technological revolution and an application phase in which the number of revolutionary innovations falls and attention focuses on exploiting and extending existing innovations. As soon as an innovation or a series of innovations becomes available, it becomes more efficient to invest in its adoption, extension and use than in creating new innovations. Each wave of technological innovations can be characterized by the area in which the most revolutionary changes took place ("leading sectors").

Every wave of innovations lasts approximately until the profits from the new innovation or sector fall to the level of other, older, more traditional sectors. It is a situation when the new technology, which originally increased a capacity to utilize new sources from nature, reached its limits and it is not possible to overcome this limit without an application of another new technology.

For the end of an application phase of any wave there are typical an economic crisis and economic stagnation. The financial crisis of 2007–2008 is a result of the coming end of the "wave of the Information and telecommunications technological revolution". Some authors have started to predict what the sixth wave might be, such as James Bradfield Moody and Bianca Nogrady who forecast that it will be driven by resource efficiency and clean technology. On the other hand, Šmihula himself considers the waves of technological innovations during the modern age (after 1600 AD) only as a part of a much longer "chain" of technological revolutions going back to the pre-modern era. It means he believes that we can find long economic cycles (analogical to Kondratiev cycles in modern economy) dependent on technological revolutions even in the Middle Ages and the Ancient era.

Criticism of Kondratiev theory

Kondratiev waves associated with gains in IT and health with phase shift and overlap, Andreas J. W. Goldschmidt, 2004

Long wave theory is not accepted by many academic economists. However, it is important for innovation-based, development and evolutionary economics. Yet, among economists who accept it, there has been no formal universal agreement about the standards that should be used universally to place start and the end years for each wave. Agreement of start and end years can be +1 to 3 years for each 40- to 65-year cycle.

Health economist and biostatistician Andreas J. W. Goldschmidt searched for patterns and proposed that there is a phase shift and overlap of the so-called Kondratiev cycles of IT and health (shown in the figure). He argued that historical growth phases in combination with key technologies does not necessarily imply the existence of regular cycles in general. Goldschmidt is of the opinion that different fundamental innovations and their economic stimuli do not exclude each other as they mostly vary in length and their benefit is not applicable to all participants in a market.

Bank run

From Wikipedia, the free encyclopedia

https://en.wikipedia.org/wiki/Bank_run

 

American Union Bank, New York City. April 26, 1932.

A bank run or run on the bank occurs when many clients withdraw their money from a bank, because they believe the bank may cease to function in the near future. In other words, it is when, in a fractional-reserve banking system (where banks normally only keep a small proportion of their assets as cash), numerous customers withdraw cash from deposit accounts with a financial institution at the same time because they believe that the financial institution is, or might become, insolvent; they keep the cash or transfer it into other assets, such as government bonds, precious metals or gemstones. When they transfer funds to another institution, it may be characterized as a capital flight. As a bank run progresses, it may become a self-fulfilling prophecy: as more people withdraw cash, the likelihood of default increases, triggering further withdrawals. This can destabilize the bank to the point where it runs out of cash and thus faces sudden bankruptcy. To combat a bank run, a bank may limit how much cash each customer may withdraw, suspend withdrawals altogether, or promptly acquire more cash from other banks or from the central bank, besides other measures.

A banking panic or bank panic is a financial crisis that occurs when many banks suffer runs at the same time, as people suddenly try to convert their threatened deposits into cash or try to get out of their domestic banking system altogether. A systemic banking crisis is one where all or almost all of the banking capital in a country is wiped out. The resulting chain of bankruptcies can cause a long economic recession as domestic businesses and consumers are starved of capital as the domestic banking system shuts down. According to former U.S. Federal Reserve chairman Ben Bernanke, the Great Depression was caused by the Federal Reserve System, and much of the economic damage was caused directly by bank runs. The cost of cleaning up a systemic banking crisis can be huge, with fiscal costs averaging 13% of GDP and economic output losses averaging 20% of GDP for important crises from 1970 to 2007.

Several techniques have been used to try to prevent bank runs or mitigate their effects. They have included a higher reserve requirement (requiring banks to keep more of their reserves as cash), government bailouts of banks, supervision and regulation of commercial banks, the organization of central banks that act as a lender of last resort, the protection of deposit insurance systems such as the U.S. Federal Deposit Insurance Corporation, and after a run has started, a temporary suspension of withdrawals. These techniques do not always work: for example, even with deposit insurance, depositors may still be motivated by beliefs they may lack immediate access to deposits during a bank reorganization.

History

Further information: List of bank runs and List of banking crises

 

10 livres tournois banknote issued by Banque Royale, France, 1720. In 1720, shareholders demanded cash payment, leading to a run on the bank and financial chaos in France. On display at the British Museum.

