Game Theory Bank Runs And The Prisoners Dilemma
b"In this episode of the Planned Solutions Incorporated Podcast, The recent bank run that caused three large banks to fail in the US this year is a classic case of a Prisoner\\u2019s Dilemma. A Prisoner\\u2019s Dilemma is a game theory concept that illustrates how the optimal strategy for participants may lead to a less-than-optimal outcome that leaves all involved worse off. Fortunately, the Federal Reserve in the US was created to be a lender of last resort to stop bank runs from spreading and impacting other institutions\\n\\nAlso, The recent bank run in the US has caused two banks to fail and a third is under tremendous stress. A review of these banks shows that they were outliers in terms of poor risk management on their reserves as well as having a high percentage of deposits that were not FDIC insured. The remainder of large and mid-sized banks appear to have been far more conservative and are likely to be more resilient.\\n\\nAnd, With the recent bank failures, the Federal Deposit Insurance Corporation (FDIC) has been in the news. Therefore, this is a good time for depositors to review the FDIC insurance limits and make sure that their deposits at their banks do not exceed the limits. This may include reducing the balance held at each bank, reviewing the title of bank accounts to maximize the FDIC insurance limit, and knowing which account types are covered by the FDIC and which are not.\\n\\nPlus a look at the Planned Solutions Incorporated Office Bulletin Board- This probably goes without saying in this day and age, but don\\u2019t believe everything that you read, or even watch, online. The recent bank turmoil has been exacerbated by false or misleading statements that have been posted online. This includes several cases where only a portion of a video interview is posted causing the statements made to be taken out of context or for the statements to lack the nuance to understand what the person being interviewed is trying to convey. In many cases, this misinformation is being spread by short-sellers (investors betting against a stock or group of stocks) in an attempt to sow panic and cause the prices of the investment that they are shorting to decline.\\n\\nThis is not to say that one should bury their head in the sand during uncertain market times. It is important to remain informed and take well-thought-out action when it is warranted. This requires getting news from many sources, including more reputable sources that still engage in fact-checking, and from many different angles to understand what is really going on. \\n\\nChase Armer's book- Financial Planning Insights is now available at:\\nhttps://www.amazon.com/Financial-Planning-Insights-Decades-Planner/dp/1098306279?ref_=ast_author_mpb\\n\\nTo subscribe to the Personal Finance Review (the written form of all the content we discuss on the podcast) please e-mail Katie@PlannedSolutions.com\\n\\nThe Personal Finance Review is published and distributed on a biweekly basis by Planned Solutions, Inc. for informational purposes only. Please seek the advice of a qualified financial planner before taking any action.\\n\\nPlanned Solutions, Inc."