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Skeptics generally claim it's not backed 1:1, not that they have zero dollars left. They can afford to buy up the demand until at some point they can't.
by paulgb 8y ago
Skeptics generally claim it's not backed 1:1, not that they have zero dollars left. They can afford to buy up the demand until at some point they can't.
- jandrese 8y agoOtherwise known as a Ponzi scheme.
- jerguismi 8y agoMore like fractional reserve banking.
- Scoundreller 8y agoYou can be solvent (assets = liabilities) with fractional cash reserves. You can also be insolvent (assets << liabilities), in which you must be fractional too.
- jerguismi 8y agoUsually by insolvency is meant that the bank doesn't have enough liquid, hard assets to cover up the withdrawals from the bank. Bank can have varying assets such as bonds that it has lent out, but if the bank has lent out a lot of money to some people who can't pay the loans or other banks are unwilling to buy, it can be insolvent even if on paper it has "assets".
- Scoundreller 8y agoIt looks like “insolvency” is ambiguous, and we should differentiate between cash flow vs balance sheet insolvency.