 

The run on the Montreal City and District Savings Bank, with the mayor addressing the crowd. Printed in 1872 in the Canadian Illustrated News.

Bank runs first appeared as part of cycles of credit expansion and its subsequent contraction. In the 16th century onwards, English goldsmiths issuing promissory notes suffered severe failures due to bad harvests, plummeting parts of the country into famine and unrest. Other examples are the Dutch tulip manias (1634–37), the British South Sea Bubble (1717–19), the French Mississippi Company (1717–20), the post-Napoleonic depression (1815–30), and the Great Depression (1929–39).

Bank runs have also been used to blackmail individuals and governments. In 1832, for example, the British government under the Duke of Wellington overturned a majority government on the orders of the king, William IV, to prevent reform (the later 1832 Reform Act). Wellington's actions angered reformers, and they threatened a run on the banks under the rallying cry "Stop the Duke, go for gold!".

Many of the recessions in the United States were caused by banking panics. The Great Depression contained several banking crises consisting of runs on multiple banks from 1929 to 1933; some of these were specific to regions of the U.S. Bank runs were most common in states whose laws allowed banks to operate only a single branch, dramatically increasing risk compared to banks with multiple branches particularly when single-branch banks were located in areas economically dependent on a single industry.

Banking panics began in the Southern United States in November 1930, one year after the stock market crash, triggered by the collapse of a string of banks in Tennessee and Kentucky, which brought down their correspondent networks. In December, New York City experienced massive bank runs that were contained to the many branches of a single bank. Philadelphia was hit a week later by bank runs that affected several banks, but were successfully contained by quick action by the leading city banks and the Federal Reserve Bank. Withdrawals became worse after financial conglomerates in New York and Los Angeles failed in prominently-covered scandals. Much of the US Depression's economic damage was caused directly by bank runs, though Canada had no bank runs during this same era due to different banking regulations.

Money supply decreased substantially between Black Tuesday and the Bank Holiday in March 1933 when there were massive bank runs across the United States.

Milton Friedman and Anna Schwartz argued that steady withdrawals from banks by nervous depositors ("hoarding") were inspired by news of the fall 1930 bank runs and forced banks to liquidate loans, which directly caused a decrease in the money supply, shrinking the economy. Bank runs continued to plague the United States for the next several years. Citywide runs hit Boston (December 1931), Chicago (June 1931 and June 1932), Toledo (June 1931), and St. Louis (January 1933), among others. Institutions put into place during the Depression have prevented runs on U.S. commercial banks since the 1930s, even under conditions such as the U.S. savings and loan crisis of the 1980s and 1990s.

The global financial crisis that began in 2007 was centered around market-liquidity failures that were comparable to a bank run. The crisis contained a wave of bank nationalizations, including those associated with Northern Rock of the UK and IndyMac of the U.S. This crisis was caused by low real interest rates stimulating an asset price bubble fuelled by new financial products that were not stress tested and that failed in the downturn.

Theory

Main article: Diamond–Dybvig model

 

A poster for the 1896 Broadway melodrama The War of Wealth depicts a 19th-century bank run in the U.S.

Under fractional-reserve banking, the type of banking currently used in most developed countries, banks retain only a fraction of their demand deposits as cash. The remainder is invested in securities and loans, whose terms are typically longer than the demand deposits, resulting in an asset–liability mismatch. No bank has enough reserves on hand to cope with all deposits being taken out at once.

Diamond and Dybvig developed an influential model to explain why bank runs occur and why banks issue deposits that are more liquid than their assets. According to the model, the bank acts as an intermediary between borrowers who prefer long-maturity loans and depositors who prefer liquid accounts. The Diamond–Dybvig model provides an example of an economic game with more than one Nash equilibrium, where it is logical for individual depositors to engage in a bank run once they suspect one might start, even though that run will cause the bank to collapse.

In the model, business investment requires expenditures in the present to obtain returns that take time in coming, for example, spending on machines and buildings now for production in future years. A business or entrepreneur that needs to borrow to finance investment will want to give their investments a long time to generate returns before full repayment, and will prefer long maturity loans, which offer little liquidity to the lender. The same principle applies to individuals and households seeking financing to purchase large-ticket items such as housing or automobiles. The households and firms who have the money to lend to these businesses may have sudden, unpredictable needs for cash, so they are often willing to lend only on the condition of being guaranteed immediate access to their money in the form of liquid demand deposit accounts, that is, accounts with shortest possible maturity. Since borrowers need money and depositors fear to make these loans individually, banks provide a valuable service by aggregating funds from many individual deposits, portioning them into loans for borrowers, and spreading the risks both of default and sudden demands for cash. Banks can charge much higher interest on their long-term loans than they pay out on demand deposits, allowing them to earn a profit.

