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The event illustrates that banking is an inherently unstable business. Depositors must have the illusion of being able to withdraw everything anytime on demand,
by unyttigfjelltol 3y ago
The event illustrates that banking is an inherently unstable business. Depositors must have the illusion of being able to withdraw everything anytime on demand, because it's their "money". Banks have a huge incentive to invest the deposits in things that can't necessarily be liquidated on demand, because what in the world other than a bank account can be?
The choice then is a) to accept some bank failures and depositor wipeouts, or b) inexorable pressure to centralize the risk structure until you have something remarkably like Gosbank[1] or 1 bank for everyone.
We tried the FDIC scheme, it was nice, but when the deposit limit is overtopped these days the bank is not stable.
[1] https://en.m.wikipedia.org/wiki/Gosbank https://en.m.wikipedia.org/wiki/Gosbank
- kelnos 3y agoAbsolutely; someone else somewhere in these threads called banking something like "a utility masquerading as a business", and I couldn't agree more. Bank accounts should be provided directly by the Fed, and/or perhaps have US Post Office branches act as bank branches. Accounts should be provided for free, with minimal hassle needed to open one.