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It is impossible. Only a moron of magnificent magnitude would fail to print additional cash to cover the run. The problems caused by the feds failure to lend t
by _3u10 5y ago
It is impossible. Only a moron of magnificent magnitude would fail to print additional cash to cover the run.
The problems caused by the feds failure to lend to First Bank of America during the Great Depression are well understood by the central banks.
What would likely happen is the overnight rate would go up to 12%, and additional money would be printed to cover withdrawals for the month or two most people would be willing to forgo 12% interest in a potentially inflationary economy.
- dekhn 5y agoi mean, the world financial system did almost just collapse, not that long ago, https://en.wikipedia.org/wiki/Financial_crisis_of_2007%E2%80%932008 https://en.wikipedia.org/wiki/Financial_crisis_of_2007%E2%80... more or less due to the confluence of several adverse events, each of which probably could have been buffered on its own. When you say additional money would be printed, I assume you mean the M0 money supply would be increased?
- _3u10 5y agoIn the case of a bank run specifically yes. In the more general case of a deleveraging (2008) it would be QE / asset purchases.