Depositors clamor to withdraw their savings from a bank in Berlin, 13 July 1931

If only a few depositors withdraw at any given time, this arrangement works well. Barring some major emergency on a scale matching or exceeding the bank's geographical area of operation, depositors' unpredictable needs for cash are unlikely to occur at the same time; that is, by the law of large numbers, banks can expect only a small percentage of accounts withdrawn on any one day because individual expenditure needs are largely uncorrelated. A bank can make loans over a long horizon, while keeping only relatively small amounts of cash on hand to pay any depositors who may demand withdrawals.

However, if many depositors withdraw all at once, the bank itself (as opposed to individual investors) may run short of liquidity, and depositors will rush to withdraw their money, forcing the bank to liquidate many of its assets at a loss, and eventually to fail. If such a bank were to attempt to call in its loans early, businesses might be forced to disrupt their production while individuals might need to sell their homes and/or vehicles, causing further losses to the larger economy. Even so, many if not most debtors would be unable to pay the bank in full on demand and would be forced to declare bankruptcy, possibly affecting other creditors in the process.

A bank run can occur even when started by a false story. Even depositors who know the story is false will have an incentive to withdraw, if they suspect other depositors will believe the story. The story becomes a self-fulfilling prophecy. Indeed, Robert K. Merton, who coined the term self-fulfilling prophecy, mentioned bank runs as a prime example of the concept in his book Social Theory and Social Structure. Mervyn King, governor of the Bank of England, once noted that it may not be rational to start a bank run, but it is rational to participate in one once it had started.

Systemic banking crisis

Bank run during the Great Depression in the United States, February 1933.

A bank run is the sudden withdrawal of deposits of just one bank. A banking panic or bank panic is a financial crisis that occurs when many banks suffer runs at the same time, as a cascading failure. In a systemic banking crisis, all or almost all of the banking capital in a country is wiped out; this can result when regulators ignore systemic risks and spillover effects.

Systemic banking crises are associated with substantial fiscal costs and large output losses. Frequently, emergency liquidity support and blanket guarantees have been used to contain these crises, not always successfully. Although fiscal tightening may help contain market pressures if a crisis is triggered by unsustainable fiscal policies, expansionary fiscal policies are typically used. In crises of liquidity and solvency, central banks can provide liquidity to support illiquid banks. Depositor protection can help restore confidence, although it tends to be costly and does not necessarily speed up economic recovery. Intervention is often delayed in the hope that recovery will occur, and this delay increases the stress on the economy.

Some measures are more effective than others in containing economic fallout and restoring the banking system after a systemic crisis. These include establishing the scale of the problem, targeted debt relief programs to distressed borrowers, corporate restructuring programs, recognizing bank losses, and adequately capitalizing banks. Speed of intervention appears to be crucial; intervention is often delayed in the hope that insolvent banks will recover if given liquidity support and relaxation of regulations, and in the end this delay increases stress on the economy. Programs that are targeted, that specify clear quantifiable rules that limit access to preferred assistance, and that contain meaningful standards for capital regulation, appear to be more successful. According to IMF, government-owned asset management companies (bad banks) are largely ineffective due to political constraints.

A silent run occurs when the implicit fiscal deficit from a government's unbooked loss exposure to zombie banks is large enough to deter depositors of those banks. As more depositors and investors begin to doubt whether a government can support a country's banking system, the silent run on the system can gather steam, causing the zombie banks' funding costs to increase. If a zombie bank sells some assets at market value, its remaining assets contain a larger fraction of unbooked losses; if it rolls over its liabilities at increased interest rates, it squeezes its profits along with the profits of healthier competitors. The longer the silent run goes on, the more benefits are transferred from healthy banks and taxpayers to the zombie banks. The term is also used when many depositors in countries with deposit insurance draw down their balances below the limit for deposit insurance.

The cost of cleaning up after a crisis can be huge. In systemically important banking crises in the world from 1970 to 2007, the average net recapitalization cost to the government was 6% of GDP, fiscal costs associated with crisis management averaged 13% of GDP (16% of GDP if expense recoveries are ignored), and economic output losses averaged about 20% of GDP during the first four years of the crisis.

Prevention and mitigation

2007 run on Northern Rock, a UK bank, during the late-2000s financial crisis

 

A run on a Bank of East Asia branch in Hong Kong, caused by "malicious rumours" in 2008

Several techniques have been used to help prevent or mitigate bank runs.

Individual banks

Some prevention techniques apply to individual banks, independently of the rest of the economy.

