Hey Jesscapitalists
This is a concept that seems weird considering where we are today but believe it or not; there was a time where physical cash rule everything. We didn't have fancy computers and digital systems to create money out of thin air.
While fiat money was still created out of thin air it came at a cost to print, manage and distribute and consumers had much more say on what the banks did, than we have to do, which is sweet blue fuckall.
In the old days in times of crisis or if the consumer suspected the banks of mismanagement they could put real pressure on them by enabling a bank run but with fractional reserve banking and digital banking that is all but impossible.
Image source: - thoughtco.com
What Is a bank run?
No, you don't need to train for it or limber up or get yourself a new pair of running shoes. A bank run is an event in which bank customers all attempt to withdraw more money from the bank than the bank can provide. Banks do not keep all customer deposits available in cash for immediate withdrawal.
Banks are meant to use the capital responsibly and use it to purchase assets or give out loans and other types of investments. But when a bank run is in full swing, an overwhelming demand for deposits can leave a bank unable to give customers their money.
When a bank cannot satisfy customer demands for withdrawals—or if there’s a rumour that the bank will be unable to do so—the situation worsens. Customers fear to be the “last one to the exit,” and they attempt to withdraw as much as possible. In a worst-case scenario, a bank may be unable to meet obligations, leading to complete failure.
The problem with a bank run
This would give the consumer the power to shut down banks and helps keep them honest, but we don't have that ability now.
How many of us have the place to store all the cash we save in the bank if we had to withdraw it physically? Do we have personal storage or non-bank custodial storage?
It would be highly unlikely and impractical, so we're forced in a way to keep our money with banks.
Bring-in Bitcoin
Now that we have private money like Bitcoin and altcoins and stable coins, we have a lot more options when it comes to moving our money out of the traditional banking system. While it may not be the most practical yet we are working towards having a counterbalance to the bank and being able to pull off bank runs.
So what do you think? Will we see bank runs in the future? Will there be banks on the brink of failure shortly?
Let's connect
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