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This has been the "fix" through out banking history, and it is the one of the main reasons central banks came into existence. Cause banks need to be bailed out
by gsatic 3y ago
This has been the "fix" through out banking history, and it is the one of the main reasons central banks came into existence.
Cause banks need to be bailed out all the time. The plebs hear only abt the big bailouts. But there are daily, weekly, monthly "bailouts" happening all the time.
Depositors cash isn't real cash sitting in vaults. Its entries in ledgers. And there are two to three dozen different ways, banks get into situations where they can't satisfy claims on those ledger entries. So central banks are a hack to take care of these situations.
Only additional point worth making is banks were needed as stores of depositors cash, cause its high risk putting all your cash under your bed.
But with crypto/blockchain showing up and things like interest bearing CBDCs emerging (BoE is running pilots) we are reaching an age where you don't need to put your Deposit in a bank to beat inflation.
This is going to change a lot of things about how bank bailouts work.
- boppo1 3y ago>But with crypto/blockchain showing up and things like interest bearing CBDCs emerging (BoE is running pilots) we are reaching an age where you don't need to put your Deposit in a bank to beat inflation. What will we need banks for at all? Why not just stick with the CB? Hell they could start offering mortgages & the other products banks do.
- gsatic 3y agoBanks have huge amount of institutional knowledge on lending. And that's what they need to do without playing games with depositor cash. They need to borrow from the central bank. Central Bank is much more sophisticated than the avg depositor in deciding which lender to hand off cash too. I think this is where we will end, up after a few more bank bailouts which are coming. Depositors will have accounts directly with Central Bank or just hold interest bearing CBDCs in their wallet.