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RE: WHY TOMORROW IS SO EXCITING AND SCARY? AND SO IMPORTANT FOR CRYPTO?
Thats an ordinary situation for any financial system. In such case central bank usually buy extra commercial bank bond on its balance sheet providing needed liquidity. Also it could suspend some of its own normatives and restrictions.
Bank run is a known danger, everyone knows how to fight it.8
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I dont think we ever had a chance to get to know each other. Great comment @cryptoheroes
How? I guess Im not everyone as I really dont know how to fight with bank runs (limiting withdrawal is not a solution as it will only give more ammo to protesters).
I was also wondering how come banks seem to struggle financially quite often as well and goverments had to rescue many of them already in the past.
It seem that most people (including majority of yellow vests) believe that they are getting poorer and banks are only getting richer.
But if reality is that we're having less money (or our money has less power) and also banks struggle with lack of resources, then ... WTF. Then something is really wrong with this system.
I don't get it. Because it does look like entire world wealth does not exist really. Everyone has debts and banks also struggle. Insane.
Cheers
How banks work essentially.
There are banks and there is a central banks which surpervises them.Lets assume that CB only need to preserve mandatory reserve ratio. Imagine you put 1000 usd at deposit ant mandatory reserve ratio is 10%, so the bank needs to put 100$ to a special account in CB and could issue credits on the rest. The deposits come and go and credits come and go and what a bank must preserve is that his reserves in CB be no less than 10% of his credits. Okay.
Now yellow wests come and start to massively withdraw their funds from a bank, so that bank is dangerously closing to 10% treshold. What next?
I see 2 options for a commercial bank.
So there is no real problem here for a bank.
Dear @cryptoheroes
Thank you for your amazing comment. I appreciate your time and effort.
Thank you for sharing your knowledge with me. I wonder if it will all really play out the way you said. I think that current events will not bring any bank down, but as result most of those banks will lose their money flow.
And having difficulties with money flow = very difficult time for company. So it is sort of a big problem as well.
ps.
I was just wondering lately, why you didn't ever post anything on Steemit. Your comments are very mature and valuable, and yet you're not publishing any of your own work? Unique.
Yours
Piotr