Money Rehab with Nicole Lapin - What Do Russia and Mary Poppins Have in Common?

Episode Date: May 3, 2022

No spoilers! You’ll have to listen to find out. See omnystudio.com/listener for privacy information.

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Well, it doesn't. Charge for wasting our time. I will take a check. Like an old school check. You recognize her from anchoring on CNN, CNBC, and Bloomberg. The only financial expert you don't need a dictionary to understand. The cold lappin'. The Money Rehab team had a conversation recently about a scene in Mary Poppins.

I didn't actually remember this scene, but let me see if I can jog your memory. In the movie, there are two little sweet kids that Mary Poppins looks over, Michael and Jane. There's a scene where Michael has a tuppence, which if you've been wondering all your life, WTF tuppence is, it's a variation of a two pence coin. It's not a lot of money for an adult, but for a kid, it's a goldmine. So Michael has a Tuppence and he and Jane are in the bank where their father works. And some ancient bank exec tries to convince Michael to put his Tuppence in the bank. There's even a whole song about it. Do you remember? It starts with, and I looked it up, but I'm not singing it for you right now. It's like, if you, it's the old man voice. It starts like this.

If you invest your tuppence wisely in the bank, safe and sound, soon that tuppence safely invested in the bank will compound. It's a bop, to say the least. It's like this old burly man singing, and I'm not going to do it. I'm just not not gonna do it. Anyway, when Michael says no and insists on holding onto his money, the bank exec tries to grab the tuppence out of Michael's hand, which leads to a public squabble. Michael has a serious meltdown. I mean, who wouldn't? If some old man with a top hat tried to take my money, I'd freak out too. Michael starts screaming that he wants his money back and tries to tussle with this Santa Claus looking guy. The tussle catches the attention of other customers in the bank who say something along the lines of, there's a problem, he can't get his money back. Well,

that won't happen to me. And then every customer in the bank flacks to the bank tellers and tries to withdraw all the money in their accounts. This quickly devolves into a mob scene. The bank tellers and tries to withdraw all the money in their accounts, this quickly devolves into a mob scene. The bank tellers close their windows, they lock their vaults, and they start running around spilling coins everywhere. It is chaos. One of our Money Rehabber producers, Morgan, says that scene was her introduction to the banking system. Anyone else in the same boat? Just Morgan? I'm gonna to go ahead and say that it's not a great first impression of a bank. And the author of Mary Poppins, Pamela Lyndon Travers, aka Helen Lyndon Goff, definitely had some emotional baggage around banks. Her father

was a bank manager, but was eventually demoted to bank clerk, allegedly because of some issues with alcoholism. So there's a lot to unpack there. But here's my take. I am pro-bank, although I'd be the first to admit that there is some major room for improvement in the banking system. It is better for your financial self to have money in the bank instead of under your mattress. However, things can go wrong. The scene in Mary Poppins isn't entirely fictional. Similar scenarios have actually played out in the real world, and often enough for this phenomenon to have a nickname. Bank runs. Bank runs are a shitshow, basically. It's a scenario in which a bank needs to slow down operations or even default because there's a significant increase in people wanting to make major withdrawals. Essentially,

people are asking for the money that they have in their account, which doesn't seem like it should be a problem, but it becomes a problem when people are asking the bank for more money than the bank has money to give. This situation is possible because of the way banks keep their reserves. Even though we like to picture our bank as having, like, nice, beautiful stacks on stacks of money just locked up in this picturesque gold vault with our name on it, it's actually not how this whole thing works. In fact, banks really only have to maintain 10% of bank deposits on them at any given time. But just because a bank doesn't have all your money available to you right when you want it doesn't mean your money is gone. If you belong to an FDIC-insured bank, your money is insured up to at least $250,000 per depositor. So your money won't disappear,

but it could be harder to access in case of a bank run. And newsflash, bank runs can be caused by other situations beyond a greedy man in a top hat. Bank runs occur when there's some sort of economic panic. It could be some public issue with the bank and members panic that they won't be able to liquidate their accounts if they need to. So they try. And then the inability to liquidate their accounts leads to even more panic, which makes it harder to take money out and on and on and on. And yes, that is the Mary Poppins scenario. A bank run could be caused by a more national issue and affect several banks,

which is what happened in Russia a few months ago. In late February, days after Russia's invasion of Ukraine, it looked like there may be a run on Russian banks. According to City Journal, there was widespread fear that there would be withdrawal limits applied in banks and at ATMs, and concern that credit cards and electronic means of payments. Because of that, there was a huge swell of Russians trying to take money from their bank accounts. Russian banks had reported that they had experienced significant outflows of deposits in a very short time,

and lines at ATMs were huge. In an effort to prevent a bank run, the central bank in Russia applied some limitations, including capital controls, to limit how much money could leave the country. And that seemed to put a band-aid on the issue. But since the invasion of Ukraine, Russia has been rocked by economic sanctions, a volatile currency, and even worse inflation than we're experiencing in the U.S. So it will be interesting to see what other Band-Aids are put on the economy to try and keep everything together and the run rate low. For today's tip, you can take straight to the bank. Again, I do think you need to use a bank

as the primary home for your money. However, I do think it's a good idea to always have a little cash stash just in case. And I mean literal. Cold, hard, green, physical cash somewhere easily accessible to you. I don't see a Mary Poppins reenactment in our future anytime soon, but let's all be good Girl Scouts and Boy Scouts and be prepared. Money Rehab is a production of iHeartRadio. I'm your host, Nicole Lappin. Our producers are Morgan Lavoie and Mike Coscarelli. Executive producers are Nikki Etor and Will Pearson.

Our mascots are Penny and Mimsy. Huge thanks to OG Money Rehab team, Michelle Lanz for her development work, Catherine Law for her production and writing magic, and Brandon Dickert for his editing, engineering, and sound design. And as always, thanks to you for finally investing in yourself so that you can get it together and get it all.