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	Gunning for Greenbacks By Declan McCullagh January 14, 1999 y2kculture's Declan McCullagh in December 1998 interviewed George Selgin, an associate professor of economics at the University of Georgia. A scholar of money and banking history, Selgin has been critical of the role of the Federal Reserve in today's US banking system. Fearing that Americans will withdraw money from their accounts, the Fed already has announced plans to print up between $50 and $75 billion in additional currency. Following are excerpts from their conversation. What happens if there's increased demand becuase of Y2K fears? When the banks find that consumers withdraw cash, these lines of credit [from the Federal Reserve] would be used and the Fed would show up with an armored truck and deliver the cash. Does this mean hyperinflation? Just as the Fed is capable of supplying the banks with more currency when consumers are demanding it, they're capable of withdrawing it. So assuming that the banking system itself is Y2K-OK and we're only talking about people's fears of problems, should we be worried? There is a reason to worry -- given the way our current system is regulated, where the only source of paper currency is the Fed. People could in fact fear that due to computer glitches, they couldn't get access to cash in the beginning of the Year 2000. This could cause a run on cash machines and generally a run in cash... The banks don't have amounts equal to their deposits. A system that has to depend on the goverment in an emergency like that isn't a good system. What happens if the banks do have Y2K problems with their computers after all and can't repay the Fed? If you have something that serious that the system has crashed and crashed for good, clearly the banks have to remain perpetually in debt to the Fed or the Fed will finally let them go broke. What's the worst-case scenario? The worst-case scenario is where we have our present kind of system and people do fear that computer breakdowns mean their banks have to close or cash machines won't be functioning. And so they go and withdraw as much cash as they think they need. It could mean a month's supply of cash. It could mean more than that -- people withdrawing their entire deposit amount. The banks [would then be] pleading with the Fed to provide them with emergency loans. The worst-case scenario would be if the Fed for whatever reason did nothing. That would mean the Fed would close or banks would have to suspend payments of cash. But the Fed has printed currency to match increases in demand before. Every Christmas the demand for currency spikes and the Fed usually handles it with no problems at all. The public will find they can go shopping and they've got cash. Life will go on.		FEATURES Book Reviews Y2K already has spawned its own genre. We tell you what books are worth buying. Chip 'n Little Cartoons Chip 'n Little goes on TV Chip 'n Little visits John Koskinen Chip 'n Little saves the world Warning: This cartoon has been called "foolish and tasteless." Y2K from A to Z Y2K Haiku Traditionalists may be shocked. Mad Cow Culture What does Y2K have in common with today's Mad Cow Culture? Answer: Everything. Declan McCullagh's Y2K articles Psychology of Y2K LATEST NEWS As of December 31, 1999 Get Your T-Shirt Quick Bill Gates Does Y2K Reader Feedback A Sarcastic Calendar Cooking After the Apocalypse A Real Y2K Disaster Hitchhiker's Guide Meets Y2K