> Just a small point of clarification - I think - that helps to make your point a little clearer. > If the bank collapses - it's likely precisely because those

> Just a small point of clarification - I think - that helps to make your point a little clearer. > If the bank collapses - it's likely precisely because those loaned dollars ARE worth less. I get what you mean, but it's not quite the same. The loan, as in the receivable, is worthless and thus might prompt/contribute to a bank run/collapse. But the only reason defaults are an issue (like in this scenario) is precisely because the loaned dollars do have value, and the bank (and its depositors/creditors) want them back. It's all just assets and liabilities.