3 ms·
From what I read banks must always have funds than liabilities and must immediately liquidate if that isn't true. If someone pays me to hold onto a box of cash
by flangola7 4y ago
From what I read banks must always have funds than liabilities and must immediately liquidate if that isn't true. If someone pays me to hold onto a box of cash for them I should obviously have it available when they ask for it back.
We may use fiat instead of gold now but that doesn't mean a bank can float itself by hoping no one opens the box and breaks their superposition.
- comte7092 4y agoGold itself is quite volatile, you would have the same issue even on the gold standard. It was in fact an extremely common problem on the gold standard. A bank is expected to be able to float itself as long as a sufficiently low number of customers demand their money at any given time, a bank run will collapse a bank no matter what monetary standard you’re on.