• Banks often project an appearance of stability, with solid architecture and conservative dress.
• A bank may try to hide information that might spark a run. For example, in the days before deposit insurance, it made sense for a bank to have a large lobby and fast service, to prevent the formation of a line of depositors extending out into the street which might cause passers-by to infer a bank run.
• A bank may try to slow down the bank run by artificially slowing the process. One technique is to get a large number of friends and relatives of bank employees to stand in line and make many small, slow transactions.
• Scheduling prominent deliveries of cash can convince participants in a bank run that there is no need to withdraw deposits hastily.
• Banks can encourage customers to make term deposits that cannot be withdrawn on demand. If term deposits form a high enough percentage of a bank's liabilities its vulnerability to bank runs will be reduced considerably. The drawback is that banks have to pay a higher interest rate on term deposits.
• A bank can temporarily suspend withdrawals to stop a run; this is called suspension of convertibility. In many cases the threat of suspension prevents the run, which means the threat need not be carried out.
• Emergency acquisition of a vulnerable bank by another institution with stronger capital reserves. This technique is commonly used by the U.S. Federal Deposit Insurance Corporation to dispose of insolvent banks, rather than paying depositors directly from its own funds.
• If there is no immediate prospective buyer for a failing institution, a regulator or deposit insurer may set up a bridge bank which operates temporarily until the business can be liquidated or sold.
• To clean up after a bank failure, the government may set up a "bad bank", which is a new government-run asset management corporation that buys individual nonperforming assets from one or more private banks, reducing the proportion of junk bonds in their asset pools, and then acts as the creditor in the insolvency cases that follow. This, however, creates a moral hazard problem, essentially subsidizing bankruptcy: temporarily underperforming debtors can be forced to file for bankruptcy in order to make them eligible to be sold to the bad bank.

Systemic techniques

Some prevention techniques apply across the whole economy, though they may still allow individual institutions to fail.

• Deposit insurance systems insure each depositor up to a certain amount, so that depositors' savings are protected even if the bank fails. This removes the incentive to withdraw one's deposits simply because others are withdrawing theirs. However, depositors may still be motivated by fears they may lack immediate access to deposits during a bank reorganization. To avoid such fears triggering a run, the U.S. FDIC keeps its takeover operations secret, and re-opens branches under new ownership on the next business day. Government deposit insurance programs can be ineffective if the government itself is perceived to be running short of cash.
• Bank capital requirements reduces the possibility that a bank becomes insolvent. The Basel III agreement strengthens bank capital requirements and introduces new regulatory requirements on bank liquidity and bank leverage.
  • Full-reserve banking is the hypothetical case where the reserve ratio is set to 100%, and funds deposited are not lent out by the bank as long as the depositor retains the legal right to withdraw the funds on demand. Under this approach, banks would be forced to match maturities of loans and deposits, thus greatly reducing the risk of bank runs.
  • A less severe alternative to full-reserve banking is a reserve ratio requirement, which limits the proportion of deposits which a bank can lend out, making it less likely for a bank run to start, as more reserves will be available to satisfy the demands of depositors. This practice sets a limit on the fraction in fractional-reserve banking.
• Transparency may help prevent crises spreading through the banking system. In the context of the recent crisis, the extreme complexity of certain types of assets made it difficult for market participants to assess which financial institutions would survive, which amplified the crisis by making most institutions very reluctant to lend to one another.
• Central banks act as a lender of last resort. To prevent a bank run, the central bank guarantees that it will make short-term loans to banks, to ensure that, if they remain economically viable, they will always have enough liquidity to honor their deposits. Walter Bagehot's book Lombard Street provides influential early analysis of the role of the lender of last resort.

The role of the lender of last resort, and the existence of deposit insurance, both create moral hazard, since they reduce banks' incentive to avoid making risky loans. They are nonetheless standard practice, as the benefits of collective prevention are commonly believed to outweigh the costs of excessive risk-taking.

Techniques to deal with a banking panic when prevention have failed:

• Declaring an emergency bank holiday
• Government or central bank announcements of increased lines of credit, loans, or bailouts for vulnerable banks

Depictions in fiction

The bank panic of 1933 is the setting of Archibald MacLeish's 1935 play, Panic. Other fictional depictions of bank runs include those in American Madness (1932), It's a Wonderful Life (1946, set in 1932 U.S.), Silver River (1948), Mary Poppins (1964, set in 1910 London), Rollover (1981), Noble House (1988) and The Pope Must Die (1991).

Arthur Hailey's novel The Moneychangers includes a potentially fatal run on a fictitious US bank.

A run on a bank is one of the many causes of the characters' suffering in Upton Sinclair's The Jungle.