4 ms·
The continued threat of bank-runs is the central absurdity of our monetary system. "Everybody keep your money in the bank because if you don't, bad things will
by salawat 5y ago
The continued threat of bank-runs is the central absurdity of our monetary system. "Everybody keep your money in the bank because if you don't, bad things will happen!"
Personally, I think the only significant disruption would be that enterprises, instead of only having to get buy-in from bankers, would have to sell the public on direct investment.
Though I've been known to be an economic stick in the mud.
- cm2187 5y agoBut that's the thing with deposits, people treat it as cash and don't even think of the credit risk. Companies are free to offer investments to the general public right now, but it is also heavily regulated to make sure that investors understand the risk they are taking. Banks do not have to at the expense of tens of thousands of pages of regulation in every jurisdiction (and that's probably low estimate).
- danielmarkbruce 5y agoWhy is it absurd? If all the creditors of any company decided they wouldn't roll their credit, and no new creditors would come along to replace them (ie, in effect a bank run), any company would default. It's not some unique thing to banking. It just tends to rear it's head more often in banking because banks are more levered than most other companies, and the nature of the agreement with creditors (you can call in your loan any time) means it can happen fast.