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Our fractional reserve banking system is kind of crazy when you really think about it. So much of our economy is built on the assumption that not everyone will
by deweller 4y ago
Our fractional reserve banking system is kind of crazy when you really think about it. So much of our economy is built on the assumption that not everyone will want to withdraw their money at the same time.
I'm not surprised that the government stepped in on this one. It is worth it just to shore up faith in our banking system.
If even 10% of business get spooked and started pulling their money out of banks, then absolute financial chaos would ensue.
- neilwilson 4y agoGood job we don't have a fractional reserve banking system then isn't it. That story is a complete myth based upon a misunderstanding of the way banks work. If you pull money out of one bank it goes into a different bank. The central bank can then easily fix the discrepancy by taking the 'up' from the different bank and supplying it to the original bank that is 'down' - all within the books of the central bank. All we need are central banks prepared to do their job properly and there can be no such things as destructive bank runs - particularly as those central bankers are also the regulators and have therefore agreed that the assets of a bank, and its capital levels, are adequate.
- ashwagary 4y ago>So much of our economy is built on the assumption that not everyone will want to withdraw their money at the same time. Even worse, many countries seem to be working on and passing legislation to limit access to cash/withdrawals partially for this outcome, further feeding the beast.
- deleted 4y ago[deleted]