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Isn't the risk of bank runs increased without this assumption? If we're all consistently attentive and worried that we may not get our bank deposits back, then
by stanleydrew 4y ago
Isn't the risk of bank runs increased without this assumption? If we're all consistently attentive and worried that we may not get our bank deposits back, then every minor hiccup at a bank could plausibly cause a run.
- tome 4y agoI wonder if it works at both extremes: 1. if you know your deposits are at risk then you actively work to derisk them, for example placing most of your cash in T-Bills. 2. if you know your deposits are safe then you just keep them in the bank. The middle seems less stable.