Bank Runs: The Domino Effect on the Economic Collapse! Bank runs can have a devastating effect on the economy, and can trigger a domino effect, leading to a full-blown economic collapse. When people panic and withdraw their savings from banks, it can cause a chain reaction, leading to a liquidity crisis and widespread bank failures. This can result in a credit crunch, reduced investment, and a drop in consumer spending, which can cause businesses to fail and lead to widespread unemployment. To prevent bank runs and economic collapse, it’s crucial to maintain confidence in the banking system and ensure that banks are adequately capitalized and regulated.