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> the demand for long term loans is not nearly as large as the supply of long term money. It is when the loans are priced correctly. This is a clear and obvio

• WJW 4y ago
  Perhaps in a pure market sense, but that's not the world we live in. The government (doesn't really matter where you live) has a vested interest in the status quo and wants people to make long term investments. That is good for both societal stability and for longer term economic growth. Therefore, such a government will support financial institutions in providing long term loans even if that sometimes leads to bank runs. Things like FDIC and related systems in other countries make sure the risk gets smoothed out over all participants in the economy. My point is that when you take the view from the wider society, the price of long term loans should be (nearly) independent from the chance of bank runs. Those are only a problem for the shareholders of the bank itself, but not to the society it resides in.